Federal Register, Volume 85 Issue 104 (Friday, May 29, 2020)

[Federal Register Volume 85, Number 104 (Friday, May 29, 2020)]
[Proposed Rules]
[Pages 32460-32975]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-10122]

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Vol. 85

Friday,

No. 104

May 29, 2020

Part II

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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

Medicare Program; Hospital Inpatient Prospective Payment Systems for
Acute Care Hospitals and the Long Term Care Hospital Prospective
Payment System and Proposed Policy Changes and Fiscal Year 2021 Rates;
Quality Reporting and Medicare and Medicaid Promoting Interoperability
Programs Requirements for Eligible Hospitals and Critical Access
Hospitals; Proposed Rule

Federal Register / Vol. 85 , No. 104 / Friday, May 29, 2020 /
Proposed Rules

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 412, 413, 417, 476, 480, 484, and 495

[CMS-1735-P]
RIN 0938-AU11

Medicare Program; Hospital Inpatient Prospective Payment Systems
for Acute Care Hospitals and the Long-Term Care Hospital Prospective
Payment System and Proposed Policy Changes and Fiscal Year 2021 Rates;
Quality Reporting and Medicare and Medicaid Promoting Interoperability
Programs Requirements for Eligible Hospitals and Critical Access
Hospitals

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

ACTION: Proposed rule.

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SUMMARY: We are proposing to revise the Medicare hospital inpatient
prospective payment systems (IPPS) for operating and capital-related
costs of acute care hospitals to implement changes arising from our
continuing experience with these systems for FY 2021 and to implement
certain recent legislation. We also are proposing to make changes
relating to Medicare graduate medical education (GME) for teaching
hospitals. In addition, we are providing the market basket update that
will apply to the rate-of-increase limits for certain hospitals
excluded from the IPPS that are paid on a reasonable cost basis,
subject to these limits for FY 2021. We are proposing to update the
payment policies and the annual payment rates for the Medicare
prospective payment system (PPS) for inpatient hospital services
provided by long-term care hospitals (LTCHs) for FY 2021. In this FY
2021 IPPS/LTCH PPS proposed rule, we are proposing changes to the new
technology add-on payment pathway for certain antimicrobial products
and other changes to new technology add-on payment policies, and to
collect market-based rate information on the Medicare cost report for
cost reporting periods ending on or after January 1, 2021, and
requesting comment on a potential market based MS-DRG relative weight
methodology beginning in FY 2024 that we may adopt in this rulemaking.
We are proposing to establish new requirements or revise existing
requirements for quality reporting by acute care hospitals and PPS-
exempt cancer hospitals. We also are proposing to establish new
requirements and revise existing requirements for eligible hospitals
and critical access hospitals (CAHs) participating in the Medicare and
Medicaid Promoting Interoperability Programs. We are providing
estimated and newly established performance standards for the Hospital
Value-Based Purchasing (VBP) Program, and proposing updated policies
for the Hospital Readmissions Reduction Program and the Hospital-
Acquired Condition (HAC) Reduction Program.

DATES: To be assured consideration, comments must be received at one of
the addresses provided in the ADDRESSES section, no later than 5 p.m.
EDT on July 10, 2020.

ADDRESSES: In commenting, please refer to file code CMS-1735-P. Because
of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
Comments, including mass comment submissions, must be submitted in
one of the following three ways (please choose only one of the ways
listed):
1. Electronically. You may (and we encourage you to) submit
electronic comments on this regulation to http://www.regulations.gov.
Follow the instructions under the ``submit a comment'' tab.
2. By regular mail. You may mail written comments to the following
address ONLY: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-1735-P, P.O. Box 8013,
Baltimore, MD 21244-1850.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments via
express or overnight mail to the following address ONLY: Centers for
Medicare & Medicaid Services, Department of Health and Human Services,
Attention: CMS-1735-P, Mail Stop C4-26-05, 7500 Security Boulevard,
Baltimore, MD 21244-1850.
For information on viewing public comments, we refer readers to the
beginning of the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Donald Thompson, (410) 786-4487, and
Michele Hudson, (410) 786-4487, Operating Prospective Payment, MS-DRGs,
Wage Index, New Medical Service and Technology Add-On Payments,
Hospital Geographic Reclassifications, Graduate Medical Education,
Capital Prospective Payment, Excluded Hospitals, Medicare
Disproportionate Share Hospital (DSH) Payment Adjustment, Medicare-
Dependent Small Rural Hospital (MDH) Program, Low-Volume Hospital
Payment Adjustment, and Critical Access Hospital (CAH) Issues.
Michele Hudson, (410) 786-4487 and Emily Lipkin, (410) 786-3633,
Long-Term Care Hospital Prospective Payment System and MS-LTC-DRG
Relative Weights Issues.
Emily Forrest, (202) 205-1922, Market Based Data Collection and
Potential Market Based MS-DRG Relative Weight Methodology Issues.
Siddhartha Mazumdar, (410) 786-6673, Rural Community Hospital
Demonstration Program Issues.
Jeris Smith, (410) 786-0110, Frontier Community Health Integration
Project Demonstration Issues.
Erin Patton, (410) 786-2437, Hospital Readmissions Reduction
Program--Administration Issues.
James Poyer, (410) 786-2261, Hospital Readmissions Reduction
Program--Readmissions--Measures Issues.
Michael Brea, (410) 786-4961, Hospital-Acquired Condition Reduction
Program--Administration Issues.
Annese Abdullah-Mclaughlin, (410) 786-2995, Hospital-Acquired
Condition Reduction Program--Measures Issues.
Julia Venanzi, (410) 786-1471 and Katrina Hoadley, (410) 786-8490,
Hospital Inpatient Quality Reporting Program.
Julia Venanzi, (410) 786-1471 and Pamela Brown (410) 786-3940,
Hospital Value-Based Purchasing Program.
Katrina Hoadley, (410) 786-8490, Hospital Inpatient Quality
Reporting and Hospital Value-Based Purchasing--Measures Issues Except
Hospital Consumer Assessment of Healthcare Providers and Systems
Issues.
Elizabeth Goldstein, (410) 786-6665, Hospital Inpatient Quality
Reporting and Hospital Value-Based Purchasing--Hospital Consumer
Assessment of Healthcare Providers and Systems Measures Issues.
Erin Patton, (410) 786-2437 and Ronique Evans, (410) 786-1000, PPS-
Exempt Cancer Hospital Quality Reporting Issues.
Mary Pratt, (410) 786-6867, Long-Term Care Hospital Quality Data
Reporting Issues.
Dylan Podson (410) 786-5031, Jessica Warren (410) 786-7519, and
Elizabeth Holland, (410) 786-1309, Promoting Interoperability Programs.
Steve Rubio, (410) 786-1782, Reimbursement for Submission of
Patient Records to Beneficiary and Family Centered Care Quality
Improvement Organizations (BFCC-QIOs) in Electronic Format.

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Maude Shepard, (410) 786-5598, Provider Reimbursement Review Board
Electronic Filing.
Kellie Shannon, (410) 786-0416 and Bob Kuhl, (443) 896-8410,
Medicare Bad Debt.

SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following
website as soon as possible after they have been received: http://www.regulations.gov/. Follow the search instructions on that website to
view public comments.

Tables Available Through the Internet on the CMS Website

The IPPS tables for this FY 2021 proposed rule are available
through the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
Click on the link on the left side of the screen titled, ``FY 2021 IPPS
Proposed Rule Home Page'' or ``Acute Inpatient--Files for Download.''
The LTCH PPS tables for this FY 2021 proposed rule are available
through the internet on the CMS website at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/index.html under the list item for Regulation Number CMS-1735-P. For
further details on the contents of the tables referenced in this
proposed rule, we refer readers to section VI. of the Addendum to this
FY 2021 IPPS/LTCH PPS proposed rule.
Readers who experience any problems accessing any of the tables
that are posted on the CMS websites, as previously identified, should
contact Michael Treitel at (410) 786-4552.

I. Executive Summary and Background

A. Executive Summary

1. Purpose and Legal Authority
This FY 2021 IPPS/LTCH PPS proposed rule would make payment and
policy changes under the Medicare inpatient prospective payment systems
(IPPS) for operating and capital-related costs of acute care hospitals
as well as for certain hospitals and hospital units excluded from the
IPPS. In addition, it would make payment and policy changes for
inpatient hospital services provided by long-term care hospitals
(LTCHs) under the long-term care hospital prospective payment system
(LTCH PPS). This proposed rule also would make policy changes to
programs associated with Medicare IPPS hospitals, IPPS-excluded
hospitals, and LTCHs. In this FY 2021 proposed rule, we are continuing
policies to address wage index disparities impacting low wage index
hospitals; and including proposals related to new technology add-on
payments for certain antimicrobial products, other proposals related to
new technology add-on payments, and to collect market-based rate
information on the Medicare cost report for cost reporting periods
ending on or after January 1, 2021, and requesting comment on a
potential market based MS-DRG relative weight methodology beginning in
FY 2024 that we may adopt in this rulemaking.
We are proposing to establish new requirements and revise existing
requirements for quality reporting by acute care hospitals and PPS-
exempt cancer hospitals that participate in Medicare. We also are
proposing to establish new requirements and revise existing
requirements for eligible hospitals and CAHs participating in the
Medicare and Medicaid Promoting Interoperability Programs.
We are providing estimated and newly established performance
standards for the Hospital Value-Based Purchasing (VBP) Program, and
proposing updated policies for the Hospital Readmissions Reduction
Program and the Hospital-Acquired Condition (HAC) Reduction Program.
Under various statutory authorities, we either discuss continued
program implementation or are proposing to make changes to the Medicare
IPPS, to the LTCH PPS, and to other related payment methodologies and
programs for FY 2021 and subsequent fiscal years. These statutory
authorities include, but are not limited to, the following:
Section 1886(d) of the Social Security Act (the Act),
which sets forth a system of payment for the operating costs of acute
care hospital inpatient stays under Medicare Part A (Hospital
Insurance) based on prospectively set rates. Section 1886(g) of the Act
requires that, instead of paying for capital-related costs of inpatient
hospital services on a reasonable cost basis, the Secretary use a
prospective payment system (PPS).
Section 1886(d)(1)(B) of the Act, which specifies that
certain hospitals and hospital units are excluded from the IPPS. These
hospitals and units are: Rehabilitation hospitals and units; LTCHs;
psychiatric hospitals and units; children's hospitals; cancer
hospitals; extended neoplastic disease care hospitals, and hospitals
located outside the 50 States, the District of Columbia, and Puerto
Rico (that is, hospitals located in the U.S. Virgin Islands, Guam, the
Northern Mariana Islands, and American Samoa). Religious nonmedical
health care institutions (RNHCIs) are also excluded from the IPPS.
Sections 123(a) and (c) of the BBRA Public Law (Pub. L.
106-113) and section 307(b)(1) of the BIPA (Pub. L. 106-554) (as
codified under section 1886(m)(1) of the Act), which provide for the
development and implementation of a prospective payment system for
payment for inpatient hospital services of LTCHs described in section
1886(d)(1)(B)(iv) of the Act.
Sections 1814(l), 1820, and 1834(g) of the Act, which
specify that payments are made to critical access hospitals (CAHs)
(that is, rural hospitals or facilities that meet certain statutory
requirements) for inpatient and outpatient services and that these
payments are generally based on 101 percent of reasonable cost.
Section 1866(k) of the Act, which provides for the
establishment of a quality reporting program for hospitals described in
section 1886(d)(1)(B)(v) of the Act, referred to as ``PPS-exempt cancer
hospitals.''
Section 1886(a)(4) of the Act, which specifies that costs
of approved educational activities are excluded from the operating
costs of inpatient hospital services. Hospitals with approved graduate
medical education (GME) programs are paid for the direct costs of GME
in accordance with section 1886(h) of the Act.
Section 1886(b)(3)(B)(viii) of the Act, which requires the
Secretary to reduce the applicable percentage increase that would
otherwise apply to the standardized amount applicable to a subsection
(d) hospital for discharges occurring in a fiscal year if the hospital
does not submit data on measures in a form and manner, and at a time,
specified by the Secretary.
Section 1886(o) of the Act, which requires the Secretary
to establish a Hospital Value-Based Purchasing (VBP) Program, under
which value-based incentive payments are made in a fiscal year to
hospitals meeting performance standards established for a performance
period for such fiscal year.
Section 1886(p) of the Act, which establishes a Hospital-
Acquired Condition (HAC) Reduction Program, under which payments to
applicable hospitals are adjusted to provide an incentive to reduce
hospital-acquired conditions.
Section 1886(q) of the Act, as amended by section 15002 of
the 21st

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Century Cures Act, which establishes the Hospital Readmissions
Reduction Program. Under the program, payments for discharges from an
applicable hospital as defined under section 1886(d) of the Act will be
reduced to account for certain excess readmissions. Section 15002 of
the 21st Century Cures Act directs the Secretary to compare hospitals
with respect to the number of their Medicare-Medicaid dual-eligible
beneficiaries (dual-eligibles) in determining the extent of excess
readmissions.
Section 1886(r) of the Act, as added by section 3133 of
the Affordable Care Act, which provides for a reduction to
disproportionate share hospital (DSH) payments under section
1886(d)(5)(F) of the Act and for a new uncompensated care payment to
eligible hospitals. Specifically, section 1886(r) of the Act requires
that, for fiscal year 2014 and each subsequent fiscal year, subsection
(d) hospitals that would otherwise receive a DSH payment made under
section 1886(d)(5)(F) of the Act will receive two separate payments:
(1) 25 percent of the amount they previously would have received under
section 1886(d)(5)(F) of the Act for DSH (``the empirically justified
amount''), and (2) an additional payment for the DSH hospital's
proportion of uncompensated care, determined as the product of three
factors. These three factors are: (1) 75 percent of the payments that
would otherwise be made under section 1886(d)(5)(F) of the Act; (2) 1
minus the percent change in the percent of individuals who are
uninsured; and (3) a hospital's uncompensated care amount relative to
the uncompensated care amount of all DSH hospitals expressed as a
percentage.
Section 1886(m)(6) of the Act, as added by section
1206(a)(1) of the Pathway for Sustainable Growth Rate (SGR) Reform Act
of 2013 (Pub. L. 113-67) and amended by section 51005(a) of the
Bipartisan Budget Act of 2018 (Pub. L. 115-123), which provided for the
establishment of site neutral payment rate criteria under the LTCH PPS,
with implementation beginning in FY 2016. Section 51005(b) of the
Bipartisan Budget Act of 2018 amended section 1886(m)(6)(B) by adding
new clause (iv), which specifies that the IPPS comparable amount
defined in clause (ii)(I) shall be reduced by 4.6 percent for FYs 2018
through 2026.
Section 1899B of the Act, as added by section 2(a) of the
Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT
Act) (Pub. L. 113-185), which provides for the establishment of
standardized data reporting for certain post-acute care providers,
including LTCHs.
2. Waiver of the 60-Day Delayed Effective Date for the Final Rule
The United States is responding to an outbreak of respiratory
disease caused by a novel (new) coronavirus that has now been detected
in more than 190 locations internationally, including in all 50 States
and the District of Columbia. The virus has been named ``SARS-CoV-2''
and the disease it causes has been named ``coronavirus disease 2019''
(abbreviated ``COVID-19'').
Due to the significant devotion of resources to the COVID-19
response, as discussed and for the reasons discussed in section XI.D.
of the preamble of this propose rule, we are hereby waiving the 60-day
delay in the effective date of the final rule, and replacing it with a
30-day delay in the effective date of the final rule.
3. Summary of the Major Provisions
The following is a summary of the major provisions in this proposed
rule. In general, these major provisions are being proposed as part of
the annual update to the payment policies and payment rates, consistent
with the applicable statutory provisions. A general summary of the
proposed changes in this proposed rule is presented in section I.D. of
the preamble of this proposed rule.
a. Proposed MS-DRG Documentation and Coding Adjustment
Section 631 of the American Taxpayer Relief Act of 2012 (ATRA, Pub.
L. 112-240) amended section 7(b)(1)(B) of Public Law 110-90 to require
the Secretary to make a recoupment adjustment to the standardized
amount of Medicare payments to acute care hospitals to account for
changes in MS- DRG documentation and coding that do not reflect real
changes in case-mix, totaling $11 billion over a 4-year period of FYs
2014, 2015, 2016, and 2017. The FY 2014 through FY 2017 adjustments
represented the amount of the increase in aggregate payments as a
result of not completing the prospective adjustment authorized under
section 7(b)(1)(A) of Public Law 110-90 until FY 2013. Prior to the
ATRA, this amount could not have been recovered under Public Law 110-
90. Section 414 of the Medicare Access and CHIP Reauthorization Act of
2015 (MACRA) (Pub. L. 114-10) replaced the single positive adjustment
we intended to make in FY 2018 with a 0.5 percent positive adjustment
to the standardized amount of Medicare payments to acute care hospitals
for FYs 2018 through 2023. (The FY 2018 adjustment was subsequently
adjusted to 0.4588 percent by section 15005 of the 21st Century Cures
Act.) Therefore, for FY 2021, we are proposing to make an adjustment of
+ 0.5 percent to the standardized amount.
b. Proposed Changes to the New Technology Add-On Payment Policy for
Certain Antimicrobial Products
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42292 through
42297), we established an alternative inpatient new technology add-on
payment pathway for certain antimicrobial products in light of the
significant concerns related to the ongoing public health crisis
represented by antimicrobial resistance. Under this alternative
pathway, if a medical product receives the FDA's Qualified Infectious
Disease Product (QIDP) designation and received FDA marketing
authorization, such a product will be considered new and not
substantially similar to an existing technology for purposes of new
technology add-on payment under the IPPS and will not need to meet the
requirement that it represent an advance that substantially improves,
relative to technologies previously available, the diagnosis or
treatment of Medicare beneficiaries.
In light of recent information that continues to highlight the
significant concerns and impacts related to antimicrobial resistance
and emphasizes the continued importance of this issue both with respect
to Medicare beneficiaries and public health overall, we are proposing
changes to the new technology add-on payment policy for certain
antimicrobials for FY 2021.
As discussed in section II.G.9.b. of the preamble of this proposed
rule, we are proposing to expand our alternative new technology add-on
payment pathway for QIDPs to include products approved through FDA's
Limited Population Pathway for Antibacterial and Antifungal Drugs (LPAD
pathway). Under this proposal, for applications received for new
technology add-on payments for FY 2022 and subsequent fiscal years, if
an antimicrobial product is approved through FDA's LPAD pathway, it
will be considered new and not substantially similar to an existing
technology for purposes of the new technology add-on payment under the
IPPS, and will not need to meet the requirement that it represent an
advance that substantially improves, relative to technologies
previously available, the diagnosis or treatment of Medicare
beneficiaries.
Under current policy, a new technology must receive FDA marketing

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authorization (for example, approval or clearance) by July 1 to be
considered in the final rule in order to allow complete review and
consideration of all the information to determine if the technology
meets the new technology add-on payment criteria. For the reasons
discussed in section II.G.9.c. of the preamble of this proposed rule,
we are proposing to provide for conditional new technology add-on
payment approval for products designated as QIDPs that do not receive
FDA marketing authorization by July 1 and products that do not receive
approval through FDA's LPAD pathway by July 1 but otherwise meet the
applicable add-on payment criteria. Under this proposal, cases
involving eligible antimicrobial products would begin receiving the new
technology add-on payment sooner, effective for discharges the quarter
after the date of FDA marketing authorization provided that the
technology receives FDA marketing authorization by July 1 of the
particular fiscal year for which the applicant applied for new
technology add-on payments.
c. Continuation of the Low Wage Index Hospital Policy
To help mitigate wage index disparities between high wage and low
hospitals, in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42326 through
42332), we adopted a policy to provide an opportunity for certain low
wage index hospitals to increase employee compensation by increasing
the wage index values for certain hospitals with low wage index values
(the low wage index hospital policy). This policy was adopted in a
budget neutral manner through an adjustment applied to the standardized
amounts for all hospitals. We also indicated that this policy would be
effective for at least 4 years, beginning in FY 2020, in order to allow
employee compensation increases implemented by these hospitals
sufficient time to be reflected in the wage index calculation.
Therefore, for FY 2021, we are continuing the low wage index hospital
policy, and also applying this policy in a budget neutral manner by
proposing an adjustment to the standardized amounts.
d. Proposed DSH Payment Adjustment and Additional Payment for
Uncompensated Care
Section 3133 of the Affordable Care Act modified the Medicare
disproportionate share hospital (DSH) payment methodology beginning in
FY 2014. Under section 1886(r) of the Act, which was added by section
3133 of the Affordable Care Act, starting in FY 2014, DSHs receive 25
percent of the amount they previously would have received under the
statutory formula for Medicare DSH payments in section 1886(d)(5)(F) of
the Act. The remaining amount, equal to 75 percent of the amount that
otherwise would have been paid as Medicare DSH payments, is paid as
additional payments after the amount is reduced for changes in the
percentage of individuals that are uninsured. Each Medicare DSH will
receive an additional payment based on its share of the total amount of
uncompensated care for all Medicare DSHs for a given time period.
In this proposed rule, we set forth our proposed estimates of the
three factors used to determine uncompensated care payments for FY
2021. We are proposing to continue to use uninsured estimates produced
by CMS' Office of the Actuary (OACT) as part of the development of the
National Health Expenditure Accounts (NHEA) in the calculation of
Factor 2. In addition, we are proposing to use a single year of data on
uncompensated care costs from Worksheet S-10 of the FY 2017 cost
reports to calculate Factor 3 in the FY 2021 methodology for all
eligible hospitals with the exception of Indian Health Service (IHS)
and Tribal hospitals and Puerto Rico hospitals. For IHS and Tribal
hospitals and Puerto Rico hospitals we are proposing to continue to use
the low-income insured days proxy to calculate Factor 3 for these
hospitals for 1 more year. Furthermore, we are proposing to calculate
Factor 3 for all subsequent fiscal years for all eligible hospitals,
except IHS and Tribal hospitals, using the most recent available single
year of audited Worksheet S-10 data. We are also making other
methodological proposals for calculating Factor 3 for FY 2021.
e. Reduction of Hospital Payments for Excess Readmissions
We are proposing to make changes to policies for the Hospital
Readmissions Reduction Program, which was established under section
1886(q) of the Act, as amended by section 15002 of the 21st Century
Cures Act. The Hospital Readmissions Reduction Program requires a
reduction to a hospital's base operating DRG payment to account for
excess readmissions of selected applicable conditions. For FY 2017 and
subsequent years, the reduction is based on a hospital's risk-adjusted
readmission rate during a 3-year period for acute myocardial infarction
(AMI), heart failure (HF), pneumonia, chronic obstructive pulmonary
disease (COPD), elective primary total hip arthroplasty/total knee
arthroplasty (THA/TKA), and coronary artery bypass graft (CABG)
surgery. In this FY 2021 IPPS/LTCH PPS proposed rule, we are proposing
the following policies: (1) To automatically adopt applicable periods
beginning with the FY 2023 program year and all subsequent program
years, unless otherwise specified by the Secretary; and (2) to update
the definition of applicable period at 42 CFR 412.152 to align with
this proposal.
f. Hospital Value-Based Purchasing (VBP) Program
Section 1886(o) of the Act requires the Secretary to establish a
Hospital VBP Program under which value-based incentive payments are
made in a fiscal year to hospitals based on their performance on
measures established for a performance period for such fiscal year. In
this FY 2021 IPPS/LTCH PPS proposed rule, we are providing estimated
and newly established performance standards for certain measures for
the FY 2023 program year, the FY 2024 program year, the FY 2025 program
year, and the FY 2026 program year.
g. Hospital-Acquired Condition (HAC) Reduction Program
Section 1886(p) of the Act establishes an incentive to hospitals to
reduce the incidence of hospital-acquired conditions by requiring the
Secretary to make an adjustment to payments to applicable hospitals,
effective for discharges beginning on October 1, 2014. This 1-percent
payment reduction applies to hospitals that rank in the worst-
performing quartile (25 percent) of all applicable hospitals, relative
to the national average, of conditions acquired during the applicable
period and on all of the hospital's discharges for the specified fiscal
year. In this FY 2021 IPPS/LTCH PPS proposed rule, we are proposing the
following policies: (1) To automatically adopt applicable periods
beginning with the FY 2023 program year and all subsequent program
years, unless otherwise specified by the secretary, (2) to make
refinements to the process for validation of HAC Reduction Program
measure data in alignment with the Hospital IQR Program validation
proposals; and (3) to update the definition of applicable period at 42
CFR 412.170 to align with the proposal to automatically adopt
applicable periods.
h. Hospital Inpatient Quality Reporting (IQR) Program
Under section 1886(b)(3)(B)(viii) of the Act, subsection (d)
hospitals are required to report data on measures

[[Page 32464]]

selected by the Secretary for a fiscal year in order to receive the
full annual percentage increase that would otherwise apply to the
standardized amount applicable to discharges occurring in that fiscal
year.
In this FY 2021 IPPS/LTCH PPS proposed rule, we are proposing
reporting, submission, and public display requirements for eCQMs,
including policies to: (1) Progressively increase the numbers of
quarters of eCQM data reported, from one self-selected quarter of data
to four quarters of data over a 3-year period, by requiring hospitals
to report: (a) Two quarters of data for the CY 2021 reporting period/FY
2023 payment determination; (b) three quarters of data for the CY 2022
reporting period/FY 2024 payment determination; and (c) four quarters
of data beginning with the CY 2023 reporting period/FY 2025 payment
determination and for subsequent years, while continuing to allow
hospitals to report: (i) Three self-selected eCQMs, and (ii) the Safe
Use of Opioids eCQM; and (2) begin public display of eCQM data
beginning with data reported by hospitals for the CY 2021 reporting
period and for subsequent years. The eCQM-related proposals are in
alignment with proposals under the Promoting Interoperability Program.
We also are proposing to expand the requirement to use EHR technology
certified to the 2015 Edition for submitting data on not only the
previously finalized Hybrid Hospital-Wide Readmission measure, but all
hybrid measures in the Hospital IQR Program.
We also are proposing to make several changes to streamline
validation processes under the Hospital IQR Program. We are proposing
to: (1) Require the use of electronic file submissions via a CMS-
approved secure file transmission process and no longer allow the
submission of paper copies of medical records or copies on digital
portable media such as CD, DVD, or flash drive; (2) combine the
validation processes for chart-abstracted measures and eCQMs by: (a)
Aligning data submission quarters; (b) combining hospital selection,
including: (i) Reducing the pool of hospitals randomly selected for
chart-abstracted measure validation; and (ii) integrating and applying
targeting criteria for eCQM validation; (c) removing previous exclusion
criteria; and (d) combining scoring processes by providing one combined
validation score for the validation of chart-abstracted measures and
eCQMs with the eCQM portion of the combined score weighted at zero; and
(3) formalize the process for conducting educational reviews for eCQM
validation in alignment with current processes for providing feedback
for chart-abstracted validation results.
h. PPS-Exempt Cancer Hospital Quality Reporting Program
Section 1866(k)(1) of the Act requires, for purposes of FY 2014 and
each subsequent fiscal year, that a hospital described in section
1886(d)(1)(B)(v) of the Act (a PPS-exempt cancer hospital, or a PCH)
submit data in accordance with section 1866(k)(2) of the Act with
respect to such fiscal year. There is no financial impact to PCH
Medicare payment if a PCH does not participate.
In this FY 2021 IPPS/LTCH PPS proposed rule, we are proposing to
refine two existing program measures, Catheter-associated Urinary Tract
infection (CAUTI) (NQF #0138) and Central Line-associated Bloodstream
Infection (CLABSI) (NQF #0139), to adopt the updated SIR calculation
methodology developed by the Center for Disease Control and Prevention
(CDC) that calculates rates using updated HAI baseline data that are
further stratified by patient location. We are also proposing to
publicly display the refined versions of the measures beginning in the
fall of CY 2022.
i. Medicare and Medicaid Promoting Interoperability Programs
For purposes of an increased level of stability, reducing the
burden on eligible hospitals and CAHs, and clarifying certain existing
policies, we are proposing several changes to the Medicare Promoting
Interoperability Program. Specifically, we are proposing: (1) An EHR
reporting period of a minimum of any continuous 90-day period in CY
2022 for new and returning participants (eligible hospitals and CAHs);
(2) to maintain the Electronic Prescribing Objective's Query of PDMP
measure as optional and worth 5 bonus points in CY 2021; (3) to modify
the name of the Support Electronic Referral Loops by Receiving and
Incorporating Health Information measure; (4) to progressively increase
the number of quarters for which hospitals are required to report eCQM
data, from the current requirement of one self-selected calendar
quarter of data, to four calendar quarters of data, over a 3-year
period. Specifically, we propose to require: (a) 2 self-selected
calendar quarters of data for the CY 2021 reporting period; (b) 3 self-
selected calendar quarters of data for the CY 2022 reporting period;
and (c) 4 self-selected calendar quarters of data beginning with the CY
2023 reporting period, where the proposed submission period for the
Medicare Promoting Interoperability Program would be the 2 months
following the close of the CY 2023 (ending February 28, 2024); (5) to
begin publicly reporting eCQM performance data beginning with the eCQM
data reported by eligible hospitals and CAHs for the reporting period
in CY 2021 on the Hospital Compare and/or data.medicare.gov websites or
successor websites; (6) to correct errors and amend regulation text
under 495.104(c)(5)(viii)(B) through (D) regarding transition factors
under section 1886(n)(2)(E)(i) for the incentive payments for Puerto
Rico eligible hospitals; and (7) to correct errors and amend regulation
text under Sec. 495.20(e)(5)(iii) and (l)(11)(ii)(C)(1) for regulatory
citations for the ONC certification criteria. We are amending our
regulation texts as necessary to incorporate these proposed changes.
j. Market-Based MS-DRG Relative Weight Proposed Data Collection and
Potential Change in Methodology for Calculating MS-DRG Relative Weights
As discussed in section IV.P. of the preamble of this proposed
rule, in order to reduce the Medicare program's reliance on the
hospital chargemaster, thereby advancing the critical goals of
Executive Orders 13813, Promoting Healthcare Choice and Competition
Across the United States and 13890, Protecting and Improving Medicare
for Our Nation's Seniors, and to support the development of a market-
based approach to payment under the Medicare FFS system, we are
proposing that hospitals would be required to report certain market-
based payment rate information on their Medicare cost report for cost
reporting periods ending on or after January 1, 2021, to be used in a
potential change to the methodology for calculating the IPPS MS-DRG
relative weights to reflect relative market-based pricing
We are specifically proposing that hospitals would report on the
Medicare cost report: (1) The median payer-specific negotiated charge
that the hospital has negotiated with all of its Medicare Advantage
(MA) organizations (also referred to as MA organizations) payers, by
MS-DRG; and (2) the median payer-specific negotiated charge the
hospital has negotiated with all of its third-party payers, which would
include MA organizations, by MS-DRG. The market-based rate information
we are proposing to collect on the Medicare cost report would be the
median of the payer-specific negotiated charges by MS-DRG, as described
previously, for a hospital's MA organization payers and all of its
third party payers. The payer-

[[Page 32465]]

specific negotiated charges used by hospitals to calculate these
medians would be the payer-specific negotiated charges for service
packages that hospitals are required to make public under the
requirements we finalized in the Hospital Price Transparency Final Rule
(84 FR 65524) that can be cross-walked to an MS-DRG. We believe that
because hospitals are already required to publically report payer-
specific negotiated charges, in accordance with the Hospital Price
Transparency Final Rule, that the additional calculation and reporting
of the median payer-specific negotiated charge will be less burdensome
for hospitals.
We are also seeking comment on a potential change to the
methodology for calculating the IPPS MS-DRG relative weights to
incorporate this market-based rate information, beginning in FY 2024,
which we may consider adopting in the FY 2021 IPPS/LTCH PPS final rule.
This potential MS-DRG relative weight methodology would utilize the
proposed median payer-specific negotiated charge information, collected
on the cost report, for calculating the MS-DRG relative weights.
4. Summary of Costs and Benefits
Proposed Adjustment for MS-DRG Documentation and Coding
Changes. Section 414 of the MACRA replaced the single positive
adjustment we intended to make in FY 2018 once the recoupment required
by section 631 of the ATRA was complete with a 0.5 percentage point
positive adjustment to the standardized amount of Medicare payments to
acute care hospitals for FYs 2018 through 2023. (The FY 2018 adjustment
was subsequently adjusted to 0.4588 percentage point by section 15005
of the 21st Century Cures Act.) For FY 2021, we are proposing to make
an adjustment of +0.5 percentage point to the standardized amount
consistent with the MACRA.
Proposed Changes to the New Technology Add-On
Payment Policy for Certain Antimicrobial Products. In light of recent
information that continues to highlight the significant concerns and
impacts related to antimicrobial resistance and emphasizes the
continued importance of this issue both with respect to Medicare
beneficiaries and public health overall, we are proposing changes to
the new technology add-on payment policy for certain antimicrobials for
FY 2021. We are proposing to expand our alternative new technology add-
on payment pathway for QIDPs to include products approved through FDA's
Limited Population Pathway for Antibacterial and Antifungal Drugs (LPAD
pathway). Under this proposal, for applications received for new
technology add-on payments for FY 2022 and subsequent fiscal years, if
an antimicrobial product is approved through FDA's LPAD pathway, it
will be considered new and not substantially similar to an existing
technology for purposes of the new technology add-on payment under the
IPPS, and will not need to meet the requirement that it represent an
advance that substantially improves, relative to technologies
previously available, the diagnosis or treatment of Medicare
beneficiaries.
We are also proposing to provide for conditional new technology
add-on payment approval for products designated as QIDPs that do not
receive FDA marketing authorization by July 1 and products that do not
receive approval through FDA's LPAD pathway by July 1 (the current
deadline for consideration in the final rule) but otherwise meet the
applicable add-on payment criteria. Under this proposal, cases
involving eligible antimicrobial products would begin receiving the new
technology add-on payment sooner, effective for discharges the quarter
after the date of FDA marketing authorization provided that the
technology receives FDA marketing authorization by July 1 of the
particular fiscal year for which the applicant applied for new
technology add-on payments. Given the relatively recent introduction of
the FDA's LPAD pathway there have not been any drugs that were approved
under the FDA's LPAD pathway that applied for a new technology add-on
payment under the IPPS. If all of the future LPADs that would have
applied for new technology add-on payments would have been approved
under existing criteria, this proposal has no impact relative to
current policy. To the extent that there are future LPADs that are the
subject of applications for new technology add-on payments, and those
applications would have been denied under the current new technology
add-on payment criteria, this proposal is a cost, but that cost is not
estimable. Therefore, it is not possible to quantify the impact of
these proposed policies.
Wage Index Disparities Between High and Low Wage Index
Hospitals. As discussed in section III.G.3. of the preamble of this
proposed rule, we are continuing to reduce the disparity between high
and low wage index hospitals by increasing the wage index values for
certain hospitals with low wage index values and proposing to apply a
budget neutrality adjustment to the standardized amount so that
increase is implemented in a budget neutral manner.
Proposed Medicare DSH Payment Adjustment and Additional
Payment for Uncompensated Care. For FY 2021, we are proposing to update
our estimates of the three factors used to determine uncompensated care
payments. We are proposing to continue to use uninsured estimates
produced by OACT as part of the development of the NHEA in the
calculation of Factor 2. We also are proposing to use a single year of
data on uncompensated care costs from Worksheet S-10 for FY 2017 to
determine Factor 3 for FY 2021. To determine the amount of
uncompensated care for purposes of calculating Factor 3 for Puerto Rico
hospitals and Indian Health Service and Tribal hospitals, we are
proposing to continue to use only data regarding low-income insured
days for FY 2013. We project that the amount available to distribute as
payments for uncompensated care for FY 2021 would decrease by
approximately $534 million, as compared to our estimate of the
uncompensated care payments that will be distributed in FY 2020. The
payments have redistributive effects, based on a hospital's
uncompensated care amount relative to the uncompensated care amount for
all hospitals that are projected to be eligible to receive Medicare DSH
payments, and the calculated payment amount is not directly tied to a
hospital's number of discharges.
Proposed Update to the LTCH PPS Payment Rates and Other
Payment Policies. Based on the best available data for the 360 LTCHs in
our database, we estimate that the proposed changes to the payment
rates and factors that we present in the preamble of and Addendum to
this proposed rule, which reflect the end of the transition of the
statutory application of the site neutral payment rate and the proposed
update to the LTCH PPS standard Federal payment rate for FY 2021, would
result in an estimated decrease in payments in FY 2021 of approximately
$36 million.
Changes to the Hospital Readmissions Reduction Program.
For FY 2021 and subsequent years, the reduction is based on a
hospital's risk-adjusted readmission rate during a 3-year period for
acute myocardial infarction (AMI), heart failure (HF), pneumonia,
chronic obstructive pulmonary disease (COPD), elective primary total
hip arthroplasty/total knee arthroplasty (THA/TKA), and coronary artery
bypass graft (CABG) surgery. For the proposed rule, we are not
providing updated estimates based on the proxy file due to timing.
Instead, we reiterate the information contained in the FY 2020 IPPS/
LTCH PPS final rule, in

[[Page 32466]]

which we estimated that 2,583 hospitals would have their base operating
DRG payments reduced by their FY 2020 hospital-specific payment
adjustment factors. As a result, we estimated that the Hospital
Readmissions Reduction Program will save approximately $563 million in
FY 2020. We will update these estimates in the FY 2021 IPPS/LTCH PPS
final rule as the data become available.
Value-Based Incentive Payments under the Hospital VBP
Program. We estimate that there will be no net financial impact to
participating hospitals under the Hospital VBP Program for the FY 2021
program year in the aggregate because, by law, the amount available for
value-based incentive payments under the program in a given year must
be equal to the total amount of base operating MS-DRG payment amount
reductions for that year, as estimated by the Secretary. The estimated
amount of base operating MS-DRG payment amount reductions for the FY
2021 program year and, therefore, the estimated amount available for
value-based incentive payments for FY 2021 discharges is approximately
$1.9 billion.
Changes to the HAC Reduction Program. A hospital's Total
HAC Score and its ranking in comparison to other hospitals in any given
year depend on several different factors. We are making no changes to
the scoring methodology, which will continue to use the Winsorized z-
score and equal measure weights approaches to determine the worst-
performing quartile of hospitals. Any significant impact due to the HAC
Reduction Program changes for FY 2021, including which hospitals will
receive the adjustment, will depend on the actual experience of
hospitals in the Program.
Changes to the Hospital Inpatient Quality Reporting (IQR)
Program. Across 3,300 IPPS hospitals, we estimate that our proposed
changes for the Hospital IQR Program in this proposed rule would result
in a total information collection burden increase of 6,533 hours
associated with our proposed policies and updated burden estimates and
a total cost increase of approximately $253,480, across a 4-year period
from the CY 2021 reporting period/FY 2023 payment determination through
the CY 2024 reporting period/FY 2026 payment determination.
Changes to the Medicare and Medicaid Promoting
Interoperability Programs. If our proposals are finalized, we estimate
a minor net reduction in burden hours due to correcting a previously
mistaken burden calculation in last year's final rule, as well as a
slight increase in total cost for the Medicare Promoting
Interoperability Program for CY 2021. Unrelated to any of this rule's
Promoting Interoperability Program proposals, the increased alteration
to the annual information collection's total cost is due to utilizing
an updated hourly wage rate for the necessary hospital staff involved
in attesting to the objectives and measures under 42 CFR 495.24(e). The
Bureau of Labor Statistics (BLS) recently released a 2018 wage rate
which, compared to the 2017 rates used in FY 2020 IPPS/LTCH PPS final
rule, would result in an estimated increase of $21,022.32 for the
annual information collection burden (total cost) in FY 2021.
Therefore, multiplying the total annual burden of 21,450 hours by the
2018 BLS labor cost of $69.34, we estimate the Promoting
Interoperability Program's total cost to be $1,487,343 for the CY 2021
EHR reporting period (21,450 hours x $69.34).
Market-Based MS-DRG Relative Weight Proposed
Data Collection and Potential Change in Methodology for Calculating MS-
DRG Relative Weights. In section IV.P.4. of the preamble of this
proposed rule, we are seeking comment on a potential methodology for
estimating the MS-DRG relative weights beginning in FY 2024 based on
the median payer-specific negotiated charge information we are
proposing to collect on the cost report and which we may consider
adopting in the FY 2021 IPPS/LTCH PPS final rule. We note that the
estimated total annual burden hours for this proposal are as follows:
3,189 hospitals times 15 hours per hospital equals 47,835 annual burden
hours and $3,096,838. We refer readers to section XI.B.11. of the
preamble of this proposed rule for further analysis of this assessment.

B. Background Summary

1. Acute Care Hospital Inpatient Prospective Payment System (IPPS)
Section 1886(d) of the 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 beginning on October 1, 2013, that considers the
amount of uncompensated care furnished by the hospital relative to all
other qualifying hospitals.
If the hospital is training residents in an approved residency
program(s), it receives a percentage add-on payment for each case paid
under the IPPS, known as the indirect medical education (IME)
adjustment. This percentage varies, depending on the ratio of residents
to beds.
Additional payments may be made for cases that involve new
technologies or medical services that have been approved for special
add-on payments. In general, 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. In addition, certain transformative new devices and certain
antimicrobial products may qualify under an alternative inpatient new
technology add-on payment pathway by demonstrating that, absent an add-
on payment, they 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.

[[Page 32467]]

Any eligible outlier payment is added to the DRG-adjusted base payment
rate, plus any DSH, IME, and new technology or medical service add-on
adjustments.
Although payments to most hospitals under the IPPS are made on the
basis of the standardized amounts, some categories of hospitals are
paid in whole or in part based on their hospital-specific rate, which
is determined from their costs in a base year. For example, sole
community hospitals (SCHs) receive the higher of a hospital-specific
rate based on their costs in a base year (the highest of FY 1982, FY
1987, FY 1996, or FY 2006) or the IPPS Federal rate based on the
standardized amount. SCHs are the sole source of care in their areas.
Specifically, section 1886(d)(5)(D)(iii) of the Act defines an SCH as a
hospital that is located more than 35 road miles from another hospital
or that, by reason of factors such as an isolated location, weather
conditions, travel conditions, or absence of other like hospitals (as
determined by the Secretary), is the sole source of hospital inpatient
services reasonably available to Medicare beneficiaries. In addition,
certain rural hospitals previously designated by the Secretary as
essential access community hospitals are considered SCHs.
Under current law, the Medicare-dependent, small rural hospital
(MDH) program is effective through FY 2022. For discharges occurring on
or after October 1, 2007, but before October 1, 2022, an MDH receives
the higher of the Federal rate or the Federal rate plus 75 percent of
the amount by which the Federal rate is exceeded by the highest of its
FY 1982, FY 1987, or FY 2002 hospital-specific rate. MDHs are a major
source of care for Medicare beneficiaries in their areas. Section
1886(d)(5)(G)(iv) of the Act defines an MDH as a hospital that is
located in a rural area (or, as amended by the Bipartisan Budget Act of
2018, a hospital located in a State with no rural area that meets
certain statutory criteria), has not more than 100 beds, is not an SCH,
and has a high percentage of Medicare discharges (not less than 60
percent of its inpatient days or discharges in its cost reporting year
beginning in FY 1987 or in two of its three most recently settled
Medicare cost reporting years).
Section 1886(g) of the Act requires the Secretary to pay for the
capital-related costs of inpatient hospital services in accordance with
a prospective payment system established by the Secretary. The basic
methodology for determining capital prospective payments is set forth
in our regulations at 42 CFR 412.308 and 412.312. Under the capital
IPPS, payments are adjusted by the same DRG for the case as they are
under the operating IPPS. Capital IPPS payments are also adjusted for
IME and DSH, similar to the adjustments made under the operating IPPS.
In addition, hospitals may receive outlier payments for those cases
that have unusually high costs.
The existing regulations governing payments to hospitals under the
IPPS are located in 42 CFR part 412, subparts A through M.
2. Hospitals and Hospital Units Excluded From the IPPS
Under section 1886(d)(1)(B) of the Act, as amended, certain
hospitals and hospital units are excluded from the IPPS. These
hospitals and units are: Inpatient rehabilitation facility (IRF)
hospitals and units; long-term care hospitals (LTCHs); psychiatric
hospitals and units; children's hospitals; cancer hospitals; extended
neoplastic disease care hospitals, and hospitals located outside the 50
States, the District of Columbia, and Puerto Rico (that is, hospitals
located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands,
and American Samoa). Religious nonmedical health care institutions
(RNHCIs) are also excluded from the IPPS. Various sections of the
Balanced Budget Act of 1997 (BBA, Pub. L. 105-33), the Medicare,
Medicaid and SCHIP [State Children's Health Insurance Program] Balanced
Budget Refinement Act of 1999 (BBRA, Pub. L. 106-113), and the
Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act
of 2000 (BIPA, Pub. L. 106-554) provide for the implementation of PPSs
for IRF hospitals and units, LTCHs, and psychiatric hospitals and units
(referred to as inpatient psychiatric facilities (IPFs)). (We note that
the annual updates to the LTCH PPS are included along with the IPPS
annual update in this document. Updates to the IRF PPS and IPF PPS are
issued as separate documents.) Children's hospitals, cancer hospitals,
hospitals located outside the 50 States, the District of Columbia, and
Puerto Rico (that is, hospitals located in the U.S. Virgin Islands,
Guam, the Northern Mariana Islands, and American Samoa), and RNHCIs
continue to be paid solely under a reasonable cost-based system,
subject to a rate-of-increase ceiling on inpatient operating costs.
Similarly, extended neoplastic disease care hospitals are paid on a
reasonable cost basis, 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). Section 1206(a) of the Pathway for SGR Reform
Act of 2013 (Pub. L. 113-67) established the site neutral payment rate
under the LTCH PPS, which made the LTCH PPS a dual rate payment system
beginning in FY 2016. Under this statute, effective for LTCH's cost
reporting periods beginning in FY 2016 cost reporting period, LTCHs are
generally paid for discharges at the site neutral payment rate unless
the discharge meets the patient criteria for payment at the LTCH PPS
standard Federal payment rate. The existing regulations governing
payment under the LTCH PPS are located in 42 CFR part 412, subpart O.
Beginning October 1, 2009, we issue the annual updates to the LTCH PPS
in the same documents that update the IPPS.
4. Critical Access Hospitals (CAHs)
Under sections 1814(l), 1820, and 1834(g) of the Act, payments made
to critical access hospitals (CAHs) (that is, rural hospitals or
facilities that meet certain statutory requirements) for inpatient and
outpatient services are generally based on 101 percent of reasonable
cost. Reasonable cost is determined under the provisions of section
1861(v) of the Act and existing regulations under 42 CFR part 413.
5. Payments for Graduate Medical Education (GME)
Under section 1886(a)(4) of the Act, costs of approved educational
activities are excluded from the operating costs of inpatient hospital
services. Hospitals with approved graduate medical education (GME)
programs are paid for the direct costs of GME in accordance with
section 1886(h) of the Act. The amount of payment for direct GME costs
for a cost reporting period is based on the hospital's number of
residents in that period and the hospital's costs per resident in a
base year. The existing regulations governing payments to the various
types of hospitals are located in 42 CFR part 413.

[[Page 32468]]

C. Summary of Provisions of Recent Legislation That Would Be
Implemented in This Proposed Rule

1. Improving Medicare Post-Acute Care Transformation Act of 2014
(IMPACT Act) (Pub. L. 113-185)
The Improving Medicare Post-Acute Care Transformation Act of 2014
(IMPACT Act) (Pub. L. 113-185), enacted on October 6, 2014, made a
number of changes that affect the Long Term Care Hospital Quality
Reporting Program (LTCH QRP). In this proposed rule, there are no
proposals or updates to the LTCH Quality Reporting Program. We are
continuing to maintain portions of section 1899B of the Act, as added
by section 2(a) of the IMPACT Act, which, in part, requires LTCHs,
among other post-acute care providers, to report standardized patient
assessment data, data on quality measures, and data on resource use and
other measures.
2. The Medicare Access and CHIP Reauthorization Act of 2015 (Pub. L.
114-10)
Section 414 of the Medicare Access and CHIP Reauthorization Act of
2015 (MACRA, Pub. L. 114-10) specifies a 0.5 percent positive
adjustment to the standardized amount of Medicare payments to acute
care hospitals for FYs 2018 through 2023. These adjustments follow the
recoupment adjustment to the standardized amounts under section 1886(d)
of the Act based upon the Secretary's estimates for discharges
occurring from FYs 2014 through 2017 to fully offset $11 billion, in
accordance with section 631 of the ATRA. The FY 2018 adjustment was
subsequently adjusted to 0.4588 percent by section 15005 of the 21st
Century Cures Act.
3. Further Consolidated Appropriations Act, 2020 (Pub. L. 116-94)
Section 108 of the Further Consolidated Appropriations Act, 2020
(Pub. L. 116-94) provides that, effective for cost reporting periods
beginning on or after October 1, 2020, payment to a subsection (d)
hospital that furnishes an allogeneic hematopoietic stem cell
transplant for hematopoietic stem cell acquisition shall be made on a
reasonable cost basis, and that the Secretary shall specify the items
included in such hematopoietic stem cell acquisition in rulemaking.
This statutory provision also requires that, beginning in FY 2021, the
payments made based on reasonable cost for the acquisition costs of
allogeneic hematopoietic stem cells be made in a budget neutral manner.

D. Summary of the Provisions of This Proposed Rule

In this proposed rule, we set forth proposed payment and policy
changes to the Medicare IPPS for FY 2021 operating costs and capital-
related costs of acute care hospitals and certain hospitals and
hospital units that are excluded from IPPS. In addition, we set forth
proposed changes to the payment rates, factors, and other payment and
policy-related changes to programs associated with payment rate
policies under the LTCH PPS for FY 2021.
The following is a general summary of the changes that we are
proposing to make in this proposed rule.
1. Proposed Changes to MS-DRG Classifications and Recalibrations of
Relative Weights
In section II. of the preamble of this proposed rule, we include--
Proposed changes to MS-DRG classifications based on our
yearly review for FY 2021.
Proposed adjustment to the standardized amounts under
section 1886(d) of the Act for FY 2021 in accordance with the
amendments made to section 7(b)(1)(B) of Public Law 110-90 by section
414 of the MACRA.
Proposed recalibration of the MS-DRG relative weights.
A discussion of the proposed FY 2021 status of new
technologies approved for add-on payments for FY 2020, a presentation
of our evaluation and analysis of the FY 2021 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) for applications not submitted under an alternative pathway,
and a discussion of the proposed status of FY 2021 new technology
applicants under the alternative pathways for certain medical devices
and certain antimicrobial products.
Proposed revision to the new technology add-on payment
policy where the coding associated with an application for new
technology add-on payments or a previously approved technology that may
continue to receive new technology add-on payments is proposed to be
assigned to a proposed new MS-DRG.
Proposed changes to the timing of the IPPS new technology
add-on payment for certain antimicrobial products, and proposed
expansion of the alternative pathway for certain antimicrobial
products.
2. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals
In section III. of the preamble of this proposed rule we propose to
make revisions to the wage index for acute care hospitals and the
annual update of the wage data. Specific issues addressed include, but
are not limited to, the following:
Proposed changes in the labor market area delineations
based on revisions to the OMB Core Based Statistical Area (CBSA)
delineations and proposed policies related to the proposed changes in
CBSAs.
The proposed FY 2021 wage index update using wage data
from cost reporting periods beginning in FY 2017.
Calculation, analysis, and implementation of the proposed
occupational mix adjustment to the wage index for acute care hospitals
for FY 2021 based on the 2016 Occupational Mix Survey.
Proposed application of the rural floor and the frontier
State floor, and continuation of the low wage index hospital policy.
Proposed revisions to the wage index for acute care
hospitals, based on hospital redesignations and reclassifications under
sections 1886(d)(8)(B), (d)(8)(E), and (d)(10) of the Act.
Proposed change to Lugar county assignments.
Proposed adjustment to the wage index for acute care
hospitals for FY 2021 based on commuting patterns of hospital employees
who reside in a county and work in a different area with a higher wage
index.
Proposed labor-related share for the proposed FY 2021 wage
index.
3. Other Decisions and Proposed Changes to the IPPS for Operating Costs
In section IV. of the preamble of this proposed rule, we discuss
proposed changes or clarifications of a number of the provisions of the
regulations in 42 CFR parts 412 and 413, including the following:
Proposed changes to MS-DRGs subject to the post-acute care
transfer policy and special payment policy.
Proposed inpatient hospital update for FY 2021.
Proposed amendment to address short cost reporting periods
during applicable timeframe for establishment of service area for SCHs.
Proposed updated national and regional case-mix values and
discharges for purposes of determining RRC status, and proposed
amendment for hospital cost reporting periods that are longer or
shorter than 12 months.

[[Page 32469]]

The statutorily required IME adjustment factor for FY
2021.
Proposed changes to the methodologies for determining
Medicare DSH payments and the additional payments for uncompensated
care.
Proposed changes to payment for allogeneic hematopoietic
stem cell acquisition costs.
Proposed payment adjustment for chimeric antigen receptor
(CAR) T-cell therapy clinical trial cases.
Proposed requirements for payment adjustments under the
Hospital Readmissions Reduction Program for FY 2021.
The provision of estimated and newly established
performance standards for the calculation of value-based incentive
payments under the Hospital Value-Based Purchasing Program.
Proposed requirements for payment adjustments to hospitals
under the HAC Reduction Program for FY 2021.
Proposed policy changes related to medical residents
affected by residency program or teaching hospital closure.
Discussion of and proposals relating to the implementation
of the Rural Community Hospital Demonstration Program in FY 2021.
Proposal to collect market-based rate information on the
Medicare cost report for cost reporting periods ending on or after
January 1, 2021, and request for comment on a potential market-based
MS-DRG relative weight methodology beginning in FY 2024, that we may
adopt in this rulemaking.
4. Proposed FY 2021 Policy Governing the IPPS for Capital-Related Costs
In section V. of the preamble to this proposed rule, we discuss the
proposed payment policy requirements for capital-related costs and
capital payments to hospitals for FY 2021.
5. Proposed Changes to the Payment Rates for Certain Excluded
Hospitals: Rate-of-Increase Percentages
In section VI. of the preamble of this proposed rule, we discuss--
Proposed changes to payments to certain excluded hospitals
for FY 2021.
Proposed continued implementation of the Frontier
Community Health Integration Project (FCHIP) Demonstration.
6. Proposed Changes to the LTCH PPS
In section VII. of the preamble of this proposed rule, we set
forth--
Proposed changes to the LTCH PPS Federal payment rates,
factors, and other payment rate policies under the LTCH PPS for FY
2021.
Proposed rebasing and revising of the LTCH PPS market
basket.
7. Proposed Changes Relating to Quality Data Reporting for Specific
Providers and Suppliers
In section VIII. of the preamble of this proposed rule, we
address--
Proposed requirements for the Hospital Inpatient Quality
Reporting (IQR) Program.
Proposed changes to the requirements for the quality
reporting program for PPS-exempt cancer hospitals (PCHQR Program).
The FY 2021 requirements under the LTCH Quality Reporting
Program (LTCH QRP).
Proposed changes to requirements pertaining to eligible
hospitals and CAHs participating in the Medicare and Medicaid Promoting
Interoperability Programs.
8. Other Proposals Included in This Proposed Rule
Section IX. of the preamble to this proposed rule includes the
following proposals:
Proposed changes pertaining to the submission format
requirements and reimbursement rates for patient records sent to the
Beneficiary and Family Centered Care Quality Improvement Organizations
(BFCC-QIOs).
Proposed changes pertaining to allowing for mandatory
electronic filing of Provider Reimbursement Review Board appeals.
Proposed changes pertaining to and codification of certain
longstanding Medicare Bad Debt policies.
9. Other Provisions of This Proposed Rule
Section X. of the preamble preamble to this proposed rule includes
our discussion of the MedPAC Recommendations.
Section XI. of the preamble to this proposed rule includes the
following:
A descriptive listing of the public use files associated
with the proposed rule.
The collection of information requirements for entities
based on our proposals.
Information regarding our responses to public comments.
Waiver of the 60-day delay in effective date for the final
rule.
10. Determining Prospective Payment Operating and Capital Rates and
Rate-of-Increase Limits for Acute Care Hospitals
In sections II. and III. of the Addendum to the proposed rule, we
set forth the proposed changes to the amounts and factors for
determining the proposed FY 2021 prospective payment rates for
operating costs and capital-related costs for acute care hospitals. We
are proposing to establish the threshold amounts for outlier cases. In
addition, in section IV. of the Addendum to the proposed rule, we
address the update factors for determining the rate-of-increase limits
for cost reporting periods beginning in FY 2021 for certain hospitals
excluded from the IPPS.
11. Determining Prospective Payment Rates for LTCHs
In section V. of the Addendum to the proposed rule, we set forth
proposed changes to the amounts and factors for determining the
proposed FY 2021 LTCH PPS standard Federal payment rate and other
factors used to determine LTCH PPS payments under both the LTCH PPS
standard Federal payment rate and the site neutral payment rate in FY
2021. We are proposing to establish the adjustment for wage levels,
including the proposed changes in the CBSAs based on revisions to the
OMB labor market area delineations and a proposed adjustment to reflect
the expected increases in wages under the IPPS low wage index hospital
policy. We are proposing to establish the adjustments for the labor-
related share, the cost-of-living adjustment, and high-cost outliers,
including the applicable fixed-loss amounts and the LTCH cost-to-charge
ratios (CCRs) for both payment rates.
12. Impact Analysis
In Appendix A of this proposed rule, we set forth an analysis of
the impact the proposed changes would have on affected acute care
hospitals, CAHs, LTCHs, PCHs and other entities.
13. 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 provide our recommendations of the
appropriate percentage changes for FY 2021 for the following:
A single average standardized amount for all areas for
hospital inpatient services paid under the IPPS for operating costs of
acute care hospitals (and hospital-specific rates applicable to SCHs
and MDHs).
Target rate-of-increase limits to the allowable operating
costs of hospital inpatient services furnished by certain hospitals
excluded from the IPPS.
The LTCH PPS standard Federal payment rate and the site
neutral payment rate for hospital inpatient

[[Page 32470]]

services provided for LTCH PPS discharges.
14. 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 2020 recommendations concerning hospital inpatient
payment policies address the update factor for hospital inpatient
operating costs and capital-related costs for hospitals under the IPPS.
We address these recommendations in Appendix B of this proposed rule.
For further information relating specifically to the MedPAC March 2020
report or to obtain a copy of the report, contact MedPAC at (202) 220-
3700 or visit MedPAC's website at: http://www.medpac.gov.

E. Advancing Health Information Exchange

The Department of Health and Human Services (HHS) has a number of
initiatives designed to encourage and support the adoption of
interoperable health information technology and to promote nationwide
health information exchange to improve health care and patient access
to their health information. The Office of the National Coordinator for
Health Information Technology (ONC) and CMS work collaboratively to
advance interoperability across settings of care, including post-acute
care.
To further interoperability in across all care settings, CMS
continues to explore opportunities to advance electronic exchange of
patient information across payers, providers and with patients,
including developing systems that use nationally recognized health IT
standards such as Logical Observation Identifier Names and Codes
(LOINC), Systemized Nomenclature of Medicine-Clinical Terms (SNOMED),
and Fast Healthcare Interoperability Recourses (FHIR). In addition, CMS
and ONC are collaborating with industry stakeholders via the Post-Acute
Care Interoperability Workgroup (PACIO) (to develop FHIR-based
standards for post-acute care (PAC) assessment content, which could
support the exchange and reuse of patient http://pacioproject.org/)
assessment data derived from the Minimum Data Set (MDS), Inpatient
Rehabilitation Facility-Patient Assessment Instrument (IRF-PAI), Long
Term Care Hospital Continuity Assessment Record and Evaluation Data Set
(LTCH CARE data set), Outcome Assessment Information Set (OASIS)
assessment tools, and other sources. The Data Element Library (DEL)
(https://del.cms.gov/DELWeb/pubHome) continues to be updated and serves
as the authoritative resource for PAC assessment data elements and
their associated mappings to health IT standards. These interoperable
data elements can reduce provider burden by allowing the use and
exchange of healthcare data, support provider exchange of electronic
health information for care coordination, person-centered care, and
support real-time, data driven, clinical decision-making. Standards in
the DEL (https://del.cms.gov/) can be referenced on the CMS website and
in the ONC Interoperability Standards Advisory (ISA). The 2020 ISA is
available at https://www.healthit.gov/isa.
In the September 30, 2019 Federal Register, we published a final
rule titled, ``Medicare and Medicaid Programs; Revisions to
Requirements for Discharge Planning for Hospitals, Critical Access
Hospitals, and Home Health Agencies, and Hospital and Critical Access
Hospital Changes to Promote Innovation, Flexibility, and Improvement in
Patient Care'' (84 FR 51836) (``Discharge Planning final rule''), that
revises the discharge planning requirements that hospitals (including
psychiatric hospitals, long-term care hospitals, and inpatient
rehabilitation facilities), critical access hospitals (CAHs), and home
health agencies, must meet to participate in Medicare and Medicaid
programs. It also revises one provision regarding patient rights in
hospitals. The rule supports our interoperability efforts by promoting
the exchange of patient information between health care settings, and
by ensuring that a patient's necessary medical information is
transferred with the patient after discharge from a hospital, CAH, or
post-acute care services provider. For more information on the
discharge planning requirements, please visit the final rule at:
https://www.federalregister.gov/documents/2019/09/30/2019-20732/medicare-and-medicaid-programs-revisions-to-requirements-for-discharge-planning-for-hospitals.
We invite providers to learn more about these important
developments and how they are likely to affect LTCHs and encourage the
electronic exchange of health data across care settings and with
patients.

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

A. Background

Section 1886(d) of the Act specifies that the Secretary shall
establish a classification system (referred to as diagnosis-related
groups (DRGs)) for inpatient discharges and adjust payments under the
IPPS based on appropriate weighting factors assigned to each DRG.
(Beginning in FY 2008, CMS adopted the Medicare-Severity DRGs (MS-DRGs)
to better recognize severity of illness and resource use based on case
complexity.) Therefore, under the IPPS, Medicare pays for inpatient
hospital services on a rate per discharge basis that varies according
to the DRG to which a beneficiary's stay is assigned. The formula used
to calculate payment for a specific case multiplies an individual
hospital's payment rate per case by the weight of the DRG to which the
case is assigned. Each DRG weight represents the average resources
required to care for cases in that particular DRG, relative to the
average resources used to treat cases in all DRGs.
Section 1886(d)(4)(C) of the Act requires that the Secretary adjust
the DRG classifications and relative weights at least annually to
account for changes in resource consumption. These adjustments are made
to reflect changes in treatment patterns, technology, and any other
factors that may change the relative use of hospital resources.

B. Adoption of the MS-DRGs and MS-DRG Reclassifications

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).
For general information about the MS-DRG system, including yearly
reviews and changes to the MS-DRGs, we refer readers to the previous
discussions in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR
43764 through 43766) and the FYs 2011 through 2020 IPPS/LTCH PPS final
rules (75 FR 50053 through 50055; 76 FR 51485 through 51487; 77 FR
53273; 78 FR 50512; 79 FR 49871; 80 FR 49342; 81 FR 56787 through
56872; 82 FR 38010 through 38085, 83 FR 41158 through 41258, and 84 FR
42058 through 42165, respectively).

[[Page 32471]]

C. Proposed FY 2021 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 and
the Recoupment or Repayment Adjustment Authorized by Section 631 of the
American Taxpayer Relief Act of 2012 (ATRA)
In the FY 2008 IPPS final rule with comment period (72 FR 47140
through 47189), we adopted the MS-DRG patient classification system for
the IPPS, effective October 1, 2007, to better recognize severity of
illness in Medicare payment rates for acute care hospitals. The
adoption of the MS-DRG system resulted in the expansion of the number
of DRGs from 538 in FY 2007 to 745 in FY 2008. By increasing the number
of MS-DRGs and more fully taking into account patient severity of
illness in Medicare payment rates for acute care hospitals, MS-DRGs
encourage hospitals to improve their documentation and coding of
patient diagnoses.
In the FY 2008 IPPS final rule with comment period (72 FR 47175
through 47186), we indicated that the adoption of the MS-DRGs had the
potential to lead to increases in aggregate payments without a
corresponding increase in actual patient severity of illness due to the
incentives for additional documentation and coding. In that final rule
with comment period, we exercised our authority under section
1886(d)(3)(A)(vi) of the Act, which authorizes us to maintain budget
neutrality by adjusting the national standardized amount, to eliminate
the estimated effect of changes in coding or classification that do not
reflect real changes in case-mix. Our actuaries estimated that
maintaining budget neutrality required an adjustment of -4.8 percentage
points to the national standardized amount. We provided for phasing in
this -4.8 percentage point adjustment over 3 years. Specifically, we
established prospective documentation and coding adjustments of -1.2
percentage points for FY 2008, -1.8 percentage points for FY 2009, and
-1.8 percentage points for FY 2010.
On September 29, 2007, Congress enacted the TMA [Transitional
Medical Assistance], Abstinence Education, and QI [Qualifying
Individuals] Programs Extension Act of 2007 (Pub. L. 110-90). Section
7(a) of Public Law 110-90 reduced the documentation and coding
adjustment made as a result of the MS-DRG system that we adopted in the
FY 2008 IPPS final rule with comment period to -0.6 percentage point
for FY 2008 and -0.9 percentage point for FY 2009.
As discussed in prior year rulemakings, and most recently in the FY
2017 IPPS/LTCH PPS final rule (81 FR 56780 through 56782), we
implemented a series of adjustments required under sections 7(b)(1)(A)
and 7(b)(1)(B) of Public Law 110-90, based on a retrospective review of
FY 2008 and FY 2009 claims data. We completed these adjustments in FY
2013 but indicated in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53274
through 53275) that delaying full implementation of the adjustment
required under section 7(b)(1)(A) of Public Law 110-90 until FY 2013
resulted in payments in FY 2010 through FY 2012 being overstated, and
that these overpayments could not be recovered under Public Law 110-90.
In addition, as discussed in prior rulemakings and most recently in
the FY 2018 IPPS/LTCH PPS final rule (82 FR 38008 through 38009),
section 631 of the American Taxpayer Relief Act of 2012 (ATRA) amended
section 7(b)(1)(B) of Public Law 110-90 to require the Secretary to
make a recoupment adjustment or adjustments totaling $11 billion by FY
2017. This adjustment represented the amount of the increase in
aggregate payments as a result of not completing the prospective
adjustment authorized under section 7(b)(1)(A) of Public Law 110-90
until FY 2013.
2. Adjustments Made for FY 2018, FY 2019, and FY 2020 as Required Under
Section 414 of Public Law 114-10 (MACRA) and Section 15005 of Public
Law 114-255
As stated in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56785),
once the recoupment required under section 631 of the ATRA was
complete, we had anticipated making a single positive adjustment in FY
2018 to offset the reductions required to recoup the $11 billion under
section 631 of the ATRA. However, section 414 of the MACRA (which was
enacted on April 16, 2015) replaced the single positive adjustment we
intended to make in FY 2018 with a 0.5 percentage point positive
adjustment for each of FYs 2018 through 2023. In the FY 2017
rulemaking, we indicated that we would address the adjustments for FY
2018 and later fiscal years in future rulemaking. Section 15005 of the
21st Century Cures Act (Pub. L. 114-255), which was enacted on December
13, 2016, amended section 7(b)(1)(B) of the TMA, as amended by section
631 of the ATRA and section 414 of the MACRA, to reduce the adjustment
for FY 2018 from a 0.5 percentage point positive adjustment to a 0.4588
percentage point positive adjustment. As we discussed in the FY 2018
rulemaking, we believe the directive under section 15005 of Public Law
114-255 is clear. Therefore, in the FY 2018 IPPS/LTCH PPS final rule
(82 FR 38009) for FY 2018, we implemented the required +0.4588
percentage point adjustment to the standardized amount. In the FY 2019
IPPS/LTCH PPS final rule (83 FR 41157) and in the FY 2020 IPPS/LTCH PPS
final rule (84 FR 42057), consistent with the requirements of section
414 of the MACRA, we implemented 0.5 percentage point positive
adjustments to the standardized amount for FY 2019 and FY 2020,
respectively. We indicated that the FY 2018, FY 2019, and FY 2020
adjustments were permanent adjustments to payment rates. We also stated
that we plan to propose future adjustments required under section 414
of the MACRA for FYs 2021 through 2023 in future rulemaking.
3. Proposed Adjustment for FY 2021
Consistent with the requirements of section 414 of the MACRA, we
are proposing to implement a 0.5 percentage point positive adjustment
to the standardized amount for FY 2021. This would constitute a
permanent adjustment to payment rates. We plan to propose future
adjustments required under section 414 of the MACRA for FYs 2022
through 2023 in future rulemaking.

D. Proposed Changes to Specific MS-DRG Classifications

1. Discussion of Changes to Coding System and Basis for Proposed FY
2021 MS-DRG Updates
a. Conversion of MS-DRGs to the International Classification of
Diseases, 10th Revision (ICD-10)
As of October 1, 2015, providers use the International
Classification of Diseases, 10th Revision (ICD-10) coding system to
report diagnoses and procedures for Medicare hospital inpatient
services under the MS-DRG system instead of the ICD-9-CM coding system,
which was used through September 30, 2015. The ICD-10 coding system
includes the International Classification of Diseases, 10th Revision,
Clinical Modification (ICD-10-CM) for diagnosis coding and the
International Classification of Diseases, 10th Revision, Procedure
Coding System (ICD-10-PCS) for inpatient hospital procedure coding, as
well as the ICD-10-CM and ICD-10-PCS Official Guidelines for Coding and

[[Page 32472]]

Reporting. For a detailed discussion of the conversion of the MS-DRGs
to ICD-10, we refer readers to the FY 2017 IPPS/LTCH PPS final rule (81
FR 56787 through 56789).
b. Basis for Proposed FY 2021 MS-DRG Updates
Given the need for more time to carefully evaluate requests and
propose updates, as discussed in the FY 2018 IPPS/LTCH PPS final rule
(82 FR 38010), we changed the deadline to request updates to the MS-
DRGs to November 1 of each year, which provided an additional 5 weeks
for the data analysis and review process. Interested parties had to
submit any comments and suggestions for FY 2021 by November 1, 2019,
and the comments that were submitted in a timely manner for FY 2021 are
discussed in this section of the preamble of this proposed rule. As we
discuss in the sections that follow, we may not be able to fully
consider all of the requests that we receive for the upcoming fiscal
year. We have found that, with the implementation of ICD-10, some types
of requested changes to the MS-DRG classifications require more
extensive research to identify and analyze all of the data that are
relevant to evaluating the potential change. We note in the discussion
that follows those topics for which further research and analysis are
required, and which we will continue to consider in connection with
future rulemaking.
With the continued increase in the number and complexity of the
requested changes to the MS-DRG classifications since the adoption of
ICD-10 MS-DRGs, and in order to consider as many requests as possible,
more time is needed to carefully evaluate the requested changes,
analyze claims data, and consider any proposed updates. Therefore, we
are changing the deadline to request changes to the MS-DRGs to October
20th of each year to allow for additional time for the review and
consideration of any proposed updates. Interested parties should submit
any comments and suggestions for FY 2022 by October 20, 2020 via the
CMS MS-DRG Classification Change Request Mailbox located at:
[email protected].
Based on public comments received in response to the FY 2020 IPPS/
LTCH PPS proposed rule, we are providing a test version of the ICD-10
MS-DRG GROUPER Software, Version 38, so that the public can better
analyze and understand the impact of the proposals included in this
proposed rule. We note that this test software reflects the proposed
GROUPER logic for FY 2021. Therefore, it includes the new diagnosis and
procedure codes that are effective for FY 2021 as reflected in Table
6A.--New Diagnosis Codes--FY 2021 and Table 6B.--New Procedure Codes--
FY 2021 associated with this proposed rule and does not include the
diagnosis codes that are invalid beginning in FY 2021 as reflected in
Table 6C.--Invalid Diagnosis Codes--FY 2021 associated with this
proposed rule. We note that there are not any procedure codes that have
been designated as invalid for FY 2021 at the time of the development
of this proposed rule. These tables are not published in the Addendum
to this proposed rule, but are available via the internet on the CMS
website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html as described in section VI. of the
Addendum to this proposed rule. Because the diagnosis codes no longer
valid for FY 2021 are not reflected in the test software, we are making
available a supplemental file in Table 6P.1a that includes the mapped
Version 38 FY 2021 ICD-10-CM codes and the deleted Version 37 FY 2020
ICD-10-CM codes that should be used for testing purposes with users'
available claims data. Therefore, users will have access to the test
software allowing them to build case examples that reflect the
proposals included in this proposed rule. In addition, users will be
able to view the draft version of the ICD-10 MS-DRG Definitions Manual,
Version 38.
The test version of the ICD-10 MS-DRG GROUPER Software, Version 38,
the draft version of the ICD-10 MS-DRG Definitions Manual, Version 38,
and the supplemental mapping file in Table 6P.1a of FY 2020 and FY 2021
ICD-10-CM diagnosis codes are available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.
Following are the changes that we are proposing to the MS-DRGs for
FY 2021. We are inviting public comments on each of the MS-DRG
classification proposed changes, as well as our proposals to maintain
certain existing MS-DRG classifications discussed in this proposed
rule. In some cases, we are proposing changes to the MS-DRG
classifications based on our analysis of claims data and consultation
with our clinical advisors. In other cases, we are proposing to
maintain the existing MS-DRG classifications based on our analysis of
claims data and consultation with our clinical advisors. For this FY
2021 IPPS/LTCH PPS proposed rule, our MS-DRG analysis was based on ICD-
10 claims data from the September 2019 update of the FY 2019 MedPAR
file, which contains hospital bills received through September 30,
2019, for discharges occurring through September 30, 2019. In our
discussion of the proposed MS-DRG reclassification changes, we refer to
these claims data as the ``September 2019 update of the FY 2019 MedPAR
file.''
As explained in previous rulemaking (76 FR 51487), in deciding
whether to propose to make further modifications to the MS-DRGs for
particular circumstances brought to our attention, we consider whether
the resource consumption and clinical characteristics of the patients
with a given set of conditions are significantly different than the
remaining patients represented in the MS-DRG. We evaluate patient care
costs using average costs and lengths of stay and rely on the judgment
of our clinical advisors to determine whether patients are clinically
distinct or similar to other patients represented in the MS-DRG. In
evaluating resource costs, we consider both the absolute and percentage
differences in average costs between the cases we select for review and
the remainder of cases in the MS-DRG. We also consider variation in
costs within these groups; that is, whether observed average
differences are consistent across patients or attributable to cases
that are extreme in terms of costs or length of stay, or both. Further,
we consider the number of patients who will have a given set of
characteristics and generally prefer not to create a new MS-DRG unless
it would include a substantial number of cases.
In our examination of the claims data, we apply the following
criteria established in FY 2008 (72 FR 47169) to determine if the
creation of a new complication or comorbidity (CC) or major
complication or comorbidity (MCC) subgroup within a base MS-DRG is
warranted:
A reduction in variance of costs of at least 3 percent;
At least 5 percent of the patients in the MS-DRG fall
within the CC or MCC subgroup;
At least 500 cases are in the CC or MCC subgroup;
There is at least a 20-percent difference in average costs
between subgroups; and
There is a $2,000 difference in average costs between
subgroups.
In order to warrant creation of a CC or MCC subgroup within a base
MS-DRG, the subgroup must meet all five of the criteria.
Beginning with this FY 2021 IPPS/LTCH PPS proposed rule, we are
proposing to expand the previously

[[Page 32473]]

listed criteria to also include the NonCC subgroup. We believe that
applying these criteria to the NonCC subgroup would better reflect
resource stratification and also promote stability in the relative
weights by avoiding low volume counts for the NonCC level MS-DRGs.
Specifically, in our analysis of the MS-DRG classification requests
for FY 2021 that we received by November 1, 2019, as well as any
additional analyses that were conducted in connection with those
requests, we applied these criteria to each of the MCC, CC and NonCC
subgroups, as described in the following table. We are providing the
following table to better illustrate all five criteria and how they are
applied for each CC subgroup, including their application to the NonCC
subgroup beginning with this FY 2021 proposed rule. We have revised the
order in which the criteria are presented for illustrative purposes.
[GRAPHIC] [TIFF OMITTED] TP29MY20.000

In general, once the decision has been made to propose to make
further modifications to the MS-DRGs as described previously, such as
creating a new base MS-DRG, or in our evaluation of a specific MS-DRG
classification request to split (or subdivide) an existing base MS-DRG
into severity levels, all five criteria must be met for the base MS-DRG
to be split (or subdivided) by a CC subgroup. We note that in our
analysis of requests to create a new MS-DRG, we evaluate the most
recent year of MedPAR claims data available. For example, we stated
earlier that for this FY 2021 IPPS/LTCH PPS proposed rule, our MS-DRG
analysis was based on ICD-10 claims data from the September 2019 update
of the FY 2019 MedPAR file. However, in our evaluation of requests to
split an existing base MS-DRG into severity levels, as noted in prior
rulemaking (80 FR 49368), we analyze the most recent 2 years of data.
This analysis includes 2 years of MedPAR claims data to compare the
data results from 1 year to the next to avoid making determinations
about whether additional severity levels are warranted based on an
isolated year's data fluctuation and also, to validate that the
established severity levels within a base MS-DRG are supported. The
first step in our process of evaluating if the creation of a new CC
subgroup within a base MS-DRG is warranted is to determine if all the
criteria are satisfied for a three way split. If the criteria fail, the
next step is to determine if the criteria are satisfied for a two way
split. If the criteria for both of the two way splits fail, then a
split (or CC subgroup) would generally not be warranted for that base
MS-DRG. If the three way split fails on any one of the five criteria
and all five criteria for both two way splits (1_23 and 12_3) are met,
we would apply the two way split with the highest R2 value. We note
that if the request to split (or subdivide) an existing base MS-DRG
into severity levels specifies the request is for either one of the two
way splits (1_23 or 12_3), in response to the specific request, we will
evaluate the criteria for both of the two way splits, however we do not
also evaluate the criteria for a three way split.
2. Pre-MDC
a. Bone Marrow Transplants
We received two separate requests that involve the MS-DRGs where
bone marrow transplant procedures are assigned. The first request was
to redesignate MS-DRG 014 (Allogeneic Bone Marrow Transplant), MS-DRG
016 (Autologous Bone Marrow Transplant with CC/MCC or T-Cell
Immunotherapy), and MS-DRG 017 (Autologous Bone Marrow Transplant
without CC/MCC) from surgical MS-DRGs to medical MS-DRGs. According to
the requestor, bone marrow transplant procedures involve a transfusion
of donor cells and do not involve a surgical procedure or require the
resources of an operating room (O.R.). The second request involving
bone marrow transplant procedures was to split MS-DRG 014 (Allogeneic
Bone Marrow Transplant) into two severity levels, based on the presence
of a MCC. In this section of this rule, we discuss each request in more
detail.
With regard to the first request, the requestor noted that the
logic for MS-DRG 014 consists of ICD-10-PCS procedure codes describing
allogeneic bone marrow transplants that are designated as non-operating
room (non-O.R.) procedures. The requestor also noted that the logic for
MS-DRGs 016 and 017 includes ICD-10-PCS procedure codes describing
autologous bone marrow transplants where certain

[[Page 32474]]

procedure codes are designated as O.R. and other procedure codes are
designated as non-O.R. procedures. The requestor stated that
redesignating the bone marrow transplant MS-DRGs from surgical to
medical would clinically align with the resources utilized in the
performance of these procedures.
The requestor is correct that bone marrow transplant procedures are
currently assigned to MS-DRGs 014, 016, and 017 which are classified as
surgical MS-DRGs under the Pre-MDC category for the ICD-10 MS-DRGs. The
requestor is also correct that the logic for MS-DRG 014 consists of
ICD-10-PCS procedure codes describing allogeneic bone marrow
transplants that are designated as non-operating room (non-O.R.)
procedures and that the logic for MS-DRGs 016 and 017 includes ICD-10-
PCS procedure codes describing autologous bone marrow transplants where
certain procedure codes are designated as O.R. procedures and other
procedure codes are designated as non-O.R. procedures. We refer the
reader to the ICD-10 MS-DRG Definitions Manual Version 37 which is
available via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software for complete documentation of the GROUPER
logic for MS-DRGs 014, 016, and 017.
We consulted with our clinical advisors and they agreed that bone
marrow transplant procedures are similar to a blood transfusion
procedure, do not utilize the resources of an operating room, and are
not surgical procedures. Our clinical advisors concurred that bone
marrow transplants are medical procedures and it is more accurate to
designate the MS-DRGs to which these procedures are assigned as medical
MS-DRGs versus surgical MS-DRGs. Therefore, we are proposing to
redesignate MS-DRGs 014, 016, and 017 as medical MS-DRGs effective
October 1, 2020 for FY 2021.
As noted previously, the logic for MS-DRGs 016 and 017 includes
ICD-10-PCS procedure codes describing autologous bone marrow
transplants and related procedures where certain procedure codes are
designated as O.R. and other procedure codes are designated as non-O.R.
procedures. During our review of the bone marrow transplant procedures
assigned to these MS-DRGs we identified the following 8 procedure codes
that are currently designated as O.R procedures.
[GRAPHIC] [TIFF OMITTED] TP29MY20.001

In connection with our proposal to designate the MS-DRGs to which
these procedures are assigned as medical, as well as for clinical
consistency with the other procedure codes describing bone marrow
transplant procedures, we are proposing to redesignate the listed ICD-
10-PCS procedure codes from O.R. to non-O.R. procedures, affecting
their current MS-DRG assignment for MS-DRGs 016 and 017, effective
October 1, 2020 for FY 2021.
As noted earlier in this section, we also received a request to
split MS-DRG 014 (Allogeneic Bone Marrow Transplant) into two severity
levels, based on the presence of a MCC. For FY 2020, the requestor had
requested that MS-DRG 014 be split into two new MS-DRGs according to
donor source. For the reasons discussed in the FY 2020 IPPS/LTCH PPS
proposed rule (84 FR 19176 through 19180) and the FY 2020 IPPS/LTCH PPS
final rule (84 FR 42067 through 42072), we did not propose to split MS-
DRG 014 into two new MS-DRGs according to donor source. However,
according to the requestor, a single (base) MS-DRG for allogeneic bone
marrow and stem cell transplants continues to not be as clinically or
resource homogeneous as it could be. The requestor conducted its own
analysis and stated the results revealed it was appropriate to split
MS-DRG 014 based on the presence of a MCC.
We examined claims data from the September 2019 update of the FY
2019 MedPAR file for MS-DRG 014. There were 962 cases found in MS-DRG
014 with an average length of stay of 26.7 days and average costs of
$89,586.
Consistent with our established process, we conducted an analysis
of MS-DRG 014 to determine if the criteria to create subgroups were
met. The process for conducting this type of analysis includes
examining 2 years of MedPAR claims data to compare the data results
from 1 year to the next to avoid making determinations about whether
additional severity levels are warranted based on an isolated year's
data fluctuation and also, to validate that the established severity
levels within a base MS-DRG are supported. Therefore, we reviewed the
claims data for base MS-DRG 014 using the September 2018 update of the
FY 2018 MedPAR file and the September 2019 update of the FY 2019 MedPAR
file, which were used in our analysis of claims data for MS-DRG
reclassification requests for FY 2020 and FY 2021. Our findings are
shown in the table.

[[Page 32475]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.002

We applied the criteria to create subgroups for each of the two-way
severity level splits. As discussed in section II.D.1.b., beginning
with this FY 2021 IPPS/LTCH PPS proposed rule, we are proposing to
expand the previously listed criteria to also include the NonCC group.
The criterion that there be at least 500 cases for each subgroup failed
due to low volume, as shown in the table for both years. Specifically,
for the ``with MCC'' and ``without MCC'' (CC+NonCC) split, there were
only 183 (141+42) cases in the ``without MCC'' subgroup based on the
data in the FY 2019 MedPAR file and only 175 (140+35) cases in the
``without MCC'' subgroup based on the data in the FY 2018 MedPAR file.
For the ``with CC/MCC'' and ``without CC/MCC'' (NonCC) split, there
were only 42 cases in the NonCC subgroup based on the data in the FY
2019 MedPAR file and only 35 cases in the NonCC subgroup based on the
data in the FY 2018 MedPAR file. The claims data do not support a two-
way severity level split for MS-DRG 014, therefore, we are proposing to
maintain the current structure of MS-DRG 014 for FY 2021.
b. Chimeric Antigen Receptor (CAR) T-Cell Therapies
We received several requests to create a new MS-DRG for procedures
involving CAR T-cell therapies. The requestors stated that creation of
a new MS-DRG would improve payment for CAR T-cell therapies in the
inpatient setting. Some requestors noted that cases involving CAR T-
cell therapies will no longer be eligible for new technology add-on
payments in FY 2021 and that this would significantly reduce the
overall payment for cases involving CAR T-cell therapies. Some
requestors also noted that in the absence of the creation of a new MS-
DRG for procedures involving CAR T-cell therapies, outlier payments for
these cases would increase significantly, which would increase the
share of total outlier payments that are attributable to CAR T-cell
therapies.
The requestors stated that the new MS-DRG for CAR T-cell therapies
should include cases that report ICD-10-PCS procedure codes XW033C3
(Introduction of engineered autologous chimeric antigen receptor t-cell
immunotherapy into peripheral vein, percutaneous approach, new
technology group 3) or XW043C3 (Introduction of engineered autologous
chimeric antigen receptor t-cell immunotherapy into central vein,
percutaneous approach, new technology group 3).
Given the high cost of the CAR T-cell product, some requestors
provided recommendations related to the differential treatment of cases
where the CAR T-cell product was provided without cost as part of a
clinical trial to ensure that the payment amount for the newly created
MS-DRG for CAR T-cell therapy cases would appropriately reflect the
average cost hospitals incur for providing CAR T-cell therapy outside
of a clinical trial. For example, some requestors suggested that CMS
make minor adjustments to its usual ratesetting methodology to exclude
clinical trial claims from the calculation of the relative weight for
any MS-DRG for CAR T-cell therapies. One requestor noted that these
adjustments are consistent with CMS' general authority under sections
1886(d)(4)(B) and (C) of the Act. Some requestors also suggested that
CMS apply an offset to the MS-DRG payment in cases where the provider
does not incur the cost of the CAR T-cell therapy.
Currently, procedures involving CAR T-cell therapies are identified
with ICD-10-PCS procedure codes XW033C3 and XW043C3, which became
effective October 1, 2017. In the FY 2019 IPPS/LTCH PPS final rule, we
finalized our proposal to assign cases reporting these ICD-10-PCS
procedure codes to Pre-MDC MS-DRG 016 for FY 2019 and to revise the
title of this MS-DRG to ``Autologous Bone Marrow Transplant with CC/MCC
or T-cell Immunotherapy''. We refer readers to section II.F.2.d. of the
preamble of the FY 2019 IPPS/LTCH PPS final rule for a complete
discussion of these final policies (83 FR 41172 through 41174).
As noted, the current procedure codes for CAR T-cell therapies both
became effective October 1, 2017. In the FY 2019 IPPS/LTCH PPS final
rule (83 FR 41172 through 41174), we indicated that we believed we
should collect more comprehensive clinical and cost data before
considering assignment of a new MS-DRG to these therapies. We stated in
the FY 2020 IPPS/LTCH PPS proposed rule that, while the September 2018
update of the FY 2018 MedPAR data file does contain some claims that
include those procedure codes that identify CAR T-cell therapies, the
number of cases is limited, and the submitted costs vary widely due to
differences in provider billing and charging practices for this
therapy. Therefore, while those claims could potentially be used to
create relative weights for a new MS-DRG, we stated that we did not
have the comprehensive clinical and cost data that we generally believe
are needed to do so. Furthermore, we stated in the FY 2020 IPPS/LTCH
PPS proposed rule that given the relative newness of CAR T-cell therapy
and our proposal to continue new technology add-on payments for FY 2020
for the two CAR T-cell therapies that currently have FDA approval
(KYMRIAH^TM and YESCARTA^TM), at the time we
believed it was premature to consider creation of a new MS-DRG
specifically for cases involving CAR T-cell therapy for FY 2020. We
stated that in future years we would have additional data that could be
used to evaluate the potential creation of a new MS-DRG specifically
for cases involving CAR T-cell therapies.
We now have more data upon which to evaluate a new MS-DRG
specifically for cases involving CAR T-cell therapies. We agree with
the requestors it is appropriate to consider the development of a new
MS-DRG using the data that is now available. We examined the claims
data from the September 2019 update of the FY 2019 MedPAR data file for
cases that reported ICD-10-PCS procedure codes XW033C3 or XW043C3. For
purposes of this analysis, we identified clinical trial cases as claims
with ICD-10-CM diagnosis code Z00.6 (Encounter for examination for
normal comparison and control in clinical research program) which is
reported only for clinical trial cases, or with standardized drug
charges of less than $373,000, which is the average sales price of
KYMRIAH and YESCARTA, which are the two CAR T-cell medicines approved
to treat relapsed/refractory diffuse large B-cell lymphoma as of the
time of the

[[Page 32476]]

development of this proposed rule. We distinguished between clinical
trial and non-clinical trial cases in this analysis because we agree
with the requestors who indicated that given the high cost of the CAR
T-cell product, it is appropriate to distinguish cases where the CAR T-
cell product was provided without cost as part of a clinical trial so
that the analysis appropriately reflects the resources required to
provide CAR T-cell therapy outside of a clinical trial. We also note
that we included cases that would have been identified as statistical
outliers under our usual process when examined as part of MS-DRG 016
due to the extreme cost differences between the CAR T-cell therapy
claims and other claims in MS-DRG 016, but would not be identified as
statistical outliers when examining CAR T-cell therapy claims only. Our
findings are shown in the table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.003

As shown in the table, we found 2,212 cases in MS-DRG 016, with an
average length of stay of 18.2 days and average costs of $55,001. Of
these 2,212 cases, 262 cases reported ICD-10-PCS procedure codes
XW033C3 or XW043C3; these cases had an average length of stay of 16.3
days and average costs of $127,408. Of these 262 cases, 94 were
identified as non-clinical trial cases; these cases had an average
length of stay of 17.2 days and average costs of $274,952. The
remaining 168 cases were identified as clinical trial cases; these
cases had an average length of stay of 15.8 days and average costs of
$44,853.
The data indicate that the average costs for the non-clinical trial
cases that reported ICD-10-PCS procedure codes XW033C3 or XW043C3 are
almost five times higher than the average costs for all cases in MS-DRG
016. Our clinical advisors also believe that the cases reporting ICD-
10-PCS procedure codes XW033C3 or XW043C3 can be clinically
differentiated from other cases that group to MS-DRG 016, which
includes procedures involving autologous bone marrow transplants, once
the CAR T-cell therapy itself is taken into account in the comparison.
As described earlier in this section, in deciding whether to
propose to make modifications to the MS-DRGs for particular
circumstances brought to our attention, we consider a variety of
factors pertaining to resource consumption and clinical
characteristics. While we generally prefer not to create a new MS-DRG
unless it would include a substantial number of cases, our clinical
advisors believe that the vast discrepancy in resource consumption as
reflected in the claims data analysis and the clinical differences
warrant the creation of a new MS-DRG. We are therefore proposing to
assign cases reporting ICD-10-PCS procedure codes XW033C3 or XW043C3 to
a proposed new MS-DRG 018 (Chimeric Antigen Receptor (CAR) T-cell
Immunotherapy). If additional procedure codes describing CAR-T cell
therapies are approved and finalized, we would use our established
process to assign these procedure codes to the most appropriate MS-DRG.
Because these cases would no longer group to MS-DRG 016, we are
proposing to revise the title for MS-DRG 016 from ``Autologous Bone
Marrow Transplant with CC/MCC or T-cell Immunotherapy'' to ``Autologous
Bone Marrow Transplant with CC/MCC.'' We refer readers to section
II.E.2.b. of the preamble of this proposed rule for a discussion of the
proposed relative weight calculation for the proposed new MS-DRG 018
for CAR T-cell Therapy, and to section IV.I. of the preamble of this
proposed rule for a discussion of the proposed payment adjustment for
CAR T-cell clinical trial cases.
3. MDC 1 (Diseases and Disorders of the Nervous System)
a. Carotid Artery Stent Procedures
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42078), we finalized
our proposal to reassign 96 ICD-10-PCS procedure codes describing
dilation of carotid artery with an intraluminal device(s) from MS-DRGs
037, 038, and 039 (Extracranial Procedures with MCC, with CC, and
without CC/MCC, respectively) to MS-DRGs 034, 035, and 036 (Carotid
Artery Stent Procedures with MCC, with CC, and without CC/MCC,
respectively). We received a request to review six ICD-10-PCS procedure
codes describing dilation of a carotid artery (common, internal or
external) with drug eluting intraluminal devices(s) using an open
approach that are currently assigned to the logic for case assignment
to MS-DRGs 037, 038, and 039 that were not included in the list of
codes finalized for reassignment in the FY 2020 IPPS/LTCH PPS final
rule. The six codes are identified in the following table.

[[Page 32477]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.004

The logic for case assignment to MS-DRGs 034, 035, and 036 as
displayed in the ICD-10 MS-DRG Version 37 Definitions Manual, available
via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.html is comprised of a list of logic which
includes procedure codes for operating room procedures involving
dilation of a carotid artery (common, internal or external) with
intraluminal device(s). All of the ICD-10-PCS procedure codes in the
logic list assigned to MS-DRGs 034, 035, and 036 describe dilation of a
carotid artery with an intraluminal device.
We examined claims data from the September 2019 update of the FY
2019 MedPAR file for MS-DRGs 034, 035, and 036 which only include those
procedure codes that describe procedures that involve dilation of a
carotid artery with an intraluminal device. Our findings are reported
in the table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.005

As shown in the table, we found a total of 1,259 cases in MS-DRG
034 with an average length of stay of 6.9 days and average costs of
$28,668. We found a total of 3,367 cases in MS-DRG 035 with an average
length of stay of 3.0 days and average costs of $17,114. We found a
total of 4,769 cases in MS-DRG 036 with an average length of stay of
1.4 days and average costs of $13,501.
We then examined claims data from the September 2019 update of the
FY 2019 MedPAR file for MS-DRGs 037, 038, and 039 and identified cases
reporting any one of the 6 procedure codes listed in the table
previously to determine the volume of cases impacted and if the average
length of stay and average costs are consistent with the average length
of stay and average costs for MS-DRGs 034, 035 and 036. Our finding are
shown in the following table.

[[Page 32478]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.006

As shown in the table, we found a total of 3,331 cases with an
average length of stay of 7.3 days and average costs of $24,155 in MS-
DRG 037. There were 6 cases reporting at least one of the 6 procedure
codes that describe dilation of the carotid artery with an intraluminal
device using an open approach in MS-DRG 037 with an average length of
stay of 7 days and average costs of $22,272. For MS-DRG 038, we found a
total of 11,021 cases with an average length of stay of 3 days and
average costs of $12,306. There were 33 cases reporting at least one of
the 6 procedure codes that describe dilation of the carotid artery with
an intraluminal device in MS-DRG 038 with an average length of stay of
2.3 days and average costs of $16,777. For MS-DRG 039, we found a total
of 20,854 cases with an average length of stay of 1.4 days and average
costs of $8,463. There were 26 cases reporting at least one of the 6
procedure codes that describe dilation of the carotid artery with an
intraluminal device in MS-DRG 039 with an average length of stay of 1.2
days and average costs of $14,981.
The data analysis shows that for the cases in MS-DRGs 037, 038, and
039 reporting ICD-10-PCS codes 037H04Z, 037J04Z, 037K04Z, 037L04Z,
037M04Z, or 037N04Z, the average length of stay is shorter and the
average costs are higher than the average length of stay and average
costs (with the exception of the average costs for the 6 cases in MS-
DRG 037 which are slightly less) in the FY 2019 MedPAR file for MS-DRGs
037, 038, and 039 respectively. The data analysis also shows for the
cases in MS-DRGs 037, 038, and 039 reporting ICD-10-PCS codes 037H04Z,
037J04Z, 037K04Z, 037L04Z, 037M04Z, and 037N04Z the average length of
stay and the average costs are in-line with the average length of stay
and average costs in the FY 2019 MedPAR file for MS-DRGs 034, 035, and
036 respectively.
As noted in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19184)
and final rule (84 FR 42077), our clinical advisors stated that MS-DRGs
034, 035 and 036 are defined to include only those procedure codes that
describe procedures that involve dilation of a carotid artery with an
intraluminal device.
Therefore, we are proposing to reassign the procedure codes listed
in the table from MS-DRGs 037, 038, and 039 that describe procedures
that involve dilation of the carotid artery with an intraluminal device
to MS-DRGs 034, 035, and 036.
In addition to our analysis of the claims data from the September
2019 MedPAR file for MS-DRGs 037, 038, and 039, we conducted an
examination of all the MS-DRGs where any one of the 6 procedure codes
listed previously were also reported to determine if any one of the 6
procedure codes were included in any other MS-DRG outside of MDC 01, to
further assess the current MS-DRG assignments. Our findings are shown
in the following table.

[[Page 32479]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.007

As shown in the table, we found one case reporting any one of these
6 procedure codes in each of MS-DRGs 023, 027, 035, 219, 233, 235 and
252. We note that all of the listed MS-DRGs are assigned to MDC 01 with
one exception: MS-DRG 252 (Other Vascular Procedures with MCC) in MDC05
(Diseases and Disorders of the Circulatory System). As a result, we
reviewed the logic list for MS-DRGs 252, 253, and 254 (Other Vascular
Procedures with MCC, with CC, and without CC/MCC, respectively) in MDC
05 and found 36 ICD-10-PCS codes for procedures that describe dilation
of the carotid artery with an intraluminal device with an open approach
that are not currently assigned in MDC 01. The 36 ICD-10-PCS codes are
listed in the following table.
BILLING CODE 4120-01-P

[[Page 32480]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.008

[[Page 32481]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.009

BILLING CODE 4120-01-C
We then examined the claims data to determine if there were other
MS-DRGs in which one of the 36 procedure codes listed in the table were
reported. We found 8 cases that grouped to MS-DRGs 981, 982, and 983
(Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC,
with CC, and without CC/MCC, respectively) when a principal diagnosis
from MDC 01 was reported with one of the procedure codes in the table
that describes dilation of a carotid artery with an intraluminal
device, open approach.
As noted previously, in the FY 2020 IPPS/LTCH PPS proposed rule (84
FR 19184) and final rule (84 FR 42077), our clinical advisors stated
that MS-DRGs 034, 035, and 036 are defined to include those procedure
codes that describe procedures that involve dilation of a carotid
artery with an intraluminal device. Our clinical advisors support
adding the 36 ICD-10-PCS codes identified in the table to MS-DRGs 034,
035, and 036 in MDC 01 for consistency to align with the definition of
MS-DRGs 034, 035, and 036 and also to permit proper case assignment
when a principal diagnosis from MDC 01 is reported with one of the
procedure codes in the table that describes dilation of a carotid
artery with an intraluminal device, open approach.
Therefore, for FY 2021, we are also proposing to add the 36 ICD-10-
PCS codes identified in the table that are currently assigned in MDC 05
to MS-DRGs 252, 253, and 254 to the GROUPER logic for MS-DRGs 034, 035,
and 036 in MDC 01.
b. Epilepsy with Neurostimulator
We received a request to reassign cases describing the insertion of
a neurostimulator generator into the skull in combination with the
insertion of a neurostimulator lead into the brain from MS-DRG 023
(Craniotomy with Major Device Implant or Acute Complex Central Nervous
System (CNS) Principal Diagnosis (PDX) with MCC or Chemotherapy Implant
or Epilepsy with Neurostimulator) to MS-DRG 021 (Intracranial Vascular
Procedures with PDX Hemorrhage with CC) or to reassign

[[Page 32482]]

these cases to another MS-DRG for more appropriate payment. The
Responsive Neurostimulator (RNS^(copyright)) System, a
cranially implanted neurostimulator that is a treatment option for
persons diagnosed with medically intractable epilepsy, is identified by
the reporting of an ICD-10-PCS code combination capturing a
neurostimulator generator inserted into the skull with the insertion of
a neurostimulator lead into the brain and cases are assigned to MS-DRG
023 when reported with a principal diagnosis of epilepsy.
As discussed in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38015
through 38019), we finalized our proposal to reassign all cases with a
principal diagnosis of epilepsy and one of the following ICD-10-PCS
code combinations capturing cases with a neurostimulator generator
inserted into the skull with the insertion of a neurostimulator lead
into the brain (including cases involving the use of the
RNS^(copyright) neurostimulator) to MS-DRG 023 even if there
is no MCC reported:
0NH00NZ (Insertion of neurostimulator generator into
skull, open approach), in combination with 00H00MZ (Insertion of
neurostimulator lead into brain, open approach).
0NH00NZ (Insertion of neurostimulator generator into
skull, open approach), in combination with 00H03MZ (Insertion of
neurostimulator lead into brain, percutaneous approach).
0NH00NZ (Insertion of neurostimulator generator into
skull, open approach), in combination with 00H04MZ (Insertion of
neurostimulator lead into brain, percutaneous endoscopic approach).
We also finalized our proposed change to the title of MS-DRG 023
from ``Craniotomy with Major Device Implant or Acute Complex Central
Nervous System (CNS) Principal Diagnosis (PDX) with MCC or Chemo
Implant'' to ``Craniotomy with Major Device Implant or Acute Complex
Central Nervous System (CNS) Principal Diagnosis (PDX) with MCC or
Chemotherapy Implant or Epilepsy with Neurostimulator'' to reflect the
modifications to the MS-DRG structure.
The requestor acknowledged the refinements made to MS-DRG 023
effective for FY 2018, but stated that despite the previously-mentioned
changes, cases describing the insertion of a neurostimulator generator
into the skull in combination with the insertion of a neurostimulator
lead into the brain continue to be underpaid. The requestor performed
its own analysis and stated that it found that the average costs of
cases describing the insertion of the RNS^(copyright)
neurostimulator were significantly higher than the average costs of all
cases in their current assignment to MS-DRG 023, and as a result, cases
describing the insertion of the RNS^(copyright)
neurostimulator are not being adequately reimbursed. The requestor
suggested the following two options for MS-DRG assignment updates: (1)
Reassign cases describing the insertion of a neurostimulator generator
into the skull in combination with the insertion of a neurostimulator
lead into the brain from MS-DRG 023 to MS-DRG 021 with a change in
title to ``lntracranial Vascular Procedures with PDX Hemorrhage with CC
or Epilepsy with Neurostimulator;'' or (2) reassign cases describing
the insertion of a neurostimulator generator into the skull in
combination with the insertion of a neurostimulator lead into the brain
to another higher paying MS-DRG that would provide adequate
reimbursement. The requestor stated its belief that MS-DRG 021 is a
better fit in terms of average costs and clinical coherence for
reassignment of RNS^(copyright) System cases and recognized
that there is likely still not enough volume to warrant the creation of
new MS-DRGs for cases describing the insertion of the
RNS^(copyright) neurostimulator.
We examined claims data from the September 2019 update of the FY
2019 MedPAR file for all cases in MS-DRG 023 and compared the results
to cases representing a neurostimulator generator inserted into the
skull with the insertion of a neurostimulator lead into the brain
(including cases involving the use of the RNS^(copyright)
neurostimulator) that had a principal diagnosis of epilepsy in MS-DRG
023. The following table shows our findings:
[GRAPHIC] [TIFF OMITTED] TP29MY20.010

As shown in the table, for MS-DRG 023, we identified a total of
11,938 cases, with an average length of stay of 9.8 days and average
costs of $40,264. Of the 11,938 cases in MS-DRG 023, there were 81
cases describing a neurostimulator generator inserted into the skull
with the insertion of a neurostimulator lead into the brain (including
cases involving the use of the RNS^(copyright)
neurostimulator) that had a principal diagnosis of epilepsy with an
average length of stay of 3.3 days and average costs of $52,362. Our
clinical advisors reviewed these data, and agreed with the requestor
that the number of cases is too small to warrant the creation of a new
MS-DRG for these cases, for the reasons discussed in the FY 2018 IPPS/
LTCH PPS final rule (82 FR 38015 through 38019).
We also examined the reassignment of cases describing a
neurostimulator generator inserted into the skull with the insertion of
a neurostimulator lead into the brain (including cases involving the
use of the RNS^(copyright) neurostimulator) to MS-DRGs 020,
021, and 022 (Intracranial Vascular Procedures with PDX Hemorrhage with
MCC, with CC, and without CC/MCC, respectively). While the request was
to reassign these cases to MS-DRG 021, MS-DRG 021 is specifically
differentiated according to the presence of a secondary diagnosis with
a severity level designation of a complication or comorbidity (CC).
Cases with a neurostimulator generator inserted into the skull with the
insertion of a neurostimulator lead into the brain (including cases
involving the use of the RNS^(copyright) neurostimulator) do
not always involve the presence of a secondary diagnosis with a
severity level designation of a complication or comorbidity (CC), and
therefore we reviewed data for all three MS-DRGs. The following table
shows our findings:

[[Page 32483]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.011

As shown in the table, for MS-DRG 020, there were a total of 1,623
cases with an average length of stay of 16.1 days and average costs of
$75,668. For MS-DRG 021, there were a total of 409 cases with an
average length of stay of 12.3 days and average costs of $55,123. For
MS-DRG 022, there were a total of 131 cases with an average length of
stay of 6.3 days and average costs of $35,599.
While the cases in MS-DRG 023 describing a neurostimulator
generator inserted into the skull with the insertion of a
neurostimulator lead into the brain (including cases involving the use
of the RNS^(copyright) neurostimulator) and a principal
diagnosis of epilepsy have average costs that are similar to the
average costs of cases in MS-DRG 021 ($52,362 compared to $55,123),
they have an average length of stay that is 9 days shorter (3.3 days
compared to 12.3 days), similar to our findings as summarized in the FY
2018 IPPS/LTCH PPS final rule. Our clinical advisors reviewed the
clinical issues and the claims data, and did not support reassigning
the cases describing a neurostimulator generator inserted into the
skull with the insertion of a neurostimulator lead into the brain
(including cases involving the use of the RNS^(copyright)
neurostimulator) and a principal diagnosis of epilepsy from MS-DRG 023
to MS-DRGs 020, 021 or 022. As discussed in the FY 2018 IPPS/LTCH PPS
final rule, the cases in MS-DRGs 020, 021 and 022 have a principal
diagnosis of a hemorrhage. The RNS^(copyright)
neurostimulator generators are not used to treat patients with
diagnosis of a hemorrhage. Our clinical advisors continue to believe
that it is inappropriate to reassign cases representing a principal
diagnosis of epilepsy to a MS-DRG that contains cases that represent
the treatment of intracranial hemorrhage, as discussed in the FY 2018
IPPS/LTCH PPS final rule (82 FR 38015 through 38019). They also stated
that the differences in average length of stay and average costs based
on the more recent data continue to support this recommendation.
We then explored alternative options, as was requested. We noted
that the 81 cases describing a neurostimulator generator inserted into
the skull with the insertion of a neurostimulator lead into the brain
(including cases involving the use of the RNS^(copyright)
neurostimulator) and a principal diagnosis of epilepsy had an average
length of stay of 3.3 days and average costs of $52,362, as compared to
the 11,938 cases in MS-DRG 023 that had an average length of stay of
9.8 days and average costs of $40,264. While these neurostimulator
cases had average costs that were $12,098 higher than the average costs
of all cases in MS-DRG 023, there were only a total of 81 cases. There
may have been other factors contributing to the higher costs.
We further analyzed the data to identify those cases describing a
neurostimulator generator inserted into the skull with the insertion of
a neurostimulator lead into the brain (including cases involving the
use of the RNS^(copyright) neurostimulator), with at least
one other procedure designated as an O.R. procedure, and a principal
diagnosis of epilepsy. This approach can be useful in determining
whether resource use is truly associated with a particular procedure or
whether the procedure frequently occurs in cases with other procedures
with higher than average resource use. Our data findings for MS-DRG 023
demonstrate that of the 81 cases describing a neurostimulator generator
inserted into the skull with the insertion of a neurostimulator lead
into the brain (including cases involving the use of the
RNS^(copyright) neurostimulator) and a principal diagnosis of
epilepsy, 19 reported at least one other procedure designated as an
O.R. procedure, and had higher average costs ($72,995 versus $52,362)
compared to the average costs of all cases in this subset of MS-DRG
023.
We also reviewed the cases reporting procedures describing a
neurostimulator generator inserted into the skull with the insertion of
a neurostimulator lead into the brain (including cases involving the
use of the RNS^(copyright) neurostimulator), and a principal
diagnosis of epilepsy to identify the secondary diagnosis CC and/or MCC
conditions reported in conjunction with these procedures that also may
be contributing to the higher average costs for these cases. We
reviewed the claims data to identify the number (frequency) and types
of principal and secondary diagnosis CC and/or MCC conditions that were
reported. Our findings for the cases reporting secondary diagnosis MCC
and CC conditions, followed by the top 10 secondary diagnosis MCC and
secondary diagnosis CC conditions that were reported within the claims
data for this subset of cases are shown in the following tables:
[GRAPHIC] [TIFF OMITTED] TP29MY20.012

[[Page 32484]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.013

[GRAPHIC] [TIFF OMITTED] TP29MY20.267

While the results of the claims analysis as previously summarized
indicate that the average costs of cases reporting a neurostimulator
generator inserted into the skull with the insertion of a
neurostimulator lead into the brain (including cases involving the use
of the RNS^(copyright) neurostimulator), and a principal
diagnosis of epilepsy are higher compared to the average costs for all
cases in their assigned MS-DRG, we cannot ascertain from the claims
data the resource use specifically attributable to the procedure during
a hospital stay. These data show cases reporting a neurostimulator
generator inserted into the skull with the insertion of a
neurostimulator lead into the brain (including cases involving the use
of the RNS^(copyright) neurostimulator), and a principal
diagnosis of epilepsy, can present greater treatment difficulty, and
have a need for additional intervention with other O.R. procedures.
When reviewing consumption of hospital resources for this subset of
cases, the claims data also clearly shows that the patients typically
have multiple MCC and CC conditions, and the increased costs appear to
be attributable to the severity of illness of the patient.
In summary, we believe that further analysis of cases reporting a
neurostimulator generator inserted into the skull with the insertion of
a neurostimulator lead into the brain (including cases involving the
use of the RNS^(copyright) neurostimulator), and a principal
diagnosis of epilepsy is needed prior to proposing any further
reassignment of these cases to ensure clinical coherence between these
cases and the other cases with which they may potentially be grouped.
We expect that, in future years, we would have additional data that
exhibit an increased number of cases that could be used to evaluate the
potential reassignment of cases reporting a neurostimulator generator
inserted into the skull with the insertion of a neurostimulator lead
into the brain (including cases involving the use of the
RNS^(copyright) neurostimulator), and a principal diagnosis
of epilepsy. Therefore, we are not proposing to reassign cases
describing a neurostimulator generator inserted into the skull with the
insertion of a neurostimulator lead into the brain (including cases
involving the use of the RNS^(copyright) neurostimulator)
from MS-DRG 023 to MS-DRG 021. We are also not proposing to reassign
Responsive Neurostimulator (RNS^(copyright)) System cases to
another MS-DRG at this time.
4. MDC 3 (Diseases and Disorders of Ear, Nose and Throat):
Temporomandibular Joint Replacements
We received a request to consider reassignment of ICD-10-PCS
procedure codes 0RRC0JZ (Replacement of right temporomandibular joint
with synthetic substitute, open approach) and 0RRD0JZ (Replacement of
left temporomandibular joint with synthetic substitute, open approach)
from MS-DRGs 133 and 134 (Other Ear, Nose, Mouth and Throat O.R.
Procedures with and without CC/MCC, respectively) to MS-DRGs 131 and
132 (Cranial and Facial Procedures with and without CC/MCC,
respectively) in MDC 03.
The requestor stated that it is inaccurate for procedure codes
0RRC0JZ and 0RRD0JZ that identify and describe replacement of the
temporomandibular joint (TMJ), which involves excision of the TMJ
followed by replacement with a prosthesis, to group to MS-DRGs 133 and
134 while excision of the TMJ alone, identified by procedure codes
0RBC0ZZ (Excision of right temporomandibular joint, open approach) and
0RBD0ZZ (Excision of left temporomandibular joint, open

[[Page 32485]]

approach), groups to the higher weighted MS-DRGs 131 and 132. According
to the requestor, reassignment of procedure codes 0RRC0JZ and 0RRD0JZ
to the higher weighted MS-DRGs 131 and 132 is reasonable and the MS-DRG
title of ``Cranial and Facial Procedures'' is more appropriate.
However, the requestor also stated that the cost of the prosthesis
would continue to be underpaid, despite that recommended reassignment.
As an alternative option, the requestor suggested CMS analyze if there
may be other higher weighted MS-DRGs that could more appropriately
compensate providers for a TMJ replacement with prosthesis procedure.
In addition, the requestor recommended that we analyze all
procedures involving the mandible and maxilla and consider reassignment
of those procedure codes from MS-DRGs 129 (Major Head and Neck
Procedures with CC/MCC or Major Device) and 130 (Major Head and Neck
Procedures without CC/MCC) to MS-DRGs 131 and 132 because the codes
describe procedures that are performed on facial and cranial
structures. Finally, the requestor also suggested another option that
included modifying the surgical hierarchy for MDC 03 by sequencing MS-
DRGs 131 and 132 above MS-DRGs 129 and 130, which the requestor
asserted would provide for more appropriate payment to providers for
the performance of multiple facial procedures.
In this section of this proposed rule, we discuss these separate
but related requests that involve procedures currently assigned to MS-
DRGs 129, 130, 131, 132, 133 and 134 in MDC 03.
To analyze the request involving temporomandibular joint
replacements, we first identified the ICD-10-PCS procedure codes that
describe the excision or replacement of a temporomandibular joint as
shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.014

The requestor is correct that procedure codes 0RRC0JZ and 0RRD0JZ
that describe replacement of the right and left TMJ with a prosthesis
(synthetic substitute) by an open approach group to MS-DRGs 133 and 134
and procedure codes 0RBC0ZZ and 0RBD0ZZ that describe excision of the
right and left TMJ alone by an open approach group to the higher
weighted MS-DRGs 131 and 132. We also note that the corresponding
related codes as previously listed in the table that describe different
approaches (excision procedures) or different types of tissue
substitute (replacement procedures) are also assigned to the same
respective MS-DRGs.
We examined claims data from the September 2019 update of the FY
2019 MedPAR file for MS-DRGs 133 and 134 to identify cases reporting
ICD-10-PCS codes 0RRC0JZ or 0RRD0JZ. Our findings are shown in the
following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.015

[[Page 32486]]

In MS-DRG 133, we found a total of 1,757 cases with an average
length of stay of 5.6 days and average costs of $15,337. Of those 1,757
cases, there were 13 cases reporting ICD-10-PCS code 0RRC0JZ or
0RRD0JZ, with an average length of stay of 3.1 days and average costs
of $21,677. In MS-DRG 134, we found a total of 849 cases with an
average length of stay of 2.5 days and average costs of $9,512. Of
those 849 cases, there were 23 cases reporting ICD-10-PCS code 0RRC0JZ
or 0RRD0JZ, with an average length of stay of 2.1 days and average
costs of $20,430. The analysis shows that cases reporting ICD-10-PCS
procedure codes 0RRC0JZ or 0RRD0JZ in MS-DRGs 133 and 134 have higher
average costs ($21,677 versus $15,337 and $20,430 versus $9,512,
respectively) and shorter lengths of stay (3.1 days versus 5.6 days and
2.1 days versus 2.5 days, respectively) compared to all the cases in
their assigned MS-DRG.
We also examined claims data from the September 2019 update of the
FY 2019 MedPAR file for MS-DRGs 131 and 132. Our findings are shown in
the following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.016

In MS-DRG 131, we found a total of 1,181 cases with an average
length of stay of 5.4 days and average costs of $18,875. In MS-DRG 132,
we found a total of 464 cases with an average length of stay of 2.5
days and average costs of $11,558.
Overall, the data analysis shows that the average costs for the
cases reporting procedure codes 0RRC0JZ and 0RRD0JZ in MS-DRGs 133 and
134 are more aligned with the average costs for all the cases in MS-DRG
131 ($21,677 and $20,430, respectively versus $18,875) compared to MS-
DRG 132 where the average costs are not significantly different than
the average costs of all the cases in MS-DRG 134 ($11,558 versus
$9,512). Our clinical advisors agreed that the replacement of a TMJ
with prosthesis procedures (codes 0RRC0JZ or 0RRD0JZ) are more resource
intensive and are clinically distinct from the cases reporting
procedure codes 0RBC0ZZ and 0RBD0ZZ that involve excision of the TMJ
alone. They also agreed that procedure codes 0RRC0JZ and 0RRD0JZ should
be reassigned to a higher weighted MS-DRG. However, they recommended we
conduct further claims analysis to identify if there are other MS-DRGs
in MDC 03 where cases reporting these procedure codes may also be found
and to compare that data.
As previously noted, the requestor had also recommended that we
analyze all procedures involving the mandible and maxilla and consider
reassignment of those procedure codes from MS-DRGs 129 and 130 to MS-
DRGs 131 and 132. The requestor did not provide a specific list of the
procedure codes involving the mandible and maxilla, therefore, we
reviewed the list of procedure codes in MS-DRGs 129 and 130 and
identified the following 26 procedure codes describing procedures
performed on the mandible. There were no procedure codes describing
procedures performed on the maxilla in MS-DRGs 129 and 130.

[[Page 32487]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.017

Based on the advice of our clinical advisors as previously
discussed, we conducted additional analyses for MDC 03 using the same
FY 2019 MedPAR data file and found cases reporting procedure code
0RRC0JZ or 0RRD0JZ for the replacement of a TMJ with prosthesis
procedure in MS-DRGs 129, 130, 131, and 132. As discussed in section
II.D.15. of this proposed rule, cases with multiple procedures are
assigned to the highest surgical class in the hierarchy to which one of
the procedures is assigned. For example, if procedure code 0RRC0JZ
which is assigned to the logic for MS-DRGs 133 and 134 is reported on a
claim with procedure code 0NSR04Z (Reposition maxilla with internal
fixation device, open approach), which is assigned to the logic for MS-
DRGs 131 and 132, the case will group to MS-DRG 131 or 132 (depending
on the presence of a CC or MCC) when reported with a principal
diagnosis from MDC 03 because MS-DRGs 131 and 132 are sequenced higher
in the surgical hierarchy than MS-DRGs 133 and 134. Therefore, since
MS-DRGs 129, 130, 131, and 132 are sequenced higher in the surgical
hierarchy than MS-DRGs 133 and 134 in MDC 03, cases reporting procedure
code 0RRC0JZ or 0RRD0JZ along with another O.R. procedure that is
currently assigned to one of those MS-DRGs in the GROUPER logic results
in case assignment to one of those higher surgical class MS-DRGs. We
also identified cases reporting procedures performed on the mandible
from the previously discussed list of procedure codes in MS-DRGs 129
and 130. Our findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.018

[[Page 32488]]

As shown in the table, for MS-DRG 129, there was a total of 2,080
cases with average length of stay of 5.2 days and average costs of
$18,091. Of these 2,080 cases, there were 3 cases reporting a TMJ
replacement with prosthesis procedure (code 0RRC0JZ or 0RRD0JZ) with an
average length of stay of 3 days and average costs of $33,581 and 592
cases reporting a mandible procedure with average length of stay of 6.9
days and average costs of $21,258. For MS-DRG 130, there was a total of
948 cases with average length of stay of 2.7 days and average costs of
$11,092. Of these 948 cases, there were 5 cases reporting a TMJ
replacement with prosthesis procedure (code 0RRC0JZ or 0RRD0JZ) with an
average length of stay of 3.4 days and average costs of $27,396 and 202
cases reporting a mandible procedure with average length of stay of 3.5
days and average costs of $14,712. For MS-DRG 131, there was a total of
1,181 cases with average length of stay of 5.4 days and average costs
of $18,875. Of these 1,181 cases there were 4 cases reporting a TMJ
replacement with prosthesis procedure (code 0RRC0JZ or 0RRD0JZ) with an
average length of stay of 7.3 days and average costs of $31,151. For
MS-DRG 132, there was a total of 464 cases with average length of stay
of 2.5 days and average costs of $11,558. Of these 464 cases, there
were 10 cases reporting a TMJ replacement with prosthesis procedure
(code 0RRC0JZ or 0RRD0JZ) with an average length of stay of 3.1 days
and average costs of $24,099.
The data analysis demonstrates that the average costs of cases
reporting procedure code 0RRC0JZ or 0RRD0JZ for the replacement of a
TMJ with prosthesis procedure in MS-DRGs 129, 130, 131, and 132 and the
cases reporting procedures performed on the mandible in MS-DRGs 129 and
130 have higher average costs compared to all the cases in their
assigned MS-DRGs. While the volume of the cases reporting procedure
code 0RRC0JZ or 0RRD0JZ was low with a total of 22 cases across MS-DRGs
129, 130, 131, and 132, similar to the analysis results for MS-DRGs 133
and 134 described earlier, the average costs for the cases are higher
($33,581 versus $18,091; $27,396 versus $11,092; $31,151 versus
$18,875; and $24,099 versus $11,558) affirming that replacement of a
TMJ with prosthesis procedures are more costly. The analysis also
demonstrates that the average length of stay for cases reporting
procedure code 0RRC0JZ or 0RRD0JZ across MS-DRGs 130, 131, and 132 is
longer (3.4 days versus 2.7 days; 7.3 days versus 5.4 days; and 3.1
days versus 2.5 days) compared to all the cases in their assigned MS-
DRGs. For MS-DRG 129, we found that the average length of stay was
shorter (3 days versus 5.2 days) for cases reporting procedure code
0RRC0JZ or 0RRD0JZ. The data demonstrated similar results for the cases
reporting procedures performed on the mandible in MS-DRGs 129 and 130,
where the average costs for the cases are higher ($21,258 versus
$18,091 and $14,712 versus $11,092, respectively) and the average
length of stay was longer (6.9 days versus 5.2 days and 3.5 days versus
2.7 days, respectively) compared to all the cases in their assigned MS-
DRG.
The analysis of MS-DRGs 129, 130, 131, and 132 further demonstrated
that the average length of stay and average costs for all cases were
almost identical for each of the subgroups. For example, MS-DRG 129 is
defined as ``with CC/MCC or major device'' and MS-DRG 131 is defined as
``with CC/MCC'' while MS-DRGs 130 and 132 are both defined as ``without
CC/MCC''. For all of the cases in MS-DRG 129, we found that the average
length of stay was 5.2 days with an average cost of $18,091, and for
all of the cases in MS-DRG 131, the average length of stay was 5.4 days
with an average cost of $18,875. Similarly, for all of the cases in MS-
DRG 130, we found that the average length of stay was 2.7 days with an
average cost of $11,092, and for MS-DRG 132, we found the average
length of stay was 2.5 days with an average cost of $11,558.
As a result of the data analysis performed for MS-DRGs 129, 130,
131, and 132, including the analysis of the procedures describing
replacement of a TMJ with prosthesis in MS-DRGs 133 and 134, as well as
considering the requestor's suggestion that we examine the
appropriateness of modifying the surgical hierarchy for MDC 03 by
sequencing MS-DRGs 131 and 132 above MS-DRGs 129 and 130 to enable more
appropriate payment for the performance of multiple facial procedures,
our clinical advisors recommended evaluating all the procedures
currently assigned to MS-DRGs 129, 130, 131, 132, 133, and 134 to
compare costs, complexity of service and clinical coherence to assess
any potential reassignment of these procedures. We refer the reader to
the ICD-10 MS-DRG Definitions Manual Version 37, which is available via
the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software, for complete documentation of the GROUPER
logic for MS-DRGs 129, 130, 131, 132, 133, and 134.
We examined claims data from the September 2019 update of the FY
2019 MedPAR file for cases reporting any of the procedure codes that
are currently assigned to MS-DRGs 129, 130, 131, 132, 133, or 134. We
refer the reader to Table 6P.2d associated with this proposed rule
(which is available via the internet on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index/ for the detailed analysis. We note that if a
procedure code that is currently assigned to MS-DRGs 129, 130, 131,
132, 133, or 134 is not displayed it is because there were no cases
found reporting that code in the assigned MS-DRG.
The data analysis shows that there is wide variation in the volume,
length of stay, and average costs of cases reporting procedures
currently assigned to MS-DRGs 129, 130, 131, 132, 133, and 134. There
were several instances in which only one case was found to report a
procedure code from MS-DRG 129, 130, 131, 132, 133, or 134, and the
average length of stay for these specific cases ranged from 1 day to 31
days. For example, in MS-DRG 131, we found one case reporting procedure
code 0NB70ZZ (Excision of occipital bone, open approach) with an
average length of stay of 31 days which we consider to be an outlier in
comparison to all the other cases reported in that MS-DRG with an
average length of stay of 5.4 days. Overall, the average costs of cases
in MS-DRGs 129 and 130 range from $4,970 to $38,217, the average costs
of cases in MS-DRGs 131 and 132 range from $4,022 to $69,558 and the
average costs of cases in MS-DRGs 133 and 134 range from $1,089 to
$87,569. As noted previously, the data demonstrate there appear to be
similar utilization of hospital resources specifically for cases
reported in MS-DRGs 129, 130, 131 and 132.
The highest volume of cases was reported in MS-DRGs 129 and 130 for
the procedure codes describing resection of the right and left neck
lymphatic. For MS-DRG 129, there was a total of 750 cases reporting
procedure code 07T10ZZ (Resection of right neck lymphatic, open
approach) with an average length of stay of 4.7 days and average costs
of $17,155 and there was a total of 679 cases reporting procedure code
07T20ZZ (Resection of left neck lymphatic, open approach) with an
average length of stay of 4.8 days and average costs of $17,857. For
MS-DRG 130, there was a total of 358 cases reporting procedure code
07T10ZZ with an average length of stay of 2.6 days and average costs of
$10,432 and there was

[[Page 32489]]

a total of 331 cases reporting procedure code 07T20ZZ with an average
length of stay of 2.5 days and average costs of $10,467. For MS-DRGs
131 and 132, the highest volume of cases was reported for the procedure
codes describing repositioning of the maxilla with internal fixation
and repositioning of the right and left mandible with internal
fixation. For MS-DRG 131, there was a total of 186 cases reporting
procedure code 0NSR04Z (Reposition maxilla with internal fixation
device, open approach) with an average length of stay of 5.1 days and
average costs of $20,500; a total of 114 cases reporting procedure code
0NST04Z (Reposition right mandible with internal fixation device, open
approach) with an average length of stay of 5.7 days and average costs
of $18,710, and a total of 219 cases reporting procedure code 0NSV04Z
(Reposition left mandible with internal fixation device, open approach)
with an average length of stay of 6.0 days and average costs of
$20,202. For MS-DRG 132, there was a total of 84 cases reporting
procedure code 0NSR04Z with an average length of stay of 2.1 days and
average costs of $12,991 and a total of 101 cases reporting procedure
code 0NSV04Z with an average length of stay of 2.8 days and average
costs of $11,386. For MS-DRGs 133 and 134, the highest volume of cases
was reported for the procedure codes describing excision of the facial
nerve or nasal turbinate. For MS-DRG 133, there was a total of 60 cases
reporting procedure code 09BL8ZZ (Excision of nasal turbinate, via
natural or artificial opening endoscopic) with an average length of
stay of 6.6 days and average costs of $21,253 and for MS-DRG 134, there
was a total of 50 cases reporting procedure code 00BM0ZZ (Excision of
facial nerve, open approach) with an average length of stay of 1.4 days
and average costs of $8,048.
Our clinical advisors reviewed the procedures currently assigned to
MS-DRGs 129, 130, 131, 132, 133, and 134 to identify the patient
attributes that currently define each of these procedures and to group
them with respect to complexity of service and resource intensity. For
example, procedures that we believe represent greater treatment
difficulty and reflect a class of patients who are similar clinically
with regard to consumption of hospital resources were grouped
separately from procedures that we believe to be less complex but still
reflect patients who are similar clinically with regard to consumption
of hospital resources. This approach differentiated the more complex
and invasive procedures, such as resection of cervical lymph nodes,
repositioning of facial bones, and excision of mandible procedures from
the less complex and less invasive procedures such as excisions
(biopsies) of lymph nodes and facial nerves, drainage procedures of the
upper respiratory system, and tonsillectomies.
After this comprehensive review of all the procedures currently
assigned to MS-DRGs 129, 130, 131, 132, 133, and 134, in combination
with the results of the data analysis discussed previously, our
clinical advisors support distinguishing the procedures currently
assigned to those MS-DRGs by clinical intensity, complexity of service
and resource utilization and also support restructuring of these MS-
DRGs accordingly. We note that during the analysis of the procedures
currently assigned to MS-DRGs 129 and 130, we recognized the special
logic defined as ``Major Device Implant'' for MS-DRG 129 that
identifies procedures describing the insertion of a cochlear implant or
other hearing device. Our clinical advisors supported the removal of
this special logic from the definition for assignment to any proposed
modifications to the MS-DRGs, noting the costs of the device have
stabilized over time and the procedures can be appropriately grouped
along with other procedures involving devices in any restructured
proposed MS-DRGs. We also identified 2 procedure codes currently
assigned to MS-DRGs 131 and 132, 00J00ZZ (Inspection of brain, open
approach) and 0WJ10ZZ (Inspection of cranial cavity, open approach),
that our clinical advisors agreed should not be included in any
proposed modifications to the MS-DRGs in MDC 03, stating that they are
appropriately assigned to MS-DRGs in MDC 01 (Diseases and Disorders of
the Nervous System). We further note that during our analysis of the
procedures currently assigned to MS-DRGs 133 and 134, we found 338
procedure codes that were inadvertently included as a result of
replication during our transition from the ICD-9 to ICD-10 based MS-
DRGs. We refer the reader to Table 6P.2c for a detailed list of these
procedure codes that describe procedures performed on various sites,
such as the esophagus, stomach, intestine, skin, and thumb that, our
clinical advisors agree should be removed from the definition for
assignment to any proposed modifications to the MS-DRGs under MDC 03.
As a result of our review, we are proposing the deletion of MS-DRGs
129, 130, 131, 132, 133, and 134, and the creation of six new MS-DRGs.
Currently, MS-DRGs 129, 131, and 133 are defined as base MS-DRGs, each
of which is split by a two-way severity level subgroup. Our proposal
includes the creation of two new base MS-DRGs with a three-way severity
level split. Our clinical advisors suggested that based on the analysis
of procedures currently assigned to MS-DRGs 129, 130, 131, 132, 133,
and 134 as described previously, only 2 base MS-DRGs were needed, each
divided into 3 levels according to the presence of a CC or MCC. The
proposed MS-DRGs were developed consistent with the analysis to
differentiate the more complex and invasive procedures from the less
complex and less invasive procedures. As noted previously, our analysis
of MS-DRGs 129, 130, 131, and 132 demonstrated that the average length
of stay and average costs for all cases were almost identical for each
of the severity level subgroups and therefore, the procedures assigned
to these MS-DRGs were initially reviewed together as one clinical group
and then evaluated further in comparison to the procedures currently
assigned to MS-DRGs 133 and 134. The objective was to better
differentiate procedures by treatment difficulty, clinical similarity,
and resource use, and to propose a more appropriate restructuring. For
example, based on this analysis, in some instances, we are proposing to
reassign procedures described by procedure codes that are currently
assigned to MS-DRGs 129 and 130 or MS-DRGs 131 and 132 to what is being
defined as the less complex MS-DRGs. We believe the resulting proposed
MS-DRG assignments are more clinically homogeneous, coherent and better
reflect hospital resource use.
We applied the criteria to create subgroups for the three-way
severity level split for the proposed new MS-DRGs and found that all
five criteria were met. For the proposed new MS-DRGs, there is at least
(1) 500 cases in the MCC group, the CC group and the NonCC group; (2) 5
percent of the cases in the MCC group, the CC group and the NonCC
group; (3) a 20 percent difference in average costs between the MCC
group, the CC group and the NonCC group; (4) a $2,000 difference in
average costs between the MCC group, the CC group and the NonCC group;
and (5) a 3-percent reduction in cost variance, indicating that the
proposed severity level splits increase the explanatory power of the
base MS-DRG in capturing differences in expected cost between the
proposed MS-DRG severity level splits by at least 3 percent and thus
improve the overall accuracy of the

[[Page 32490]]

IPPS payment system. The following table reflects our simulation for
the proposed new MS-DRGs with a three-way severity level split. Our
findings represent what we would expect under the proposed
modifications and proposed new MS-DRGs, based on claims data in the FY
2019 MedPAR file.
[GRAPHIC] [TIFF OMITTED] TP29MY20.019

We are proposing to create two new base MS-DRGs, 140 and 143, with
a three-way severity level split for proposed new MS-DRGs 140, 141, and
142 (Major Head and Neck Procedures with MCC, with CC, and without CC/
MCC, respectively) and proposed new MS-DRGs 143, 144, and 145 (Other
Ear, Nose, Mouth And Throat O.R. Procedures with MCC, with CC, and
without CC/MCC, respectively).
We refer the reader to Table 6P.2a and Table 6P.2b for the list of
procedure codes we are proposing for reassignment from MS-DRGs 129,
130, 131, 132, 133, and 134 to each of the proposed new MS-DRGs. As
noted, we are also proposing the removal of procedure codes 00J00ZZ and
0WJ10ZZ, and the 338 procedure codes listed in Table 6P.2c from the
logic for MDC 03.
We note that discussion of the surgical hierarchy for the proposed
modifications is discussed in section II.D.15. of this proposed rule.
5. MDC 5 (Diseases and Disorders of the Circulatory System)
a. Left Atrial Appendage Closure (LAAC)
In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49363 through 49367)
we finalized our proposal to create two new MS-DRGs to classify
percutaneous intracardiac procedures. Specifically, we created MS-DRGs
273 and 274 (Percutaneous Intracardiac Procedures with and without MCC,
respectfully) for cases reporting procedure codes describing cardiac
ablation and other percutaneous intracardiac procedures. In that
discussion, as FY 2016 was the first year of our transition from the
ICD-9 based MS-DRGs to the ICD-10 based MS-DRGs, we provided a list of
the ICD-9-CM procedure codes that identify and describe the cardiac
ablation procedures and other percutaneous intracardiac procedures that
were the subject of that MS-DRG classification change request, one of
which was ICD-9-CM procedure code 37.90 (Insertion of left atrial
appendage device).
Separately, we also discussed a request we received for new
technology add-on payments for the WATCHMAN^TM Left Atrial
Appendage Closure (LAAC) device (80 FR 49480 through 49488). In that
discussion, we noted that effective October 1, 2004 (FY 2005), ICD-9-CM
procedure code 37.90 (Insertion of left atrial appendage device) was
created to identify and describe procedures using the
WATCHMAN^TM Left Atrial Appendage (LAA) Closure Technology
and that under ICD-10-PCS, procedure code 02L73DK (Occlusion of left
atrial appendage with intraluminal device, percutaneous approach) is
the comparable translation. We also noted that at the time of the new
technology request, under the ICD-9 based MS-DRGs, procedure code 37.90
was assigned to MS-DRGs 250 and 251 (Percutaneous Cardiovascular
Procedures without Coronary Artery Stent with MCC and without MCC,
respectively). We further noted that, as stated previously, we
finalized our proposal to assign procedures performed within the heart
chambers using intracardiac techniques, including those identified by
ICD-9-CM procedure code 37.90, and its comparable ICD-10-PCS code
translations (that specifically identify a percutaneous or percutaneous
endoscopic approach), including 02L73DK, to new MS-DRGs 273 and 274.
For this FY 2021 IPPS/LTCH PPS proposed rule, we received two
separate, but related requests involving the procedure codes that
describe the technology that is utilized in the performance of LAAC
procedures. The first request was to reassign ICD-10-PCS procedure code
02L73DK (Occlusion of left atrial appendage with intraluminal device,
percutaneous approach) that identifies the WATCHMAN^TM Left
Atrial Appendage Closure (LAAC) device, from MS-DRG 274 (Percutaneous
Intracardiac Procedures without MCC) to MS-DRG 273 (Percutaneous
Intracardiac Procedures with MCC) and revise the title for MS-DRG 273
to ``Percutaneous Intracardiac Procedures with MCC or Major Device
Implant for Left Atrial Appendage Closure Procedures''. Cases involving
LAAC procedures with a percutaneous or percutaneous endoscopic
approach, including cases reporting ICD-10-PCS procedure code 02L73DK,
are currently assigned to MS-DRGs 273 and 274.
According to the requestor's analysis, the average cost for LAAC
procedures reporting ICD-10-PCS procedure code 02L73DK is $3,405 higher
than the average cost for all cases in MS-DRG 274. The requestor stated
that based on its analysis, this requested reassignment would have
minimal impact on MS-DRGs 273 and 274 and would ensure adequate
payments and better resource

[[Page 32491]]

coherency. The requestor stated that cases reporting procedure codes
describing a LAAC procedure with procedure code 02L73DK within MS-DRG
274 are more clinically similar and costs are more closely aligned to
cases within MS-DRG 273.
We examined claims data from the September 2019 update of the FY
2019 MedPAR file for MS-DRGs 273 and 274 to identify cases reporting
ICD-10-PCS procedure code 02L73DK. Our findings are shown in the
following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.020

In MS-DRG 273, we found a total of 7,048 cases with an average
length of stay of 6.1 days and average costs of $28,100. Of those 7,048
cases, there were 1,126 cases reporting ICD-10-PCS procedure code
02L73DK, with an average length of stay of 2.7 days and average costs
of $29,504. In MS-DRG 274, we found a total of 24,319 cases with an
average length of stay of 2.0 days and average costs of $24,048. Of
those 24,319 cases, there were 13,423 cases reporting ICD-10-PCS
procedure code 02L73DK, with an average length of stay of 1.2 days and
average costs of $25,846.
The data analysis demonstrates that the average costs of the cases
reporting procedure code 02L73DK in MS-DRG 274 are slightly higher than
the average costs of all the cases in MS-DRG 274 ($25,846 versus
$24,048), with a difference of approximately $1,798, however, the
average length of stay for cases reporting procedure code 02L73DK in
MS-DRG 274 is shorter compared to all the cases in MS-DRG 274 (1.2 days
versus 2 days). If we were to reassign cases reporting procedure code
02L73DK from MS-DRG 274 to MS-DRG 273, we would be assigning cases with
an average length of stay of 1.2 days to a MS-DRG with an average
length of stay of 6.1 days, which our clinical advisors did not
support. The average costs of the cases reporting procedure code
02L73DK in MS-DRG 274 ($25,846) compared to the average costs of all
the cases in MS-DRG 273 ($28,100) show a difference of $2,254. Our
clinical advisors did not support reassigning the 13,423 cases
reporting procedure code 02L73DK without an MCC from MS-DRG 274 to MS-
DRG 273, which includes cases reporting a MCC, noting that it would
impact the average costs for all cases in this MS-DRG. Lastly, our
clinical advisors expressed concern regarding making proposed MS-DRG
changes based on a specific, single technology (WATCHMAN^TM
Left Atrial Appendage Closure (LAAC) device), identified by only one
unique procedure code versus considering proposed changes based on a
group of related procedure codes that can be reported to describe that
same type or class of technology, which is more consistent with the
intent of the MS-DRGs. Therefore, for these reasons, we are not
proposing to reassign cases reporting ICD-10-PCS procedure code 02L73DK
(Occlusion of left atrial appendage with intraluminal device,
percutaneous approach) from MS-DRG 274 to MS-DRG 273.
The second request was to create a new MS-DRG specific to all left
atrial appendage closure (LAAC) procedures or to map all LAAC
procedures to a different cardiovascular MS-DRG that has payment rates
aligned with procedural costs. The requestor stated that by creating a
new MS-DRG specific to all LAAC procedures or mapping all LAAC
procedures to a different cardiovascular MS-DRG, the MS-DRG would more
appropriately recognize the clinical characteristics and cost
differences in LAAC cases.
The 9 ICD-10-PCS procedure codes that describe LAAC procedures and
their corresponding MS-DRG assignment are listed in the following
table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.021

Currently, the MS-DRG assignments for these procedure codes are
based on the surgical approach: open approach, percutaneous approach,
or percutaneous endoscopic approach. Procedures describing an open
approach are assigned to MS-DRGs 250 and 251 (Percutaneous
Cardiovascular Procedures without Coronary Artery Stent with and
without MCC, respectively); while procedures describing a percutaneous
or percutaneous endoscopic approach are assigned to MS-DRGs 273 and 274
(Percutaneous Intracardiac Procedures

[[Page 32492]]

with and without MCC, respectfully). Of the nine listed ICD-10-PCS
procedure codes, three (02L70CK, 02L70DK, and 02l70ZK) describe an open
approach and are currently assigned to MS-DRG 250 and 251, and six
(02L73CK, 02L73DK, 02L73ZK, 02L74CK, 02L74DK, 02L74ZK) describe a
percutaneous or percutaneous endoscopic approach and are currently
assigned to MS-DRG 273 and 274.
We examined claims data from the September 2019 update of the FY
2019 MedPAR file for cases reporting LAAC procedures with an open
approach in MS-DRGs 250 and 251. Our findings are shown in the
following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.022

In MS-DRG 250, we found a total of 4,192 cases with an average
length of stay of 5.0 days and average costs of $18,807. Of those 4,192
cases, there were 21 cases reporting a LAAC procedure with an open
approach, with an average length of stay of 7.0 days and average costs
of $44,012. In MS-DRG 251, we found a total of 4,941 cases with an
average length of stay of 2.6 days and average costs of $12,535. Of
those 4,941 cases, there were 74 cases reporting a LAAC procedure with
an open approach, with an average length of stay of 3.4 days and
average costs of $22,711. The analysis shows that the cases reporting a
LAAC procedure with an open approach in MS-DRGs 250 and 251 have higher
average costs compared to all cases in MS-DRGs 250 and 251 ($44,012
versus $18,807 and $22,711 versus $12,535, respectively). The analysis
also shows that the average length of stay for cases reporting a LAAC
procedure with an open approach in MS-DRGs 250 and 251 is longer
compared to all cases in MS-DRGs 250 and 251 (7.0 days versus 5.0 days
and 3.4 days versus 2.6 days, respectively). Overall, there were a
total of 95 (21+74) cases reporting a LAAC procedure with an open
approach in MS-DRGs 250 and 251 with an average length of stay of 4.2
days and average costs of $27,420. Based on the results of the claims
data described previously, we conducted further analysis for the 95
cases reporting a LAAC procedure with an open approach in MS-DRGs 250
and 251 to determine if there were additional factors that may be
contributing to the higher average costs and longer length of stay. Of
those 95 cases, we found a total of 20 cases in which there was another
O.R. procedure reported on the claim that is also currently assigned to
MS-DRGs 250 and MS-DRG 251 and believed to be influencing the average
costs and average length of stay, as shown in the following tables.

[[Page 32493]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.023

As shown in the table, for MS-DRG 250, there were a total of 8
cases reporting another O.R. procedure with a LAAC procedure with an
open approach with an average length of stay of 8.9 days and average
costs of $63,653. The data shows that the average length of stay for
these 8 cases range from 4.0 days to 15.0 days and the average costs
range from $20,650 to $235,720.
Overall, the data demonstrates that the 8 cases reporting another
O.R. procedure with a LAAC procedure with an open approach in MS-DRG
250 have a longer length of stay (8.9 days versus 7 days) and higher
average costs ($63,653 versus $44,012) compared to all 21 cases
reporting a LAAC procedure with an open approach in MS-DRG 250.

[[Page 32494]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.024

As shown in the table, for MS-DRG 251, there were a total of 12
cases reporting another O.R. procedure with a LAAC procedure with an
open approach with an average length of stay of 6.5 days and average
costs of $31,560. The data shows that the average length of stay for
these 12 cases range from 1.0 day to 18.0 days and the average costs
range from $11,052 to $89,682.
Overall, the data demonstrates that the 12 cases reporting another
O.R. procedure with a LAAC procedure with an open approach in MS-DRG
251 have a longer average length of stay (6.5 days versus 3.4 days) and
higher average costs ($31,560 versus $22,711) compared to all 74 cases
reporting a LAAC procedure with an open approach in MS-DRG 251. The
results of our claims analysis for the 20 cases reporting a LAAC
procedure with an open approach and another O.R. procedure in MS-DRGs
250 and 251 indicate that the longer average length of stay and higher
average costs of the 95 cases reporting a LAAC procedure with an open
approach in MS-DRGs 250 and 251 may be attributed to the resource
consumption of the additional O.R. procedures reported in the subset of
20 cases. The claims analysis also shows that the majority of the cases
reporting a LAAC procedure with an open approach in MS-DRGs 250 and 251
(75 cases out of 95 cases) were without another O.R. procedure.
As noted in the discussion previously, with respect to the first
LAAC MS-DRG request, our analysis of MS-DRG 273 found a total of 7,048
cases with an average length of stay of 6.1 days and average costs of
$28,100 and our analysis of MS-DRG 274 found a total of 24,319 cases
with an average length of stay of 2.0 days and average costs of
$24,048. The average costs and average length of stay for cases
reporting a LAAC procedure with an open approach in MS-DRGs 250 and 251
($44,012 and $22,711, respectively) and (7.0 days and 3.4 days,
respectively) appear to be generally more aligned with the average
costs and average length of stay for all cases in MS-DRGs 273 and 274
($28,100 and $24,048, respectively) and (6.1 days and 2.0 days,
respectively) as compared to all cases in MS-DRGs 250 and 251 with
average costs of $18,807 and $12,535, respectively and an average
length of stay of 5.0 days and 2.6 days, respectively. In addition, as
also noted previously, the second LAAC MS-DRG request was to create a
new MS-DRG specific to all left atrial appendage closure (LAAC)
procedures or to map all LAAC procedures to a different cardiovascular
MS-DRG that has payment rates aligned with procedural costs. Our
clinical advisors suggested that because our review of the cases
reporting a LAAC procedure with an open approach in MS-DRGs 250 and 251
demonstrated that these procedures are primarily performed in the
absence of another O.R. procedure and generally are not performed with
a more intensive open chest procedure, that we should

[[Page 32495]]

evaluate cases reporting LAAC procedures with the other approaches in
their assigned MS-DRGs.
We then examined claims data from the September 2019 update of the
FY 2019 MedPAR file for cases reporting LAAC procedures with a
percutaneous or percutaneous endoscopic approach in MS-DRGs 273 and
274. Our findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.025

In MS-DRG 273, we found a total of 7,048 cases with an average
length of stay of 6.1 days and average costs of $28,100. Of those 7,048
cases, there were 1,180 cases reporting a LAAC procedure with a
percutaneous or percutaneous endoscopic approach, with an average
length of stay of 2.9 days and average costs of $29,591. In MS-DRG 274,
we found a total of 24,319 cases with an average length of stay of 2.0
days and average costs of $24,048. Of those 24,319 cases, there were
13,774 cases reporting a LAAC procedure with a percutaneous or
percutaneous endoscopic approach, with an average length of stay of 1.2
days and average costs of $25,765.
The analysis shows that the cases reporting a LAAC procedure with a
percutaneous or percutaneous endoscopic approach in MS-DRGs 273 and 274
have very similar average costs compared to all the cases in MS-DRGs
273 and 274 ($29,591 versus $28,100 and $25,765 versus $24,048,
respectively). The analysis also shows that the average length of stay
for cases reporting a LAAC procedure with a percutaneous or
percutaneous endoscopic approach in MS-DRGs 273 and 274 is shorter
compared to all cases in MS-DRGs 273 and 274 (2.9 days versus 6.1 days
and 1.2 days versus 2.0 days, respectively). Overall, there were a
total of 14,954 (1,180 + 13,774) cases reporting a LAAC procedure with
a percutaneous or percutaneous endoscopic approach in MS-DRGs 273 and
274 with an average length of stay of 1.3 days and average costs of
$26,067.
Our clinical advisors did not support creating a new MS-DRG for all
LAAC procedures for FY 2021. Rather, our clinical advisors believe that
ICD-10-PCS codes 02L70CK, 02L70DK, and 02L70ZK that describe a LAAC
procedure with an open approach are more suitably grouped to MS-DRGs
273 and 274. They stated this reassignment would allow all LAAC
procedures to be grouped together under the same MS-DRGs and would
improve clinical coherence. We note that all the procedure codes
describing LAAC procedures are designated as non-O.R. procedures that
affect the MS-DRG to which they are assigned. Therefore, we are
proposing to reassign ICD-10-PCS codes 02L70CK, 02L70DK, and 02L70ZK
from MS-DRGs 250 and 251 (Percutaneous Cardiovascular Procedures
without Coronary Artery Stent with and without MCC, respectively) to
MS-DRGs 273 and 274 (Percutaneous Intracardiac Procedures with and
without MCC, respectively).
b. Endovascular Cardiac Valve Replacement and Supplement Procedures
We received a request to revise MS-DRGs 266 and 267 (Endovascular
Cardiac Valve Replacement and Supplement Procedures with and without
MCC, respectively) by removing the current two-way severity level split
and creating a base MS-DRG without any severity level splits. According
to the requestor, patients treated with an endovascular cardiac valve
replacement procedure have severe heart failure due to a valvular
disorder, which may be documented as either an exacerbation of heart
failure or as chronic severe heart failure.
The requestor noted that in the cases reporting an endovascular
cardiac valve replacement procedure, a secondary diagnosis code
describing the specific type of heart failure may be the only MCC
reported on the claim and in instances where the heart failure
diagnosis code is reported as the principal diagnosis on a claim, it is
disregarded from acting as a MCC. In both scenarios, the requestor
reported that the heart failure is treated with the endovascular
cardiac valve replacement procedure, fluid balance, and medication.
The requestor also stated that providers are challenged in reaching
a consensus regarding this subset of patients' symptoms that may be
helpful in establishing a diagnosis for exacerbation of heart failure
versus chronic severe heart failure and stated that a single, base MS-
DRG would assist in the calculation of costs and charges more reliably,
regardless of the diagnosis reported in combination with the
endovascular cardiac valve replacement procedure.
We examined claims data from the September 2019 update of the FY
2019 MedPAR file for MS-DRGs 266 and 267. Our findings are shown in the
following table.

[[Page 32496]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.026

As shown in the table, there was a total of 19,012 cases with an
average length of stay of 5.3 days and average costs of $50,879 in MS-
DRG 266. For MS-DRG 267, there was a total of 27,084 cases with an
average length of stay of 2.1 days and average costs of $40,471. To
evaluate the request to create a single MS-DRG for cases reporting
endovascular cardiac valve procedures, we conducted an analysis of base
MS-DRG 266. This analysis includes 2 years of MedPAR claims data to
compare the data results from 1 year to the next to avoid making
determinations about whether additional severity levels are warranted
based on an isolated year's data fluctuation and also, to validate that
the established severity levels within a base MS-DRG are supported.
Therefore, we reviewed the claims data for base MS-DRG 266 using the
September 2018 update of the FY 2018 MedPAR file and the September 2019
update of the FY 2019 MedPAR file, which were used in our analysis of
claims data for MS-DRG reclassification requests for FY 2020 and FY
2021. Our findings are shown in the table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.027

As shown in the table, the data reflect that the criteria for a
two-way split (``with MCC'' and ``without MCC'') are satisfied using
both the data from the September 2018 update of the FY 2018 MedPAR file
and the data from the September 2019 update of the FY 2019 MedPAR file:
(1) At least 500 cases are in the MCC group and in the without MCC
subgroup; (2) at least 5 percent of the cases in the MS-DRG are in the
MCC group and in the without MCC subgroup; (3) at least a 20 percent
difference in average costs between the MCC group and the without MCC
group; (4) at least a $2,000 difference in average costs between the
MCC group and the without MCC group; and (5) at least a 3-percent
reduction in cost variance, indicating that the current severity level
splits increase the explanatory power of the base MS-DRG in capturing
differences in expected cost between the current MS-DRG severity level
splits by at least 3 percent and thus improve the overall accuracy of
the IPPS payment system. Our clinical advisors also did not agree with
the requestor's assertion that a single, base MS-DRG would assist in
calculating costs more reliably. As shown in the claims data and stated
previously, the criteria are satisfied for the current two-way split.
We further note that the basis for the MS-DRGs is to better recognize
severity and complexity of services, which is accomplished through the
CC subgroups.
Based on the results of our analysis, for FY 2021, we are proposing
to maintain the current structure of MS-DRGs 266 and 267 with a two-way
severity level split and not create a single, base MS-DRG.
c. Insertion of Cardiac Contractility Modulation Device
We received a request to review the MS-DRG assignment for cases
that identify patients who receive a cardiac contractility modulation
(CCM) device system for congestive heart failure. CCM is indicated for
patients with moderate to severe heart failure resulting from either
ischemic or non-ischemic cardiomyopathy. CCM utilizes electrical
signals which are intended to enhance the strength of the heart and
overall cardiac performance. CCM delivery device systems consist of a
programmable implantable pulse generator (IPG) and three leads which
are implanted in the heart. One lead is implanted into the right atrium
and the other two leads are inserted into the right ventricle. The lead
in the right atrium detects atrial electric signals and transmits them
to the IPG. The IPG, which is usually implanted into the subcutaneous
pocket of the pectoral region and secured to the fascia with a non-
absorbable suture, processes the atrial signal and generates the CCM
signals which are transmitted to the right ventricle via the two
ventricular leads. According to the requestor, MS-DRGs 222, 223, 224,
225, 226, and 227 (Cardiac Defibrillator Implant with and without
Cardiac Catheterization with and without AMI/HF/Shock with and without
MCC, respectively) include code combinations or ``code pairs''
describing the insertion of contractility modulation devices. Currently
however, the MS-DRG GROUPER logic requires the combination of the CCM
device codes and a left ventricular lead to map to MS-DRGs 222, 223,
224, 225, 226 and 227. The requestor stated the CCM device is
contraindicated in patients with a left ventricular lead. Therefore,
using the current V37 MS-DRG GROUPER logic, no case involving insertion
of the CCM system can be appropriately mapped to MS-DRGs 222, 223, 224,
225, 226 and 227. Instead, the cases map to MS-DRG 245 (AICD Generator
Procedures). According to the requestor, to date, the procedure has
been performed on an outpatient basis, but it is expected that some
Medicare patients will receive CCM devices on an inpatient basis. The
requestor asked that CMS revise the MS-DRG GROUPER logic to group cases
reporting the use of the CCM device appropriately.
The ICD-10-PCS procedure code pairs currently assigned to MS-DRGs

[[Page 32497]]

222, 223, 224, 225, 226 and 227 that identify the insertion of
contractility modulation devices are shown in the following table:
[GRAPHIC] [TIFF OMITTED] TP29MY20.028

Based on our analysis of cases reporting ICD-10-PCS procedure codes
for CCM device systems, we agree with the requestor that a procedure
code pair for the insertion of a CCM device and right ventricular and/
or right atrial lead does not exist in the logic for MS-DRGs 222, 223,
224, 225, 226 and 227. Our analysis indicates that the ICD-10-PCS
procedure code combinations for right ventricular and/or right atrial
lead insertion with insertion of contractility modulation devices were
inadvertently excluded from MS-DRGs 222, 223, 224, 225, 226 and 227 as
a result of replicating the ICD-9 based MS-DRGs.
We examined claims data from the September 2019 update of the FY
2019 MedPAR file for MS-DRG 245 and identified the subset of cases
within MS-DRG 245 reporting procedure codes for the insertion of a
rechargeable CCM device and the insertion of right ventricular and/or
right atrium lead. We found zero cases in MS-DRG 245 reporting a
procedure code combination that identifies the insertion of
contractility modulation device and the insertion of a cardiac lead
into the right ventricle and/or right atrium lead.
Our clinical advisors agree that insertion of a rechargeable CCM
system always involves placement of a right-sided lead, and that the
code combinations that currently exist in the MS-DRG GROUPER logic are
considered clinically invalid. We again examined claims data from the
September 2019 update of the FY 2019 MedPAR file for MS-DRGs 222, 223,
224, 225, 226 and 227 for this subset of cases to determine if there
were any cases that reported one of the 12 clinically invalid code
combinations that exist in the GROUPER logic. Because the combinations
of codes that describe the insertion of a rechargeable CCM device and
the insertion of left ventricular lead are considered clinically
invalid procedures, we would not expect these code combinations to be
reported in any claims data. We found zero cases across MS-DRGs 222,
223, 224, 225, 226 and 227 reporting the clinically invalid procedure
combination that identifies the insertion of contractility modulation
device and the insertion of a cardiac lead into the left ventricle.
While our analysis did not identify any cases reporting a procedure
code combination for the insertion of contractility modulation device
and the

[[Page 32498]]

insertion of a cardiac lead into right ventricle or right atrium,
recognizing that it is expected that some Medicare patients will
receive CCM devices on an inpatient basis, we are proposing to add the
following 24 ICD-10-PCS code combinations to MS-DRGs 222, 223, 224,
225, 226 and 227. We are also proposing to delete the 12 clinically
invalid code combinations from the GROUPER logic of MS-DRGs 222, 223,
224, 225, 226 and 227 that describe the insertion of contractility
modulation device and the insertion of a cardiac lead into the left
ventricle.
BILLING CODE 4120-01-P

[[Page 32499]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.029

[[Page 32500]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.030

BILLING CODE 4120-01-C
6. MDC 6 (Diseases and Disorders of the Digestive System): Acute
Appendicitis
We received a request to add ICD-10-CM diagnosis code K35.20 (Acute
appendicitis with generalized peritonitis, without abscess) to the list
of complicated principal diagnoses that group to MS-DRGs 338, 339 and
340 (Appendectomy with Complicated Principal Diagnosis with MCC, with
CC, and without CC/MCC, respectively) so that all ruptured/perforated
appendicitis codes in MDC 06 (Diseases and Disorders of the Digestive
System) group to MS-DRGs 338, 339, and 340. ICD-10-CM diagnosis code
K35.20 currently groups to MS-DRGs 341, 342, and 343 (Appendectomy
without Complicated Principal Diagnosis with MCC, with CC, and without
CC/MCC, respectively). Under current coding conventions, the following
inclusion term for subcategory

[[Page 32501]]

K35.2 (Acute appendicitis with generalized peritonitis) is:
Appendicitis (acute) with generalized (diffuse) peritonitis following
rupture or perforation of the appendix. The requestor also noted that
diagnosis code K35.32 (Acute appendicitis with perforation and
localized peritonitis, without abscess) currently groups to MS-DRGs
338, 339, and 340, however, diagnosis code K35.20 which describes a
generalized, more extensive form of peritonitis does not. The requestor
stated that ICD-10-CM diagnosis code K35.20 is the only ruptured
appendicitis code not included in the list of complicated principal
diagnosis codes for MS-DRGs 338, 339 and 340 and stated that it is
clinically appropriate for all ruptured/perforated appendicitis
diagnosis codes to group to MS-DRGs 338, 339 and 340.
We analyzed claims data from the September 2019 update of the FY
2019 MedPAR file for cases in MS-DRGs 341, 342, and 343 and claims
reporting ICD-10-CM diagnosis code K35.20 as a principal diagnosis. Our
findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.031

As shown in the table, we found a total of 718 cases with an
average length of stay of 5.9 days and average costs of $17,270 in MS-
DRG 341. Of those 718 cases, there were 62 cases reporting a principal
diagnosis code of K35.20 with an average length of stay of 7.8 days,
and average costs of $20,244. We found a total of 2,184 cases with an
average length of stay of 3.4 days and average costs of $10,611 in MS-
DRG 342. Of those 2,184 cases there were 183 cases reporting a
principal diagnosis code of K35.20 with an average length of stay of
4.2 days, and average costs of $10,952. We found a total of 2,329 cases
with an average length of stay of 2.0 days and average costs of $8,298
in MS-DRG 343. Of those 2,329 cases, there were 137 cases reporting a
principal diagnosis code of K35.20 with an average length of stay of
2.6 days, and average costs of $8,088.
We also analyzed claims data from the September 2019 update of the
FY 2019 MedPAR file for MS-DRGs 338, 339, and 340. Our findings are
shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.032

As shown in the table, we found a total of 685 cases with an
average length of stay of 8.1 days and average costs of $20,930 in MS-
DRG 338. We found a total of 2,245 cases with an average length of stay
of 5.0 days and average costs of $12,705 in MS-DRG 339. We found a
total of 1,840 cases, average length of stay 2.9 days, and average
costs of $9,101 in MS-DRG 340.
Our clinical advisors agreed that the presence of an abscess would
clinically determine whether a diagnosis of acute appendicitis would be
considered a complicated principal diagnosis. As diagnosis code K35.20
is described as ``without'' an abscess, our clinical advisors
recommended that it not be added to the list of principal diagnoses for
MS-DRGS 338, 339, and 340 (Appendectomy with Complicated Principal
Diagnosis with MCC, with CC, and without CC/MCC, respectively). We
believe that while the average costs for cases reporting diagnosis code
K35.20 are similar to the cases in MS-DRGs 338, 339, and 340, diagnosis
codes describing acute appendicitis that do not indicate the presence
of an abscess should remain in MS-DRGs 341, 342, and 343 (Appendectomy
without Complicated Principal Diagnosis with MCC, with CC, and without
CC/MCC, respectively) for clinical consistency. Therefore, we are not
proposing to reassign diagnosis code K35.20 from MS-DRGs 341, 342, and
343 to MS-DRGs 338, 339, and 340.
As noted previously, the requestor pointed out that diagnosis
K35.32 (Acute appendicitis with perforation and localized peritonitis,
without abscess) currently groups to MS-DRGs 338, 339, and 340
(Appendectomy with Complicated Principal Diagnosis with MCC, with CC,
and without CC/MCC, respectively). Therefore, we identified all the
diagnosis codes describing acute appendicitis within the ICD-10-CM
classification under subcategory K35.2 (Acute appendicitis with
generalized peritonitis) and subcategory K35.3 (Acute appendicitis with
localized

[[Page 32502]]

peritonitis) and reviewed their respective MS-DRG assignments for
clinical coherence. The diagnosis codes in these subcategories are
shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.033

We analyzed claims data from the September 2019 update of the FY
2019 MedPAR file for cases reporting any one of the ICD-10-CM diagnosis
codes as previously listed as a principal diagnosis in MS-DRGs 338,
339, 340, 341, 342, and 343. Our findings are shown in the following
table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.034

As shown in the table, the diagnosis codes describing ``with
abscess'' (K35.21 and K35.33) are currently assigned to MS-DRGs 338,
339, and 340. In addition, the diagnosis codes describing ``without
abscess'' (K35.20, K35.30, and K35.31) are currently assigned to MS-
DRGs 341, 342, and 343. Our clinical advisors believe that cases
reporting ICD-10-CM diagnosis codes describing ``with abscess'' are
associated with higher severity of illness and resource consumption
because of extended lengths of stay and treatment with intravenous
antibiotics. Therefore, our clinical advisors determined that diagnosis
code K35.32 should also be assigned to MS-DRGs 341, 342, and 343 for
clinical consistency.
Accordingly, we are proposing to reassign diagnosis code K35.32 to
MS-DRGs 341, 342, and 343 (Appendectomy without Complicated Principal

[[Page 32503]]

Diagnosis with MCC, with CC, and without CC/MCC, respectively).
The ICD-10 MS-DRG Version 37 Definitions Manual currently lists the
following ICD-10-CM diagnosis codes as Complicated Principal Diagnoses
in MS-DRGs 338, 339, 340, 341, 342, and 343: C18.1 (Malignant neoplasm
of appendix); C7A.020 (Malignant carcinoid tumor of the appendix);
K35.21 (Acute appendicitis with generalized peritonitis, with abscess);
K35.32 (Acute appendicitis with perforation and localized peritonitis,
without abscess) and K35.33 (Acute appendicitis with perforation and
localized peritonitis, with abscess). For the same reasons discussed
previously, we are proposing to remove diagnosis code K35.32 from the
complicated principal diagnosis list to be clinically consistent.
Therefore, for the reasons discussed, we are proposing to (1)
maintain the current assignment of diagnosis code K35.20 (Acute
appendicitis with generalized peritonitis, without abscess) in MS-DRGs
341, 342, and 343 (Appendectomy without Complicated Principal Diagnosis
with MCC, with CC, and without CC/MCC, respectively); (2) reassign
diagnosis code K35.32 from MS-DRGs 338, 339, and 340 to MS-DRGs 341,
342, and 343; and (3) remove diagnosis code K35.32 from the complicated
principal diagnosis list in MS-DRGs 338, 339, and 340 as listed in the
ICD-10 MS-DRG Version 37 Definitions Manual.
7. MDC 8 (Diseases and Disorders of the Musculoskeletal System and
Connective Tissue)
a. Cervical Radiculopathy
We received a request to reassign ICD-10-CM diagnosis codes M54.11
(Radiculopathy, occipito-atlanto-axial region), M54.12, (Radiculopathy,
cervical region) and M54.13 (Radiculopathy, cervicothoracic region)
from MDC 01 (Diseases and Disorders of the Nervous System) to MDC 08
(Diseases and Disorders of the Musculoskeletal System and Connective
Tissue). The requestor stated that when one of these diagnosis codes
describing radiculopathy in the cervical/cervicothoracic area of the
spine is reported as a principal diagnosis in combination with a
cervical spinal fusion procedure code, the case currently groups to MDC
01 in MS-DRG 028 (Spinal Procedures with MCC), MS-DRG 029 (Spinal
Procedures with CC or Spinal Neurostimulators), and MS-DRG 030 (Spinal
Procedures without CC/MCC). The requestor acknowledged that
radiculopathy results from nerve impingement, however, the requestor
noted it typically also results from a musculoskeletal spinal disorder
such as spondylosis or stenosis. According to the requestor, the
underlying musculoskeletal cause should be reported as the principal
diagnosis if documented. The requestor stated that when the medical
record documentation to support a musculoskeletal cause is not
available, cases reporting a cervical spinal fusion procedure with a
principal diagnosis of cervical radiculopathy would be more consistent
with other cervical spinal fusion procedures if they grouped to MDC 08
in MS-DRGs 471, 472, and 473 (Cervical Spinal Fusion with MCC, with CC,
and without CC/MCC, respectively). The requestor stated that the
following diagnosis codes describing radiculopathy of the thoracic and
lumbar areas of the spine are currently assigned to MDC 08 and
therefore, group appropriately to the spinal fusion MS-DRGs in MDC 08.
[GRAPHIC] [TIFF OMITTED] TP29MY20.035

The requestor is correct that when diagnosis codes M54.11, M54.12
or M54.13 are reported as a principal diagnosis in combination with a
cervical spinal fusion procedure, the case currently groups to MDC 01
in MS-DRG 028, MS-DRG 029, and MS-DRG 030. This grouping occurs because
the diagnosis codes describing radiculopathy in the cervical/
cervicothoracic area of the spine are assigned to MDC 01 and the
procedure codes describing a cervical spinal fusion procedure are
assigned to MDC 01 in MS-DRGs 028, 029 and 030. The requestor is also
correct that diagnosis codes describing radiculopathy of the thoracic
and lumbar areas of the spine (M54.14, M54.15, M54.16 and M54.17) are
currently assigned to MDC 08 and therefore, group to the spinal fusion
MS-DRGs in MDC 08 consistent with the GROUPER logic definitions. The
MS-DRGs that involve spinal fusion procedures of the cervical or lumbar
regions that are currently assigned in MDC 01 and MDC 08 are listed in
the following table.

[[Page 32504]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.036

We refer the reader to the ICD-10 MS-DRG Version 37 Definitions
Manual (which is available via the internet on the CMS website at:
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software for complete
documentation of the GROUPER logic for the listed MS-DRGs.
We examined claims data from the September 2019 update of the FY
2019 MedPAR file for all cases in MS-DRGs 028, 029, and 030 and for
cases reporting any one of the diagnosis codes describing radiculopathy
of the cervical/cervicothoracic area of the spine (M54.11, M54.12, or
M54.13) in combination with a cervical spinal fusion procedure. We
refer the reader to Table 6P.1b associated with this proposed rule
(which is available via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index/ for the list of procedure codes describing a
cervical spinal fusion procedure. Our findings are shown in the
following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.037

As shown in the table, there were a total of 2,105 cases with an
average length of stay of 11.9 days and average costs of $40,866 in MS-
DRG 028. Of those 2,105 cases, there were 22 cases reporting a
principal diagnosis of cervical radiculopathy with a cervical spinal
fusion procedure with an average length of stay of 8.2 days and average
costs of $44,980. For MS-DRG 029, there were a total of 3,574 cases
with an average length of stay of 6 days and average costs of $24,026.
Of those 3,574 cases, there were 176 cases reporting a principal
diagnosis of cervical

[[Page 32505]]

radiculopathy with a cervical spinal fusion procedure with an average
length of stay of 2.6 days and average costs of $24,852. For MS-DRG
030, there were a total of 1,338 cases with an average length of stay
of 3.1 days and average costs of $17,393. Of those 1,338 cases, there
were 166 cases reporting a principal diagnosis of cervical
radiculopathy with a cervical spinal fusion procedure with an average
length of stay of 1.7 days and average costs of $23,003.
We also reviewed the claims data for MS-DRGs 471, 472, and 473. Our
findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.038

As shown in the table, there were a total of 3,327 cases with an
average length of stay of 9 days and average costs of $36,941 in MS-DRG
471. There were a total of 15,298 cases with an average length of stay
of 3.3 days and average costs of $22,539 in MS-DRG 472. There were a
total of 11,144 cases with an average length of stay of 2 days and
average costs of $18,748 in MS-DRG 473.
Based on the claims data, the average costs of the cases reporting
a principal diagnosis of cervical radiculopathy with a cervical spinal
fusion procedure are consistent with the average costs of all the cases
in MS-DRGs 028, 029, and 030 in MDC 01. We also note that the average
costs of all the cases in MS-DRGs 028, 029, and 030 in MDC 01 are also
comparable to the average costs of all the cases in MS-DRGs 471, 472,
and 473, respectively; ($40,886 versus $36,941; $24,026 versus $22,539;
and $17,393 versus $18,748).
Our clinical advisors do not support reassigning diagnosis codes
M54.11, M54.12, and M54.13 that describe radiculopathy in the cervical/
cervicothoracic area of the spine from MDC 01 to MDC 08 until further
analysis of the appropriate assignment of these and other diagnosis
codes describing radiculopathy. As the requestor pointed out, the
diagnosis codes describing radiculopathy of the thoracic and lumbar
areas of the spine (M54.14, M54.15, M54.16 and M54.17) are currently
assigned to MDC 08. There are also two other codes to identify
radiculopathy within the classification, diagnosis code M54.10
(Radiculopathy, site unspecified) and M54.18 (Radiculopathy, sacral and
sacrococcygeal region), both of which are currently assigned to MDC 01.
Our clinical advisors recommend maintaining the current assignment of
diagnosis codes describing cervical radiculopathy in MDC 01 until
further analysis of whether all the diagnosis codes describing
radiculopathy of a specified or unspecified site should be assigned to
the same MDC and if so, whether those codes should be assigned to MDC
01 or MDC 08. As part of this analysis, they also recommend soliciting
further input from the public on the appropriate assignment for all of
the diagnosis codes describing radiculopathy, including from
professional societies and national associations for neurology and
orthopedics. For these reasons, we are not proposing to reassign
diagnosis codes M54.11, M54.12, and M54.13 from MDC 01 to MDC 08 at
this time.
b. Hip and Knee Joint Replacements
We received a request to restructure the MS-DRGs for total joint
arthroplasty that utilize an oxidized zirconium bearing surface implant
in total hip replacement and total knee replacement procedures.
According to the requestor, several international joint replacement
registries, retrospective claims review, and published clinical studies
show compelling short-term, mid-term and long-term clinical outcomes
for patients receiving these implants. The requestor stated that
without specific MS-DRGs, beneficiary access to these implants is
restricted and the benefit to patients and cost savings cannot be
recognized.
The requestor noted that effective October 1, 2017, new ICD-10-PCS
procedure codes describing hip and knee replacement procedures with an
oxidized zirconium bearing surface implant were established, which
allow greater specificity and provide the ability to track costs and
clinical outcomes for the patients who receive the implant. The
requestor provided 3 options for CMS to consider as part of its request
which are summarized in this section of this rule.
The first option provided by the requestor was to create a new MS-
DRG by reassigning cases reporting a hip or knee replacement procedure
with an oxidized zirconium bearing surface implant from MS-DRG 470
(Major Hip and Knee Joint Replacement or Reattachment of Lower
Extremity without MCC) to the suggested new MS-DRG. The requestor
conducted its own analysis and noted that there were approximately
18,000 cases reporting a hip or knee replacement with an oxidized
zirconium bearing surface implant and the average length of stay for
these cases was shorter in comparison to the cases reporting hip and
knee replacement procedures without an oxidized zirconium bearing
surface implant. The requestor suggested that patients receiving an
oxidized zirconium bearing surface implant may be walking earlier after
surgery and the risk of infection may be reduced as a result of the
shorter hospitalization.
The requestor stated that separating out these cases reporting the
use of an oxidized zirconium bearing surface implant is clinically
justified because the implants are designed for increased longevity.
The requestor also stated that oxidized zirconium is an entirely
distinct material from traditional ceramic or metal implants, as it is
made through a unique thermal oxidation process which creates a
ceramicised surface while maintaining the biocompatible zirconium alloy
substrate. According to the requestor, this process creates an implant
with the unique properties of both metals and ceramics: Durability,
strength and friction resistance. Conversely, the requestor stated that
cobalt chrome used in metal implants contains up to 143x

[[Page 32506]]

more nickel (<0.5% vs <0.0035%) than oxidized zirconium and that nickel
is the leading cause of negative reactions in patients with metal
sensitivities.
The requestor asserted that creating a new MS-DRG for hip and knee
replacement procedures with an oxidized zirconium bearing surface
implant would be a logical extension of the unique procedure codes that
CMS finalized and stated that other countries have established higher
government reimbursement for these implants to reflect the increased
value of the technology. The requestor also asserted that multiple
joint replacement registries have reported excellent hip replacement
results, including a statistically significant 33 percent reduced risk
of revision (p<0.001) for oxidized zirconium on highly cross-linked
polyethylene (XLPE), from three months compared to the most common
bearing surface of metal/XLPE.
Lastly, the requestor stated that multiple U.S. data sources,
including Medicare claims, show strong short-term outcomes, reduced 30-
day readmissions, fewer discharges to skilled nursing facilities
(SNFs), shorter LOS, and more frequent discharges to home, resulting in
less costly post-acute care.
The second option provided by the requestor was to create a new MS-
DRG by reassigning all cases in MS-DRG 470 reporting a hip replacement
procedure (excluding those with an oxidized zirconium bearing surface
implant) with a principal diagnosis of hip fracture and all hip
replacement procedures with an oxidized zirconium bearing surface
implant, with or without a principal diagnosis of hip fracture to the
suggested new MS-DRG. The requestor stated that based on its own
analysis, this proposed new MS-DRG would have approximately 58,000
cases with an estimated relative weight between the current MS-DRGs for
total joint arthroplasty (MS-DRGs 469 and 470) to reflect the increased
resource consumption of total hip replacement procedures performed due
to a hip fracture, while also reflecting a higher resource grouping for
oxidized zirconium bearing surface implants used in total hip
replacement procedures, and lastly, to reflect statistically
significant reductions in revision of total hip replacement procedure
rates.
The requestor also indicated that a new MS-DRG for total hip
replacement procedures with a hip fracture would correspond to
differentials recognized in the Comprehensive Care for Joint
Replacement (CJR) program, which established a separate target 90-day
episode price for total hip replacement procedures performed due to hip
fracture cases, as these are typically higher severity patients with
longer lengths of stay than hip replacement procedures absent a hip
fracture.
The requestor conducted its own analysis of Medicare claims data
(Q4 2017-Q3 2018) for total hip replacement procedures and compared
cases with an oxidized zirconium bearing surface implant to cases
without an oxidized zirconium bearing surface implant. The requestor
reported that it found statistically reduced SNF costs, hospital length
of stay, 90-day episode costs, and 55% decreased mortality at 180 days
for the oxidized zirconium bearing surface implant cases. The requestor
urged CMS to recognize this technology with a differentiated payment in
the form of a new MS-DRG, based on its findings of excellent clinical
outcomes for total hip replacement procedures that utilize an oxidized
zirconium bearing surface implant.
The third option provided by the requestor was to reassign all
cases reporting a total hip replacement procedure using an oxidized
zirconium bearing surface implant with a principal diagnosis of hip
fracture from MS-DRG 470 (Major Hip and Knee Joint Replacement or
Reattachment of Lower Extremity without MCC) to MS-DRG 469 (Major Hip
and Knee Joint Replacement or Reattachment of Lower Extremity with MCC
or Total Ankle Replacement). The requestor stated this option would
maintain the two existing MS-DRGs for total joint arthroplasty and
would only involve moving a small subset of cases (approximately 300)
from MS-DRG 470 to MS-DRG 469.
The requestor acknowledged that the third option was more limited
than the first two options, however, the requestor stated that it was
the least disruptive since the two MS-DRGs and estimated relative
weights would remain essentially the same. The requestor also stated
that reassigning cases reporting a total hip replacement procedure
using an oxidized zirconium bearing surface implant with a principal
diagnosis of hip fracture from MS-DRG 470 to MS-DRG 469 would encourage
hospitals to use these high-quality, proven implants.
The requestor also asserted that the third option focuses the
suggested payment changes on the population of patients that benefit
the most from the technology. According to the requestor, the analysis
of Medicare claims data suggests that there is potential to improve
care for the older population of patients who receive a total hip
replacement by encouraging providers to use an oxidized zirconium
bearing surface implant for hip fracture cases. In addition, the
requestor stated that long-term Medicare solvency concerns impel
consideration of incentives as a means to drive better outcomes at
lower cost. Specifically, the requestor asserted that if all of the
approximately 150,000 total hip replacement procedures performed
annually in the U.S. for hip fracture achieved 90-day episode cost
savings observed in Medicare claims for oxidized zirconium bearing
surface implants, based on the requestor's analysis, potential annual
savings of more than $650 million could be realized, in addition to
longer-term savings achieved through reduced revisions.
The requestor also welcomed additional analysis by CMS of the
claims data and consideration of alternative configurations that might
better align patient severity, clinical value and payment.
As indicated by the requestor, October 1, 2017, new ICD-10-PCS
procedure codes describing hip and knee replacement procedures with an
oxidized zirconium bearing surface implant were created. The procedure
codes are as follows:

[[Page 32507]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.039

We examined claims data from the September 2019 update of the FY
2019 MedPAR file for MS-DRGs 469 and 470 where hip and knee replacement
procedures are currently assigned for cases reporting the use of an
oxidized zirconium bearing surface implant to address the three options
provided by the requestor.
To evaluate the first option provided by the requestor, we analyzed
the cases reporting a total hip or total knee replacement procedure
with an oxidized zirconium bearing surface implant in MS-DRG 470 to
determine if a new MS-DRG is warranted. To evaluate the second option
provided by the requestor, we analyzed the cases reporting a total hip
replacement procedure without an oxidized zirconium bearing surface
implant with a principal diagnosis of hip fracture and cases reporting
a total hip replacement procedure with an oxidized zirconium implant
with or without a principal diagnosis of hip fracture in MS-DRG 470 to
determine if a new MS-DRG is warranted. We refer the reader to Table
6P.1c for a list of the procedure codes that describe a hip replacement
without an oxidized zirconium bearing surface implant and to Table
6P.1e for a list of the diagnosis codes describing a hip fracture that
were provided by the requestor for consideration of options 2 and 3. To
evaluate the third option provided by the requestor, we analyzed the
cases reporting a total hip replacement procedure with an oxidized
zirconium bearing surface implant and a principal diagnosis of fracture
in MS-DRG 470 to determine if the cases warrant reassignment to MS-DRG
469. Our findings are shown in the following table.

[[Page 32508]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.040

As shown in the table, there was a total of 25,701 cases with an
average length of stay of 5.9 days and average costs of $22,126 in MS-
DRG 469. For MS-DRG 470, there was a total of 386,221 cases with an
average length of stay of 2.3 days and average costs of $14,326. Of
those 386,221 cases in MS-DRG 470, there was a total of 18,898 cases
reporting a total hip replacement or total knee replacement procedure
with an oxidized zirconium bearing surface implant with an average
length of stay of 2.1 days and average costs of $14,808; a total of
47,316 cases reporting a total hip replacement procedure with a
principal diagnosis of hip fracture with an average length of stay of
4.5 days and average costs of $16,077; a total of 7,241 cases reporting
a total hip replacement procedure with an oxidized zirconium bearing
surface implant with or without a principal diagnosis of hip fracture
with an average length of stay of 1.9 days and average costs of
$13,875; and a total of 316 cases reporting a total hip replacement
procedure with an oxidized zirconium bearing surface implant with a
principal diagnosis of hip fracture with an average length of stay of 4
days and average costs of $18,304.
The data analysis performed to evaluate the first option provided
by the requestor indicates that the 18,898 cases reporting a total hip
replacement or total knee replacement procedure with an oxidized
zirconium bearing surface implant in MS-DRG 470 have a similar average
length of stay (2.1 days versus 2.3 days) and similar average costs
($14,808 versus $14,326) compared to all the cases in MS-DRG 470. The
results are also consistent with the requestor's findings that there
were approximately 18,000 cases reporting a hip or knee replacement
with an oxidized zirconium bearing surface implant. Based on the claims
analysis, our clinical advisors stated that the data does not support
creating a new MS-DRG for these procedures. Our clinical advisors also
believe that the characteristics of the patients and resources used for
a case that involves a total hip replacement or total knee replacement
procedure with an oxidized zirconium bearing surface implant are not
clinically distinct from the characteristics of the patients and
resources used for the cases reporting a total hip replacement or total
knee replacement procedure without an oxidized zirconium bearing
surface implant. Therefore, in consideration of the first option
provided by the requestor, we are not proposing to create a new MS-DRG
for cases reporting a total hip or knee replacement procedure with an
oxidized zirconium bearing surface implant.
The data analysis performed to evaluate the second option provided
by the requestor indicates that the 47,316 cases reporting a total hip
replacement procedure without an oxidized zirconium bearing surface
implant with a principal diagnosis of hip fracture have an average
length of stay that is longer than the average length of stay for all
the cases in MS-DRG 470 (4.5 days versus 2.3 days) and the average
costs are higher when compared to all the cases in MS-DRG 470 ($16,077
versus

[[Page 32509]]

$14,326). For the 7,241 cases reporting a total hip replacement
procedure with an oxidized zirconium bearing surface implant with or
without a principal diagnosis of hip fracture, the average length of
stay is shorter than the average length of stay for all the cases (1.9
days versus 2.3 days) and the average costs are slightly lower when
compared to all the cases in MS-DRG 470 ($13,875 versus $14,326). Our
analysis of the combined total number of cases identified for the
second option provided by the requestor indicates that the 54,557 cases
(47,316 + 7,241) have a longer average length of stay compared to the
average length of stay for all the cases in MS-DRG 470 (4.2 days versus
2.3 days) and the average costs are slightly higher ($15,785 versus
$14,326) when compared to all the cases in MS-DRG 470. The results are
also consistent with the requestor's findings that there were
approximately 58,000 cases reporting a total hip replacement procedure
without an oxidized zirconium bearing surface implant with a principal
diagnosis of hip fracture or a total hip replacement procedure with an
oxidized zirconium bearing surface implant with or without a principal
diagnosis of hip fracture. Our clinical advisors believe that the data
does not support creating a new MS-DRG for the subset of cases as
suggested by the requestor. They noted the variation in the volume
(47,316 cases and 7,241 cases), average length of stay (4.5 days and
1.9 days), and the average costs ($16,077 and $13,875) for each subset
of option 2 and that the total average cost for the combined cases
identified for the second option ($15,785) is very similar to the costs
of all the cases in MS-DRG 470 ($14,326). Therefore, in consideration
of the second option provided by the requestor, we are not proposing to
create a new MS-DRG for cases reporting a total hip replacement
procedure without an oxidized zirconium bearing surface implant with a
principal diagnosis of hip fracture and cases reporting a total hip
replacement procedure with an oxidized zirconium implant with or
without a principal diagnosis of hip fracture.
The data analysis performed to evaluate the third option provided
by the requestor indicates that the 316 cases reporting a total hip
replacement procedure with an oxidized zirconium bearing surface
implant with a principal diagnosis of hip fracture have a longer
average length of stay (4.0 days versus 2.3 days) and higher average
costs ($18,304 versus $14,326) compared to all the cases in MS-DRG 470.
The results are also consistent with the requestor's findings that
there were approximately 300 cases reporting a total hip replacement
procedure with an oxidized zirconium bearing surface implant with a
principal diagnosis of hip fracture. Our clinical advisors noted that
while the data shows a longer length of stay and higher average costs
for these cases under option 3, the analysis of the cases reporting a
total hip replacement procedure without an oxidized zirconium bearing
surface implant with a principal diagnosis of hip fracture under option
2 also demonstrated a longer length of stay and higher average costs.
They therefore recommended we conduct further review specifically of
those cases reporting a total hip replacement procedure with a
principal diagnosis of hip fracture, with or without an oxidized
zirconium bearing surface implant.
Based on the advice of our clinical advisors and in connection with
the request for CMS to examine the claims data and consider alternative
configurations, we performed additional analysis of those cases
reporting a total hip replacement procedure with a principal diagnosis
of hip fracture for both MS-DRGs 469 and 470. The procedure codes for
the hip replacement procedures included in this additional analysis are
displayed in Table 6P.1d and the diagnosis codes for hip fracture
included in this additional analysis are displayed in Table 6P.1e. Our
findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.041

As shown in the table, there was a total of 14,163 cases reporting
a total hip replacement procedure with a principal diagnosis of hip
fracture with an average length of stay of 7.2 days and average costs
of $21,951 in MS-DRG 469. There was a total of 47,632 cases reporting a
total hip replacement procedure with a principal diagnosis of hip
fracture with an average length of stay of 4.5 days and average costs
of $16,092 in MS-DRG 470. The average length of stay for the cases
reporting a total hip replacement procedure with a principal diagnosis
of hip fracture in MS-DRGs 469 and 470 were longer (7.2 days versus 5.9
days and 4.5 versus 2.3 days, respectively) compared to all the cases
in their assigned MS-DRGs. The average costs of the cases reporting a
total hip replacement procedure with a principal diagnosis of hip
fracture in MS-DRG 469 were approximately $175 less when compared to
the average costs of all

[[Page 32510]]

cases in MS-DRG 469 ($21,951 versus $22,126) and slightly more for MS-
DRG 470 ($16,092 versus $14,326). Our clinical advisors support
differentiating the cases reporting a total hip replacement procedure
with a principal diagnosis of hip fracture from those cases without a
hip fracture by assigning them to a new MS-DRG. They noted that
clinically, individuals who undergo hip replacement following hip
fracture tend to require greater resources for effective treatment than
those without hip fracture. They further noted that the increased
complexity associated with hip fracture patients can be attributed to
the post traumatic state and the stress of pain, possible peri-
articular bleeding, and the fact that this subset of patients, most of
whom have fallen as the cause for their fracture, may be on average
more frail than those who require hip replacement because of
degenerative joint disease.
We applied the criteria to create subgroups in a base MS-DRG as
discussed in section II.D.1.b. of this FY 2021 IPPS/LTCH PPS proposed
rule. As shown in the table that follows, a three-way split of this
base MS-DRG failed to meet the criterion that there be at least a 20%
difference in average costs between the CC and NonCC subgroup and also
failed to meet the criterion that there be at least a $2,000 difference
in average costs between the CC and NonCC subgroup. The following table
illustrates our findings.
[GRAPHIC] [TIFF OMITTED] TP29MY20.042

We then applied the criteria for a two-way split for the ``with MCC
and without MCC'' subgroups and found that all five criteria were met.
For the proposed new MS-DRGs, there is at least (1) 500 cases in the
MCC subgroup and 500 cases in the without MCC subgroup; (2) 5 percent
of the cases in the MCC group and 5 percent in the without MCC
subgroup; (3) a 20 percent difference in average costs between the MCC
group and the without MCC group; (4) a $2,000 difference in average
costs between the MCC group and the without MCC group; and (5) a 3-
percent reduction in cost variance, indicating that the proposed
severity level splits increase the explanatory power of the base MS-DRG
in capturing differences in expected cost between the proposed MS-DRG
severity level splits by at least 3 percent and thus improve the
overall accuracy of the IPPS payment system. The following table
illustrates our findings.
[GRAPHIC] [TIFF OMITTED] TP29MY20.043

For FY 2021, we are proposing to create new MS-DRG 521 (Hip
Replacement with Principal Diagnosis of Hip Fracture with MCC) and new
MS-DRG 522 (Hip Replacement with Principal Diagnosis of Hip Fracture
without MCC). We refer the reader to Table 6P.1d for the list of
procedure codes describing hip replacement procedures and to Table
6P.1e for the list of diagnosis codes describing hip fracture diagnoses
that we are proposing to define in the logic for these proposed new MS-
DRGs.
We also note that the Comprehensive Care for Joint Replacement
(CJR) model includes episodes triggered by MS-DRG 469 with hip fracture
and MS-DRG 470 with hip fracture. Given the proposal to create proposed
new MS-DRG 521 and MS-DRG 522, we seek comment on the effect this
proposal would have on the CJR model and whether to incorporate MS-DRG
521 and MS-DRG 522, if finalized, into the CJR model's proposed
extension to December 31, 2023. As discussed in the CJR proposed rule
``Comprehensive Care for Joint Replacement Model Three-Year Extension
and Changes to Episode Definition and Pricing'' (85 FR 10516), we
proposed to extend the duration of the CJR model. This extension, if
finalized, would revise certain aspects of the CJR model including, but
not limited to, the episode of care definition, the target price
calculation, the reconciliation process, the beneficiary notice
requirements and the appeals process. Additionally, the CJR proposed
rule would allow time to test the proposed changes by extending the
length of the CJR model through December 31, 2023, for certain
participant hospitals. The comment period for the CJR proposed rule
closes on June 23, 2020 (85 FR 22978).
8. MDC 11 (Diseases and Disorders of the Kidney and Urinary Tract)
a. Kidney Transplants
We received two separate but related requests to review the MS-DRG
assignment for procedures describing the transplantation of kidneys.
The first request was to designate kidney transplants as a Pre-MDC MS-
DRG in the same manner that other organ transplants are. The requestor
performed its own analysis and stated that it found that cases with a
principal diagnosis from MDC 05 (Diseases and Disorders of the
Circulatory System), for example I13.2 (Hypertensive heart and chronic
kidney disease with heart failure and with stage 5 chronic kidney
disease, or end stage renal disease), reported with a kidney transplant
from

[[Page 32511]]

MDC 11 (Diseases and Disorders of the Kidney and Urinary Tract),
grouped to MS-DRG 981 (Extensive O.R. Procedure Unrelated to Principal
Diagnosis with MCC). The requestor stated it did not appear appropriate
that a kidney transplant would group to MS-DRG 981 when diagnosis code
I13.2 is a legitimate principal diagnosis for this procedure. This
requestor also suggested that if there was a proposal for designating
the MS-DRG for kidney transplants as a Pre-MDC MS-DRG, that a severity
level split should also be proposed.
As discussed in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42128
through 42129), during our review of cases that group to MS-DRGS 981
through 983, we noted that when procedures describing transplantation
of kidneys (ICD-10-PCS procedure codes 0TY00Z0 (Transplantation of
right kidney, allogeneic, open approach) and 0TY10Z0 (Transplantation
of left kidney, allogeneic, open approach) are reported in conjunction
with ICD-10-CM diagnosis codes in MDC 05 (Diseases and Disorders of the
Circulatory System), the cases group to MS-DRGs 981 through 983. For
the reasons discussed, we proposed to add ICD-10-PCS procedure codes
0TY00Z0 and 0TY10Z0 to MS-DRG 264 in MDC 05. As summarized in the FY
2020 IPPS/LTCH PPS final rule, commenters opposed our proposal to add
ICD-10-PCS procedure codes 0TY00Z0 and 0TY10Z0 to MS-DRG 264 in MDC 05.
Commenters suggested that CMS instead assign these cases to MS-DRG 652,
noting that the length of stay for the vast majority of kidney
transplant cases involving serious cardiac conditions approximates the
length of stay for kidney transplants in general. After consideration
of public comments, we did not finalize our proposal to add ICD-10-PCS
procedure codes 0TY00Z0 and 0TY10Z0 to MS-DRG 264 in MDC 05. We stated
that we believed it would be appropriate to take additional time to
review the concerns raised by commenters consistent with the
President's Executive Order on Advancing American Kidney Health (see
https://www.whitehouse.gov/presidential-actions/executive-order-advancing-american-kidney-health/). Accordingly, cases reporting a
principal diagnosis in MDC 05 with a procedure describing kidney
transplantation (that is, procedure code 0TY00Z0 or 0TY10Z0) continue
to group to MS-DRGs 981 through 983 under the ICD-10 MS-DRGs Version
37, effective October 1, 2019.
In response to these public comments and the request we received on
this topic for FY 2021 consideration, we examined claims data from the
September 2019 update of the FY 2019 MedPAR file for MS-DRG 652. In MS-
DRG 652, there were 11,324 cases reporting one of the procedure codes
listed describing a kidney transplant procedure, with an average length
of stay of 6 days and average costs of $25,424.
[GRAPHIC] [TIFF OMITTED] TP29MY20.044

We then analyzed claims data for cases reporting one of the
procedure codes listed describing the transplantation of kidney
reported in MS-DRGs 981, 982, and 983. We did not find any such cases
in MS-DRG 983.
[GRAPHIC] [TIFF OMITTED] TP29MY20.045

Of the 366 cases reporting procedures describing kidney transplants
in MS-DRGs 981 and 982, all of the cases reported a principal diagnosis
from MDC 05. The diagnoses reported are reflected in the table.

[[Page 32512]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.046

Our clinical advisors reviewed these data. As indicated previously,
in MS-DRG 652, there were 11,324 cases reporting one of the procedure
codes listed describing a kidney transplant procedure, with an average
length of stay of 6 days and average costs of $25,424. Our clinical
advisors noted that the average costs for cases reporting
transplantation of kidney with a diagnosis from MDC 05 listed
previously are generally similar to the average costs of cases in MS-
DRG 652. The diagnoses assigned to MDC 05 reflect conditions associated
with the circulatory system. Our clinical advisors agreed that although
these diagnoses might also be a reasonable indication for kidney
transplant procedures, it would not be appropriate to move these
diagnoses into MDC 11 because it could inadvertently cause cases
reporting these same MDC 05 diagnoses with a circulatory system
procedure to be assigned to an unrelated MS-DRG.
To further examine the impact of moving MDC 05 diagnoses into MDC
11, we analyzed claims data for cases reporting a circulatory system
O.R. procedure and MDC 05 ICD-10-CM diagnosis code I13.2 (Hypertensive
heart and chronic kidney disease with heart failure and with stage 5
chronic kidney disease, or end stage renal disease). Diagnosis code
I13.2 was selected since this diagnosis was the MDC 05 diagnosis most
frequently reported with kidney transplant procedures. Our findings are
reflected in the following table:
BILLING CODE 4120-01-P

[[Page 32513]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.047

[[Page 32514]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.048

BILLING CODE 4120-01-C
As shown in the table, if we were to move diagnosis code I13.2 to
MDC 11, 4,366 cases would be assigned to the surgical class referred to
as ``unrelated operating room procedures'' as an unintended
consequence. Therefore, as an alternate option, we are proposing to
modify the GROUPER logic for MS-DRG 652 by allowing the presence of a
procedure code describing transplantation of the kidney to determine
the MS-DRG assignment independent of the MDC of the principal diagnosis
in most instances. The logic for MDC 24 (Multiple Significant Trauma)
and MDC 25 (Human Immunodeficiency Virus Infections) will remain
unchanged, meaning there would be two exceptions to the proposed
modification of the GROUPER logic for MS-DRG 652. If a principal
diagnosis of trauma and at least two significant traumas of different
body sites are present, the appropriate MS-DRG in MDC 24 would be
assigned based on the principal diagnosis and procedures reported,
instead of MS-DRG 652. Also, if either a principal diagnosis of HIV
infection or a secondary diagnosis of HIV infection with a principal
diagnosis of a significant HIV related condition are present, the
appropriate MS-DRG in MDC 25 would be assigned based on the principal
diagnosis and procedures reported instead of MS-DRG 652. The diagram
found towards the end of this discussion illustrates how the proposed
MS-DRG logic for MS-DRG 652 (Kidney Transplant) would function.
We recognize MS-DRG 652 is one of the only transplant MS-DRGs not
currently defined as a Pre-MDC. Pre-MDCs were an addition to Version 8
of the Diagnosis Related Groups. This was the first departure from the
use of principal diagnosis as the initial variable in DRG and
subsequently MS-DRG assignment. For Pre-MDC DRGs, the initial step in
DRG assignment is not the principal diagnosis, but instead certain
surgical procedures with extremely high costs such as heart transplant,
liver transplant, bone marrow transplant, and tracheostomies performed
on patients on long-term ventilation. When added in Version 8, these
types of services were viewed as being very resource intensive. Our
clinical advisors have noted, however, that treatment practices have
shifted since the inception of Pre-MDCs. The current proposed
refinements to MS-DRG 652 represent the first step in investigating how
we may consider introducing this concept of allowing certain procedures
to affect the MS-DRG assignment regardless of the MDC from which the
diagnosis is reported in the future, with the possibility of removing
the Pre-MDC category entirely. In other words, we would consider having
the resource intensive procedures currently assigned to the Pre-MDC MS-
DRGs determine assignment to MS-DRGs within the clinically appropriate
MDC. We are making concerted efforts to continue refining the ICD-10
MS-DRGs and we believe that it is important to include the Pre-MDC
category as part of our comprehensive review.
In response to the request for a severity level split, since the
request to designate kidney transplants as a Pre-MDC MS-DRG did not
involve a revision of the existing GROUPER logic for MS-DRG 652, we
applied the five criteria as described in section II.D1.b. of the
preamble of this proposed rule to determine if it would be appropriate
to subdivide cases currently assigned to MS-DRG 652 into severity
levels. This analysis includes 2 years of MedPAR claims data to compare
the data results from 1 year to the next to avoid making determinations
about whether additional severity levels are warranted based on an
isolated year's data fluctuation and also, to validate that the
established severity levels within a base MS-DRG are supported.
Therefore, we reviewed the claims data for base MS-DRG 652 using the
September 2018 update of the FY 2018 MedPAR file and the September 2019
update of the FY 2019 MedPAR file, which were used in our analysis of
claims data for MS-DRG reclassification requests for FY 2020 and FY
2021. Our findings are shown in the table:
[GRAPHIC] [TIFF OMITTED] TP29MY20.049

[[Page 32515]]

We applied the criteria to create subgroups for the three-way
severity level split. As discussed in section II.D.1.b., beginning with
this FY 2021 IPPS/LTCH PPS proposed rule, we are proposing to expand
the previously listed criteria to also include the Non-CC group. We
found that the criterion that there be at least a 20% difference in
average costs between subgroups failed for the average costs between
the MCC and CC subgroups based on the data in both the FY 2018 and FY
2019 MedPAR files. The criterion that there be at least 500 cases for
each subgroup also was not met, as shown in the table for both years.
Specifically, for the ``with MCC'', ``with CC'', and ``without CC/MCC''
split, there were only 356 cases in the ``without CC/MCC'' subgroup
based on the data in the FY 2019 MedPAR file and only 464 cases in the
``without CC/MCC'' subgroup based on the data in the FY 2018 MedPAR
file. We then applied the criteria to create subgroups for the two-way
severity level splits and found that the criterion that there be at
least a 20 percent difference in average costs between the ``with MCC''
subgroup and the ``without MCC'' group failed for both years. The
criterion that there be at least a 3-percent reduction in cost variance
between the ``with CC/MCC'' and ``without CC/MCC'' subgroups also
failed for both years, indicating that the current base MS-DRG 652
maintains the overall accuracy of the IPPS payment system. The claims
data do not support a three-way or a two-way severity level split for
MS-DRG 652, therefore for FY 2021, we are not proposing to subdivide
MS-DRG 652 into severity levels.
As discussed earlier in this section we received two separate but
related requests. The second request was that a new MS-DRG be created
for kidney transplant cases where the patient received dialysis during
the inpatient stay and after the date of the transplant. According to
the requestor, transplant hospitals incur higher costs related to post-
transplant care of patients who receive kidneys from ``medically
complex donors'' (defined by the requestor as coming from organ donors
over aged 60 and donors after circulatory death). The requestor also
stated that their research indicated that studies consistently
identified organ donors over the age of 60 and donors after circulatory
death as the most significant areas for growth in increasing the number
of organ transplantations, but this growth is hampered by the
underutilization of these types of organs. The requestor performed its
own data analysis and stated that total standardized costs were 32
percent higher for cases where the beneficiary received dialysis during
the inpatient stay and after the date of transplant compared to all
other kidney transplant cases currently in MS-DRG 652 (Kidney
Transplant), with the additional costs serving as a disincentive to the
use of viable kidneys for donation. The requestor asserted that this
financially disadvantages transplant centers from using such organs,
contributing to the kidney discard rate.
The following ICD-10-PCS procedure codes identify the performance
of hemodialysis.
[GRAPHIC] [TIFF OMITTED] TP29MY20.050

We acknowledge that the request was to review the costs of dialysis
performed after kidney transplantation during the same inpatient
admission, however our clinical advisors pointed out, that while not
routine, it is not uncommon for a patient to require dialysis while
admitted for kidney transplantation before the procedure is performed
due to factors related to the availability of the organ, nor is it
uncommon for a kidney that has been removed from the donor,
transported, and then implanted to require dialysis before it returns
to optimal function. Therefore, we examined claims data from the
September 2019 update of the FY 2019 MedPAR file for all cases in MS-
DRG 652 and compared the results to cases representing kidney
transplantation with dialysis performed during the same inpatient
admission either before or after the date of kidney transplantation.
The following table shows our findings:
[GRAPHIC] [TIFF OMITTED] TP29MY20.051

As shown by the table, for MS-DRG 652, we identified a total of
11,324 cases, with an average length of stay of 6.0 days and average
costs of $25,424. Of the 11,324 cases in MS-DRG 652, there were 3,254
cases describing the performance of hemodialysis in an admission where
the patient received a kidney transplant with an average length of stay
of 7.6 days and average costs of $30,606. Our clinical advisors noted
that the average length of stay and average costs of cases in MS-DRG
652 describing the performance of hemodialysis in an admission where
the patient received a kidney transplant were higher than the average
length of stay and average costs for all cases in the same MS-DRG.
In further analyzing this issue, noting that patients can require a
simultaneous

[[Page 32516]]

pancreas/kidney transplant procedure, we also examined claims data from
the September 2019 update of the FY 2019 MedPAR file for all cases in
Pre-MDC MS-DRG 008 (Simultaneous Pancreas/Kidney Transplant) and
compared the results to cases representing simultaneous pancreas/kidney
transplantation with dialysis performed during the same inpatient
admission either before or after the date of kidney transplantation.
The following table shows our findings:
[GRAPHIC] [TIFF OMITTED] TP29MY20.052

As shown by the table, for Pre-MDC MS-DRG 008, we identified a
total of 374 cases, with an average length of stay of 10.9 days and
average costs of $41,926. Of the 374 cases in Pre-MDC MS-DRG 008, there
were 84 cases describing the performance of hemodialysis during an
admission where the patient received a simultaneous pancreas/kidney
transplant with an average length of stay of 13.4 days and average
costs of $49,001. Our clinical advisors again noted that the average
length of stay and average costs of cases in Pre-MDC MS-DRG 008
describing the performance of hemodialysis during an admission where
the patient received a simultaneous pancreas/kidney transplant were
higher than the average length of stay and average costs for all cases
in the same Pre-MDC MS-DRG.
Our clinical advisors believe that these hemodialysis procedures
either performed before or after kidney transplant or before or after
simultaneous pancreas/kidney transplant contribute to increased
resource consumption for these transplant patients. While there is not
a large number of cases describing a simultaneous pancreas/kidney
transplant with hemodialysis procedures either performed before or
after transplant represented in the Medicare data, and we generally
prefer not to create a new MS-DRG unless it would include a substantial
number of cases, we believe creating separate MS-DRGs for these cases
would appropriately address the differential in resource consumption
consistent with the President's Executive Order on Advancing American
Kidney Health (see https://www.whitehouse.gov/presidential-actions/executive-order-advancing-american-kidney-health/). For these reasons,
we are proposing to create new MS-DRGs for the performance of
hemodialysis during an admission where the patient received a kidney
transplant or simultaneous pancreas/kidney transplant.
To compare and analyze the impact of our suggested modifications,
we ran a simulation using the Version 37 ICD-10 MS-DRG GROUPER and the
claims data from the September 2019 update of the FY 2019 MedPAR file.
The following table reflects our findings for all 3,254 cases
representing kidney transplantation with dialysis performed during the
same inpatient admission either before or after the date of kidney
transplantation with a two-way severity level split.
[GRAPHIC] [TIFF OMITTED] TP29MY20.053

As shown in the table, there was a total of 2,195 cases for the
kidney transplant with hemodialysis with MCC subgroup, with an average
length of stay of 8.0 days and average costs of $32,360. There was a
total of 1,059 cases for the kidney transplant with hemodialysis
without MCC subgroup, with an average length of stay of 6.8 days and
average costs of $26,972. We applied the criteria to create subgroups
for the two-way severity level split for the proposed MS-DRGs,
including our proposed expansion of the criteria to also include the
nonCC group, and found that all five criteria were met. For the
proposed MS-DRGs, there is (1) at least 500 cases in the MCC subgroup
and in the without MCC subgroup; (2) at least 5 percent of the cases
are in the MCC subgroup and in the without MCC subgroup; (3) at least a
20 percent difference in average costs between the MCC subgroup and the
without MCC subgroup; (4) at least a $2,000 difference in average costs
between the MCC subgroup and the without MCC subgroup; and (5) at least
a 3-percent reduction in cost variance, indicating that the proposed
severity level splits increase the explanatory power of the base MS-DRG
in capturing differences in expected cost between the proposed MS-DRG
severity level splits by at least 3 percent and thus improve the
overall accuracy of the IPPS payment system.

[[Page 32517]]

For the cases describing the performance of hemodialysis during an
admission where the patient received a simultaneous pancreas/kidney
transplant, we identified a total of 84 cases, so the criterion that
there are at least 500 or more cases in any subgroup could not be met.
Therefore, for FY 2021, we are not proposing to subdivide the proposed
new Pre-MDC MS-DRG for the performance of hemodialysis in an admission
where the patient received a simultaneous pancreas/kidney transplant
into severity levels.
In summary, for FY 2021, taking into consideration that it
clinically requires greater resources to perform hemodialysis during an
admission where the patient received a kidney or simultaneous pancreas/
kidney transplant, we are proposing to create a new Pre-MDC MS-DRG for
cases describing the performance of hemodialysis during an admission
where the patient received a simultaneous pancreas/kidney transplant.
We are also proposing to create two new MS-DRGs with a two-way severity
level split for cases describing the performance of hemodialysis in an
admission where the patient received a kidney transplant in MDC 11.
These proposed new MS-DRGs are proposed new Pre-MDC MS-DRG 019
(Simultaneous Pancreas/Kidney Transplant with Hemodialysis), proposed
new MS-DRG 650 (Kidney Transplant with Hemodialysis with MCC) and
proposed new MS-DRG 651 (Kidney Transplant with Hemodialysis without
MCC). We are proposing to add the procedure codes from current Pre-MDC
MS-DRG 008 to the proposed new Pre-MDC MS-DRG 019 with the procedure
codes describing a hemodialysis procedure. Similarly, we are also
proposing to add the procedure codes from current MS-DRG 652 to the
proposed new MS-DRGs 650 and 651 with the procedure codes describing a
hemodialysis procedure. We note that the procedure codes describing
hemodialysis procedures are designated as non-O.R. procedures,
therefore, as part of the logic for these proposed new MS-DRGs, we are
also proposing to designate these codes as non-O.R. procedures
affecting the MS-DRG.
The diagram illustrates how the proposed MS-DRG logic for Kidney
Transplants would function. The diagram (Diagram 1.) begins by asking
if the criteria for a Pre-MDC MS-DRG is met. If yes, the logic asks if
the criteria for Pre-MDC MS-DRGs 018, 001-006, 014 or 007 is met. If
yes, the logic directs the case to either Pre-MDC MS-DRG 018, 001-006,
014 or 007 based on the principal diagnosis and/or procedures reported.
If no, the logic asks if there is a simultaneous pancreas/kidney
transplant with a qualifying diagnosis reported on the claim. If no,
the logic directs the case to either Pre-MDC MS-DRGs 016, 017, or 010-
013 based on the principal diagnosis and/or procedures reported. If
yes, the logic asks if there was a hemodialysis procedure reported on
the claim. If yes, the logic assigns the case to proposed new Pre-MDC
MS-DRG 019 (Simultaneous Pancreas/Kidney Transplant with Hemodialysis).
If no, the logic assigns the case to existing Pre-MDC MS-DRG 008
(Simultaneous Pancreas/Kidney Transplant).
If the criteria for a Pre-MDC MS-DRG were not met at the first
step, the GROUPER logic asks if there was a principal diagnosis of
trauma and at least two significant traumas of different body sites. If
yes, the logic directs the case to the appropriate MS-DRG in MDC 24
based on the principal diagnosis and procedures reported. If no, the
logic asks if there was either a principal diagnosis of HIV infection
or a secondary diagnosis of HIV infection with a principal diagnosis of
a significant HIV related condition. If yes, the logic directs the case
to the appropriate MS-DRG in MDC 25 based on the principal diagnosis
and procedures reported. If no, the logic asks if there is kidney
transplant procedure reported on the claim. If no, the logic directs
the case to the appropriate MDC and MS-DRG based on the principal
diagnosis and procedures reported. If yes, the logic asks if there was
a hemodialysis procedure reported on the claim. If yes, the logic
assigns the case to proposed new MS-DRGs 650 or 651 (Kidney Transplant
with Hemodialysis with MCC or without MCC, respectively). If no, the
logic assigns the case to existing MS-DRG 652 (Kidney Transplant).
BILLING CODE 4120-01-C

[[Page 32518]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.054

[[Page 32519]]

BILLING CODE 4120-01-P
b. Proposed Addition of Diagnoses to Other Kidney and Urinary Tract
Procedures Logic
We received a request to add 29 ICD-10-CM diagnosis codes to the
list of principal diagnoses assigned to MS-DRGs 673, 674, and 675
(Other Kidney and Urinary Tract Procedures with MCC, with CC, and
without CC/MCC, respectively) in MDC 11 (Diseases and Disorders of the
Kidney and Urinary Tract) when reported with procedure codes describing
the insertion of totally implantable vascular access devices (TIVADs)
and tunneled vascular access devices. The list of 29 ICD-10-CM
diagnosis codes submitted by the requestor, as well as their current
MDC assignments, are found in the table:
[GRAPHIC] [TIFF OMITTED] TP29MY20.055

The requestor stated that by adding the codes listed, cases
reporting principal diagnosis codes describing complications of
dialysis access sites and principal diagnosis codes describing kidney
disease in the setting of diabetes or hypertension, would group to MS-
DRGs 673, 674, and 675 when a TIVAD or tunneled vascular access device
is inserted. The requestor stated that patients who have kidney
transplant complications or dialysis catheter complications typically
also have chronic kidney disease, end stage renal disease (ESRD) or
resolving acute tubular necrosis (ATN) but ICD-10-CM coding guidelines
require a complication code to be sequenced first. The requester stated
that when reporting a diagnosis code describing ESRD and diabetes, a
diabetes code from ICD-10-CM Chapter 4 (Endocrine, Nutritional and
Metabolic Diseases) must be sequenced first and when coding ESRD,
hypertension, and heart failure, the combination code I13.2
(Hypertensive heart and chronic kidney disease with heart failure and
with stage 5 chronic kidney disease or end stage renal disease) must be
sequenced first per coding guidelines. The requestor pointed out that
code I13.11 (Hypertensive heart and chronic kidney disease without
heart failure with stage 5 CKD or ESRD) is currently one of the
qualifying principal diagnoses in MS-DRGs 673, 674, and 675 when
reported with procedure codes describing the insertion of TIVADs or
tunneled vascular access devices; therefore, according to the
requestor, diagnosis code I13.2 should reasonably be added.
To begin our analysis, we reviewed the GROUPER logic for MS-DRGs
673, 674, and 675 including the special logic in MS-DRGs 673, 674, and
675 for certain MDC 11 diagnoses reported with procedure codes for the
insertion of tunneled or totally implantable vascular access devices.
As discussed in the FY 2003 IPPS/LTCH PPS final rule (67 FR

[[Page 32520]]

49993 through 49994), the procedure code for the insertion of totally
implantable vascular access devices was added to the GROUPER logic of
DRG 315 (Other Kidney and Urinary Tract O.R. Procedures), the
predecessor DRG of MS-DRGs 673, 674, and 675, when combined with
principal diagnoses specifically describing renal failure, recognizing
that inserting these devices as an inpatient procedure for the purposes
of hemodialysis can lead to higher average charges and longer lengths
of stay for those cases.
We next reviewed the 29 ICD-10-CM codes submitted by the requestor.
Our clinical advisors noted that ICD-10-CM diagnosis codes E10.21,
E11.21, and E13.21 describing diabetes mellitus with diabetic
nephropathy; codes E10.29, E11.29, and E13.29 describing diabetes
mellitus with other diabetic kidney complication; T80.211A, T80.212A,
and T80.218A describing infection due to central venous catheters; and
codes T82.7XXA, T82.818A, T82.828A, T82.838A, T82.848A, T82.858A,
T82.868A, and T82.898A describing complications of cardiac and vascular
prosthetic devices, implants and grafts, are not necessarily indicative
of a patient having renal (kidney) failure requiring the insertion of a
TIVAD or a tunneled vascular access device to allow access to the
patient's blood for hemodialysis purposes. TIVADs and tunneled vascular
access devices are widely used to provide central venous access for the
administration of intravenous antibiotics, chemotherapeutic agents,
parenteral nutrition and other treatments. They are used in a variety
of disease groups, and in both children and adults. As such, our
clinical advisors do not support adding these diagnoses to the list of
principal diagnosis codes in MS-DRG 673, 674, and 675 when reported
with procedure codes describing the insertion of TIVADs and tunneled
vascular access devices. They noted that TIVADs and tunneled vascular
access devices may be inserted for a variety of principal diagnoses,
and that adding these 17 diagnoses that are not specific to renal
failure would not maintain the clinical coherence with other cases in
this subset of cases in MS-DRGs 673, 674, and 675.
Our clinical advisors also do not support adding ICD-10-CM
diagnosis code I13.2 (Hypertensive heart and chronic kidney disease
with heart failure and with stage 5 chronic kidney disease, or end
stage renal disease) to the special logic in MS-DRGs 673, 674, and 675.
As discussed previously, code I13.2 is assigned to MDC 05 (Diseases and
Disorders of the Circulatory System). Our clinical advisors agreed it
would not be appropriate to move this diagnosis into MDC 11 because it
would inadvertently cause cases reporting this same MDC 05 diagnosis
with circulatory system procedures to be assigned to an unrelated MS-
DRG.
Therefore, for the reasons described previously, we are not
proposing to add the following 18 ICD-10-CM codes to the list of
principal diagnosis codes for MS-DRGs 673, 674, and 675 when reported
with a procedures code describing the insertion of a TIVAD or a
tunneled vascular access device: E10.21, E10.29, E11.21, E11.29,
E13.21, E13.29, I13.2, T80.211A, T80.212A, T80.218A, T82.7XXA,
T82.818A, T82.828A, T82.838A, T82.848A, T82.858A, T82.868A, and
T82.898A.
We then reviewed the remaining 11 diagnosis codes submitted by the
requestor. Codes T82.41XA, T82.42XA, T82.43XA and T82.49XA describe
mechanical complications of vascular dialysis catheters. Our clinical
advisors believe the insertion of TIVADs or tunneled vascular access
devices for the purposes of hemodialysis is clearly clinically related
to diagnosis codes describing a mechanical complication of a vascular
dialysis catheter and that for clinical coherence, these cases should
be grouped with the subset of cases that report the insertion of
totally implantable vascular access devices or tunneled vascular access
devices as an inpatient procedure for the purposes of hemodialysis for
renal failure.
Codes T82.41XA, T82.42XA, T82.43XA and T82.49XA that describe
mechanical complications of vascular dialysis catheters are currently
assigned to MDC 05 and would require reassignment to MDC 11 in MS-DRGs
673, 674, and 675 to group with the subset of cases that report the
insertion of totally implantable vascular access devices or tunneled
vascular access devices as an inpatient procedure for the purposes of
hemodialysis for renal failure. We examined claims data from the
September 2019 update of the FY 2019 MedPAR file for all cases
reporting procedures describing the insertion of TIVADs or tunneled
vascular access devices with a principal diagnosis from the T82.4-
series in MDC 05 and compared this data to cases in MS-DRGs 673, 674
and 675. The following table shows our findings:

[[Page 32521]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.056

As shown in the table, there were 13,068 cases in MS-DRG 673 with
an average length of stay of 11 days and average costs of $26,528.
There were 1,025 cases reporting a principal diagnosis describing a
mechanical complication of vascular dialysis catheter, with a secondary
diagnosis of MCC, and a procedure code for the insertion of a TIVAD or
tunneled vascular access device with an average length of stay of 4.6
days and average costs of $14,882. There were 6,592 cases in MS-DRG 674
with an average length of stay of 7.6 days and average costs of
$17,491. There were 2 cases reporting a principal diagnosis describing
a mechanical complication of vascular dialysis catheter, with a
secondary diagnosis of CC, and a procedure code for the insertion of a
TIVAD or tunneled vascular access device with an average length of stay
of 6 days and average costs of $15,016. There were 437 cases in MS-DRG
675 with an average length of stay of 3.4 days and average costs of
$12,506. There was one case reporting a principal diagnosis describing
a mechanical complication of vascular dialysis catheter, without a
secondary diagnosis of CC or MCC, and a procedure code for the
insertion of a TIVAD or tunneled vascular access device with a length
of stay of 3 days and costs of $9,317. Our clinical advisors noted that
the average length of stay and average costs of cases reporting a
diagnosis describing a mechanical complication of a vascular dialysis
catheter and the insertion of a TIVAD or a tunneled vascular access
device are lower than for all cases in MS-DRGs 673, 674, and 675,
respectively.
For the reasons discussed, our clinical advisors believe that it is
clinically appropriate for the four ICD-10-CM diagnosis codes
describing a mechanical complication of a vascular dialysis catheter to
group to the subset of GROUPER logic that recognizes the insertion of
totally implantable vascular access devices or tunneled vascular access
devices as an inpatient procedure for the purposes of hemodialysis.
Therefore, we are proposing to reassign ICD-10-CM diagnosis codes
T82.41XA, T82.42XA, T82.43XA, and T82.49XA from MDC 05 in MS-DRGs 314,
315, and 316 (Other Circulatory System Diagnoses with MCC, with CC, and
without CC/MCC, respectively) to MDC 11 (Diseases and Disorders of the
Kidney and Urinary Tract) assigned to MS-DRGs 673, 674, and 675 (Other
Kidney and Urinary Tract Procedures with MCC, with CC, and without CC/
MCC, respectively) and 698, 699, and 700 (Other Kidney and Urinary
Tract Diagnoses with MCC, with CC, and without CC/MCC, respectively).
In reviewing ICD-10-CM codes E10.22, E11.22, and E13.22 describing
diabetes mellitus with diabetic chronic kidney disease, we noted that
related ICD-10-CM diagnosis code E09.22 (Drug or chemical induced
diabetes mellitus with diabetic chronic kidney disease) is also not
included in the current list of diagnosis codes included in the special
logic in MS-DRGs 673, 674, and 675 for certain MDC 11 diagnoses
reported with procedure codes for the insertion of tunneled or totally
implantable vascular access devices, and therefore we included E09.22
in our review. ICD-10-CM assumes a causal relationship between diabetes
mellitus and chronic kidney disease. According to the ICD-10-CM
Official Guidelines for Coding and Reporting, the word ``with'' or
``in'' should be interpreted to mean ``associated with'' or ``due to''
when it appears in a code title, the Alphabetic Index (either under a
main term or subterm), or an instructional note in the Tabular List,
meaning these conditions should be coded as related even in the absence
of provider documentation explicitly linking them, unless the
documentation clearly states the conditions are unrelated. To code
diabetic chronic kidney disease in ICD-10-CM, instructional notes
direct to ``code first any associated diabetic chronic kidney disease''
(that is, E09.22, E10.22, E11.22, and E13.22) with a second code from
subcategory of N18

[[Page 32522]]

listed after the diabetes code to specify the stage of chronic kidney
disease. Recognizing that coding guidelines instruct to code E09.22,
E10.22, E11.22, and E13.22 before codes that specify the stage of
chronic kidney disease, our clinical advisors recommend adding diabetic
codes E09.22, E10.22, E11.22, and E13.22 when reported with a secondary
diagnosis of either N18.5 Chronic kidney disease, stage 5) or N18.6
(End stage renal disease) to the special logic in MS-DRGs 673, 674, and
675 since these diagnosis code combinations describe an indication that
could require the insertion of a totally implantable vascular access
device or a tunneled vascular access device to allow access to the
patient's blood for hemodialysis purposes.
ICD-10-CM codes T86.11, T86.12, T86.13, and T86.19 describe
complications of kidney transplant and are currently assigned to MDC
11. Our clinical advisors believe these diagnoses are also indications
for hemodialysis and these cases represent a distinct, recognizable
clinical group similar to those cases in the subset of cases assigned
to the special logic in MS-DRGs 673, 674, and 675 when reported with
procedure codes describing the insertion of totally implantable
vascular access devices or tunneled vascular access devices for
hemodialysis.
In summary, we are proposing to add ICD-10-CM codes E09.22, E10.22,
E11.22, and E13.22, when reported with a secondary diagnosis of N18.5
or N18.6, to the list of principal diagnosis codes in the subset of
GROUPER logic in MS-DRGs 673, 674, and 675 that recognizes the
insertion of totally implantable vascular access devices or tunneled
vascular access devices as an inpatient procedure for the purposes of
hemodialysis. We are also proposing to add ICD-10-CM codes T86.11,
T86.12, T86.13, and T86.19 to the list of principal diagnosis codes in
this subset of GROUPER logic in MS-DRGs 673, 674, and 675.
Lastly, we reviewed the current list of 20 MDC 11 diagnoses
assigned to the special logic in MS-DRGs 673, 674, and 675 when
reported with procedure codes for the insertion of tunneled or totally
implantable vascular access devices. The list of MDC 11 diagnosis codes
currently included in the special logic of MS-DRGs 673, 674, and 675
are found in the following table:
[GRAPHIC] [TIFF OMITTED] TP29MY20.057

Our clinical advisors pointed out that ICD-10-CM codes I12.9,
I13.10, N18.1, N18.2, N18.3, N18.4, and N18.9 do not describe renal
failure and they do not describe indications that would generally
require the insertion of totally implantable vascular access devices or
tunneled vascular access devices for the purposes of hemodialysis. Our
advisors

[[Page 32523]]

note hemodialysis replicates the function of the kidneys. In cases of
acute kidney failure and anuria, hemodialysis is indicated to prevent
urea and other waste material from building up in the blood until the
kidneys return to normal function. A diagnosis of chronic kidney
disease stages 1 through 4, however, means the kidneys still have the
ability to filter waste and extra fluid out of the blood. Dialysis is
not often not initiated in chronic kidney disease until the chronic
kidney disease progresses to stage 5 or ESRD, which is defined as when
kidney function drops to 15 percent or less. Our clinical advisors
stated that these seven codes do not describe indications requiring the
insertion of totally implantable vascular access devices or tunneled
vascular access devices for hemodialysis and recommended these codes be
removed from the special logic in MS-DRGs 673, 674, and 675.
We examined claims data from the September 2019 update of the FY
2019 MedPAR file for MS--DRGs 673, 674, and 675 for this subset of
cases to determine if there were any cases that reported one of the
seven ICD-10-CM codes in the special logic of MS-DRGs 673, 674, and 675
that do not necessarily describe indications requiring the insertion of
totally implantable vascular access devices or tunneled vascular access
devices for hemodialysis, the frequency with which they were reported
and the relative resource use as compared with all cases assigned to
the special logic in MS-DRGs 673, 674, and 675. The following table
shows our findings:
[GRAPHIC] [TIFF OMITTED] TP29MY20.058

As shown by the table, for MS-DRG 673, we identified a total of
7,391 cases assigned to the special logic within this MS-DRG with an
average length of stay of 12.1 days and average costs of $28,273. Of
these 7,391 cases in the subset of MS-DRG 673, there were 34 cases
describing insertion of a TIVAD or tunneled vascular access device with
a principal diagnosis of I12.9, I13.10, N18.1, N18.2, N18.3, N18.4, or
N18.9 with an average length of stay of 14.2 days and average costs of
$27,844. For MS-DRG 674, we identified a total of 3,055 cases assigned
to the special logic within this MS-DRG with an average length of stay
of 7.8 days and average costs of $17,107. Of these 3,055 cases in the
subset of MS-DRG 674, there were 30 cases describing insertion of a
TIVAD or tunneled vascular access device with a principal diagnosis of
I12.9, I13.10, N18.1, N18.2, N18.3, N18.4, or N18.9 with an average
length of stay of 7.2 days and average costs of $11,227. For MS-DRG
675, we identified a total of 58 cases assigned to the special logic
within this MS-DRG with an average length of stay of 6.1 days and
average costs of $12,582. Of these 58 cases in the subset of MS-DRG
675, there was one case describing insertion of a TIVAD or tunneled
vascular access device with a principal diagnosis of I12.9, I13.10,
N18.1, N18.2, N18.3, N18.4, or N18.9 with a length of stay of 4 days
and costs of $6,549. Overall, for MS-DRGs 673, 674 and 675, there were
a relatively small number of cases reporting a principal diagnosis of
I12.9, I13.10, N18.1, N18.2, N18.3, N18.4, or N18.9 and a procedure
code describing the insertion of a TIVAD or tunneled vascular access
device demonstrating

[[Page 32524]]

that these conditions are not typically addressed by insertion of these
devices.
As stated previously, TIVADs and tunneled vascular access devices
may be inserted for a variety of principal diagnoses. Our clinical
advisors believe that continuing to include these seven diagnoses that
are not specific to renal failure or that do not otherwise describe
indications requiring the insertion of totally implantable vascular
access devices or tunneled vascular access devices for hemodialysis
would not maintain clinical coherence with other cases in this subset
of cases in MS-DRGs 673, 674, and 675. Therefore, for the reasons
stated, we are proposing to remove ICD-10-CM codes I12.9, I13.10,
N18.1, N18.2, N18.3, N18.4, and N18.9 from the subset of GROUPER logic
in MS-DRGs 673, 674, and 675 that recognizes the insertion of totally
implantable vascular access devices or tunneled vascular access devices
as an inpatient procedure for the purposes of hemodialysis.
9. MDC 17 (Myeloproliferative Diseases and Disorders, Poorly
Differentiated Neoplasms): Inferior Vena Cava Filter Procedures
We received a request to review the GROUPER logic in MDC 17. The
requester stated that cases reporting the introduction of a high dose
chemotherapy agent, or reporting a chemotherapy principal diagnosis
with a secondary diagnosis describing acute leukemia, are assigned to
medical MS-DRGs 837 (Chemotherapy with Acute Leukemia as Secondary
Diagnosis or with High Dose Chemotherapy Agent with MCC), MS-DRG 838
(Chemotherapy with Acute Leukemia as Secondary Diagnosis with CC or
High Dose Chemotherapy Agent), and MS-DRG 839 (Chemotherapy with Acute
Leukemia as Secondary Diagnosis without CC/MCC). However, when
procedure codes describing the placement of an inferior vena cava (IVC)
filter, namely 06H03DZ (Insertion of intraluminal device into inferior
vena cava, percutaneous approach), are also reported with the same
codes describing the introduction of a high dose chemotherapy agent or
report a chemotherapy principal diagnosis with a secondary diagnosis
describing acute leukemia, the cases are assigned to surgical MS-DRGs
829 and 830 (Myeloproliferative Disorders or Poorly Differentiated
Neoplasms with Other Procedure with and without CC/MCC, respectively).
According to the requestor, the additional resources used by the
hospital to place an IVC filter should not result in assignment to
lower-weighted MS-DRGs.
The ICD-10-PCS codes that describe the insertion of an infusion
device or the insertion of an intraluminal device into the inferior
vena cava are listed in the following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.059

Our analysis of this grouping issue confirmed that, when procedure
code 06H03DZ (Insertion of intraluminal device into inferior vena cava,
percutaneous approach) is reported with a procedure code describing the
introduction of a high dose chemotherapy agent, or when it is reported
with a chemotherapy principal diagnosis code with a secondary diagnosis
code describing acute leukemia, these cases group to surgical MS-DRGs
829 and 830. ICD-10-PCS procedure code 06H03DZ identifies the placement
of an IVC filter and is designated as an extensive O.R. procedure for
purposes of MS-DRG assignment. We then examined the GROUPER logic for
medical MS-DRGs 837, 838 and 839. The GROUPER logic for MS-DRGs 837,
838, and 839 is defined by a principal diagnosis of chemotherapy
identified with ICD-10-CM diagnosis codes Z08 (Encounter for follow-up
examination after completed treatment for malignant neoplasm), Z51.11
(Encounter for antineoplastic chemotherapy) or Z51.112 (Encounter for
antineoplastic immunotherapy) along with a secondary diagnosis of acute
leukemia or a procedure code for the introduction of a high dose
chemotherapy agent as reflected in the logic table:

[[Page 32525]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.060

We refer the reader to the ICD-10 MS-DRG Version 37 Definitions
Manual (which is available via the internet on the CMS website at:
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software for complete
documentation of the GROUPER logic for the listed MS-DRGs.
We examined claims data from the September 2019 update of the FY
2019 MedPAR file for all cases in MS-DRGs 829 and 830 and for cases
reporting the insertion of an IVC filter (procedure codes 06H00DZ,
06H03DZ, and 06H04DZ) with a procedure code describing the introduction
of a high dose chemotherapy agent, or with a chemotherapy principal
diagnosis code with a secondary diagnosis code describing acute
leukemia. Our findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.061

As shown in the table, there were a total of 1,697 cases with an
average length of stay of 9.2 days and average costs of $24,188 in MS-
DRG 829. Of those 1,697 cases, there were 18 cases reporting procedure
code 06H03DZ with a procedure code describing the introduction of a
high dose chemotherapy agent, or with a chemotherapy principal
diagnosis code with a secondary diagnosis code describing acute
leukemia with an average length of stay of 25.6 days and average costs
of $83,861. We note that there were no cases reporting procedure codes
06H00DZ or 06H04DZ. For MS-DRG 830, there were a total of 311 cases
with an average length of stay of 2.9 days and average costs of
$10,885. We found zero cases in MS-DRG 830 reporting a procedure code
for the insertion of an IVC filter with a procedure code describing the
introduction of a high dose chemotherapy agent, or with a chemotherapy
principal diagnosis code with a secondary diagnosis code describing
acute leukemia. Based on the claims data, the cases reporting procedure
code 06H03DZ with a procedure code describing the introduction of a
high dose chemotherapy agent, or with a chemotherapy principal
diagnosis code with a secondary diagnosis code describing acute
leukemia have higher average costs ($83,861 versus $24,188) and a
longer average length of stay (25.6

[[Page 32526]]

days versus 9.2 days) than all the cases in MS-DRG 829.
We also reviewed the claims data for MS-DRGs 837, 838, and 839. Our
findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.062

As shown in the table, there were a total of 1,776 cases with an
average length of stay of 17 days and average costs of $40,667 in MS-
DRG 837. There were a total of 1,172 cases with an average length of
stay of 7.3 days and average costs of $16,594 in MS-DRG 838. There were
a total of 810 cases with an average length of stay of 5 days and
average costs of $10,994 in MS-DRG 839. Based on the claims data, the
cases reporting procedure code 06H03DZ with a procedure code describing
the introduction of a high dose chemotherapy agent, or with a
chemotherapy principal diagnosis code with a secondary diagnosis code
describing acute leukemia again have higher average costs ($83,861
versus $40,667, $16,594, and $10,994 respectively) and a longer average
length of stay (25.6 days versus 17 days, 7.3 days and 5 days,
respectively) than all the cases in MS-DRG 837, 838, and 839. Our
clinical advisors reviewed the claims data and noted there were only a
small number of cases reporting procedure code 06H03DZ with a procedure
code describing the introduction of a high dose chemotherapy agent, or
with a chemotherapy principal diagnosis code with a secondary diagnosis
code describing acute leukemia, and believe there may have been other
factors contributing to the higher costs for these cases. Our clinical
advisors stated the procedure to insert an IVC filter is not surgical
in nature and recommended further analysis.
We performed further analysis on the other ICD-10-PCS codes
describing the insertion of a device into the inferior vena cava to
identify if they have a similar extensive O.R. designations and noted
inconsistencies among the O.R. and non-O.R. designations. In Version 37
of the ICD-10 MS-DRGs, ICD-10-PCS procedure codes 06H003T, 06H003Z,
06H033T, 06H033Z, and 06H043Z identify the insertion of an infusion
device into the inferior vena cava with various approaches and are
classified as Non-O.R. procedures. ICD-10-PCS procedure codes 06H00DZ,
06H03DZ, and 06H04DZ identify the insertion of an intraluminal device
into the inferior vena cava (IVC filter procedure) with various
approaches and are classified as extensive O.R. procedures. Our
clinical advisors indicated that codes 06H00DZ, 06H03DZ, and 06H04DZ
describing the insertion of an intraluminal device into the inferior
vena cava do not require the resources of an operating room, that the
procedure to insert an IVC filter is not surgical in nature and that
these procedures are comparable to the related ICD-10-PCS procedure
codes that describe the insertion of infusion devices into the inferior
vena cava that are currently designated as Non-O.R. procedures. Our
clinical advisors believe that, given the similarity in factors such as
complexity, resource utilization, and lack of a requirement for
anesthesia administration between all procedures describing insertion
of a device into the inferior vena cava, it would be more appropriate
to designate these three ICD-10-PCS codes describing the insertion of
an intraluminal device into the inferior vena cava as Non-O.R.
procedures. Therefore, we are proposing to remove ICD-10-PCS procedure
codes 06H00DZ, 06H03DZ, and 06H04DZ from the FY 2021 ICD-10 MS-DRG
Version 38 Definitions Manual in Appendix E--Operating Room Procedures
and Procedure Code/MS-DRG Index as O.R. procedures. Under this
proposal, these procedures would no longer impact MS-DRG assignment.
10. Review of Procedure Codes in MS-DRGs 981 Through 983 and 987
Through 989
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 (Non-Extensive 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 cases reporting these 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 use this information to
determine which procedure codes and diagnosis codes to examine.
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.
We also consider whether it would be more appropriate to move the
principal diagnosis codes into the MDC to which the procedure is
currently assigned.
In addition to this internal review, we also consider requests that
we receive to examine cases found to group to MS-DRGs 981 through 983
or MS-DRGs 987 through 989 to determine if it would be appropriate to
add procedure codes to one of the surgical MS DRGs for the MDC into
which the principal diagnosis falls or to move the principal diagnosis
to the surgical MS DRGs to which the procedure codes are assigned.
Based on the results of our review of the claims data from the
September 2019 update of the FY 2019 MedPAR file, as well as our review
of the requests that we received to examine cases found to group to MS-
DRGs 981 through 983 or MS-DRGs 987 through 989, we are proposing to
move the cases reporting the procedures and/or principal diagnosis
codes described in this section of this rule 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 or procedure is assigned.

[[Page 32527]]

a. Horseshoe Abscess With Drainage
We received a request to reassign cases reporting a principal
diagnosis of a horseshoe abscess with a procedure involving open
drainage of perineum subcutaneous tissue and fascia from MS-DRGs 987,
988, and 989 (Non-Extensive O.R. Procedure Unrelated to Principal
Diagnosis with MCC, with CC, and without CC/MCC, respectively) to MS-
DRGs 356, 357, and 358 (Other Digestive System O.R. Procedures with
MCC, with CC, and without CC/MCC, respectively) in MDC 06. ICD-10-CM
diagnosis code K61.31 (Horseshoe abscess) is used to report a horseshoe
abscess and is currently assigned to MDC 06 (Diseases and Disorders of
the Digestive System). A horseshoe abscess is a specific type of
ischiorectal abscess caused by an abscessed anal gland located in the
posterior midline of the anal canal with suppuration found in the
ischiorectal fossae. ICD-10-PCS procedure code 0J9B0ZZ (Drainage of
perineum subcutaneous tissue and fascia, open approach) may be reported
to describe drainage of an abscess in the ischiorectal space and is
currently assigned to MDC 08 (Diseases and Disorders of the
Musculoskeletal System and Connective Tissue), MDC 09 (Diseases and
Disorders of the Skin, Subcutaneous Tissue and Breast), MDC 21
(Injuries, Poisonings and Toxic Effects of Drugs) and MDC 24 (Multiple
Significant Trauma).
Our analysis of this grouping issue confirmed that, when a
horseshoe abscess is reported as a principal diagnosis with ICD-10-PCS
procedure code 0J9B0ZZ, these cases group to MS-DRGs 987, 988, and 989.
As previously noted, whenever there is a surgical procedure reported on
the claim that is unrelated to the MDC to which the case was assigned
based on the principal diagnosis, it results in an MS-DRG assignment to
a surgical class referred to as ``unrelated operating room
procedures''.
We examined the claims data to identify cases reporting procedure
code 0J9B0ZZ with a principal diagnosis of K61.31 that are currently
grouping to MS-DRGs 987, 988, and 989. Our findings are shown in this
table:
[GRAPHIC] [TIFF OMITTED] TP29MY20.063

As previously noted, the requestor asked that we reassign these
cases to MS-DRGs 356, 357, and 358. We therefore examined the data for
all cases in MS-DRGs 356, 357, and 358. Our findings are shown in this
table:
[GRAPHIC] [TIFF OMITTED] TP29MY20.064

While our clinical advisors noted that the average length of stay
and average costs of cases in MS-DRGs 356, 357, and 358 are higher than
the average length of stay and average costs for the small subset of
cases reporting procedure code 0J9B0ZZ and a principal diagnosis code
of K61.31 in MS-DRGs 987, 988, and 989, they believe that the procedure
is clearly clinically related to the principal diagnosis and is a
logical accompaniment of the diagnosis. Therefore, they believe it is
clinically appropriate for the procedure to group to the same MS-DRGs
as the principal diagnosis.
Therefore, we are proposing to add ICD-10-PCS procedure code
0J9B0ZZ to MDC 06 in MS-DRGs 356, 357, and 358. Under this proposal,
cases reporting procedure code 0J9B0ZZ in conjunction with a principal
diagnosis from MDC 06, such as diagnosis code K61.31, would group to
MS-DRGs 356, 357, and 358.
b. Chest Wall Deformity With Supplementation
We received a request to reassign cases reporting a principal
diagnosis of acquired deformity of chest and rib with a procedure
involving the placement of a biological or synthetic material that
supports or strengthens the body part from MS-DRGs 981, 982, and 983
(Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC,
with CC, and without CC/MCC, respectively) to MS-DRGs 515, 516, and 517
(Other Musculoskeletal System and Connective Tissue O.R. Procedures,
with MCC, with CC, and without CC/MCC, respectively) in MDC 08.
ICD-10-CM diagnosis code M95.4 (Acquired deformity of chest and
rib) is used to report this condition and is currently assigned to MDC
08 (Diseases and Disorders of the Musculoskeletal System and Connective
Tissue). ICD-10-PCS procedure codes 0WU807Z (Supplement chest wall with
autologous tissue substitute, open approach), 0WU80JZ (Supplement chest
wall with synthetic substitute, open approach)

[[Page 32528]]

and 0WU80KZ (Supplement chest wall with nonautologous tissue
substitute, open approach) may be reported to describe procedures to
supplement or reinforce the chest wall with biologic or synthetic
material. ICD-10-PCS procedure codes 0WU807Z and 0WU80KZ are currently
assigned to MDC 04 (Diseases and Disorders of the Respiratory System).
We note that ICD-10-PCS procedure code 0WU80JZ is already assigned to
MDC 08 (Diseases and Disorders of the Musculoskeletal System and
Connective Tissue) as well as MDC 04 (Diseases and Disorders of the
Respiratory System), so these cases already group to MS-DRGs 515, 516,
and 517 when reported with a principal diagnosis of ICD-10-CM diagnosis
code M95.4.
Our analysis of this grouping issue confirmed that when diagnosis
code M95.4 is reported as a principal diagnosis with ICD-10-PCS
procedure codes 0WU807Z or 0WU80KZ, these cases group to MS-DRGs 981,
982, and 983. As noted in the previous discussion, whenever there is a
surgical procedure reported on the claim that is unrelated to the MDC
to which the case was assigned based on the principal diagnosis, it
results in an MS-DRG assignment to a surgical class referred to as
``unrelated operating room procedures''.
We examined the claims data to identify cases reporting procedure
codes 0WU807Z or 0WU80KZ with principal diagnosis code M95.4 that are
currently grouping to MS-DRGs 981, 982, and 983. Our analysis showed
one case reporting a principal diagnosis of code M95.4 with procedure
code 0WU807Z, with a length of stay of 2.0 days and average costs of
$11,594 in MS-DRG 983. We found zero cases in MS-DRGs 981 and 982
reporting procedure codes 0WU807Z or 0WU80KZ and a principal diagnosis
of M95.4.
We also examined the data for cases in MS-DRGs 515, 516, and 517,
and our findings are shown in this table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.065

While there is only one case reporting procedure codes 0WU807Z or
0WU80KZ with principal diagnosis M95.4 in MS-DRGs 981, 982, and 983,
our clinical advisors reviewed this request and believe that the cases
involving procedures of chest wall supplementation with a principal
diagnosis of acquired deformity of chest and rib represent a distinct,
recognizable clinical group similar to those cases in MS-DRGs 515, 516,
and 517, and that procedures reporting 0WU80JZ and 0WU80KZ are clearly
related to the principal diagnosis code. They believe that it is
clinically appropriate for the three ICD-10-PCS codes describing
procedures to supplement or reinforce the chest wall with biologic or
synthetic material to group to the same MS-DRGs as the principal
diagnoses.
Therefore, we are proposing to add ICD-10-PCS procedure codes
0WU807Z and 0WU80KZ to MDC 08 in MS-DRGs 515, 516, and 517. Under this
proposal, cases reporting procedure codes 0WU807Z or 0WU80KZ in
conjunction with a principal diagnosis code from MDC 08 would group to
MS-DRGs 515, 516, and 517.
c. Hepatic Malignancy With Hepatic Artery Embolization
We received a request to reassign cases for hepatic malignancy when
reported with procedures involving the embolization of a hepatic artery
from MS-DRGs 987, 988, and 989 (Non-Extensive O.R. Procedure Unrelated
to Principal Diagnosis with MCC, with CC, and without CC/MCC,
respectively) to MS-DRGs 423, 424, and 425 (Other Hepatobiliary or
Pancreas Procedures with MCC, with CC, and without CC/MCC,
respectively) in MDC 08.
ICD-10-PCS procedure code 04V33DZ (Restriction of hepatic artery
with intraluminal device, percutaneous approach) may be reported to
describe embolization procedures to narrow or partially occlude a
hepatic artery with an intraluminal device and is currently assigned to
MDC 05 (Diseases and Disorders of the Circulatory System). ICD-10-PCS
procedure code 04L33DZ (Occlusion of hepatic artery with intraluminal
device, percutaneous approach) may be reported to describe embolization
procedures to completely close off a hepatic artery with an
intraluminal device and is currently assigned to MDC 05 (Diseases and
Disorders of the Circulatory System) and MDC 06 (Diseases and Disorders
of the Digestive System).
The requestor did not provide an ICD-10-CM diagnosis code in its
request so we reviewed ICD-10-CM diagnosis codes in the C00 through D49
code range to identify conditions that describe hepatic malignancies.
We identified the following fourteen ICD-10-CM diagnosis codes, all
currently assigned to MDC 07 (Diseases and Disorders of the
Hepatobiliary System & Pancreas):

[[Page 32529]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.066

Our analysis of this grouping issue confirmed that, when one of the
fourteen hepatic malignancy ICD-10-CM diagnosis codes previously listed
is reported as a principal diagnosis with ICD-10-PCS procedure code
04L33DZ, these cases group to MS-DRGs 987, 988, and 989. However, we
noted that when one of these fourteen hepatic malignancy ICD-10-CM
diagnosis codes is reported as a principal diagnosis with ICD-10-PCS
procedure code 04V33DZ, these cases currently group to MS DRGs 981,
982, and 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis
with MCC, with CC, and without CC/MCC, respectively). As noted in the
previous discussion, whenever there is a surgical procedure reported on
the claim that is unrelated to the MDC to which the case was assigned
based on the principal diagnosis, it results in an MS-DRG assignment to
a surgical class referred to as ``unrelated operating room
procedures''.
To understand the resource use for the subset of cases reporting
procedure code 04V33DZ with a principal diagnosis of hepatic malignancy
that are currently grouping to MS-DRGs 981, 982, and 983, we examined
claims data for the average length of stay and average costs for these
cases. Our findings are shown in the following table:
[GRAPHIC] [TIFF OMITTED] TP29MY20.067

We then examined the claims data to identify cases reporting
procedure code 04L33DZ reported with a principal diagnosis of hepatic
malignancy that are currently grouping to MS-DRGs 987, 987, and 989.
Our findings are shown in the following table:

[[Page 32530]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.068

We also examined the data for cases in MS-DRGs 423, 424, and 425,
and our findings are shown in the following table:
[GRAPHIC] [TIFF OMITTED] TP29MY20.069

While the average lengths of stay of cases in MS-DRGs 423, 424, and
425 are longer than the average lengths of stay for the subset of cases
reporting procedure codes 04V33DZ or 04L33DZ and a principal diagnosis
of hepatic malignancy, the average costs of these same cases are
generally similar. Our clinical advisors also believe that these
procedures are clearly related to the principal diagnoses, as they are
an appropriate treatment for a number of hepatobiliary diagnoses,
including cancer and it is clinically appropriate for the procedures to
group to the same MDC as the principal diagnoses.
Therefore, we are proposing to add ICD-10-PCS procedure codes
04V33DZ and 04L33DZ to MDC 07 in MS-DRGs 423, 424 and 425. Under this
proposal, cases reporting procedure codes 04V33DZ or 04L33DZ in
conjunction with a principal diagnosis code for a hepatic malignancy
from MDC 07 would group to MS-DRGs 423, 424 and 425.
d. Hemoptysis With Percutaneous Artery Embolization
We received a request to reassign cases for hemoptysis when
reported with a procedure describing percutaneous embolization of an
upper artery with an intraluminal device from MS-DRGs 981, 982, and 983
(Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC,
with CC, and without CC/MCC, respectively) to MS-DRGs 163, 164, and 165
(Major Chest Procedures with MCC, with CC, and without CC/MCC,
respectively) in MDC 04. Hemoptysis is the expectoration of blood from
some part of the respiratory tract. ICD-10-CM diagnosis code R04.2
(Hemoptysis) is used to report this condition and is currently assigned
to MDC 04 (Diseases and Disorders of the Respiratory System). ICD-10-
PCS procedure code 03LY3DZ (Occlusion of upper artery with intraluminal
device, percutaneous approach) may be reported to describe percutaneous
embolization of an upper artery with an intraluminal device and is
currently assigned to MDC 05 (Diseases and Disorders of the Circulatory
System), MDC 21 (Injuries, Poisonings and Toxic Effects of Drugs) and
MDC 24 (Multiple Significant Trauma).
Our analysis of this grouping issue confirmed that when a procedure
describing percutaneous embolization of an upper artery with an
intraluminal device (such as ICD-10-PCS procedure code 03LY3DZ) is
reported with a principal diagnosis from MDC 04, such as R04.2, these
cases group to MS-DRGs 981, 982, and 983. During our review of this
issue, we also examined claims data for similar procedures 03LY0DZ
(Occlusion of upper artery with intraluminal device, open approach) and
03LY4DZ (Occlusion of upper artery with intraluminal device,
percutaneous endoscopic approach) and noted the same pattern. As noted
in the previous discussion, whenever there is a surgical procedure
reported on the claim that is unrelated to the MDC to which the case
was assigned based on the principal diagnosis, it results in an MS-DRG
assignment to a surgical class referred to as ``unrelated operating
room procedures''.
We examined the claims data to identify cases reporting procedure
codes 03LY0DZ, 03LY3DZ or 03LY4DZ with a principal diagnosis from MDC
04 that are currently grouping to MS-DRGs 981, 982, and 983. Our
findings are shown in this table:

[[Page 32531]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.070

As indicated earlier, the requestor suggested that we move ICD-10-
PCS procedure code 03LY3DZ to MS-DRGs 163, 164, and 165. However, our
clinical advisors believe that, within MDC 04, procedure codes
describing percutaneous embolization of an upper artery with an
intraluminal device are more clinically aligned with the procedure
codes assigned to MS-DRGs 166, 167, and 168 (Other Respiratory System
O.R. Procedures with MCC, with CC and without CC/MCC, respectively), as
these procedures would not be considered major chest procedures.
Therefore, we examined claims data to identify the average length of
stay and average costs for cases assigned to MS-DRGs 166, 167 and 168.
Our findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.071

While our clinical advisors noted that the average costs of cases
in MS-DRGs 166, 167, and 168 are lower than the average costs for the
subset of cases reporting procedure codes 03LY0DZ, 03LY3DZ or 03LY4DZ
and a principal diagnosis code from MDC 04, they believe that these
procedures are clearly related to the principal diagnoses as these
procedures are appropriate for certain respiratory tract diagnoses.
Therefore, it is clinically appropriate for the procedures to group to
the same MDC as the principal diagnoses.
Therefore, we are proposing to add ICD-10-PCS procedure codes
03LY0DZ, 03LY3DZ and 03LY4DZ to MDC 04 in MS-DRGs 166, 167, and 168.
Under this proposal, cases reporting procedure codes 03LY0DZ, 03LY3DZ
or 03LY4DZ in conjunction with a principal diagnosis code from MDC 04
such as hemoptysis (R04.2) would group to MS-DRGs 166, 167, and 168.
e. Acquired Coagulation Factor Deficiency With Percutaneous Artery
Embolization
We received a request to reassign cases for acquired coagulation
factor deficiency when reported with a procedure describing the
complete occlusion of an artery with an intraluminal device from MS-
DRGs 981, 982, and 983 (Extensive O.R. Procedure Unrelated to Principal
Diagnosis with MCC, with CC, and without CC/MCC, respectively) to MS-
DRGs 252, 253 and 254 (Other Vascular Procedures with MCC, with CC, and
without CC/MCC, respectively) or 270, 271, and 272 (Other Major
Cardiovascular Procedures with MCC, with CC, and without CC/MCC,
respectively) in MDC 05 (Diseases and Disorders of the Circulatory
System). The requestor asked that we reassign ICD-10-CM diagnosis code
D68.4 (Acquired coagulation factor deficiency) from MDC 16 (Diseases
and Disorders of Blood, Blood Forming Organs, Immunologic Disorders) in
MS-DRG 813 (Coagulation Disorders), to MDC 05. The requestor provided
the following list of 59 ICD-10-PCS procedure codes describing the
complete occlusion of an artery with an intraluminal device in its
request for consideration to reassign the ICD-10-CM diagnosis code for
acquired coagulation factor deficiency to MDC 05. The requester noted
that the diagnosis of Hemorrhage, not elsewhere classified (ICD-10-CM
diagnosis code R58) groups to MS-DRGs 252, 253 and 254 or 270, 271, and
272 in MDC 05 when reported with one of the 59 ICD-10-PCS procedure
codes listed and requested that cases reporting a diagnosis describing
acquired coagulation factor deficiency also group to those MS-DRGs when
reported with one of the 59 ICD-10-PCS procedure codes listed.
BILLING CODE 4120-01-P

[[Page 32532]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.072

[[Page 32533]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.073

BILLING CODE 4120-01-C
Our analysis of this grouping issue confirmed that, when diagnosis
code D68.4 is reported as a principal diagnosis with one of the 59 ICD-
10-PCS procedure codes provided by the requestor, these cases group to
MS-DRGs 981, 982, and 983. As noted in the previous discussion,
whenever there is a surgical procedure reported on the claim that is
unrelated to the MDC to which the case was assigned based on the
principal diagnosis, it results in an MS-DRG assignment to a surgical
class referred to as ``unrelated operating room procedures''.
We examined the claims data to identify cases involving the 59
procedure codes in MDC 05 reported with a principal diagnosis of code
D68.4 that are currently grouping to MS-DRGs 981, 982, and 983. Our
analysis showed one case reported a principal diagnosis of D68.4 with a
procedure code in MDC 05, with a length of stay of 2.0 days and costs
of $21,890 in MS-DRG 981. We found zero cases in MS-DRGs 982 and 983
reporting a procedure code from MDC 05 and a principal diagnosis of
code M95.4.
Overall, for MS-DRGs 981, 982, and 983, there was a total of one
case reporting a principal diagnosis of acquired coagulation factor
deficiency with any of the procedures from MDC 05 provided by the
requestor, demonstrating that acquired coagulation factor deficiency is
not typically corrected surgically by occlusion of an artery with an
intraluminal device.
We also examined the data for cases in MS-DRG 813, and our findings
are shown in this table:
[GRAPHIC] [TIFF OMITTED] TP29MY20.074

As shown in this table, there were a total of 16,680 cases in MS-
DRG 813, with an average length of stay of 4.7 days and average costs
of $11,286. In MS-DRG 813, we found 142 cases reporting a principal
diagnosis of an acquired coagulation factor deficiency with an average
length of stay of 6.41 days and average costs of $17,822. We note that
the average costs for the subset of cases in MS-DRG 813 reporting a
principal diagnosis of an acquired coagulation factor deficiency are
higher than the average costs of all cases that currently group to MS-
DRG 813. However, our clinical advisors believe that diagnosis code
D68.4 describes acquired bleeding disorders in which the affected
person lacks the necessary coagulation factors for proper clot
formation and wound healing, and therefore, is most clinically aligned
with the diagnosis codes assigned to MDC 16 (where it is currently
assigned). Our clinical advisors further note that a diagnosis of an
acquired bleeding disorder is not comparable to conditions described by
the ICD-10-CM code R58 (Hemorrhage, not elsewhere classified) as
suggested by the requestor. Diagnoses described by codes from Chapter
18 (Symptoms, Signs and Abnormal Clinical and Laboratory Findings) of
ICD-10-CM, such as R58, can be the result of a variety of underlying
conditions, or describe conditions of an unexplained etiology. As an
ill-defined condition, our clinical advisors do not believe it is
appropriate to equate this diagnosis code with a bleeding disorder.
Therefore, we are not proposing to reassign ICD-10-CM diagnosis code
D68.4 from MDC 16 to MDC 05.
f. Epistaxis With Percutaneous Artery Embolization
We received a request to consider adding cases for a hemorrhage of
the nose when reported with a procedure describing percutaneous
arterial embolization to MDC 03 (Disease and Disorders of the Ear,
Nose, Mouth and Throat) in MS-DRGs 133 and 134 (Other Ear, Nose, Mouth
and Throat O.R. Procedures with CC/MCC and without CC/MCC,
respectively). ICD-10-CM diagnosis code R04.0 (Epistaxis) is used to
describe a hemorrhage of the nose or ``nosebleed'' and is currently
assigned to MDC 03. ICD-10-PCS procedure codes

[[Page 32534]]

describing percutaneous arterial embolization may be reported with
procedure codes 03LM3DZ (Occlusion of right external carotid artery
with intraluminal device, percutaneous approach), 03LN3DZ (Occlusion of
left external carotid artery with intraluminal device, percutaneous
approach), or 03LR3DZ (Occlusion of face artery with intraluminal
device, percutaneous approach) and are currently assigned to several
MS-DRGs in five MDCs as illustrated in the table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.075

According to the requestor, when diagnosis code R04.0 is reported
as a principal diagnosis with any one of the procedure codes describing
a percutaneous arterial embolization (03LM3DZ, 03LN3DZ, or 03LR3DZ),
these cases are grouping to MS-DRGs 981, 982, and 983 (Extensive O.R.
Procedure Unrelated to Principal Diagnosis with MCC, with CC, and
without CC/MCC, respectively).
Our analysis of this grouping issue confirmed that, when epistaxis
(ICD-10-CM diagnosis code R04.0) is reported as a principal diagnosis
with ICD-10-PCS procedure codes 03LM3DZ, 03LN3DZ, or 03LR3DZ, these
cases group to MS-DRGs 981, 982, and 983. The reason for this grouping
is because whenever there is a surgical procedure reported on a claim
that is unrelated to the MDC to which the case was assigned based on
the principal diagnosis, it results in an MS-DRG assignment to a
surgical class referred to as ``unrelated operating room procedures.''
For our review of this grouping issue and the request to have cases
reporting procedure codes 03LM3DZ, 03LN3DZ, or 03LR3DZ added to MDC 03
in MS-DRGs 133 through 134, we examined claims data from September 2019
update of the FY 2019 MedPAR file for cases reporting ICD-10-PCS
procedure codes 03LM3DZ, 03LN3DZ, or 03LR3DZ with a principal diagnosis
of R0.40 from MDC 03 that currently group to MS-DRGs 981 through 983.
Our findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.076

We then examined the claims data to identify the average length of
stay and average costs for all cases in MS-DRGs 133 and 134. Our
findings are shown in the table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.077

As shown in the table, for MS-DRG 133, there were a total of 1,757
cases with an average length of stay of 5.6 days and average costs of
$15,337. For MS-DRG 134, there were a total of 849 cases with an
average length of stay of 2.5 days and average costs of $9,512. Our
clinical advisors believe that procedure codes 03LM3DZ, 03LN3DZ,

[[Page 32535]]

and 03LR3DZ are appropriate procedures to treat commonly occurring ear,
nose, and throat bleeding diagnoses and expressed support for these
procedure codes to group to MDC 03.
We note that, as discussed in section II.D.4 of the preamble of
this proposed rule, we are proposing to delete MS-DRGs 133 and 134 and
create proposed new MS-DRGs 143, 144, and 145 (Other Ear, Nose, Mouth
and Throat O.R. Procedures with MCC, with CC, and without CC/MCC,
respectively). Therefore, we are proposing to add ICD-10-PCS procedure
codes 03LM3DZ, 03LN3DZ, and 03LR3DZ to MDC 03 in proposed new MS-DRGs
143, 144, and 145, if finalized. Under this proposal, cases reporting
ICD-10-PCS procedure codes 03LM3DZ, 03LN3DZ, or 03LR3DZ with a
principal diagnosis from MDC 03 would group to proposed new MS-DRGs
143, 144, and 145.
The following table reflects our simulation for ICD-10-PCS
procedure codes 03LM3DZ, 03LN3DZ, and 03LR3DZ in proposed new MS-DRGs
143, 144, and 145.
[GRAPHIC] [TIFF OMITTED] TP29MY20.078

g. Revision or Removal of Synthetic Substitute in Peritoneal Cavity
During the review of the cases that group to MS-DRGs 981 through
983, we noted that when several ICD-10-PCS procedure codes describing
revision or removal of synthetic substitute in the peritoneal cavity
are reported in conjunction with ICD-10-CM diagnosis codes in MDC 01
(Diseases and Disorders of the Nervous System), such as complications
of intracranial shunts, the cases group to MS-DRGs 981 through 983.
ICD-10-PCS procedure codes 0WWG0JZ (Revision of synthetic substitute in
peritoneal cavity, open approach), 0WWG4JZ (Revision of synthetic
substitute in peritoneal cavity, percutaneous endoscopic approach), and
0WPG0JZ (Removal of synthetic substitute from peritoneal cavity, open
approach) are currently assigned to MDC 06 (Diseases and Disorders of
the Digestive System) in MS-DRGs 356, 357, and 358 (Other Digestive
System O.R. Procedures with MCC, with CC, and without CC/MCC,
respectively).
We examined cases that reported a principal diagnosis in MDC 01 and
procedure code 0WWG0JZ, 0WWG4JZ, or 0WPG0JZ that currently group to MS-
DRGs 981 through 983. Our findings are shown in the following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.079

Within MDC 01, our clinical advisors believe that these procedures,
which describe revision or removal of synthetic substitute in
peritoneal cavity, are most clinically similar to those in MS-DRGs 031,
032, and 033 (Ventricular Shunt Procedures with MCC, with CC, and
without CC/MCC, respectively). We therefore examined the data for all
cases in MS-DRGS 031, 032, and 033.

[[Page 32536]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.080

The average costs for the subset of cases in MS-DRGs 981, 982, and
983 that report procedures describing revision or removal of synthetic
substitute in the peritoneal cavity with a principal diagnosis from MDC
01 are lower than the average costs of cases in MS-DRGs 031, 032, and
033 as a whole, and the average length of stay for this subset of cases
is also lower in two of the MS-DRGs and higher in one. Our clinical
advisors believe the procedure codes describing revision or removal of
synthetic substitute in the peritoneal cavity are clearly related to
the principal diagnosis codes describing complications of intracranial
shunts and, therefore, it is clinically appropriate for the procedures
to group to the same MS-DRGs (031, 032, and 033) as the principal
diagnoses describing complications of intracranial shunts. We are
proposing to add ICD-10-PCS procedure codes 0WWG0JZ, 0WWG4JZ, and
0WPG0JZ to MDC 01 (Diseases and Disorders of the Nervous System) in MS-
DRGs 031, 032, and 033.
h. Revision of Totally Implantable Vascular Access Devices
During the review of the cases that group to MS-DRGs 981 through
983, we noted that when procedure codes describing Totally Implantable
Vascular Access Devices (TIVADs) are reported with ICD-10-CM diagnosis
codes assigned to MDC 04 (Diseases and Disorders of the Respiratory
System), MDC 06 (Diseases and Disorders of the Digestive System), MDC
07 (Diseases and Disorders of the Hepatobiliary System and Pancreas),
MDC 08 (Diseases and Disorders of the Musculoskeletal System and
Connective Tissue), MDC 13 (Diseases and Disorders of the Female
Reproductive System), or MDC 16 (Diseases and Disorders of Blood, Blood
Forming Organs, Immunologic Disorders), the cases group to MS-DRGs 981
through 983.
TIVADs are port catheter devices inserted for chemotherapy
treatment. The nine ICD-10-PCS procedure codes describing TIVADs are
listed in this table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.081

We examined claims data to identify the average length of stay and
average costs for cases in MS-DRGs 981 through 983 reporting ICD-10-PCS
procedure codes describing TIVADs in conjunction with a principal
diagnosis from MDCs 04, 06, 07, 08, 13, or 16. Our findings are shown
in the following table.

[[Page 32537]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.082

Our clinical advisors believe that cases reporting TIVADs with a
principal diagnosis in MDCs 04, 06, 07, 08, 13, or 16 would most
suitably group to the MS-DRGs describing ``Other'' procedures for each
of these MDCs. These TIVAD procedures cannot be assigned to the
specific surgical MS-DRGs within these MDCs since they are not
performed on the particular anatomical areas described by each of the
specific surgical MS-DRGs. For example, in MDC 04, TIVADs could not be
assigned to MS-DRGs 163, 164, and 165 (Major Chest Procedures with MCC,
with CC, and without CC/MCC, respectively) because they are not major
chest procedures.
We therefore examined the claims data for each of these MS-DRGs.
Our findings are shown in the following table.

[[Page 32538]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.083

We note that while the average costs and length of stay are similar
in some cases and in some cases vary between the subset of cases
currently grouping to MS-DRGs 981 through 983 and the cases currently
grouping to the MS-DRGs describing ``Other'' procedures as set forth in
the table, our clinical advisors noted that TIVADs are frequently
inserted in order to administer chemotherapy for a variety of
malignancies. MDCs 04, 06, 07, 08, 13, or 16 each contain ICD-10-CM
diagnosis codes that describe a variety of malignancies. Therefore, our
clinical advisors believe that the TIVAD procedures are clearly related
to the principal diagnoses within MDCs 04, 06, 07, 08, 13, and 16. For
the reasons previously indicated, our clinical advisors believe that
cases reporting TIVADs with a principal diagnosis in MDCs 04, 06, 07,
08, 13, or 16 would mostly suitably group to the MS-DRGs describing
``Other'' procedures for each of these MDCs.
Therefore, we are proposing to add the nine ICD-10-PCS procedure
codes describing TIVADs as set forth in the table to the MS-DRGs
describing ``Other'' procedures within each of MDCs 04, 06, 07, 08, 13,
and 16, specifically: MDC 04 in MS-DRGs 166, 167, and 168, MDC 06 in
MS-DRGs 356, 357, and 358, MDC 07 in MS-DRGs 423, 424, and 425, MDC 08
in MS-DRGs 515, 516, and 517, MDC 13 in MS-DRGs 749 and 750, and MDC 16
in MS-DRGs 802, 803, and 804. Under this proposal, cases reporting a
principal diagnosis in MDCs 04, 06, 07, 08, 13, or 16 with a TIVAD
procedure would group to the respective MS-DRGs within the MDC.
i. Multiple Trauma With Internal Fixation of Joints
For FY 2020, we received a request to reassign cases involving
diagnoses that identify multiple significant trauma combined with
internal fixation of joint procedures from MS-DRGs 981, 982, and 983
(Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC,
with CC, and without CC/MCC, respectively) to MS-DRGs 957, 958, and 959
(Other O.R. Procedures for Multiple Significant Trauma with MCC, with
CC, and without CC/MCC, respectively) in MDC 24 (Multiple Significant
Trauma). The requestor provided an example of several ICD-10-CM
diagnosis codes that together described multiple significant trauma in
conjunction with ICD-10-PCS procedure codes beginning with the prefix
``0RH'' and ``0SH'' that describe internal fixation of upper and lower
joints. The requestor provided several suggestions to address this
reassignment, including: Adding all ICD-10-PCS procedure codes from MDC
08 (Diseases and Disorders of the Musculoskeletal System and Connective
Tissue) with the exception of codes that group to MS-DRG 956 (Limb
Reattachment, Hip and Femur Procedures for Multiple Significant Trauma)
to MS DRGs 957, 958, and 959; adding codes with the prefix ``0RH'' and
``0SH'' to MDC 24; and adding ICD-10-PCS procedure codes from all MDCs
except those that currently group to MS-DRG 955 (Craniotomy for
Multiple Significant Trauma) or MS-DRG 956 (Limb Reattachment, Hip and
Femur Procedures for Multiple Significant Trauma) to MS-DRGs 957, 958,
and 959 in MDC 24. In the FY 2020 IPPS/LTCH PPS proposed rule, we
stated that we believe any potential reassignment of these cases
requires significant analysis. We therefore did not propose any changes
to the cases identified by the requestor.
For FY 2021, as the first step of the comprehensive analysis needed
to assess the reassignment of cases involving diagnoses that identify
multiple significant trauma combined with internal fixation of joint
procedures, our clinical advisors reviewed the list of procedure codes
in the ``0RH'' and ``0SH'' code ranges, as

[[Page 32539]]

suggested by the requestor. Our clinical advisors identified 161 ICD-
10-PCS codes, which are listed in table 6P.1f., that they believe are
clinically related to diagnoses assigned to MDC 24. We examined the
claims data for cases that would be assigned to MDC 24 based on their
diagnoses, but currently group to MS-DRGs 981 through 983 based on the
presence of procedure codes in the ``0RH'' and ``0SH'' code ranges. Our
findings are shown in this table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.084

We note that we found only 8 claims, with varying lengths of stay
and average costs. We also examined the claims data for all cases in
MS-DRGs 957, 958, and 959. Our findings are shown in this table.

[[Page 32540]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.085

The very small number of claims we identified for cases that would
be assigned to MDC 24 based on their diagnoses, but grouped to MS-DRGs
981 through 983 based on the presence of procedure codes in the ``0RH''
and ``0SH'' code ranges, have varying resource use relative to MS-DRGs
957, 958, and 959 as a whole. The average costs of the cases found in
MS-DRGs 981-983 range from $7,015 to $72,331 with average lengths of
stay ranging from 3 days to 14 days. The average costs of the cases
found in MS-DRGs 957-959 range from $20,563 to $54,771 with average
lengths of stay ranging from 5 days to 13.2 days. Given the nature of
trauma cases, the resource use would be expected to vary based on the
nature of the patient's injuries. In addition, as noted, our clinical
advisors believe that these procedure codes are clinically related to
the diagnoses in MDC 24. Therefore, we are proposing to add the 161
ICD-10-PCS codes shown in Table 6P.1f to MDC 24 in MS-DRGs 957, 958,
and 959. Under this proposal, cases that would be assigned to MDC 24
based on their diagnoses, that also report one of the 161 ICD-10-PCS
codes included in table 6P.1f, will group to MDC 24 in MS-DRGs 957,
958, and 959, rather than to MS-DRGs 981 through 983.
We note that while we are making this proposal to address the
grouping issue for internal fixation of upper and lower joint
procedures identified by the requestor, our clinical advisors believe
that a more comprehensive analysis is required within MDC 24 to address
the differences in severity level of diagnoses as well as the
assignment of procedure codes to the MS-DRGs within MDC 24. We plan to
continue this comprehensive analysis in future rulemaking.
j. Reassignment of Procedures Among MS-DRGs 981 Through 983 and 987
Through 989
We also review the list of ICD-10-PCS procedures that, when in
combination with their principal diagnosis code, result in assignment
to MS-DRGs 981 through 983, or 987 through 989, to ascertain whether
any of those procedures should be reassigned from one of those two
groups of MS-DRGs to the other group of MS-DRGs based on average costs
and the length of stay. We look at the data for trends such as shifts
in treatment practice or reporting practice that would make the
resulting MS-DRG assignment illogical. If we find these shifts, we
would propose to move cases to keep the MS-DRGs clinically similar or
to provide payment for the cases in a similar manner. Generally, we
move only those procedures for which we have an adequate number of
discharges to analyze the data.
Based on the results of our review of claims data in the September
2019 update of the FY 2019 MedPAR file, we are proposing to reassign
three procedure codes from MS-DRGs 981, 982, and 983 (Extensive O.R.
Procedure Unrelated to Principal Diagnosis with MCC, with CC, without
CC/MCC, respectively) to MS-DRGs 987, 988, and 989 (Non-Extensive
Procedure Unrelated to Principal Diagnosis with MCC, with CC, without
CC/MCC, respectively). We are also proposing to reassign three
procedure codes from MS-DRGs 987, 988, and 989 (Non-Extensive Procedure
Unrelated to Principal Diagnosis with MCC, with CC, without CC/MCC,
respectively) to MS-DRGs 981, 982, and 983 (Extensive O.R. Procedure
Unrelated to Principal Diagnosis with MCC, with CC, without CC/MCC,
respectively).
In conducting our review of the request to designate ICD-10-PCS
procedure code 0W3G0ZZ (Control bleeding in peritoneal cavity, open
approach) as an O.R. procedure (as described in section II.D.11.c.5. of
this proposed rule), our clinical advisors noted that ICD-10-PCS codes
0W3G3ZZ (Control bleeding in peritoneal cavity, percutaneous approach)
and 0W3G4ZZ (Control bleeding in peritoneal cavity, endoscopic
approach) are currently assigned to MS-DRGs 981 through 983 when
reported with a principal diagnosis that is not assigned to one of the
MDCs to which these procedure codes are assigned. Our clinical advisors
believe that these procedures would be more appropriately assigned to
MS-DRGs 987 through 989 because they are on average less complex and
difficult than the same procedure performed by an open approach, and
therefore should be assigned to the ``less extensive'' DRG. Therefore,
we are proposing to reassign ICD-10-PCS codes 0W3G3ZZ and 0W3G4ZZ from
MS-DRGs 981 through 983 to 987 through 989.
In conducting our review of the request to designate ICD-10-PCS
procedure codes 0WBC4ZX (Excision of mediastinum, percutaneous
endoscopic

[[Page 32541]]

approach, diagnostic) and 0WBC3ZX (Excision of mediastinum,
percutaneous approach, diagnostic) as O.R. procedures (as described in
section II.D.11.c.1. of this proposed rule), our clinical advisors
noted that ICD-10-PCS code 0WBC0ZX (Excision of mediastinum, open
approach, diagnostic) is currently assigned to MS-DRGs 981 through 983
when reported with a principal diagnosis that is not assigned to one of
the MDCs to which the procedure code is assigned. Our clinical advisors
believe that this procedure would be more appropriately assigned to MS-
DRGs 987 through 989 because this assignment is consistent with the
assignment of other procedures that describe excision of the
mediastinum performed by an open, percutaneous, or percutaneous
endoscopic approach, and is consistent with the proposal for procedure
codes 0WBC4ZX and 0WBC3ZX (with diagnostic qualifier) as discussed in
section II.D.11.c.1. of this proposed rule. Therefore, we are proposing
to reassign ICD-10-PCS code 0WBC0ZX from MS-DRGs 981 through 983 to 987
through 989.
We received a request to examine cases reporting a procedure
describing the open excision of gastrointestinal body parts in the
gastrointestinal body system. The requester stated that when procedures
describing the open excision of a specific gastrointestinal body part
in the gastrointestinal body system are reported with a principal
diagnosis such as C49.A3 (Gastrointestinal stromal tumor of small
intestine (GIST)), the cases are assigned to MS-DRGs 987, 988, and 989
(Non-Extensive O.R. Procedure Unrelated to Principal Diagnosis with
MCC, with CC, and without CC/MCC, respectively). However, when
procedures describing the excision of a general gastrointestinal body
part in the gastrointestinal body system are reported with the same
principal diagnosis of GIST, the cases are assigned to MS-DRGs 981,
982, and 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis
with MCC, with CC, and without CC/MCC, respectively). The requestor
stated that procedures describing a specific body part value should be
assigned to the same MS-DRG as procedures describing a general body
part value.
The requestor provided four ICD-10-PCS procedure codes in its
request. These four ICD-10-PCS procedure codes, as well as their MDC
assignments, are listed in the table:
[GRAPHIC] [TIFF OMITTED] TP29MY20.086

We note that in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42120
through 42122), we finalized our proposal to move seven ICD-10-CM
diagnosis codes describing gastrointestinal stromal tumors (GIST),
including C49.A3, from MDC 08 to MDC 06, under the ICD-10 MS-DRGs
Version 37, effective October 1, 2019. As a result, cases reporting a
principal diagnosis of GIST and a procedure code that is assigned to
MDC 06 (such as ICD-10-PCS codes 0DBA0ZZ, 0DBB0ZZ, 0DB80ZZ, and
0DB90ZZ) now group to MS-DRGs in MDC 06.
Our analysis of this grouping issue found that these four ICD-10-
PCS codes describing related procedures have dissimilar designations
that determine whether and in what way the presence of the procedure
impacts the MS-DRG assignment. ICD-10-PCS code 0DB80ZZ is classified as
an extensive O.R. procedure and ICD-10-PCS codes 0DB90ZZ, 0DBA0ZZ, and
0DBB0ZZ are classified as non-extensive O.R. procedures. As a result,
whenever ICD-10-PCS code 0DB80ZZ is reported with a principal diagnosis
that is assigned to a different MDC than the procedure code, the case
would be assigned to MS-DRGs 981 through 983. When ICD-10-PCS codes
0DB90ZZ, 0DBA0ZZ, or 0DBB0ZZ are reported with a principal diagnosis
that is assigned to a different MDC than the procedure code, the case
would be assigned to MS-DRGs 987 through 989.
We examined the claims data to identify cases reporting procedure
code 0DB80ZZ that are currently grouping to MS-DRGs 981, 982 and 983.
Our findings are shown in this table:

[[Page 32542]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.087

We also examined the claims data to identify cases reporting
procedure codes 0DB90ZZ, 0DBA0ZZ, and 0DBB0ZZ that are currently
grouping to MS-DRGs 987, 988 and 989. Our findings are shown in this
table:
[GRAPHIC] [TIFF OMITTED] TP29MY20.088

The results of our data analysis indicate that cases reporting
procedure codes 0DB90ZZ, 0DBA0ZZ, and 0DBB0ZZ describing the open
excision of a specific gastrointestinal body part in MS-DRGs 987, 988,
and 989 generally have a longer length of stay and higher average costs
when compared to all the cases in their assigned MS-DRG. The subset of
cases reporting 0DB90ZZ, 0DBA0ZZ, and 0DBB0ZZ and the subset of cases
in MS-DRGs 981, 982 and 983 reporting 0DB80ZZ are more closely aligned
in terms of the lengths of stay and average costs. Our clinical
advisors believe that, given the similarity in resource use required
for procedures describing an open excision of a gastrointestinal body
part in terms of the use of an operating room, anesthesia and skills
required, for clinical coherence and consistency in assignment with
ICD-10-PCS code 0DB80ZZ, it would be appropriate to also designate ICD-
10-PCS codes 0DB90ZZ, 0DBA0ZZ, and 0DBB0ZZ as extensive O.R.
procedures.
Therefore, we are proposing to change the designation of ICD-10-PCS
codes 0DB90ZZ, 0DBA0ZZ and 0DBB0ZZ from non-extensive O.R. procedures
to extensive O.R. procedures for FY 2021. Under this proposal, cases
reporting procedure codes 0DB90ZZ, 0DBA0ZZ and 0DBB0ZZ, which are
unrelated to the MDC to which the case would otherwise be assigned
based on the principal diagnosis, will group to MS-DRGs 981, 982 and
983.
11. Operating Room (O.R.) and Non-O.R. Issues
a. Background
Under the IPPS MS-DRGs (and former CMS MS-DRGs), we have a list of
procedure codes that are considered operating room (O.R.) procedures.
Historically, we developed this list using physician panels that
classified each procedure code based on the procedure and its effect on
consumption

[[Page 32543]]

of hospital resources. For example, generally the presence of a
surgical procedure which required the use of the operating room would
be expected to have a significant effect on the type of hospital
resources (for example, operating room, recovery room, and anesthesia)
used by a patient, and therefore, these patients were considered
surgical. Because the claims data generally available do not precisely
indicate whether a patient was taken to the operating room, surgical
patients were identified based on the procedures that were performed.
Generally, if the procedure was not expected to require the use of the
operating room, the patient would be considered medical (non-O.R.).
Currently, each ICD-10-PCS procedure code has designations that
determine whether and in what way the presence of that procedure on a
claim impacts the MS-DRG assignment. First, each ICD-10-PCS procedure
code is either designated as an O.R. procedure for purposes of MS-DRG
assignment (``O.R. procedures'') or is not designated as an O.R.
procedure for purposes of MS-DRG assignment (``non-O.R. procedures'').
Second, for each procedure that is designated as an O.R. procedure,
that O.R. procedure is further classified as either extensive or non-
extensive. Third, for each procedure that is designated as a non-O.R.
procedure, that non-O.R. procedure is further classified as either
affecting the MS-DRG assignment or not affecting the MS-DRG assignment.
We refer to these designations that do affect MS-DRG assignment as
``non-O.R. affecting the MS-DRG.'' For new procedure codes that have
been finalized through the ICD-10 Coordination and Maintenance
Committee meeting process and are proposed to be classified as O.R.
procedures or non-O.R. procedures affecting the MS-DRG, our clinical
advisors recommend the MS-DRG assignment which is then made available
in association with the proposed rule (Table 6B.--New Procedure Codes)
and subject to public comment. These proposed assignments are generally
based on the assignment of predecessor codes or the assignment of
similar codes. For example, we generally examine the MS-DRG assignment
for similar procedures, such as the other approaches for that
procedure, to determine the most appropriate MS-DRG assignment for
procedures proposed to be newly designated as O.R. procedures. As
discussed in section II.D.13 of the preamble of this proposed rule, we
are making Table 6B.--New Procedure Codes--FY 2021 available on the CMS
website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. We also refer readers to the ICD-
10 MS-DRG Version 37 Definitions Manual at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.html for detailed information regarding
the designation of procedures as O.R. or non-O.R. (affecting the MS-
DRG) in Appendix E--Operating Room Procedures and Procedure Code/MS-DRG
Index.
In the FY 2020 IPPS/LTCH PPS proposed rule, we stated that, given
the long period of time that has elapsed since the original O.R.
(extensive and non-extensive) and non-O.R. designations were
established, the incremental changes that have occurred to these O.R.
and non-O.R. procedure code lists, and changes in the way inpatient
care is delivered, we plan to conduct a comprehensive, systematic
review of the ICD-10-PCS procedure codes. This will be a multi-year
project during which we will also review the process for determining
when a procedure is considered an operating room procedure. For
example, we may restructure the current O.R. and non-O.R. designations
for procedures by leveraging the detail that is now available in the
ICD-10 claims data. We refer readers to the discussion regarding the
designation of procedure codes in the FY 2018 IPPS/LTCH PPS final rule
(82 FR 38066) where we stated that the determination of when a
procedure code should be designated as an O.R. procedure has become a
much more complex task. This is, in part, due to the number of various
approaches available in the ICD-10-PCS classification, as well as
changes in medical practice. While we have typically evaluated
procedures on the basis of whether or not they would be performed in an
operating room, we believe that there may be other factors to consider
with regard to resource utilization, particularly with the
implementation of ICD-10. Therefore, we are again soliciting feedback
on what factors or criteria to consider in determining whether a
procedure is designated as an O.R. procedure in the ICD-10-PCS
classification system for future consideration. Commenters should
submit their recommendations to the following email address:
[email protected] by October 20, 2020.
We discussed in the FY 2020 IPPS/LTCH PPS proposed rule that as a
result of this planned review and potential restructuring, procedures
that are currently designated as O.R. procedures may no longer warrant
that designation, and conversely, procedures that are currently
designated as non-O.R. procedures may warrant an O.R. type of
designation. We intend to consider the resources used and how a
procedure should affect the MS-DRG assignment. We may also consider the
effect of specific surgical approaches to evaluate whether to subdivide
specific MS-DRGs based on a specific surgical approach. We plan to
utilize our available MedPAR claims data as a basis for this review and
the input of our clinical advisors. As part of this comprehensive
review of the procedure codes, we also intend to evaluate the MS-DRG
assignment of the procedures and the current surgical hierarchy because
both of these factor into the process of refining the ICD-10 MS-DRGs to
better recognize complexity of service and resource utilization.
We will provide more detail on this analysis and the methodology
for conducting this review in future rulemaking. As we noted in the FY
2020 IPPS/LTCH PPS rulemaking, as we continue to develop our process
and methodology, as previously noted, we are soliciting recommendations
on other factors to consider in our refinement efforts to recognize and
differentiate consumption of resources for the ICD-10 MS-DRGs.
In this proposed rule, we are addressing requests that we received
regarding changing the designation of specific ICD-10-PCS procedure
codes from non-O.R. to O.R. procedures, or changing the designation
from O.R. procedure to non-O.R. procedure. In this section of the rule
we discuss the process that was utilized for evaluating the requests
that were received for FY 2021 consideration. For each procedure, our
clinical advisors considered--
Whether the procedure would typically require the
resources of an operating room;
Whether it is an extensive or a nonextensive procedure;
and
To which MS-DRGs the procedure should be assigned.
We note that many MS-DRGs require the presence of any O.R.
procedure. As a result, cases with a principal diagnosis associated
with a particular MS-DRG would, by default, be grouped to that MS-DRG.
Therefore, we do not list these MS-DRGs in our discussion in this
section of this rule. Instead, we only discuss MS-DRGs that require
explicitly adding the relevant procedure codes to the GROUPER logic in
order for those procedure codes to affect the MS-DRG assignment as
intended. In cases where

[[Page 32544]]

we are proposing to change the designation of procedure codes from non-
O.R. procedures to O.R. procedures, we also are proposing one or more
MS-DRGs with which these procedures are clinically aligned and to which
the procedure code would be assigned.
In addition, cases that contain O.R. procedures will map to MS-DRG
981, 982, or 983 (Extensive O.R. Procedure Unrelated to Principal
Diagnosis with MCC, with CC, and without CC/MCC, respectively) or MS-
DRG 987, 988, or 989 (Non-Extensive O.R. Procedure Unrelated to
Principal Diagnosis with MCC, with CC, and without CC/MCC,
respectively) when they do not contain a principal diagnosis that
corresponds to one of the MDCs to which that procedure is assigned.
These procedures need not be assigned to MS-DRGs 981 through 989 in
order for this to occur. Therefore, if requestors included some or all
of MS-DRGs 981 through 989 in their request or included MS-DRGs that
require the presence of any O.R. procedure, we did not specifically
address that aspect in summarizing their request or our response to the
request in this section of this rule.
For procedures that would not typically require the resources of an
operating room, our clinical advisors determined if the procedure
should affect the MS-DRG assignment.
We received several requests to change the designation of specific
ICD-10-PCS procedure codes from non-O.R. procedures to O.R. procedures,
or to change the designation from O.R. procedures to non-O.R.
procedures. In this section of this rule, we detail and respond to some
of those requests. With regard to the remaining requests, our clinical
advisors believe it is appropriate to consider these requests as part
of our comprehensive review of the procedure codes as previously
discussed.
b. O.R. Procedures to Non-O.R. Procedures
(1) Endoscopic Revision of Feeding Devices
One requestor identified three ICD-10-PCS procedure codes that
describe endoscopic revision of feeding devices, shown in the following
table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.089

In the ICD-10 MS-DRG Version 37 Definitions Manual, these three
ICD-10-PCS procedure codes are currently recognized as O.R. procedures
for purposes of MS-DRG assignment. The requestor noted that these
procedures would not require the resources of an operating room and
that they consume resources comparable to related ICD-10-PCS procedure
codes describing the endoscopic insertion of feeding tubes that
currently are designated as Non-O.R. procedures.
We agree with the requestors that these procedures do not typically
require the resources of an operating room, and are not surgical in
nature. Therefore, we are proposing to remove 0DW08UZ, 0DW68UZ, 0DWD8UZ
from the FY 2021 ICD-10 MS-DRGs Version 38 Definitions Manual in
Appendix E--Operating Room Procedures and Procedure Code/MS-DRG Index
as O.R. procedures. Under this proposal, these procedures would no
longer impact MS-DRG assignment.
c. Non-O.R. Procedures to O.R. Procedures
(1) Percutaneous/Endoscopic Biopsy of Mediastinum
One requestor identified ICD-10-PCS procedure code 0WBC4ZX
(Excision of mediastinum, percutaneous endoscopic approach, diagnostic)
that describes a percutaneous endoscopic biopsy of the mediastinum that
the requestor stated is performed in the operating room under general
anesthesia, requires an incision through the chest wall, insertion of a
mediastinoscope in the space between the lungs and involves removal of
a tissue sample. The requestor recommended that all procedures
performed within the mediastinum by an open or percutaneous endoscopic
approach, regardless of whether it is a diagnostic or therapeutic
procedure, should be designated as O.R. procedures because the
procedures require great skill and pose risks to patients due to the
structures contained within the mediastinum. The requestor noted that
the mediastinum contains loose connective tissue, the heart and great
vessels, esophagus, trachea, nerves, and lymph nodes. The requestor
further noted that redesignating these procedures from non-O.R. to O.R.
would provide compensation for operating room resources and general
anesthesia.
We note that under the ICD-10-PCS procedure classification, biopsy
procedures are identified by the 7th digit qualifier value
``diagnostic'' in the code description. In response to the requestor's
suggestion that all procedures performed within the mediastinum by an
open or percutaneous endoscopic approach, regardless of whether it is a
diagnostic or therapeutic procedure should be designated as an O.R.
procedure, we examined the following procedure codes:

[[Page 32545]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.090

In the ICD-10 MS-DRGs Definitions Manual Version 37, procedure
codes 0WBC0ZX, 0WBC0ZZ, 0WBC3ZZ, and 0WBC4ZZ are currently designated
as O.R. procedures, however, procedure codes 0WBC3ZX and 0WBC4ZX are
not recognized as O.R. procedures for purposes of MS-DRG assignment. We
agree with the requestor that procedure code 0WBC4ZX would typically
require the resources of an operating room. Our clinical advisors also
agree that procedure code 0WBC3ZX would typically require the resources
of an operating room. Therefore, we are proposing to add these 2
procedure codes to the FY 2021 ICD-10 MS-DRGs Version 38 Definitions
Manual in Appendix E--Operating Room Procedures and Procedure Code/MS-
DRG Index as O.R. procedures, assigned to MS-DRGs 166, 167, and 168
(Other Respiratory System O.R. Procedures with MCC, with CC, and
without CC/MCC, respectively) in MDC 04 (Diseases and Disorders of the
Respiratory System); MS-DRGs 628, 629, and 630 (Other Endocrine,
Nutritional and Metabolic O.R. Procedures with MCC, with CC, and
without CC/MCC, respectively) in MDC 10 (Endocrine, Nutritional and
Metabolic Diseases and Disorders); MS-DRGs 820, 821, and 822 (Lymphoma
and Leukemia with Major O.R. Procedure with MCC, with CC, and without
CC/MCC, respectively) and MS-DRGs 826, 827, and 828 (Myeloproliferative
Disorders or Poorly Differentiated Neoplasms with Major O.R. Procedure
with MCC, with CC, and without CC/MCC, respectively) in MDC 17
(Myeloproliferative Diseases and Disorders, Poorly Differentiated
Neoplasms); and to MS-DRGs 987, 988, and 989 (Non-Extensive O.R.
Procedure Unrelated to Principal Diagnosis with MCC, with CC and
without MCC/CC, respectively).
As previously noted, procedure codes 0WBC0ZX, 0WBC0ZZ, 0WBC3ZZ, and
0WBC4ZZ are currently designated as O.R. procedures. As displayed in
the FY 2020 ICD-10 MS-DRGs Version 37 Definitions Manual in Appendix
E--Operating Room Procedures and Procedure Code/MS-DRG Index, these
procedure codes are assigned to several MS-DRGs across many MDCs.
During our process of reviewing potential MDC and MS-DRG assignments
for procedure codes 0WBC3ZX and 0WBC4ZX, our clinical advisors
recommended that we reassign procedure codes 0WBC0ZZ, 0WBC3ZZ, and
0WBC4ZZ from their current MS-DRG assignments in MDC 04 (Diseases and
Disorders of the Respiratory System). Procedure codes 0WBC0ZZ, 0WBC3ZZ,
and 0WBC4ZZ are currently assigned to MS-DRGs 163, 164, and 165 (Major
Chest Procedures with MCC, with CC, and without CC/MCC, respectively)
and procedure code 0WBC0ZX is assigned to MS-DRGs 166, 167, and 168
(Other Respiratory System O.R. Procedures with MCC, with CC, and
without CC/MCC, respectively). According to our clinical advisors,
procedure codes 0WBC0ZZ, 0WBC3ZZ, and 0WBC4ZZ would be more
appropriately and clinically aligned with the same MS-DRG assignment as
procedure code 0WBC0ZX, which is also consistent with the assignment
for other procedures performed on the mediastinum. Therefore, we are
proposing to reassign procedure codes 0WBC0ZZ, 0WBC3ZZ, and 0WBC4ZZ to
MS-DRGs 166, 167, and 168 (Other Respiratory System O.R. Procedures
with MCC, with CC, and without CC/MCC, respectively).
(2) Percutaneous Endoscopic Chemical Pleurodesis
One requestor identified ICD-10-PCS procedure code 3E0L4GC
(Introduction of other therapeutic substance into pleural cavity,
percutaneous endoscopic approach) that the requestor stated is
currently not recognized as an O.R. procedure for purposes of MS-DRG
assignment. The requestor noted that talc pleurodesis via video-
assisted thoracoscopic surgery (VATS), involves placing a thoracoscope
through the chest wall for visualization, then placing a port and
injecting talc, doxycycline, or other chemical into the pleural cavity
under general anesthesia and should therefore be recognized as an O.R.
procedure for purposes of MS-DRG assignment.
We agree with the requestor that ICD-10-PCS procedure code 3E0L4GC
typically requires the resources of an operating room. We also note
that the AHA published Coding Clinic advice in 2015 that instructed to
code both ICD-10-PCS procedure codes 0BJQ4ZZ (Inspection of pleura,
percutaneous endoscopic approach) and 3E0L3GC (Introduction of other
therapeutic substance into pleural cavity, percutaneous approach) for
thoracoscopic chemical pleurodesis. In the publication, code 0BJQ4ZZ,
recognized as an O.R. procedure for purposes of MS-DRG assignment, was
instructed to be reported for the video-assisted thoracoscopic portion
of the procedure since the endoscopic component of the procedure could
not be captured by the approach values available at the time. In FY
2018, the approach value ``4'' Percutaneous Endoscopic was added to the
root operation Introduction table 3E0, to capture percutaneous
endoscopic administration of a therapeutic substance, meaning that code
0BJQ4ZZ was no longer needed along with code 3E0L3GC to report
thoracoscopic chemical pleurodesis. Only code 3E0L4GC is needed to
report all components of the procedure. Designating code 3E0L4GC as an
O.R. procedure for purposes of MS-DRG assignment classifies the
procedure as intended when two codes were needed to fully code the
procedure. Therefore, we are proposing to add procedure code 3E0L4GC to
the FY 2021 ICD-10 MS-DRG Version 38 Definitions Manual in Appendix E--
Operating Room Procedures and Procedure Code/MS-DRG Index as an O.R.
procedure assigned to MS-DRGs 166, 167, and 168 (Other Respiratory
System O.R. procedures with MCC, CC, without CC/MCC, respectively) in
MDC 04 (Diseases and Disorders of the Respiratory System); and MS-DRG
264 (Other Circulatory System O.R. Procedures) in MDC 05 (Diseases and
Disorders of the Circulatory System).

[[Page 32546]]

(3) Percutaneous Endoscopic Excision of Stomach
One requestor identified ICD-10-PCS procedure code 0DB64ZZ
(Excision of stomach, percutaneous endoscopic approach) that the
requestor stated is currently not recognized as an O.R. procedure for
purposes of MS-DRG assignment. The requestor noted that percutaneous
endoscopic excisions of gastric lesions and percutaneous endoscopic
partial gastrectomies are performed in the operating room under general
anesthesia, use comparable resources, and are designated as O.R.
procedures. Therefore, the requestor stated that this procedure should
also be recognized as O.R. procedure for purposes of MS-DRG assignment.
We agree with the requestor that ICD-10-PCS procedure code 0DB64ZZ
typically requires the resources of an operating room. During our
review, we also noted that ICD-10-PCS code 0DB64ZX (Excision of
stomach, percutaneous endoscopic approach, diagnostic) was not
currently recognized as an O.R. procedure. We are proposing to add
these codes to the FY 2021 ICD-10 MS-DRG Version 38 Definitions Manual
in Appendix E--Operating Room Procedures and Procedure Code/MS-DRG
Index as an O.R. procedure assigned to MS-DRGs 326, 327, and 328
(Stomach, Esophageal and Duodenal Procedures with MCC, with CC, and
without CC/MCC, respectively) in MDC 06 (Diseases and Disorders of the
Digestive System); MS-DRGs 619, 620, and 621 (Procedures for Obesity
with MCC, with CC, and without CC/MCC, respectively) in MDC 10
(Endocrine, Nutritional and Metabolic Diseases and Disorders); and MS-
DRGs 820, 821, and 822 (Lymphoma and Leukemia with Major Procedure with
MCC, with CC, and without CC/MCC, respectively), MS-DRGs 826, 827, and
828 (Myeloproliferative Disorders or Poorly Differentiated Neoplasms
with Major Procedure with MCC, with CC, and without CC/MCC,
respectively), and MS-DRGs 829 and 830 (Myeloproliferative Disorders or
Poorly Differentiated Neoplasms with Other Procedure with CC/MCC and
without CC/MCC, respectively) in MDC 17 (Myeloproliferative Diseases
and Disorders, Poorly Differentiated Neoplasms).
During our review, we also noted that ICD-10-PCS procedure code
0DB64Z3 (Excision of stomach, percutaneous endoscopic approach,
vertical (sleeve)), which is clinically similar to ICD-10-PCS codes
0DB64ZZ and 0DB64ZX, is designated as an O.R. procedure assigned to the
same MS-DRGs as we are proposing for ICD-10-PCS codes 0DB64ZZ and
0DB64ZX, as well as to MS-DRG 264 (Other Circulatory System O.R.
Procedures) in MDC 05 (Diseases and Disorders of the Circulatory
System); MS-DRGs 907, 908, and 909 (Other O.R. Procedures for Injuries,
with MCC, with CC, and without CC/MCC, respectively) in MDC 21
(Injuries, Poisonings and Toxic Effects of Drugs); and MS-DRGs 957,
958, and 959 (Other O.R. procedures for multiple significant trauma,
with MCC, with CC, and without CC/MCC, respectively) in MDC 24
(Multiple Significant Trauma). Our clinical advisors believe that
principal diagnoses in MDCs 05 and 21 are typically not indications for
procedures describing percutaneous endoscopic excision of stomach and
that ICD-10-PCS procedure code 0DB64Z3 should be assigned to the same
MS-DRGs as ICD-10-PCS codes 0DB64ZZ and 0DB64ZX. We examined claims
data from the September 2019 update of the FY 2019 MedPAR file to
determine if there were any cases that reported 0DB64Z3 and were
assigned to MDC 05, MDC 21, or MDC 24. The following table shows our
findings:
[GRAPHIC] [TIFF OMITTED] TP29MY20.091

We found zero cases in MS-DRGs 957, 958, and 959 reporting 0DB64Z3
and a principal diagnosis in MDC 24 (Multiple Significant Trauma). Our
analysis demonstrates that diagnoses assigned to MDC 05, MDC 21, and
MDC 24 are not typically corrected surgically by percutaneous
endoscopic vertical (sleeve) gastrectomy given the small number of
cases reporting this procedure in these MDCs. Our clinical advisors
believe procedure codes describing the percutaneous endoscopic excision
of stomach should have the same MDC assignments in the ICD-10 MS-DRGs
Version 38 for coherence. Therefore, we are proposing to remove the
assignments of code 0DB64Z3 from MS-DRG 264 (Other Circulatory System
O.R. Procedures) in MDC 05 (Diseases and Disorders of the Circulatory
System); MS-DRGs 907, 908, and 909 (Other O.R. Procedures for Injuries,
with MCC, with CC, and without CC/MCC, respectively) in MDC 21
(Injuries, Poisonings and Toxic Effects of Drugs); and MS-DRGs 957,
958, and 959 (Other O.R. procedures for multiple significant trauma,
with MCC, with CC, and without CC/MCC, respectively) in MDC 24
(Multiple Significant Trauma).
Lastly, while we were reviewing this request, we noted
inconsistencies in how procedures involving the excision of stomach are
designated. Excision of stomach codes differ by approach and qualifier.
ICD-10-PCS procedure codes describing excision of stomach with similar
approaches have been assigned

[[Page 32547]]

different attributes in terms of designation as an O.R. or Non-O.R.
procedure. We identified the following five related codes:
[GRAPHIC] [TIFF OMITTED] TP29MY20.092

In the ICD-10 MS-DRGs Version 37, these ICD-10-PCS codes are
currently recognized as O.R. procedures for purposes of MS-DRG
assignment, while similar excision of stomach procedure codes with the
same approach but different qualifiers are recognized as Non-O.R.
procedures. Our clinical advisors indicated that these procedures are
not surgical in nature and do not require an incision. Therefore, we
are proposing to remove ICD-10-PCS procedure codes 0DB63Z3, 0DB63ZZ,
0DB67Z3, 0DB67ZZ, and 0DB68Z3 from the FY 2021 ICD-10 MS-DRG Version 38
Definitions Manual in Appendix E--Operating Room Procedures and
Procedure Code/MS-DRG Index as O.R. procedures. Under this proposal,
these procedures would no longer impact MS-DRG assignment.
(4) Percutaneous Endoscopic Drainage
One requestor identified six ICD-10-PCS procedure codes that
describe procedures involving laparoscopic drainage of peritoneum,
peritoneal cavity, and gallbladder that the requestor stated are
currently not recognized as O.R. procedures for purposes of MS-DRG
assignment. The six procedure codes are listed in the following table:
[GRAPHIC] [TIFF OMITTED] TP29MY20.093

The requestor stated these procedures would commonly be performed
under general anesthesia and require the resources of an operating
room. The requestor also noted that similar procedures such as
percutaneous endoscopic inspection of gallbladder, percutaneous
endoscopic excision of peritoneum and percutaneous endoscopic
extirpation of matter from peritoneal cavity are currently classified
as O.R. procedures in Version 37 of the ICD-10 MS-DRGs and that the six
listed procedure codes should be designated as O.R. procedures due to
comparable costs and resource use.
We agree with the requestor that the six ICD-10-PCS procedure codes
listed in the table typically require the resources of an operating
room. Therefore, to the FY 2021 ICD-10 MS-DRG Version 38 Definitions
Manual in Appendix E--Operating Room Procedures and Procedure Code/MS-
DRG Index, we are proposing to add codes 0D9W4ZZ and 0D9W40Z as O.R.
procedures assigned to MS-DRGs 356, 357, and 358 (Other Digestive
System O.R. Procedures, with MCC, with CC, and without CC/MCC,
respectively) in MDC 06 (Diseases and Disorders of the Digestive
System); and MS-DRGs 907, 908, and 909 (Other O.R. Procedures for
Injuries with MCC, with CC, and without CC/MCC, respectively) in MDC 21
(Injuries, Poisonings and Toxic Effects of Drugs). We are also
proposing to add codes 0W9G4ZZ and 0W9G40Z as O.R. procedures assigned
to MS-DRGs 356, 357, and 358 (Other Digestive System O.R. Procedures
with MCC, with CC, and without CC/MCC, respectively) in MDC 06
(Diseases and Disorders of the Digestive System); MS-DRGs 420, 421, and
422 (Hepatobiliary Diagnostic Procedures, with MCC, with CC, and
without CC/MCC, respectively) in MDC 07 (Diseases and Disorders of the
Hepatobiliary System and Pancreas); MS-DRGs 673, 674, and 675 (Other
Kidney and Urinary Tract Procedures, with MCC, with CC, and without CC/
MCC, respectively) in MDC 11 (Diseases and Disorders of the Kidney and
Urinary Tract); MS-DRGs 749 and 750 (Other Female Reproductive System
Procedures with and without CC/MCC, respectively) in MDC 13 (Diseases
and Disorders of the Female Reproductive System); MS-DRGs 802, 803, and
804 (Other O.R. Procedures of the Blood and Blood Forming Organs, with
MCC, with CC, and without CC/MCC, respectively) in MDC 16 (Diseases and
Disorders of Blood, Blood Forming Organs, Immunologic Disorders); MS-
DRGs 820, 821, and 822 (Lymphoma and Leukemia with Major Procedure with
MCC, with CC, and without CC/MCC, respectively) and MS-DRGs 826, 827,
and 828 (Myeloproliferative Disorders or Poorly Differentiated
Neoplasms with Major Procedure with MCC, with CC, and without CC/MCC,
respectively) in MDC 17 (Myeloproliferative Diseases and Disorders,
Poorly Differentiated Neoplasms); and MS-DRGs 907, 908, and 909 (Other
O.R. Procedures for Injuries with MCC, with CC, and without CC/MCC,
respectively) in MDC 21 (Injuries, Poisonings and Toxic

[[Page 32548]]

Effects of Drugs). Lastly, we are proposing to add codes 0F944ZZ and
0F9440Z as O.R. procedures assigned to MS-DRGs 408, 409, and 410
(Biliary Tract Procedures Except Only Cholecystectomy with or without
C.D.E., with MCC, with CC, and without CC/MCC, respectively) in MDC 07
(Diseases and Disorders of the Hepatobiliary System and Pancreas).
We identified related ICD-10-PCS procedure code 0F944ZX (Drainage
of gallbladder, percutaneous endoscopic approach, diagnostic) that is
also currently not recognized as an O.R. procedure for purposes of MS-
DRG assignment. Our clinical advisors believe that similar to the six
procedure codes submitted by the requester, this procedure typically
requires the resources of an operating room and should have the same
attributes in Version 38 for coherence. Therefore, we are proposing to
add code 0F944ZX as an O.R. procedure assigned to MS-DRGs 420, 421 and
422 (Hepatobiliary Diagnostic Procedures, with MCC, with CC, and
without CC/MCC, respectively) in MDC 07 (Diseases and Disorders of the
Hepatobiliary System and Pancreas) to the FY 2021 ICD-10 MS-DRG Version
38 Definitions Manual in Appendix E--Operating Room Procedures and
Procedure Code/MS-DRG Index.
During our review, we also identified the related ICD-10-PCS
procedure codes 0F940ZZ (Drainage of gallbladder, open approach),
0F940ZX (Drainage of gallbladder, open approach, diagnostic) and
0F9400Z (Drainage of gallbladder with drainage device, open approach).
Our analysis found that the ICD-10-PCS codes describing drainage of
gallbladder have dissimilar MDC assignments. Procedure codes 0F940ZZ
and 0F940ZX are currently assigned to MS-DRGs 356, 357, and 358 (Other
Digestive System O.R. Procedures, with MCC, with CC, and without CC/
MCC, respectively) in MDC 06 (Diseases and Disorders of the Digestive
System) and MS-DRGs 408, 409, and 410 (Biliary Tract Procedures Except
Only Cholecystectomy with or without C.D.E. with MCC, with CC, and
without CC/MCC, respectively) in MDC 07 (Diseases and Disorders of the
Hepatobiliary System and Pancreas). However, ICD-10-PCS procedure code
0F9400Z is currently assigned to MS-DRGs 408, 409, and 410 (Biliary
Tract Procedures Except Only Cholecystectomy with or without C.D.E.
with MCC, with CC, and without CC/MCC, respectively) in MDC 07
(Diseases and Disorders of the Hepatobiliary System and Pancreas)
alone. Our clinical advisors believe that principal diagnoses in MDC 06
are typically not indications for procedures describing the drainage of
gallbladder. We examined claims data from the September 2019 update of
the FY 2019 MedPAR file to determine if there were any cases that
reported procedure codes 0F940ZZ or 0F940ZX and were assigned to MDC
06. We found zero cases in MS-DRGs 356, 357, and 358 reporting code
0F944ZZ or 0F940ZX and a principal diagnosis in MDC 06 (Diseases and
Disorders of the Digestive System), demonstrating that diagnoses in MDC
06 are not typically corrected surgically by drainage of the
gallbladder. Our clinical advisors believe procedure codes describing
the drainage of gallbladder should have the same MDC assignments in
Version 38 for coherence. Therefore, we are proposing to remove
procedure codes 0F940ZZ and 0F940ZX from MS-DRGs 356, 357, and 358 in
MDC 06 (Diseases and Disorders of the Digestive System).
Our further analysis of this request identified the nine ICD-10-PCS
codes in the following table describing drainage of the peritoneum,
peritoneal cavity, or gallbladder:
[GRAPHIC] [TIFF OMITTED] TP29MY20.094

We note that these procedures are currently classified as extensive
O.R. procedures. Our clinical advisors have noted that treatment
practices have shifted since the initial O.R procedure designations.
Our clinical advisors believe that, given the similarity in factors
such as complexity, resource utilization, and requirement for
anesthesia administration between procedures describing the drainage of
the peritoneum, peritoneal cavity, and gallbladder, it would be more
appropriate to designate these nine ICD-10-PCS codes as non-extensive
O.R. procedures. Therefore, we are also proposing to change the
designation of ICD-10-PCS codes 0D9W00Z, 0D9W0ZX, 0D9W0ZZ, 0D9W4ZX,
0W9G00Z, 0W9G0ZZ, 0F9400Z, 0F940ZZ, and 0F940ZX from extensive O.R.
procedures to non-extensive O.R. procedures for FY 2021.
(5) Control of Bleeding
One requestor identified ICD-10-PCS procedure code 0W3G0ZZ (Control
bleeding in peritoneal cavity, open approach) that describes a
procedure in which the bleeding source within the peritoneal cavity is
controlled by cautery, clips, and/or suture through an open abdominal
incision with direct visualization of the surgical site, that the
requestor stated requires the resources of an operating room and
general anesthesia but is currently not recognized as an O.R. procedure
for purposes of MS-DRG assignment. The requestor also noted that ICD-
10-PCS procedure codes 0W3F0ZZ (Control bleeding in abdominal wall,
open approach), 0W3H0ZZ (Control bleeding in retroperitoneum, open
approach), and 0W3J0ZZ (Control bleeding in pelvic cavity, open
approach) describe procedures to control bleeding in

[[Page 32549]]

various anatomic sites and are currently classified as O.R. procedures.
We agree with the requestor that it would be clinically appropriate
to redesignate procedure code 0W3G0ZZ as an O.R. procedure consistent
with procedure codes 0W3F0ZZ, 0W3H0ZZ and 0W3J0ZZ, that also describe
procedures performed to control bleeding and are designated as O.R.
procedures. Therefore, we are proposing to add procedure code 0W3G0ZZ
to the FY 2021 ICD-10 MS-DRG Version 38 Definitions Manual in Appendix
E--Operating Room Procedures and Procedure Code/MS-DRG Index as an O.R.
procedure assigned to MS-DRG 264 (Other Circulatory O.R. Procedures) in
MDC 05 (Diseases and Disorders of the Circulatory System); MS-DRGs 356,
357, and 358 (Other Digestive System O.R. Procedures with MCC, with CC,
and without CC/MCC, respectively) in MDC 06 (Diseases and Disorders of
the Digestive System); MS-DRGs 423, 424, and 425 (Other Hepatobiliary
or Pancreas O.R. Procedures with MCC, with CC, and without CC/MCC,
respectively) in MDC 07 (Diseases and Disorders of the Hepatobiliary
System and Pancreas); MS-DRGs 673, 674, and 675 (Other Kidney and
Urinary Tract Procedures with MCC, with CC, and without CC/MCC,
respectively) in MDC 11 (Diseases and Disorders of the Kidney and
Urinary Tract); MS-DRGs 820, 821, and 822 (Lymphoma and Leukemia with
Major O.R. Procedure with MCC, with CC, and without CC/MCC,
respectively), MS-DRGs 826, 827, and 828 (Myeloproliferative Disorders
or Poorly Differentiated Neoplasms with Major O.R. Procedure with MCC,
with CC, and without CC/MCC, respectively), and MS-DRGs 829 and 830
(Myeloproliferative Disorders or Poorly Differentiated Neoplasms with
Other Procedure with and without CC/MCC, respectively) in MDC 17
(Myeloproliferative Diseases and Disorders, Poorly Differentiated
Neoplasms); MS-DRGs 907, 908, and 909 (Other O.R. Procedures for
Injuries with and without CC/MCC, respectively) in MDC 21 ((Injuries,
Poisonings and Toxic Effects of Drugs); MS-DRGs 957, 958, and 959
(Other O.R. Procedures for Multiple Significant Trauma, with MCC, with
CC, and without CC/MCC, respectively) in MDC 24 (Multiple Significant
Trauma) and to MS-DRGs 981, 982 and 983 (Extensive O.R. Procedure
Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC,
respectively).
(6) Inspection of Penis
One requestor stated that ICD-10-PCS procedure code 0VJS0ZZ
(Inspection of penis, open approach) is currently not recognized as an
O.R. procedure for purposes of MS-DRG assignment. The requestor noted
that there are circumstances that warrant inpatient admission for open
exploration of the penis, such as to rule out penile fracture and
extravasation due to trauma. The requestor stated their belief that
because this procedure involves an open incision for exploration of
penile structures and utilizes general anesthesia in the operating
room, it would be appropriately classified as an O.R. procedure. We
agree with the requestor that ICD-10-PCS code 0VJS0ZZ typically
requires the resources of an operating room. Therefore, we are
proposing to add ICD-10-PCS procedure code 0VJS0ZZ to the FY 2021 ICD-
10 MS-DRG Version 38 Definitions Manual in Appendix E--Operating Room
procedures and procedure code/MS-DRG Index as an O.R. procedure
assigned to MS-DRGs 709 (Penis Procedures with CC/MCC) and 710 (Penis
Procedures without CC/MCC) in MDC 12 (Diseases and Disorders of the
Male Reproductive System).
12. Proposed Changes to the MS-DRG Diagnosis Codes for FY 2021
a. Background of the CC List and the CC Exclusions List
Under the IPPS MS-DRG classification system, we have developed a
standard list of diagnoses that are considered CCs. Historically, we
developed this list using physician panels that classified each
diagnosis code based on whether the diagnosis, when present as a
secondary condition, would be considered a substantial complication or
comorbidity. A substantial complication or comorbidity was defined as a
condition that, because of its presence with a specific principal
diagnosis, would cause an increase in the length-of-stay by at least 1
day in at least 75 percent of the patients. However, depending on the
principal diagnosis of the patient, some diagnoses on the basic list of
complications and comorbidities may be excluded if they are closely
related to the principal diagnosis. In FY 2008, we evaluated each
diagnosis code to determine its impact on resource use and to determine
the most appropriate CC subclassification (non-CC, CC, or MCC)
assignment. We refer readers to sections II.D.2. and 3. of the preamble
of the FY 2008 IPPS final rule with comment period for a discussion of
the refinement of CCs in relation to the MS-DRGs we adopted for FY 2008
(72 FR 47152 through 47171).
b. Overview of Comprehensive CC/MCC Analysis
In the FY 2008 IPPS/LTCH PPS final rule (72 FR 47159), we described
our process for establishing three different levels of CC severity into
which we would subdivide the diagnosis codes. The categorization of
diagnoses as a MCC, a CC, or a non-CC was accomplished using an
iterative approach in which each diagnosis was evaluated to determine
the extent to which its presence as a secondary diagnosis resulted in
increased hospital resource use. We refer readers to the FY 2008 IPPS/
LTCH PPS final rule (72 FR 47159) for a complete discussion of our
approach. Since the comprehensive analysis was completed for FY 2008,
we have evaluated diagnosis codes individually when receiving requests
to change the severity level of specific diagnosis codes.
We noted in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19235)
that with the transition to ICD-10-CM and the significant changes that
have occurred to diagnosis codes since the FY 2008 review, we believed
it was necessary to conduct a comprehensive analysis once again. Based
on this analysis, we proposed changes to the severity level
designations for 1,492 ICD-10-CM diagnosis codes and invited public
comments on those proposals. As summarized in the FY 2020 IPPS/LTCH PPS
final rule, many commenters expressed concern with the proposed
severity level designation changes overall and recommended that CMS
conduct further analysis prior to finalizing any proposals. After
careful consideration of the public comments we received, as discussed
further in the FY 2020 final rule, we generally did not finalize our
proposed changes to the severity designations for the ICD-10-CM
diagnosis codes, other than the changes to the severity level
designations for the diagnosis codes in category Z16--(Resistance to
antimicrobial drugs) from a non-CC to a CC. We stated that postponing
adoption of the proposed comprehensive changes in the severity level
designations would allow further opportunity to provide additional
background to the public on the methodology utilized and clinical
rationale applied across diagnostic categories to assist the public in
its review. We refer readers to the FY 2020 IPPS/LTCH PPS final rule
(84 FR 42150 through 42152) for a complete discussion of our response
to public comments regarding the proposed severity level designation
changes for FY 2020.

[[Page 32550]]

c. Guiding Principles for Making Changes to Severity Levels
To provide the public with more information on the CC/MCC
comprehensive analysis discussed in the FY 2020 IPPS/LTCH PPS proposed
and final rules, CMS hosted a listening session on October 8, 2019. The
listening session included a review of the methodology to measure the
impact on resource use. It also provided an opportunity for CMS to
receive public input on this analysis and to address any questions in
order to assist the public in formulating written comments on the
current severity level designations for consideration in the FY 2021
rulemaking. We refer readers to https://www.cms.gov/Outreach-and-Education/Outreach/OpenDoorForums/PodcastAndTranscripts.html for the
transcript and audio file of the listening session. We also refer
readers to https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.html for
the supplementary file containing the data describing the impact on
resource use of specific ICD-10-CM diagnosis codes when reported as a
secondary diagnosis that was made available for the listening session.
Following the listening session, we further considered the public
comments received and reconvened an internal workgroup comprised of
clinicians, consultants, coding specialists and other policy analysts
to identify guiding principles to apply in evaluating whether changes
to the severity level designations of diagnoses are needed and to
ensure the severity designations proposed appropriately reflect
resource use based on review of the claims data, as well as
consideration of relevant clinical factors (for example, the clinical
nature of each of the secondary diagnoses and the severity level of
clinically similar diagnoses) and improve the overall accuracy of the
IPPS payments. Our goal was to develop a set of guiding principles
that, when applied, could assist in determining whether the presence of
the specified secondary diagnosis would lead to increased hospital
resource use in most instances. The workgroup identified the following
nine guiding principles as meaningful indicators of expected resource
use by a secondary diagnosis:
Represents end of life/near death or has reached an
advanced stage associated with systemic physiologic decompensation and
debility.
Denotes organ system instability or failure.
Involves a chronic illness with susceptibility to
exacerbations or abrupt decline.
Serves as a marker for advanced disease states across
multiple different comorbid conditions.
Reflects systemic impact.
Post-operative condition/complication impacting recovery.
Typically requires higher level of care (that is,
intensive monitoring, greater number of caregivers, additional testing,
intensive care unit care, extended length of stay).
Impedes patient cooperation and/or management of care.
Recent (last 10 years) change in best practice, or in
practice guidelines and review of the extent to which these changes
have led to concomitant changes in expected resource use.
Using a combination of mathematical analysis of claims data as
discussed in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19235) and
the application of these guiding principles, we plan to continue a
comprehensive CC/MCC analysis and present the findings and proposals in
future rulemaking. We are inviting public comments regarding these
guiding principles, as well as other possible ways we can incorporate
meaningful indicators of clinical severity. When providing additional
feedback or comments, we encourage the public to provide a detailed
explanation of how applying a suggested concept or principle would
ensure that the severity designation appropriately reflects resource
use for any diagnosis code.
d. Proposed Additions and Deletions to the Diagnosis Code Severity
Levels for FY 2021
The following tables identify the proposed additions and deletions
to the diagnosis code MCC severity levels list and the proposed
additions and deletions to the diagnosis code CC severity levels list
for FY 2021 and are available via the internet on the CMS website at:
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
Table 6I.1--Proposed Additions to the MCC List--FY 2021;
Table 6I.2-- Proposed Deletions to the MCC List--FY 2021;
Table 6J.1-- Proposed Additions to the CC List--FY 2021; and
Table 6J.2-- Proposed Deletions to the CC List--FY 2021.
e. Proposed CC Exclusions List for FY 2021
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.
In the May 19, 1987 proposed notice (52 FR 18877) and the September
1, 1987 final notice (52 FR 33154), we explained that the excluded
secondary diagnoses were established using the following five
principles:
Chronic and acute manifestations of the same condition
should not be considered CCs for one another;
Specific and nonspecific (that is, not otherwise specified
(NOS)) diagnosis codes for the same condition should not be considered
CCs for one another;
Codes for the same condition that cannot coexist, such as
partial/total, unilateral/bilateral, obstructed/unobstructed, and
benign/malignant, should not be considered CCs for one another;
Codes for the same condition in anatomically proximal
sites should not be considered CCs for one another; and
Closely related conditions should not be considered CCs
for one another.
The creation of the CC Exclusions List was a major project
involving hundreds of codes. We have continued to review the remaining
CCs to identify additional exclusions and to remove diagnoses from the
master list that have been shown not to meet the definition of a CC. We
refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50541
through 50544) for detailed information regarding revisions that were
made to the CC and CC Exclusion Lists under the ICD-9-CM MS-DRGs.
The ICD-10 MS-DRGs Version 37 CC Exclusion List is included as
Appendix C in the ICD-10 MS-DRG Definitions Manual, which is available
via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.html, and includes two lists identified as
Part 1 and Part 2. Part 1 is the list of all diagnosis codes that are
defined as a CC or MCC when reported as a secondary diagnosis. For all
diagnosis codes on the list, a link is provided to a collection of
diagnosis codes which, when used as the principal diagnosis, would
cause the

[[Page 32551]]

CC or MCC diagnosis to be considered as a non-CC. Part 2 is the list of
diagnosis codes designated as a MCC only for patients discharged alive;
otherwise, they are assigned as a non-CC.
We received a request to consider removing diagnosis codes
describing any type of stroke that is designated as a MCC in the code
range I60.00 through I63.9 from the CC Exclusion list when a principal
diagnosis of diabetes in the code range E08.00 through E13 is reported.
According to the requestor, acute strokes and chronic diabetes are two
distinct conditions, therefore a stroke that occurs during an admission
for an underlying diabetic condition should not be excluded from acting
as a MCC. The requestor provided an example of a patient with type 2
diabetes who was admitted for treatment of infected foot ulcers and
then experienced a stroke prior to discharge, resulting in assignment
to MS-DRG 639 (Diabetes without CC/MCC). The requestor asserted the
more appropriate assignment is MS-DRG 637 (Diabetes with MCC), which
they stated more appropriately reflects severity of illness and
resources involved in the treatment of an acute stroke. In another
example provided by the requestor, a patient with type 2 diabetes and
osteomyelitis underwent a left below the knee amputation and
experienced a stroke before discharge, resulting in assignment to MS-
DRG 617 (Amputation of Lower Limb for Endocrine, Nutritional, and
Metabolic Diseases with CC). The requestor asserted the more
appropriate assignment is MS-DRG 616 (Amputation of Lower Limb for
Endocrine, Nutritional, and Metabolic Diseases with MCC), which they
stated more appropriately reflects severity of illness and resources
involved in the treatment an acute stroke.
Our clinical advisors agree that acute strokes and chronic diabetes
are two distinct conditions and a case reporting a secondary diagnosis
of a stroke in the code range I60.00 through I63.9 should not be
excluded from acting as a MCC when reported with a principal diagnosis
of diabetes in the code range E08.00 through E13.9.
We analyzed claims data from the September 2019 update of the FY
2019 MedPAR file for cases reporting a principal diagnosis of diabetes
in the code range E08.00 through E13.9 with a secondary diagnosis of a
stroke in the code range I60.00 through I63.9. We refer the reader to
table 6P.3a for a detailed list of the diagnosis codes describing
diabetes that were analyzed and table 6P.3b for a detailed list of the
diagnosis codes describing a stroke that were analyzed and that are
also designated as a MCC in this code range. We found a total of 1,109
cases across 40 MS-DRGs with an average length of stay of 10.1 days and
average costs of $24,672 reporting a principal diagnosis of diabetes
with a secondary diagnosis of a stroke that was excluded from acting as
a MCC. Of those 1,109 cases, we identified 161 cases that would result
in assignment to the higher severity level ``with MCC'' MS-DRG if the
diagnosis of stroke was no longer excluded from acting as a MCC. The
remaining 948 cases would maintain their existing MS-DRG assignment
since they were either already grouped to the highest MCC severity
level based on another diagnosis code that is designated as a MCC or
they were assigned to one of the Pre-MDC MS-DRGs. We refer the reader
to table 6P.4a for the detailed analysis.
Based on the advice of our clinical advisors, for FY 2021, we are
proposing to remove the diagnosis codes describing stroke in the code
range I60.00 through I63.9 that are designated as a MCC from the list
of CC Exclusions when reported with a principal diagnosis of diabetes
in the code range E08.00 through E13.9 from the ICD-10 MS-DRGs Version
38 CC Exclusion List as reflected in Table 6H.1.--Proposed Secondary
Diagnosis Order Deletions to the CC Exclusions List--FY 2021 and Table
6H.2.--Proposed Principal Diagnosis Order Deletions to the CC
Exclusions List--FY 2021.
We are proposing additional changes to the ICD-10 MS-DRGs Version
38 CC Exclusion List based on the diagnosis and procedure code updates
as discussed in section II.D.13. of this FY 2021 IPPS/LTCH PPS proposed
rule. Therefore, we have developed Table 6G.1.--Proposed Secondary
Diagnosis Order Additions to the CC Exclusions List--FY 2021; Table
6G.2.--Proposed Principal Diagnosis Order Additions to the CC
Exclusions List--FY 2021; Table 6H.1.--Proposed Secondary Diagnosis
Order Deletions to the CC Exclusions List--FY 2021; and Table 6H.2.--
Proposed Principal Diagnosis Order Deletions to the CC Exclusions
List--FY 2021. For Table 6G.1, each secondary diagnosis code proposed
for addition to the CC Exclusion List is shown with an asterisk and the
principal diagnoses proposed to exclude the secondary diagnosis code
are provided in the indented column immediately following it. For Table
6G.2, each of the principal diagnosis codes for which there is a CC
exclusion is shown with an asterisk and the conditions proposed for
addition to the CC Exclusion List that will not count as a CC are
provided in an indented column immediately following the affected
principal diagnosis. For Table 6H.1, each secondary diagnosis code
proposed for deletion from the CC Exclusion List is shown with an
asterisk followed by the principal diagnosis codes that currently
exclude it. For Table 6H.2, each of the principal diagnosis codes is
shown with an asterisk and the proposed deletions to the CC Exclusions
List are provided in an indented column immediately following the
affected principal diagnosis. Tables 6G.1., 6G.2., 6H.1., and 6H.2.
associated with this proposed rule are available via the internet on
the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
13. Proposed Changes to the ICD-10-CM and ICD-10-PCS Coding Systems
To identify new, revised and deleted diagnosis and procedure codes,
for FY 2021, we have developed Table 6A.--New Diagnosis Codes, Table
6B.--New Procedure Codes, Table 6C.--Invalid Diagnosis Codes, and Table
6E.--Revised Diagnosis Code Titles for this proposed rule.
These tables are not published in the Addendum to this proposed
rule, but are available via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html as described in section VI. of the
Addendum to this proposed rule. As discussed in section II.D.16. of the
preamble of this proposed rule, the code titles are adopted as part of
the ICD-10 (previously ICD-9-CM) Coordination and Maintenance Committee
meeting process. Therefore, although we publish the code titles in the
IPPS proposed and final rules, they are not subject to comment in the
proposed or final rules.
We are proposing the MDC and MS-DRG assignments for the new
diagnosis codes and procedure codes as set forth in Table 6A.--New
Diagnosis Codes and Table 6B.--New Procedure Codes. In addition, the
proposed severity level designations for the new diagnosis codes are
set forth in Table 6A. and the proposed O.R. status for the new
procedure codes are set forth in Table 6B.
We are making available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html
the following tables associated with this proposed rule:
Table 6A.--New Diagnosis Codes-FY 2021;

[[Page 32552]]

Table 6B.--New Procedure Codes-FY 2021;
Table 6C.--Invalid Diagnosis Codes-FY 2021;
Table 6E.--Revised Diagnosis Code Titles-FY 2021;
Table 6G.1.--Proposed Secondary Diagnosis Order Additions
to the CC Exclusions List-FY 2021;
Table 6G.2.-- Proposed Principal Diagnosis Order Additions
to the CC Exclusions List-FY 2021;
Table 6H.1.-- Proposed Secondary Diagnosis Order Deletions
to the CC Exclusions List-FY 2021;
Table 6H.2.-- Proposed Principal Diagnosis Order Deletions
to the CC Exclusions List--FY 2021;
Table 6I.1.-- Proposed Additions to the MCC List-FY 2021;
Table 6I.2.- Proposed Deletions to the MCC List-FY 2021;
Table 6J.1.-- Proposed Additions to the CC List-FY 2021;
and
Table 6J.2.-- Proposed Deletions to the CC List -FY 2021.
14. Proposed Changes to the Medicare Code Editor (MCE)
The Medicare Code Editor (MCE) is a software program that detects
and reports errors in the coding of Medicare claims data. Patient
diagnoses, procedure(s), and demographic information are entered into
the Medicare claims processing systems and are subjected to a series of
automated screens. The MCE screens are designed to identify cases that
require further review before classification into an MS-DRG.
As discussed in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42156),
we made available the FY 2020 ICD-10 MCE Version 37 manual file. The
manual contains the definitions of the Medicare code edits, including a
description of each coding edit with the corresponding diagnosis and
procedure code edit lists. The link to this MCE manual file, along with
the link to the mainframe and computer software for the MCE Version 37
(and ICD-10 MS-DRGs) are posted on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.
For this FY 2021 IPPS/LTCH PPS proposed rule, we address the MCE
requests we received by the November 1, 2019 deadline. We also discuss
the proposals we are making based on our internal review and analysis.
a. Age Conflict Edit
In the MCE, the Age conflict edit exists to detect inconsistencies
between a patient's age and any diagnosis on the patient's record; for
example, a 5-year-old patient with benign prostatic hypertrophy or a
78-year-old patient coded with a delivery. In these cases, the
diagnosis is clinically and virtually impossible for a patient of the
stated age. Therefore, either the diagnosis or the age is presumed to
be incorrect. Currently, in the MCE, the following four age diagnosis
categories appear under the Age conflict edit and are listed in the
manual and written in the software program:
Perinatal/Newborn--Age 0 years only; a subset of diagnoses
which will only occur during the perinatal or newborn period of age 0
(for example, tetanus neonatorum, health examination for newborn under
8 days old).
Pediatric--Age is 0-17 years inclusive (for example,
Reye's syndrome, routine child health exam).
Maternity--Age range is 9-64 years inclusive (for example,
diabetes in pregnancy, antepartum pulmonary complication).
Adult--Age range is 15-124 years inclusive (for example,
senile delirium, mature cataract).
(1) Maternity Diagnoses
Under the ICD-10 MCE, the Maternity diagnoses category for the Age
conflict edit considers the age range of 9 to 64 years inclusive. For
that reason, the diagnosis codes on this Age conflict edit list would
be expected to apply to conditions or disorders specific to that age
group only.
As discussed in section II.D.13. of the preamble of this proposed
rule, Table 6A.--New Diagnosis Codes, lists the diagnosis codes that
have been approved to date which will be effective with discharges on
and after October 1, 2020. We are proposing to add the following new
ICD-10-CM diagnosis codes listed in this section of this rule to the
Maternity diagnoses category code list under the Age conflict edit.
[GRAPHIC] [TIFF OMITTED] TP29MY20.095

In addition, as discussed in section II.D.13. of the preamble of
this proposed rule, Table 6C.--Invalid Diagnosis Codes, lists the
diagnosis codes that are no longer effective October 1, 2020. Included
in this table is ICD-10-CM diagnosis code O99.89 (Other specified
diseases and conditions complicating pregnancy, childbirth and the
puerperium) which is currently listed on the Maternity diagnoses
category code list under the Age Conflict edit. We are proposing to
remove this code from the Maternity diagnoses category code list.
(2) Adult Diagnoses
Under the ICD-10 MCE, the Adult diagnoses category for the Age
conflict edit considers the age range of 15 to 124 years inclusive. For
that reason, the diagnosis codes on this Age conflict edit list would
be expected to apply to conditions or disorders specific to that age
group only.
As discussed in section II.D.13. of the preamble of this proposed
rule, Table 6A.--New Diagnosis Codes, lists the diagnosis codes that
have been approved to date which will be effective with discharges on
and after October 1, 2020. We are proposing to add the following new
ICD-10-CM diagnosis codes to the Adult diagnoses category code list
under the Age conflict edit.

[[Page 32553]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.096

b. Sex Conflict Edit
In the MCE, the Sex conflict edit detects inconsistencies between a
patient's sex and any diagnosis or procedure on the patient's record;
for example, a male patient with cervical cancer (diagnosis) or a
female patient with a prostatectomy (procedure). In both instances, the
indicated diagnosis or the procedure conflicts with the stated sex of
the patient. Therefore, the patient's diagnosis, procedure, or sex is
presumed to be incorrect.
(1) Diagnoses for Females Only Edit
As discussed in section II.D.13. of the preamble of this proposed
rule, Table 6A.--New Diagnosis Codes, lists the new diagnosis codes
that have been approved to date which will be effective with discharges
on and after October 1, 2020. We are proposing to add the following new
ICD-10-CM diagnosis codes listed in this section of this rule to the
edit code list for the Diagnoses for Females Only edit.
[GRAPHIC] [TIFF OMITTED] TP29MY20.097

In addition, as discussed in section II.D.13. of the preamble of
this proposed rule, Table 6C.--Invalid Diagnosis Codes, lists the
diagnosis codes that are no longer effective October 1, 2020. Included
in this table are ICD-10-CM diagnosis code O99.89 (Other specified
diseases and conditions complicating pregnancy, childbirth and the
puerperium) and ICD-10-CM diagnosis code Q51.20 (Other doubling of
uterus, unspecified) which are currently listed on the Diagnoses for
Females Only edit code list. We are proposing to delete these codes
from the Diagnoses for Females Only edit code list.
(2) Procedures for Females Only Edit
As discussed in section II.D.13. of the preamble of this proposed
rule, Table 6B.--New Procedure Codes, lists the new procedure codes
that have been approved to date which will be effective with discharges
on and after October 1, 2020. We are proposing to add the following new
ICD-10-PCS procedure codes listed in this section of this rule to the
edit code list for the Procedures for Females Only edit.
[GRAPHIC] [TIFF OMITTED] TP29MY20.098

(3) Procedures for Males Only
As discussed in section II.D.13. of the preamble of this proposed
rule, Table 6B.--New Procedure Codes, lists the new procedure codes
that have been approved to date which will be effective with discharges
on and after October 1, 2020. We are proposing to add the following new
ICD-10-PCS procedure

[[Page 32554]]

codes listed in this section of this rule to the edit code list for the
Procedures for Males Only edit.
[GRAPHIC] [TIFF OMITTED] TP29MY20.099

c. Manifestation Code as Principal Diagnosis Edit
In the ICD-10-CM classification system, manifestation codes
describe the manifestation of an underlying disease, not the disease
itself, and therefore should not be used as a principal diagnosis.
As discussed in section II.D.13. of the preamble of this proposed
rule, Table 6A--New Diagnosis Codes, lists the new diagnosis codes that
have been approved to date which will be effective with discharges on
and after October 1, 2020. We are proposing to add the following new
ICD-10-CM diagnosis codes listed in this section of this rule to the
edit code list for the Manifestation Codes Not Allowed as Principal
Diagnosis edit code list because these codes are describing the
manifestation of an underlying disease and not the disease itself.
[GRAPHIC] [TIFF OMITTED] TP29MY20.100

In addition, as discussed in section II.D.13. of the preamble of
this proposed rule, Table 6C.--Invalid Diagnosis Codes, lists the
diagnosis codes that are no longer effective October 1, 2020. Included
in this table is ICD-10-CM diagnosis code J84.17 (Other interstitial
pulmonary diseases with fibrosis in diseases classified elsewhere)
which is currently listed on the Manifestation Codes Not Allowed as
Principal Diagnosis edit code list. We are proposing to delete this
code from the Manifestation Codes Not Allowed as Principal Diagnosis
edit code list.
d. Unacceptable Principal Diagnosis Edit
In the MCE, there are select codes that describe a circumstance
which influences an individual's health status but does not actually
describe a current illness or injury. There also are codes that are not
specific manifestations but may be due to an underlying cause. These
codes are considered unacceptable as a principal diagnosis. In limited
situations, there are a few codes on the MCE Unacceptable Principal
Diagnosis edit code list that are considered ``acceptable'' when a
specified secondary diagnosis is also coded and reported on the claim.
As discussed in Section II.D.13. of the preamble of this proposed
rule, Table 6A.--New Diagnosis Codes, lists the new diagnosis codes
that have been approved to date which will be effective with discharges
on and after October 1, 2020. We are proposing to add the following new
ICD-10-CM diagnosis codes listed in this section of this rule to the
Unacceptable Principal Diagnosis edit code list.

[[Page 32555]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.101

In addition, as discussed in section II.D.13. of the preamble of
this proposed rule, Table 6C.--Invalid Diagnosis Codes, lists the
diagnosis codes that are no longer effective October 1, 2020. Included
in this table are the following ICD-10-CM diagnosis codes that are
currently listed on the Unacceptable Principal Diagnosis edit code
list. We are proposing to delete these codes from the Unacceptable
Principal Diagnosis edit code list.
[GRAPHIC] [TIFF OMITTED] TP29MY20.102

e. Future Enhancement
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38053 through 38054)
we noted the importance of ensuring accuracy of the coded data from the
reporting, collection, processing, coverage, payment and analysis
aspects. Subsequently, in the FY 2019 IPPS/LTCH PPS proposed rule (83
FR 20235) we stated that we engaged a contractor to assist in the
review of the limited coverage and non-covered procedure edits in the
MCE that may also be present in other claims processing

[[Page 32556]]

systems that are utilized by our MACs. The MACs must adhere to criteria
specified within the National Coverage Determinations (NCDs) and may
implement their own edits in addition to what is already incorporated
into the MCE, resulting in duplicate edits. The objective of this
review is to identify where duplicate edits may exist and to determine
what the impact might be if these edits were to be removed from the
MCE. The contractor is continuing to conduct this review.
We have also noted that the purpose of the MCE is to ensure that
errors and inconsistencies in the coded data are recognized during
Medicare claims processing. As we indicated in the FY 2019 IPPS/LTCH
PPS final rule (83 FR 41228), we are considering whether the inclusion
of coverage edits in the MCE necessarily aligns with that specific goal
because the focus of coverage edits is on whether or not a particular
service is covered for payment purposes and not whether it was coded
correctly.
As we continue to evaluate the purpose and function of the MCE with
respect to ICD-10, we encourage public input for future discussion. As
we have discussed in prior rulemaking, we recognize a need to further
examine the current list of edits and the definitions of those edits.
We continue to encourage public comments on whether there are
additional concerns with the current edits, including specific edits or
language that should be removed or revised, edits that should be
combined, or new edits that should be added to assist in detecting
errors or inaccuracies in the coded data. Comments should be directed
to the MS-DRG Classification Change Mailbox located at
[email protected] by October 20, 2020.
15. Proposed Changes to Surgical Hierarchies
Some inpatient stays entail multiple surgical procedures, each one
of which, occurring by itself, could result in assignment of the case
to a different MS-DRG within the MDC to which the principal diagnosis
is assigned. Therefore, it is necessary to have a decision rule within
the GROUPER by which these cases are assigned to a single MS-DRG. The
surgical hierarchy, an ordering of surgical classes from most resource-
intensive to least resource-intensive, performs that function.
Application of this hierarchy ensures that cases involving multiple
surgical procedures are assigned to the MS-DRG associated with the most
resource-intensive surgical class.
A surgical class can be composed of one or more MS-DRGs. For
example, in MDC 11, the surgical class ``kidney transplant'' consists
of a single MS-DRG (MS-DRG 652) and the class ``major bladder
procedures'' consists of three MS-DRGs (MS-DRGs 653, 654, and 655).
Consequently, in many cases, the surgical hierarchy has an impact on
more than one MS-DRG. The methodology for determining the most
resource-intensive surgical class involves weighting the average
resources for each MS-DRG by frequency to determine the weighted
average resources for each surgical class. For example, assume surgical
class A includes MS-DRGs 001 and 002 and surgical class B includes MS-
DRGs 003, 004, and 005. Assume also that the average costs of MS-DRG
001 are higher than that of MS-DRG 003, but the average costs of MS-
DRGs 004 and 005 are higher than the average costs of MS-DRG 002. To
determine whether surgical class A should be higher or lower than
surgical class B in the surgical hierarchy, we would weigh the average
costs of each MS-DRG in the class by frequency (that is, by the number
of cases in the MS-DRG) to determine average resource consumption for
the surgical class. The surgical classes would then be ordered from the
class with the highest average resource utilization to that with the
lowest, with the exception of ``other O.R. procedures'' as discussed in
this proposed rule.
This methodology may occasionally result in assignment of a case
involving multiple procedures to the lower-weighted MS-DRG (in the
highest, most resource-intensive surgical class) of the available
alternatives. However, given that the logic underlying the surgical
hierarchy provides that the GROUPER search for the procedure in the
most resource-intensive surgical class, in cases involving multiple
procedures, this result is sometimes unavoidable.
We note that, notwithstanding the foregoing discussion, there are a
few instances when a surgical class with a lower average cost is
ordered above a surgical class with a higher average cost. For example,
the ``other O.R. procedures'' surgical class is uniformly ordered last
in the surgical hierarchy of each MDC in which it occurs, regardless of
the fact that the average costs for the MS-DRG or MS-DRGs in that
surgical class may be higher than those for other surgical classes in
the MDC. The ``other O.R. procedures'' class is a group of procedures
that are only infrequently related to the diagnoses in the MDC, but are
still occasionally performed on patients with cases assigned to the MDC
with these diagnoses. Therefore, assignment to these surgical classes
should only occur if no other surgical class more closely related to
the diagnoses in the MDC is appropriate.
A second example occurs when the difference between the average
costs for two surgical classes is very small. We have found that small
differences generally do not warrant reordering of the hierarchy
because, as a result of reassigning cases on the basis of the hierarchy
change, the average costs are likely to shift such that the higher-
ordered surgical class has lower average costs than the class ordered
below it.
Based on the changes that we are proposing to make in this FY 2021
IPPS/LTCH PPS proposed rule, as discussed in section II.D.2.b. of the
preamble of this proposed rule, we are proposing to revise the surgical
hierarchy for the Pre-MDC MS-DRGs as follows: In the Pre-MDC MS-DRGs we
are proposing to sequence proposed new Pre-MDC MS-DRG 018 (Chimeric
Antigen Receptor (CAR) T-cell Immunotherapy) above Pre-MDC MS-DRGs 001
and 002 (Heart Transplant or Implant of Heart Assist System with and
without MCC, respectively). We also note that, as discussed in section
II.D.2.b. of the preamble of this proposed rule, we are proposing to
revise the title for Pre-MDC MS-DRG 016 to ``Autologous Bone Marrow
Transplant with CC/MCC''. In addition, based on the changes that we are
proposing to make as discussed in section II.D.8.a. of the preamble of
this proposed rule, we are also proposing to sequence proposed new Pre-
MDC MS-DRG 019 (Simultaneous Pancreas/Kidney Transplant with
Hemodialysis) above Pre-MDC MS-DRG 008 (Simultaneous Pancreas/Kidney
Transplant) and below Pre-MDC MS-DRG 007 (Lung Transplant).
As discussed in section II.D.4. of the preamble of this proposed
rule, we are proposing to delete MS-DRGs 129 and 130 (Major Head and
Neck Procedures with CC/MCC or Major Device and without CC/MCC,
respectively), MS-DRGs 131 and 132 (Cranial and Facial Procedures with
CC/MCC and without CC/MCC, respectively), and MS-DRGs 133 and 134
(Other Ear, Nose, Mouth and Throat O.R. Procedures with CC/MC and
without CC/MCC, respectively). Based on the changes we are proposing to
make for those MS-DRGs in MDC 03, we are proposing to revise the
surgical hierarchy for MDC 03 (Diseases and Disorders of the Ear, Nose,
Mouth and Throat) as follows: In MDC 03, we are proposing to sequence
proposed new MS-DRGs 140, 141, and 142 (Major Head and Neck Procedures
with MCC, with CC, and without CC/MCC, respectively) above proposed new
MS-DRGs 143, 144, and 145 (Other Ear,

[[Page 32557]]

Nose, Mouth and Throat O.R. Procedures with MCC, with CC, and without
CC/MCC, respectively). We are also proposing to sequence proposed new
MS-DRGs 143, 144, and 145 above MS-DRGs 135 and 136 (Sinus and Mastoid
Procedures with CC/MCC and without CC/MCC, respectively). We also note
that, based on the changes that we are proposing to make, as discussed
in section II.D.7b of the preamble of this proposed rule, we are
proposing to revise the surgical hierarchy for MDC 08 (Diseases and
Disorders of the Musculoskeletal System and Connective Tissue) as
follows: In MDC 08, we are proposing to sequence proposed new MS-DRGs
521 and 522 (Hip Replacement with Principal Diagnosis of Hip Fracture
with and without MCC, respectively) above MS-DRGs 469 (Major Hip and
Knee Joint Replacement or Reattachment of Lower Extremity with MCC or
Total Ankle Replacement) and 470 (Major Hip and Knee Joint Replacement
or Reattachment of Lower Extremity without MCC). We further note that,
based on the changes we are proposing to make, as discussed in section
II.D. 8 of the preamble of this proposed rule, we are proposing to
revise the surgical hierarchy for MDC 11 (Diseases and Disorders of the
Kidney and Urinary Tract) as follows: In MDC 11, we are proposing to
sequence proposed new MS-DRGs 650 and 651 (Kidney Transplant with
Hemodialysis with and without MCC, respectively) above MS-DRG 652
(Kidney Transplant).
Our proposal for Appendix D MS-DRG Surgical Hierarchy by MDC and
MS-DRG of the ICD-10 MS-DRG Definitions Manual Version 38 is
illustrated in the following tables.
[GRAPHIC] [TIFF OMITTED] TP29MY20.104

[GRAPHIC] [TIFF OMITTED] TP29MY20.105

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[GRAPHIC] [TIFF OMITTED] TP29MY20.107

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16. Maintenance of the ICD-10-CM and ICD-10-PCS Coding Systems
In September 1985, the ICD-9-CM Coordination and Maintenance
Committee was formed. This is a Federal interdepartmental committee,
co-chaired by the Centers for Disease Control and Prevention's (CDC)
National Center for Health Statistics (NCHS) and CMS, charged with
maintaining and updating the ICD-9-CM system. The final update to ICD-
9-CM codes was made on October 1, 2013. Thereafter, the name of the
Committee was changed to the ICD-10 Coordination and Maintenance
Committee, effective with the March 19-20, 2014 meeting. The ICD-10
Coordination and Maintenance Committee addresses updates to the ICD-10-
CM and ICD-10-PCS coding systems. The Committee is jointly responsible
for approving coding changes, and developing errata, addenda, and other
modifications to the coding systems to reflect newly developed
procedures and technologies and newly identified diseases. The
Committee is also responsible for promoting the use of Federal and non-
Federal educational programs and other communication techniques with a
view toward standardizing coding applications and upgrading the quality
of the classification system.
The official list of ICD-9-CM diagnosis and procedure codes by
fiscal year can be found on the CMS website at: http://cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/codes.html. The official
list of ICD-10-CM and ICD-10-PCS codes can be found on the CMS website
at: http://www.cms.gov/Medicare/Coding/ICD10/index.html.
The NCHS has lead responsibility for the ICD-10-CM and ICD-9-CM
diagnosis codes included in the Tabular List and Alphabetic Index for
Diseases, while CMS has lead responsibility for the ICD-10-PCS and ICD-
9-CM procedure codes included in the Tabular List and Alphabetic Index
for Procedures.
The Committee encourages participation in the previously mentioned
process by health-related organizations. In this regard, the Committee
holds public meetings for discussion of educational issues and proposed
coding changes. These meetings provide an opportunity for
representatives of recognized organizations in the coding field, such
as the American Health Information Management Association (AHIMA), the
American Hospital Association (AHA), and various physician specialty
groups, as well as individual physicians, health information management
professionals, and other members of the public, to contribute ideas on
coding matters. After considering the opinions expressed at the public
meetings and in writing, the Committee formulates recommendations,
which then must be approved by the agencies.
The Committee presented proposals for coding changes for
implementation in FY 2021 at a public meeting held on September 10-11,
2019, and finalized the coding changes after consideration of comments
received at the meetings and in writing by November 8, 2019.
The Committee held its 2020 meeting on March 17-18, 2020. The
deadline for submitting comments on these code proposals was April 17,
2020. It was announced at this meeting that any new diagnosis and
procedure codes for which there was consensus of public support and for
which complete tabular and indexing changes would be made by June 2020
would be included in the October 1, 2020 update to the ICD-10-CM
diagnosis and ICD-10-PCS procedure code sets. As discussed in earlier
sections of the preamble of this proposed rule, there are new, revised,
and deleted ICD-10-CM diagnosis codes and ICD-10-PCS procedure codes
that are captured in Table 6A.--New Diagnosis Codes, Table 6B.--New
Procedure Codes, Table 6C.--Invalid Diagnosis Codes, and Table 6E.--
Revised Diagnosis Code Titles for this proposed rule, which are
available via the internet on the CMS website at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
The code titles are adopted as part of the ICD-10 (previously ICD-9-CM)
Coordination and Maintenance Committee process. Therefore, although we
make the code titles available for the IPPS proposed rule, they are not
subject to comment in the proposed rule. Because of the length of these
tables, they are not published in the Addendum to the proposed rule.
Rather, they are available via the internet as discussed in section VI.
of the Addendum to the proposed rule.
Live Webcast recordings of the discussions of the diagnosis and
procedure codes at the Committee's September 10-11, 2019 meeting and a
recording of the virtual meeting held on March 17-18, 2020 can be
obtained from the CMS website at: https://www.cms.gov/Medicare/Coding/ICD10/C-and-M-Meeting-Materials. The materials for the discussions
relating to diagnosis codes at the September 10-11, 2019 meeting and
March 17-18, 2020 meeting can be found at: http://www.cdc.gov/nchs/icd/icd10cm_maintenance.html. These websites also provide detailed
information about the Committee, including information on requesting a
new code, attending or participating in a Committee meeting, and
timeline requirements and meeting dates.
We encourage commenters to address suggestions on coding issues
involving diagnosis codes via Email to: [email protected].
Questions and comments concerning the procedure codes should be
submitted via Email to: [email protected].
In the September 7, 2001 final rule implementing the IPPS new
technology add-on payments (66 FR 46906), we indicated we would attempt
to include proposals for procedure codes that would describe new
technology discussed and approved at the Spring meeting as part of the
code revisions effective the following October.
Section 503(a) of Public Law 108-173 included a requirement for
updating diagnosis and procedure codes twice a year instead of a single
update on October 1 of each year. This requirement was included as part
of the amendments to the Act relating to recognition of new technology
under the IPPS. Section 503(a) of Public Law 108-173 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
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

[[Page 32559]]

in order to identify and report the new codes.
The ICD-10 (previously the ICD-9-CM) Coordination and Maintenance
Committee holds its meetings in the spring and fall in order to update
the codes and the applicable payment and reporting systems by October 1
of each year. Items are placed on the agenda for the Committee meeting
if the request is received at least 3 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 website. A complete addendum
describing details of all diagnosis and procedure coding changes, both
tabular and index, is published on the CMS and NCHS websites in June of
each year. Publishers of coding books and software use this information
to modify their products that are used by health care providers. This
5-month time period has proved to be necessary for hospitals and other
providers to update their systems.
A discussion of this timeline and the need for changes are included
in the December 4-5, 2005 ICD-9-CM Coordination and Maintenance
Committee Meeting minutes. The public agreed that there was a need to
hold the fall meetings earlier, in September or October, in order to
meet the new implementation dates. The public provided comment that
additional time would be needed to update hospital systems and obtain
new code books and coding software. There was considerable concern
expressed about the impact this April update would have on providers.
In the FY 2005 IPPS final rule, we implemented section
1886(d)(5)(K)(vii) of the Act, as added by section 503(a) of Public Law
108-173, by developing a mechanism for approving, in time for the April
update, diagnosis and procedure code revisions needed to describe new
technologies and medical services for purposes of the new technology
add-on payment process. We also established the following process for
making these determinations. Topics considered during the Fall ICD-10
(previously ICD-9-CM) Coordination and Maintenance Committee meeting
are considered for an April 1 update if a strong and convincing case is
made by the requestor 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 materials and live webcast 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 not any requests submitted for an expedited April 1,
2020 implementation of a new code at the September 10-11, 2019
Committee meeting. However, as announced by the CDC on December 9,
2019, a new ICD-10 emergency code was established by the World Health
Organization (WHO) in response to recent occurrences of vaping related
disorders. Consistent with this update, the CDC/NCHS implemented a new
ICD-10-CM diagnosis code, U07.0 (Vaping-related disorder) for U.S.
reporting of vaping-related disorders effective April 1, 2020. In
addition, as announced by the CDC, a new emergency code was established
by the WHO on January 31, 2020, in response to the 2019 Novel
Coronavirus (2019-nCoV) disease outbreak that was declared a public
health emergency of international concern. Consistent with this update,
the CDC/NCHS implemented a new ICD-10-CM diagnosis code, U07.1 (COVID-
19) for U.S. reporting of the 2019 Novel Coronavirus disease effective
April 1, 2020. We refer the reader to the CDC web page at https://www.cdc.gov/nchs/icd/icd10cm.htm for additional details regarding the
implementation of these new diagnosis codes.
We have provided the MS-DRG assignments for these codes effective
with discharges on and after April 1, 2020, consistent with our
established process for assigning new diagnosis codes. Specifically, we
review the predecessor diagnosis code and MS-DRG assignment most
closely associated with the new diagnosis code, and consider other
factors that may be relevant to the MS-DRG assignment, including the
severity of illness, treatment difficulty, and the resources utilized
for the specific condition/diagnosis. We note that this process does
not automatically result in the new diagnosis code being assigned to
the same MS-DRG as the predecessor code. Effective with discharges on
and after April 1, 2020, diagnosis code U07.0 is assigned to MDC 04
(Diseases and Disorders of the Respiratory System) in MS-DRGs 205 and
206 (Other Respiratory System Diagnoses with and without MCC,
respectively), consistent with the assignment of the predecessor
diagnosis code. Effective with discharges on and after April 1, 2020,
diagnosis code U07.1 is assigned to MDC 04 in MS-DRGs 177, 178 and 179
(Respiratory Infections and Inflammations with MCC, with CC, and
without CC/MCC, respectively), MDC 15 (Newborns and Other Neonates with
Conditions Originating in Perinatal Period) in MS-DRG 791 (Prematurity
with Major Problems) and MS-DRG 793 (Full Term Neonate with Major
Problems), and MDC 25 (Human Immunodeficiency Virus Infections) in MS-
DRGs 974, 975, and 976 (HIV with Major Related Condition with MCC, with
CC, and without CC/MCC, respectively).
These assignments for diagnosis codes U07.0 and U07.1 are reflected
in Table 6A--New Diagnosis Codes (which is available via the internet
on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS. As with the other new diagnosis
codes and MS-DRG assignments included in Table 6A of this proposed
rule, we are soliciting public comments on the most appropriate MDC,
MS-DRG, and severity level assignments for these codes for FY 2021, as
well as any other options for the GROUPER logic. We also note that
Change Request (CR) 11623, Transmittal 4499, titled ``Update to the
International Classification of Diseases, Tenth Revision, Clinical
Modification (ICD-10-CM) for Vaping Related Disorder'', was issued on
January 24, 2020 (available via the internet on the CMS website at:
https://www.cms.gov/files/document/r4499cp.pdf) regarding the release
of an updated version of the ICD-10 MS-DRG Grouper and Medicare Code
Editor (MCE) software, Version 37.1, to be effective with discharges on
or after April 1, 2020 reflecting new diagnosis code U07.0. The updated
software, along with the updated ICD-10 MS-DRG V37.1 Definitions Manual
and the Definitions of Medicare Code Edits V37.1 manual was made
available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPSMS-DRG-Classifications-and-Software. In
response to the implementation of diagnosis code U07.1 (COVID-19), we
subsequently released a new updated version of the ICD-10 MS-DRG
Grouper and Medicare Code Editor (MCE) software, Version 37.1 R1,
effective with discharges on or after April 1, 2020 reflecting this new
code, which replaced the ICD-10 MS-DRG Grouper and Medicare Code Editor
(MCE) software, Version 37.1. The updated software, along with the
updated ICD-10 MS-DRG V37.1 R1 Definitions Manual and the Definitions
of Medicare Code Edits V37.1 R1 manual are available at https://
www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/

[[Page 32560]]

AcuteInpatientPPS/MS-DRG-Classifications-and-Software.
ICD-9-CM addendum and code title information is published on the
CMS website at: http://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html?redirect=/icd9ProviderDiagnosticCodes/01overview.asp#TopofPage. ICD-10-CM and
ICD-10-PCS addendum and code title information is published on the CMS
website at: http://www.cms.gov/Medicare/Coding/ICD10/index.html. CMS
also sends copies of all ICD-10-CM and ICD-10-PCS coding changes to its
Medicare contractors for use in updating their systems and providing
education to providers.
Information on ICD-10-CM diagnosis codes, along with the Official
ICD-10-CM Coding Guidelines, can also be found on the CDC website at:
http://www.cdc.gov/nchs/icd/icd10.htm. Additionally, information on
new, revised, and deleted ICD-10-CM diagnosis and ICD-10-PCS procedure
codes is provided to the AHA for publication in the Coding Clinic for
ICD-10. AHA also distributes coding update information to publishers
and software vendors.
The following chart shows the number of ICD-10-CM and ICD-10-PCS
codes and code changes since FY 2016 when ICD-10 was implemented.
[GRAPHIC] [TIFF OMITTED] TP29MY20.108

As mentioned previously, the public is provided the opportunity to
comment on any requests for new diagnosis or procedure codes discussed
at the ICD-10 Coordination and Maintenance Committee meeting.
17. Replaced Devices Offered Without Cost or With a Credit
a. Background
In the FY 2008 IPPS final rule with comment period (72 FR 47246
through 47251), we discussed the topic of Medicare payment for devices
that are replaced without cost or where credit for a replaced device is
furnished to the hospital. We implemented a policy to reduce a
hospital's IPPS payment for certain MS-DRGs where the implantation of a
device that subsequently failed or was recalled determined the base MS-
DRG assignment. At that time, we specified that we will reduce a
hospital's IPPS payment for those MS-DRGs where the hospital received a
credit for a replaced device equal to 50 percent or more of the cost of
the device.
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51556 through
51557), we clarified this policy to state that the policy applies if
the hospital received a credit equal to 50 percent or more of the cost
of the replacement device and issued instructions to hospitals
accordingly.
b. Proposed Changes for FY 2021
As discussed in section II.D.4. of the preamble of this proposed
rule, for FY 2021, under MDC 03, we are proposing to delete MS-DRGs 129
and 130 and to

[[Page 32561]]

add new MS-DRGs 140, 141, and 142 (Major Head and Neck Procedures with
MCC, with CC, and without CC/MCC, respectively). A subset of the
procedures currently assigned to MS-DRGs 129 and 130 are being proposed
for assignment to proposed new MS-DRGs 140, 141, and 142.
Additionally, as discussed in section II.D.7.b. of the preamble of
this proposed rule, for FY 2021, under MDC 08, we are proposing to
create new MS-DRGs 551 and 552 (Hip Replacement with Principal
Diagnosis of Hip Fracture with and without MCC, respectively). A subset
of the procedures currently assigned to MS-DRGs 469 through 470 are
being proposed for assignment to proposed new MS-DRGs 551 and 552.
As stated in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24409),
we generally map new MS-DRGs onto the list when they are formed from
procedures previously assigned to MS-DRGs that are already on the list.
Currently, MS-DRGs 129, 130, 469 and 470 are on the list of MS-DRGs
subject to the policy for payment under the IPPS for replaced devices
offered without cost or with a credit. Therefore, if the applicable
proposed MS-DRG changes are finalized, we also would add proposed new
MS-DRGs 140, 141, 142, 551 and 552 to the list of MS-DRGs subject to
the policy for payment under the IPPS for replaced devices offered
without cost or with a credit and make conforming changes as reflected
in the table. We are also proposing to continue to include the existing
MS-DRGs currently subject to the policy as also displayed in the table.
BILLING CODE 4120-01-P

[[Page 32562]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.110

[[Page 32563]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.111

BILLING CODE 4120-01-C
The final list of MS-DRGs subject to the IPPS policy for replaced
devices offered without cost or with a credit will be included in the
FY2021 IPPS/LTCH

[[Page 32564]]

PPS final rule and also will be issued to providers in the form of a
Change Request (CR).

E. Recalibration of the FY 2021 MS-DRG Relative Weights

Beginning in FY 2007, we implemented relative weights for DRGs
based on cost report data instead of charge information. We refer
readers to the FY 2007 IPPS final rule (71 FR 47882) for a detailed
discussion of our final policy for calculating the cost based DRG
relative weights and to the FY 2008 IPPS final rule with comment period
(72 FR 47199) for information on how we blended relative weights based
on the CMS DRGs and MS DRGs. We also refer readers to the FY 2017 IPPS/
LTCH PPS final rule (81 FR 56785 through 56787) for a detailed
discussion of the history of changes to the number of cost centers used
in calculating the DRG relative weights. Since FY 2014, we have
calculated the IPPS MS DRG relative weights using 19 CCRs, which now
include distinct CCRs for implantable devices, MRIs, CT scans, and
cardiac catheterization.
1. Data Sources for Developing the Relative Weights
Consistent with our established policy, in developing the MS-DRG
relative weights for FY 2021, we are proposing to use two data sources:
claims data and cost report data. The claims data source is the MedPAR
file, which includes fully coded diagnostic and procedure data for all
Medicare inpatient hospital bills. The FY 2019 MedPAR data used in this
proposed rule include discharges occurring on October 1, 2018, through
September 30, 2019, based on bills received by CMS through December 31,
2019, from all hospitals subject to the IPPS and short-term, acute care
hospitals in Maryland (which at that time were under a waiver from the
IPPS). The FY 2019 MedPAR file used in calculating the proposed
relative weights includes data for approximately 9,184,114 Medicare
discharges from IPPS providers. Discharges for Medicare beneficiaries
enrolled in a Medicare Advantage managed care plan are excluded from
this analysis. These discharges are excluded when the MedPAR ``GHO
Paid'' indicator field on the claim record is equal to ``1'' or when
the MedPAR DRG payment field, which represents the total payment for
the claim, is equal to the MedPAR ``Indirect Medical Education (IME)''
payment field, indicating that the claim was an ``IME only'' claim
submitted by a teaching hospital on behalf of a beneficiary enrolled in
a Medicare Advantage managed care plan. In addition, the December 31,
2019 update of the FY 2019 MedPAR file complies with version 5010 of
the X12 HIPAA Transaction and Code Set Standards, and includes a
variable called ``claim type.'' Claim type ``60'' indicates that the
claim was an inpatient claim paid as fee-for-service. Claim types
``61,'' ``62,'' ``63,'' and ``64'' relate to encounter claims, Medicare
Advantage IME claims, and HMO no-pay claims. Therefore, the calculation
of the proposed relative weights for FY 2021 also excludes claims with
claim type values not equal to ``60.'' The data exclude CAHs, including
hospitals that subsequently became CAHs after the period from which the
data were taken. We note that the proposed FY 2021 relative weights are
based on the ICD-10-CM diagnosis codes and ICD-10-PCS procedure codes
from the FY 2019 MedPAR claims data, grouped through the ICD-10 version
of the proposed FY 2021 GROUPER (Version 38).
The second data source used in the cost-based relative weighting
methodology is the Medicare cost report data files from the HCRIS.
Normally, we use the HCRIS dataset that is 3 years prior to the IPPS
fiscal year. Specifically, we used cost report data from the December
31, 2019 update of the FY 2018 HCRIS for calculating the proposed FY
2021 cost-based relative weights. Consistent with our historical
practice, for this FY 2021 proposed rule, we are providing the version
of the HCRIS from which we calculated these proposed 19 CCRs on the CMS
website at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. Click on the link on the left
side of the screen titled ``FY 2021 IPPS Proposed Rule Home Page'' or
``Acute Inpatient Files for Download.''
2. Methodology for Calculation of the Relative Weights
a. General
We calculated the proposed FY 2021 relative weights based on 19
CCRs, as we did for FY 2020. The methodology we are proposing to use to
calculate the FY 2021 MS-DRG cost-based relative weights based on
claims data in the FY 2019 MedPAR file and data from the FY 2018
Medicare cost reports is as follows:
To the extent possible, all the claims were regrouped
using the proposed FY 2021 MS-DRG classifications discussed in sections
II.B. and II.F. of the preamble of this proposed rule.
The transplant cases that were used to establish the
proposed relative weights for heart and heart-lung, liver and/or
intestinal, and lung transplants (MS-DRGs 001, 002, 005, 006, and 007,
respectively) were limited to those Medicare-approved transplant
centers that have cases in the FY 2019 MedPAR file. (Medicare coverage
for heart, heart-lung, liver and/or intestinal, and lung transplants is
limited to those facilities that have received approval from CMS as
transplant centers.)
Organ acquisition costs for kidney, heart, heart-lung,
liver, lung, pancreas, and intestinal (or multivisceral organs)
transplants continue to be paid on a reasonable cost basis. Because
these acquisition costs are paid separately from the prospective
payment rate, it is necessary to subtract the acquisition charges from
the total charges on each transplant bill that showed acquisition
charges before computing the average cost for each MS-DRG and before
eliminating statistical outliers.
Claims with total charges or total lengths of stay less
than or equal to zero were deleted. Claims that had an amount in the
total charge field that differed by more than $30.00 from the sum of
the routine day charges, intensive care charges, pharmacy charges,
implantable devices charges, supplies and equipment charges, therapy
services charges, operating room charges, cardiology charges,
laboratory charges, radiology charges, other service charges, labor and
delivery charges, inhalation therapy charges, emergency room charges,
blood and blood products charges, anesthesia charges, cardiac
catheterization charges, CT scan charges, and MRI charges were also
deleted.
At least 92.8 percent of the providers in the MedPAR file
had charges for 14 of the 19 cost centers. All claims of providers that
did not have charges greater than zero for at least 14 of the 19 cost
centers were deleted. In other words, a provider must have no more than
five blank cost centers. If a provider did not have charges greater
than zero in more than five cost centers, the claims for the provider
were deleted.
Statistical outliers were eliminated by removing all cases
that were beyond 3.0 standard deviations from the geometric mean of the
log distribution of both the total charges per case and the total
charges per day for each MS-DRG.
Effective October 1, 2008, because hospital inpatient
claims include a POA indicator field for each diagnosis present on the
claim, only for purposes of relative weight-setting, the POA indicator
field was reset to ``Y'' for ``Yes'' for all claims that otherwise have
an ``N'' (No) or a ``U'' (documentation insufficient to determine if
the

[[Page 32565]]

condition was present at the time of inpatient admission) in the POA
field.
Under current payment policy, the presence of specific HAC codes,
as indicated by the POA field values, can generate a lower payment for
the claim. Specifically, if the particular condition is present on
admission (that is, a ``Y'' indicator is associated with the diagnosis
on the claim), it is not a HAC, and the hospital is paid for the higher
severity (and, therefore, the higher weighted MS-DRG). If the
particular condition is not present on admission (that is, an ``N''
indicator is associated with the diagnosis on the claim) and there are
no other complicating conditions, the DRG GROUPER assigns the claim to
a lower severity (and, therefore, the lower weighted MS-DRG) as a
penalty for allowing a Medicare inpatient to contract a HAC. While the
POA reporting meets policy goals of encouraging quality care and
generates program savings, it presents an issue for the relative
weight-setting process. Because cases identified as HACs are likely to
be more complex than similar cases that are not identified as HACs, the
charges associated with HAC cases are likely to be higher as well.
Therefore, if the higher charges of these HAC claims are grouped into
lower severity MS-DRGs prior to the relative weight-setting process,
the relative weights of these particular MS-DRGs would become
artificially inflated, potentially skewing the relative weights. In
addition, we want to protect the integrity of the budget neutrality
process by ensuring that, in estimating payments, no increase to the
standardized amount occurs as a result of lower overall payments in a
previous year that stem from using weights and case-mix that are based
on lower severity MS-DRG assignments. If this would occur, the
anticipated cost savings from the HAC policy would be lost.
To avoid these problems, we reset the POA indicator field to ``Y''
only for relative weight-setting purposes for all claims that otherwise
have an ``N'' or a ``U'' in the POA field. This resetting ``forced''
the more costly HAC claims into the higher severity MS-DRGs as
appropriate, and the relative weights calculated for each MS-DRG more
closely reflect the true costs of those cases.
In addition, in the FY 2013 IPPS/LTCH PPS final rule, for FY 2013
and subsequent fiscal years, we finalized a policy to treat hospitals
that participate in the Bundled Payments for Care Improvement (BPCI)
initiative the same as prior fiscal years for the IPPS payment modeling
and ratesetting process without regard to hospitals' participation
within these bundled payment models (77 FR 53341 through 53343).
Specifically, because acute care hospitals participating in the BPCI
Initiative still receive IPPS payments under section 1886(d) of the
Act, we include all applicable data from these subsection (d) hospitals
in our IPPS payment modeling and ratesetting calculations as if the
hospitals were not participating in those models under the BPCI
initiative. We refer readers to the FY 2013 IPPS/LTCH PPS final rule
for a complete discussion on our final policy for the treatment of
hospitals participating in the BPCI initiative in our ratesetting
process. For additional information on the BPCI initiative, we refer
readers to the CMS' Center for Medicare and Medicaid Innovation's
website at: http://innovation.cms.gov/initiatives/Bundled-Payments/index.html and to section IV.H.4. of the preamble of the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53341 through 53343).
The participation of hospitals in the BPCI initiative concluded on
September 30, 2018. The participation of hospitals in the BPCI Advanced
model started on October 1, 2018. The BPCI Advanced model, tested under
the authority of section 1115A of the Act, is comprised of a single
payment and risk track, which bundles payments for multiple services
beneficiaries receive during a Clinical Episode. Acute care hospitals
may participate in BPCI Advanced in one of two capacities: As a model
Participant or as a downstream Episode Initiator. Regardless of the
capacity in which they participate in the BPCI Advanced model,
participating acute care hospitals will continue to receive IPPS
payments under section 1886(d) of the Act. Acute care hospitals that
are Participants also assume financial and quality performance
accountability for Clinical Episodes in the form of a reconciliation
payment. For additional information on the BPCI Advanced model, we
refer readers to the BPCI Advanced web page on the CMS Center for
Medicare and Medicaid Innovation's website at: https://innovation.cms.gov/initiatives/bpci-advanced/. Consistent with our
policy for FY 2020, and consistent with how we have treated hospitals
that participated in the BPCI Initiative, for FY 2021, we continue to
believe it is appropriate to include all applicable data from the
subsection (d) hospitals participating in the BPCI Advanced model in
our IPPS payment modeling and ratesetting calculations because, as
noted previously, these hospitals are still receiving IPPS payments
under section 1886(d) of the Act. Consistent with FY 2020 IPPS/LTCH PPS
final rule, we also are proposing to include all applicable data from
subsection (d) hospitals participating in the Comprehensive Care for
Joint Replacement (CJR) Model in our IPPS payment modeling and
ratesetting calculations.
The charges for each of the 19 cost groups for each claim were
standardized to remove the effects of differences in area wage levels,
IME and DSH payments, and for hospitals located in Alaska and Hawaii,
the applicable cost-of-living adjustment. Because hospital charges
include charges for both operating and capital costs, we standardized
total charges to remove the effects of differences in geographic
adjustment factors, cost-of-living adjustments, and DSH payments under
the capital IPPS as well. Charges were then summed by MS-DRG for each
of the 19 cost groups so that each MS-DRG had 19 standardized charge
totals. Statistical outliers were then removed. These charges were then
adjusted to cost by applying the proposed national average CCRs
developed from the FY 2018 cost report data.
The 19 cost centers that we used in the proposed relative weight
calculation are shown in a supplemental data file posted via the
internet on the CMS website for this proposed rule and available at
http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. The supplemental data file shows the
lines on the cost report and the corresponding revenue codes that we
used to create the proposed 19 national cost center CCRs. If we receive
comments about the groupings, we may consider those comments as we
finalize our policy.
We are inviting public comments on our proposals related to
recalibration of the proposed FY 2021 relative weights and the changes
in relative weights from FY 2020.
We note that in the FY 2020 IPPS/LTCH PPS final rule, we adopted a
temporary one-time measure for FY 2020 for an MS-DRG where the FY 2018
relative weight declined by 20 percent from the FY 2017 relative
weight, and the FY 2020 relative weight would have declined by 20
percent or more from the FY 2019 relative weight, which was maintained
at the FY 2018 relative weight. For an MS-DRG meeting this criterion,
the FY 2020 relative weight was set equal to the FY 2019 relative
weight, which in turn had been set equal to the FY 2018 relative weight
(84 FR 42167). For FY 2020, the only MS-DRG meeting this criterion was
MS-

[[Page 32566]]

DRG 215. We are inviting public comments on the proposed FY 2021 weight
for MS-DRG 215 (Other Heart Assist System Implant) as set forth in
Table 5 associated with this proposed rule, including comments on
whether we should consider a policy under sections 1886(d)(4)(B) and
(C) of the Act similar to the measure adopted in the FY 2020 IPPS/LTCH
PPS final rule to maintain the FY 2021 relative weight equal to the FY
2020 relative weight for MS-DRG 215, or an alternative approach such as
averaging the FY 2020 relative weight and the otherwise applicable FY
2021 weight.
b. Proposed Relative Weight Calculation for Proposed New MS-DRG 018 for
CAR T-Cell Therapy
As discussed in section II.D.2.b. of this proposed rule, we are
proposing to create new MS-DRG 018 for cases that include procedures
describing CAR T-cell therapies, which are currently reported using
ICD-10-PCS procedure codes XW033C3 or XW043C3. As discussed in section
IV.I. of this proposed rule, given the high cost of the CAR T-cell
product, we are proposing a differential payment for cases where the
CAR T-cell product is provided without cost as part of a clinical trial
to ensure that the payment amount for CAR T-cell therapy clinical trial
cases appropriately reflects the relative resources required for
providing CAR T-cell therapy as part of a clinical trial.
We also believe it would be appropriate to modify our existing
relative weight methodology to ensure that the relative weight for
proposed new MS-DRG 018 appropriately reflects the relative resources
required for providing CAR T-cell therapy outside of a clinical trial,
while still accounting for the clinical trial cases in the overall
average cost for all MS-DRGs. Specifically, we are proposing that
clinical trial claims that group to proposed new MS-DRG 018 would not
be included when calculating the average cost for proposed new MS-DRG
018 that is used to calculate the relative weight for this MS-DRG, so
that the relative weight reflects the costs of the CAR T-cell therapy
drug. Consistent with our analysis of the FY 2019 MedPAR claims data as
discussed in section IV.I. of this proposed rule, we identified
clinical trial claims as claims that contain ICD-10-CM diagnosis code
Z00.6 or contain standardized drug charges of less than $373,000, which
is the average sales price of KYMRIAH and YESCARTA, which are the two
CAR T-cell medicines approved to treat relapsed/refractory diffuse
large B-cell lymphoma as of the time of the development of this
proposed rule. We are also proposing to calculate the following
adjustment to account for the CAR T-cell therapy cases identified as
clinical trial cases in calculating the national average standardized
cost per case that is used to calculate the relative weights for all
MS-DRGs and for purposes of budget neutrality and outlier simulations:
Calculate the average cost for cases to be assigned to
proposed new MS-DRG 018 that contain ICD-10-CM diagnosis code Z00.6 or
contain standardized drug charges of less than $373,000.
Calculate the average cost for cases to be assigned to
proposed new MS-DRG 018 that do not contain ICD-10-CM diagnosis code
Z00.6 or standardized drug charges of at least $373,000.
Calculate an adjustor by dividing the average cost
calculated in step 1 by the average cost calculated in step 2.
Apply the adjustor calculated in step 3 to the cases
identified in step 1 as clinical trial cases, then add this adjusted
case count to the non-clinical trial case count prior to calculating
the average cost across all MS-DRGs.
Each year, when we calculate the relative weights, we use a
transfer-adjusted case count for each MS-DRG, which accounts for
payment adjustments resulting from our postacute care transfer policy.
This process is described in the FY 2006 IPPS/LTCH PPS final rule (70
FR 47697). We propose to apply this adjustor to the case count for MS-
DRG 018 in a similar manner. We propose to first calculate the
transfer-adjusted case count for MS-DRG 018, and then further adjust
the transfer-adjusted case count by the adjustor described previously.
Then, we propose to use this adjusted case count for MS-DRG 018 in
calculating the national average cost per case, which is used in the
calculation of the relative weights. Based on the December 2019 update
of the FY 2019 MedPAR file, we estimate that the average costs of CAR
T-cell therapy cases identified as clinical trial cases ($42,164) are
15 percent of the average costs of CAR T-cell therapy cases identified
as non-clinical trial cases ($277,592), and therefore, in calculating
the national average cost per case, each case identified as a clinical
trial case was adjusted to 0.15. We expect to recalculate this adjustor
for the CAR T cell therapy clinical trial cases for the final rule
based on the updated data available. We also note that we are applying
this proposed adjustor for CAR T-cell therapy clinical trial cases for
purposes of budget neutrality and outlier simulations, as discussed
further in section II.A. of the Addendum to this proposed rule.
We are inviting public comments on our proposal.
3. Development of Proposed National Average CCRs
We developed the proposed national average CCRs as follows:
Using the FY 2018 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. Then we created CCRs for each provider for each cost
center (see the supplemental data file 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. Then we took the logs of the normalized cost center
CCRs and removed any cost center CCRs where the log of the cost center
CCR was greater or less than the mean log plus/minus 3 times the
standard deviation for the log of that cost center CCR. Once the cost
report data were trimmed, we calculated a Medicare-specific CCR. The
Medicare-specific CCR was determined by taking the Medicare charges for
each line item from Worksheet D-3 and deriving the Medicare-specific
costs by applying the hospital-specific departmental CCRs to the
Medicare-specific charges for each line item from Worksheet D-3. Once
each hospital's Medicare-specific costs were established, we summed the
total Medicare-specific costs and divided by the sum of the total
Medicare-specific charges to produce national average, charge-weighted
CCRs.
After we multiplied the total charges for each MS-DRG in each of
the 19 cost centers by the corresponding national average CCR, we
summed the 19 ``costs'' across each MS-DRG to produce a total
standardized cost for the MS-DRG. The average standardized cost for
each MS-DRG was then computed as the total standardized cost for the
MS-DRG divided by the transfer-adjusted case count for the MS-DRG. The
average cost for each MS-DRG was then divided by the national average
standardized cost per case to determine the proposed relative weight.
The proposed FY 2021 cost-based relative weights were then
normalized by a proposed adjustment factor of 1.818392 so that the
average case weight

[[Page 32567]]

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 proposed 19 national average CCRs for FY 2021 are as follows:
[GRAPHIC] [TIFF OMITTED] TP29MY20.116

Since FY 2009, the relative weights have been based on 100 percent
cost weights based on our MS-DRG grouping system.
When we recalibrated the DRG weights for previous years, we set a
threshold of 10 cases as the minimum number of cases required to
compute a reasonable weight. We are proposing to use that same case
threshold in recalibrating the proposed MS-DRG relative weights for FY
2021. Using data from the FY 2019 MedPAR file, there were 7 MS-DRGs
that contain fewer than 10 cases. For FY 2021, because we do not have
sufficient MedPAR data to set accurate and stable cost relative weights
for these low-volume MS-DRGs, we are proposing to compute relative
weights for the low-volume MS-DRGs by adjusting their final FY 2020
relative weights by the percentage change in the average weight of the
cases in other MS-DRGs from FY 2020 to FY 2021. The crosswalk table is
as follows.

[[Page 32568]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.117

G. Proposed Add-On Payments for New Services and Technologies for FY
2021

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 Sec. 412.87(b) specifies 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. In addition, certain transformative new devices and
Qualified Infectious Disease Products may qualify under an alternative
inpatient new technology add-on payment pathway, as set forth in the
regulations at Sec. 412.87(c) and (d). In this rule, 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) and the FY 2020 IPPS/LTCH PPS final rule (84 FR 42288
through 42300).
a. New Technology Add On Payment Criteria
(1) Newness Criterion
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 medical product receives a new FDA approval or clearance, it
may not necessarily be considered ``new'' for purposes of new
technology add-on payments if it is ``substantially similar'' to
another medical product that was approved or cleared by FDA and has
been on the market for more than 2 to 3 years. In the FY 2010 IPPS/RY
2010 LTCH PPS final rule (74 FR 43813 through 43814), we established
criteria for evaluating whether a new technology is substantially
similar to an existing technology, specifically: (1) Whether a product
uses the same or a similar mechanism of action to achieve a therapeutic
outcome; (2) whether a product is assigned to the same or a different
MS-DRG; and (3) whether the new use of the technology involves the
treatment of the same or similar type of disease and the same or
similar patient population. If a technology meets all three of these
criteria, it would be considered substantially similar to an existing
technology and would not be considered ``new'' for purposes of new
technology add-on payments. For a detailed discussion of the criteria
for substantial similarity, we refer readers to the FY 2006 IPPS final
rule (70 FR 47351 through 47352), and the FY 2010 IPPS/LTCH PPS final
rule (74 FR 43813 through 43814).
(2) Cost Criterion
Under the second criterion, Sec. 412.87(b)(3) further provides
that, to be eligible for the add-on payment for new medical services or
technologies, the MS-DRG prospective payment rate otherwise applicable
to discharges involving the new medical service or technology must be
assessed for adequacy. Under the cost criterion, consistent with the
formula specified in section 1886(d)(5)(K)(ii)(I) of the Act, to assess
the adequacy of payment for a new technology paid under the applicable
MS-DRG prospective payment rate, we evaluate whether the charges for
cases involving the new technology exceed certain threshold amounts.
The MS-DRG threshold amounts generally used in evaluating new
technology add-on payment applications for FY 2021 are presented in a
data file that is available, along with the other data files associated
with the FY 2020 IPPS/LTCH PPS final rule and correction notice, on the
CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index. However, as we discuss in section
II.F.5.i. of the

[[Page 32569]]

preamble of this proposed rule, we are proposing to apply the proposed
threshold value for proposed new MS-DRG 018 in evaluating the cost
criterion for the CAR T-cell therapy technologies for purposes of FY
2021 new technology add-on payments.
As finalized in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41275),
beginning with FY 2020, we include the thresholds applicable to the
next fiscal year (previously included in Table 10 of the annual IPPS/
LTCH PPS proposed and final rules) in the data files associated with
the prior fiscal year. Accordingly, the proposed thresholds for
applications for new technology add-on payments for FY 2022 are
presented in a data file that is available on the CMS website, along
with the other data files associated with this FY 2021 proposed rule,
by clicking on the FY 2021 IPPS Proposed Rule Home Page at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index. We note that, under our proposal discussed in
section II.F.5.i of the preamble of this proposed rule, beginning with
FY 2022, we would use the proposed threshold values associated with the
proposed rule for that fiscal year to evaluate the cost criterion for
all other applications for new technology add-on payments and
previously approved technologies that may continue to receive new
technology add-on payments, if those technologies would be assigned to
a proposed new MS-DRG for that same fiscal year. In the September 7,
2001 final rule that established the new technology add-on payment
regulations (66 FR 46917), we discussed that applicants should submit a
significant sample of data to demonstrate that the medical service or
technology meets the high-cost threshold. Specifically, applicants
should submit a sample of sufficient size to enable us to undertake an
initial validation and analysis of the data. We also discussed in the
September 7, 2001 final rule (66 FR 46917) the issue of whether the
Health Insurance Portability and Accountability Act (HIPAA) Privacy
Rule at 45 CFR parts 160 and 164 applies to claims information that
providers submit with applications for new medical service or
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.
b. Substantial Clinical Improvement Criterion
Under the third criterion at Sec. 412.87(b)(1), a medical service
or technology must represent an advance that substantially improves,
relative to technologies previously available, the diagnosis or
treatment of Medicare beneficiaries. In the FY 2020 IPPS/LTCH PPS final
rule (84 FR 42288 through 42292) we prospectively codified in our
regulations at Sec. 412.87(b) the following aspects of how we evaluate
substantial clinical improvement for purposes of new technology add-on
payments under the IPPS:
The totality of the circumstances is considered when
making a determination that a new medical service or technology
represents an advance that substantially improves, relative to services
or technologies previously available, the diagnosis or treatment of
Medicare beneficiaries.
A determination that a new medical service or technology
represents an advance that substantially improves, relative to services
or technologies previously available, the diagnosis or treatment of
Medicare beneficiaries means--
++ The new medical service or technology offers a treatment option
for a patient population unresponsive to, or ineligible for, currently
available treatments;
++ The new medical service or technology offers the ability to
diagnose a medical condition in a patient population where that medical
condition is currently undetectable, or offers the ability to diagnose
a medical condition earlier in a patient population than allowed by
currently available methods, and there must also be evidence that use
of the new medical service or technology to make a diagnosis affects
the management of the patient;
++ The use of the new medical service or technology significantly
improves clinical outcomes relative to services or technologies
previously available as demonstrated by one or more of the following: A
reduction in at least one clinically significant adverse event,
including a reduction in mortality or a clinically significant
complication; a decreased rate of at least one subsequent diagnostic or
therapeutic intervention; a decreased number of future hospitalizations
or physician visits; a more rapid beneficial resolution of the disease
process treatment including, but not limited to, a reduced length of
stay or recovery time; an improvement in one or more activities of
daily living; an improved quality of life; or, a demonstrated greater
medication adherence or compliance; or
++ The totality of the circumstances otherwise demonstrates that
the new medical service or technology substantially improves, relative
to technologies previously available, the diagnosis or treatment of
Medicare beneficiaries.
Evidence from the following published or unpublished
information sources from within the United States or elsewhere may be
sufficient to establish that a new medical service or technology
represents an advance that substantially improves, relative to services
or technologies previously available, the diagnosis or treatment of
Medicare beneficiaries: Clinical trials, peer reviewed journal
articles; study results; meta-analyses; consensus statements; white
papers; patient surveys; case studies; reports; systematic literature
reviews; letters from major healthcare associations; editorials and
letters to the editor; and public comments. Other appropriate
information sources may be considered.
The medical condition diagnosed or treated by the new
medical service or technology may have a low prevalence among Medicare
beneficiaries.
The new medical service or technology may represent an
advance that substantially improves, relative to services or
technologies previously available, the diagnosis or treatment of a
subpopulation of patients with the medical condition diagnosed or
treated by the new medical service or technology.
We refer the reader to the FY 2020 IPPS/LTCH PPS final rule for
additional discussion of the evaluation of substantial clinical
improvement for purposes of new technology add-on payments under the
IPPS.
We note, consistent with the discussion in the FY 2003 IPPS Final
Rule (67 FR 50015), although we are affiliated with the FDA and we do
not question the FDA's regulatory responsibility for decisions related
to marketing authorization (for example, approval, clearance, etc.), we
do not use FDA criteria to determine what drugs, devices, or
technologies qualify for new technology add-on payments under Medicare.
Our criteria do not depend on the standard of safety and efficacy on
which the FDA relies but on a demonstration of substantial clinical
improvement in the Medicare population (particularly patients over age
65).
c. Alternative Inpatient New Technology Add-On Payment Pathway
Under Sec. 412.87(c) and (d) of the regulations, beginning with
applications for new technology add-on payments for FY 2021, certain
transformative new devices and Qualified Infectious Disease Products
(QIDPs) may qualify for the new technology add-on payment under

[[Page 32570]]

an alternative pathway, as described in this section. We refer the
reader to the FY 2020 IPPS/LTCH PPS final rule for complete discussion
on this policy (84 FR 42292 through 42297). We note, in section
II.F.9.b. of this preamble, we are proposing to expand our current
alternative new technology add-on payment pathway for QIDPs to include
products approved under the Limited Population Pathway for
Antibacterial and Antifungal Drugs (LPAD) pathway. In addition, we are
proposing to refer more broadly to ``certain antimicrobial products''
rather than specifying the particular FDA programs for antimicrobial
products (that is, QIDPs and LPADs) that are the subject of the
alternative new technology add-on payment pathway. (We refer the reader
to section II.F.9.b. of this preamble below for a complete discussion
regarding this proposal.) We note that a technology is not required to
have the specified FDA designation at the time the new technology add-
on payment application is submitted. CMS will review the application
based on the information provided by the applicant under the
alternative pathway specified by the applicant. However, to receive
approval for the new technology add-on payment under that alternative
pathway, the technology must have the applicable designation and meet
all other requirements in the regulations in Sec. 412.87(c) and (d),
as applicable.
(1) Alternative Pathway for Certain Transformative New Devices
For applications received for new technology add-on payments for FY
2021 and subsequent fiscal years, if a medical device is part of FDA's
Breakthrough Devices Program nd received FDA marketing authorization,
it will be considered new and not substantially similar to an existing
technology for purposes of the new technology add-on payment under the
IPPS, and will not need to meet the requirement under Sec.
412.87(b)(1) that it represent an advance that substantially improves,
relative to technologies previously available, the diagnosis or
treatment of Medicare beneficiaries. This policy is codified at Sec.
412.87(c). Under this alternative pathway, a medical device that has
received FDA marketing authorization (that is, has been approved or
cleared by, or had a De Novo classification request granted by, FDA)
and that is part of FDA's Breakthrough Devices Program will need to
meet the cost criterion under Sec. 412.87(b)(3), as reflected in Sec.
412.87(c)(3), and will be considered new as reflected in Sec.
412.87(c)(2). We note, in section II.F.8. of this preamble, we are
clarifying our policy that a new medical device under this alternative
pathway must receive marketing authorization for the indication covered
by the Breakthrough Devices Program designation. (We refer the reader
to section II.F.8. of this preamble below for a complete discussion
regarding this clarification.)
(2) Alternative Pathway for Qualified Infectious Disease Products
(QIDPs)
For applications received for new technology add-on payments for FY
2021 and subsequent fiscal years, if a technology is designated by FDA
as a QIDP and received FDA marketing authorization, it will be
considered new and not substantially similar to an existing technology
for purposes of new technology add-on payments and will not need to
meet the requirement that it represent an advance that substantially
improves, relative to technologies previously available, the diagnosis
or treatment of Medicare beneficiaries. We codified this policy at
Sec. 412.87(d). Under this alternative pathway for QIDPs, a medical
product that has received FDA marketing authorization and is designated
by FDA as a QIDP will need to meet the cost criterion under Sec.
412.87(b)(3), as reflected in Sec. 412.87(d)(3), and will be
considered new as reflected in Sec. 412.87(d)(2).
We refer the reader to the FY 2020 IPPS/LTCH PPS final rule for
complete discussion on this policy (84 FR 42292 through 42297). We
note, in section II.F.9.b. of this preamble, we are clarifying a new
medical product seeking approval for the new technology add-on payment
under the alternative pathway for QIDPs must receive marketing
authorization for the indication covered by the QIDP designation. (We
refer the reader to section II.F.9.b. of this preamble. below for a
complete discussion regarding this clarification.)
d. Additional Payment for New Medical Service or Technology
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. For discharges
occurring before October 1, 2019, under Sec. 412.88, if the costs of
the discharge (determined by applying CCRs as described in Sec.
412.84(h)) exceed the full DRG payment (including payments for IME and
DSH, but excluding outlier payments), Medicare made an add-on payment
equal to the lesser of: (1) 50 percent of the costs of the new medical
service or technology; or (2) 50 percent of the amount by which the
costs of the case exceed the standard DRG payment.
Beginning with discharges on or after October 1, 2019, for the
reasons discussed in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42297
through 42300), we finalized an increase in the new technology add-on
payment percentage, as reflected at Sec. 412.88(a)(2)(ii).
Specifically, for a new technology other than a medical product
designated by FDA as a QIDP, beginning with discharges on or after
October 1, 2019, if the costs of a discharge involving a new technology
(determined by applying 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) 65 percent of the costs of the new medical service or
technology; or (2) 65 percent of the amount by which the costs of the
case exceed the standard DRG payment. For a new technology that is a
medical product designated by FDA as a QIDP, beginning with discharges
on or after October 1, 2019, if the costs of a discharge involving a
new technology (determined by applying 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) 75 percent of the costs of the new
medical service or technology; or (2) 75 percent of the amount by which
the costs of the case exceed the standard DRG payment. As set forth in
Sec. 412.88(b)(2), unless the discharge qualifies for an outlier
payment, the additional Medicare payment will be limited to the full
MS-DRG payment plus 65 percent (or 75 percent for a medical product
designated by FDA as a QIDP) of the estimated costs of the new
technology or medical service.
We refer the reader to the FY 2020 IPPS/LTCH PPS final rule (84 FR
42297 through 42300) for complete discussion on the increase in the new
technology add on payment beginning with discharges on or after October
1, 2019. We note, in section II.F.9.c. of this preamble, we are
proposing an increase in the new technology add-on payment percentage
to 75 percent for products approved under FDA's LPAD pathway. (We refer
the reader to section II.F.9.c. of this preamble below for a complete
discussion regarding this proposal.)

[[Page 32571]]

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 subsequent years have not been subjected to budget neutrality.
e. Evaluation of Eligibility Criteria for New Medical Service or
Technology Applications
In the FY 2009 IPPS final rule (73 FR 48561 through 48563), we
modified our regulations at Sec. 412.87 to codify our longstanding
practice of how CMS evaluates the eligibility criteria for new medical
service or technology add-on payment applications. That is, we first
determine whether a medical service or technology meets the newness
criterion, and only if so, do we then make a determination as to
whether the technology meets the cost threshold and represents a
substantial clinical improvement over existing medical services or
technologies. We amended Sec. 412.87(c) to specify that all applicants
for new technology add-on payments must have FDA approval or clearance
by July 1 of the year prior to the beginning of the fiscal year for
which the application is being considered. We note, in section
II.F.9.c. of this preamble, we are proposing a process by which a
technology for which an application for new technology add-on payments
is submitted under the alternative pathway for certain antimicrobial
products would receive conditional approval for such payment, provided
the product receives FDA marketing authorization by July 1 of the year
for which the new technology add-on payment application was submitted.
(We refer the reader to section II.F.9.c. of this preamble below for a
complete discussion regarding this proposal.)
f. Council on Technology and Innovation (CTI)
The Council on Technology and Innovation at CMS oversees the
agency's cross-cutting priority on coordinating coverage, coding and
payment processes for Medicare with respect to new technologies and
procedures, including new drug therapies, as well as promoting the
exchange of information on new technologies and medical services
between CMS and other entities. The CTI, composed of senior CMS staff
and clinicians, was established under section 942(a) of Public Law 108-
173. The Council is co-chaired by the Director of the Center for
Clinical Standards and Quality (CCSQ) and the Director of the Center
for Medicare (CM), who is also designated as the CTI's Executive
Coordinator.
The specific processes for coverage, coding, and payment are
implemented by CM, CCSQ, and the local Medicare Administrative
Contractors (MACs) (in the case of local coverage and payment
decisions). The CTI supplements, rather than replaces, these processes
by working to assure that all of these activities reflect the agency-
wide priority to promote high-quality, innovative care. At the same
time, the CTI also works to streamline, accelerate, and improve
coordination of these processes to ensure that they remain up to date
as new issues arise. To achieve its goals, the CTI works to streamline
and create a more transparent coding and payment process, improve the
quality of medical decisions, and speed patient access to effective new
treatments. It is also dedicated to supporting better decisions by
patients and doctors in using Medicare-covered services through the
promotion of better evidence development, which is critical for
improving the quality of care for Medicare beneficiaries.
To improve the understanding of CMS' processes for coverage,
coding, and payment and how to access them, the CTI has developed an
``Innovator's Guide'' to these processes. The intent is to consolidate
this information, much of which is already available in a variety of
CMS documents and in various places on the CMS website, in a user
friendly format. This guide was published in 2010 and is available on
the CMS website at: https://www.cms.gov/Medicare/Coverage/CouncilonTechInnov/Downloads/Innovators-Guide-Master-7-23-15.pdf.
As we indicated in the FY 2009 IPPS final rule (73 FR 48554), we
invite any product developers or manufacturers of new medical services
or technologies to contact the agency early in the process of product
development if they have questions or concerns about the evidence that
would be needed later in the development process for the agency's
coverage decisions for Medicare.
The CTI aims to provide useful information on its activities and
initiatives to stakeholders, including Medicare beneficiaries,
advocates, medical product manufacturers, providers, and health policy
experts. Stakeholders with further questions about Medicare's coverage,
coding, and payment processes, or who want further guidance about how
they can navigate these processes, can contact the CTI at
[email protected].
g. Application Information for New Medical Services or Technologies
Applicants for add-on payments for new medical services or
technologies for FY 2022 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 (unless the application is under one of the
alternative pathways as previously described), 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 website at: https://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 2022, the CMS website also will post the tracking
forms completed by each applicant. We note that the burden associated
with this information collection requirement is the time and effort
required to collect and submit the data in the formal request for add-
on payments for new medical services and technologies to CMS. The
aforementioned burden is subject to the PRA and approved under OMB
control number 0938-1347.
As discussed previously, in the FY 2020 IPPS/LTCH PPS final rule,
we adopted an alternative inpatient new technology add-on payment
pathway for certain transformative new devices and for Qualified
Infectious Disease Products, as set forth in the regulations at Sec.
412.87(c) and (d). The change in burden associated with these changes
to the new technology add-on payment application process were discussed
in a revision of the information collection requirement (ICR) request
currently approved under OMB control number 0938-1347. In accordance
with the implementing regulations of the PRA, we detailed the revisions
of the ICR and published the required 60-day notice on August 15, 2019
(84 FR 41723) and 30-day notice on December 17, 2019 (84 FR 68936) to
solicit public comments. The ICR is currently pending OMB approval.
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

[[Page 32572]]

Public Law 108-173, provides for a mechanism for public input before
publication of a notice of proposed rulemaking regarding whether a
medical service or technology represents a substantial clinical
improvement or advancement. The process for evaluating new medical
service and technology applications requires the Secretary to--
Provide, before publication of a proposed rule, for public
input regarding whether a new service or technology represents an
advance in medical technology that substantially improves the diagnosis
or treatment of Medicare beneficiaries;
Make public and periodically update a list of the services
and technologies for which applications for add-on payments are
pending;
Accept comments, recommendations, and data from the public
regarding whether a service or technology represents a substantial
clinical improvement; and
Provide, before publication of a proposed rule, for a
meeting at which organizations representing hospitals, physicians,
manufacturers, and any other interested party may present comments,
recommendations, and data regarding whether a new medical service or
technology represents a substantial clinical improvement to the
clinical staff of CMS.
In order to provide an opportunity for public input regarding add-
on payments for new medical services and technologies for FY 2021 prior
to publication of this FY 2021 IPPS/LTCH PPS proposed rule, we
published a notice in the Federal Register on October 8, 2019 (84 FR
53732), and held a town hall meeting at the CMS Headquarters Office in
Baltimore, MD, on December 16, 2019. In the announcement notice for the
meeting, we stated that the opinions and presentations provided during
the meeting would assist us in our evaluations of applications by
allowing public discussion of the substantial clinical improvement
criterion for the FY 2021 new medical service and technology add-on
payment applications before the publication of the FY 2021 IPPS/LTCH
PPS proposed rule.
Approximately 100 individuals registered to attend the town hall
meeting in person, while additional individuals listened over an open
telephone line. We also live-streamed the town hall meeting and posted
the morning and afternoon sessions of the town hall on the CMS YouTube
web page at: https://www.youtube.com/watch?v=4z1AhEuGHqQ and https://www.youtube.com/watch?v=m26Xj1EzbIY, respectively. We considered each
applicant's presentation made at the town hall meeting, as well as
written comments submitted on the applications that were received by
the due date of January 3, 2020, in our evaluation of the new
technology add-on payment applications for FY 2021 in the development
of this FY 2021 IPPS/LTCH PPS proposed rule.
In response to the published notice and the December 16, 2019 New
Technology Town Hall meeting, we received written comments regarding
the applications for FY 2021 new technology add-on payments. We note
that we do not summarize comments that are unrelated to the
``substantial clinical improvement'' criterion. As explained earlier
and in the Federal Register notice announcing the New Technology Town
Hall meeting (84 FR 53732 through 53734), the purpose of the meeting
was specifically to discuss the substantial clinical improvement
criterion in regard to pending new technology add-on payment
applications for FY 2021. Therefore, we are not summarizing those
written comments in this proposed rule that are unrelated to the
substantial clinical improvement criterion. In section II.F.5. of the
preamble of this proposed rule, we are summarizing comments regarding
individual applications, or, if applicable, indicating that there were
no comments received in response to the New Technology Town Hall
meeting notice or New Technology Town Hall meeting, at the end of each
discussion of the individual applications.
3. ICD-10-PCS Section ``X'' Codes for Certain New Medical Services and
Technologies
As discussed in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49434),
the ICD-10-PCS includes a new section containing the new Section ``X''
codes, which began being used with discharges occurring on or after
October 1, 2015. Decisions regarding changes to ICD-10-PCS Section
``X'' codes will be handled in the same manner as the decisions for all
of the other ICD-10-PCS code changes. That is, proposals to create,
delete, or revise Section ``X'' codes under the ICD-10-PCS structure
will be referred to the ICD-10 Coordination and Maintenance Committee.
In addition, several of the new medical services and technologies that
have been, or may be, approved for new technology add-on payments may
now, and in the future, be assigned a Section ``X'' code within the
structure of the ICD-10-PCS. We posted ICD-10-PCS Guidelines on the CMS
website at: http://www.cms.gov/Medicare/Coding/ICD10/2016-ICD-10-PCS-and-GEMs.html, including guidelines for ICD-10-PCS Section ``X'' codes.
We encourage providers to view the material provided on ICD-10-PCS
Section ``X'' codes.
4. Proposed FY 2021 Status of Technologies Approved for FY 2020 New
Technology Add-On Payments
In this section of the proposed rule, we discuss the proposed FY
2021 status of 18 technologies approved for FY 2020 new technology add-
on payments. In general, we extend new technology add-on payments for
an additional year only if the 3-year anniversary date of the product's
entry onto the U.S. market occurs in the latter half of the upcoming
fiscal year. We refer readers to a table at the end of this section
summarizing for FY 2021 the name of each technology, newness start
date, whether we are proposing to continue or discontinue the add-on
payment for FY 2021, relevant final rule citations, proposed maximum
add-on payment amount and coding assignments.
a. KYMRIAH[supreg] (Tisagenlecleucel) and YESCARTA[supreg]
(Axicabtagene Ciloleucel)
Two manufacturers, Novartis Pharmaceuticals Corporation and Kite
Pharma, Inc., submitted separate applications for new technology add-on
payments for FY 2019 for KYMRIAH[supreg] (tisagenlecleucel) and
YESCARTA[supreg] (axicabtagene ciloleucel), respectively. Both of these
technologies are CD-19-directed T-cell immunotherapies used for the
purposes of treating patients with aggressive variants of non-Hodgkin
lymphoma (NHL). On May 1, 2018, Novartis Pharmaceuticals Corporation
received FDA approval for KYMRIAH[supreg]'s second indication, the
treatment of adult patients with relapsed or refractory (r/r) large B-
cell lymphoma after two or more lines of systemic therapy including
diffuse large B-cell lymphoma (DLBCL) not otherwise specified, high
grade B-cell lymphoma and DLBCL arising from follicular lymphoma. On
October 18, 2017, Kite Pharma, Inc. received FDA approval for the use
of YESCARTA[supreg] indicated for the treatment of adult patients with
r/r large B-cell lymphoma after two or more lines of systemic therapy,
including DLBCL not otherwise specified, primary mediastinal large B-
cell lymphoma, high grade B-cell lymphoma, and DLBCL arising from
follicular lymphoma. With respect to the newness criterion, because
potential cases representing patients who may be eligible for treatment
using KYMRIAH[supreg] and YESCARTA[supreg] would group to the same

[[Page 32573]]

MS-DRGs (because the same ICD-10-CM diagnosis codes and ICD-10-PCS
procedures codes are used to report treatment using either
KYMRIAH[supreg] or YESCARTA[supreg]), and because we believed that
these technologies are intended to treat the same or similar disease in
the same or similar patient population, and are purposed to achieve the
same therapeutic outcome using the same or similar mechanism of action,
we considered these two technologies to be substantially similar to
each other. We refer readers to the FY 2019 IPPS/LTCH PPS final rule
(83 FR 41285 through 41286) and FY 2020 IPPS/LTCH/PPS final rule (84 FR
42185 through 42187) for a complete discussion. We stated in the FY
2019 IPPS/LTCH PPS final rule (83 FR 41285 through 41286) and FY 2020
IPPS/LTCH PPS final rule (84 FR 42185 through 42186) that in accordance
with our policy, since we consider the technologies to be substantially
similar to each other, it is appropriate to use the earliest market
availability date submitted as the beginning of the newness period for
both technologies. According to the applicant for YESCARTA[supreg], the
first commercial shipment of YESCARTA[supreg] was received by a
certified treatment center on November 22, 2017. Therefore, based on
our policy, with regard to both technologies, we stated that the
beginning of the newness period would be November 22, 2017.
KYMRIAH[supreg] and YESCARTA[supreg] were approved for new technology
add-on payments for FY 2019 (83 FR 41299). We refer readers to section
II.H.5.a. of the preamble of the FY 2019 IPPS/LTCH PPS final rule (83
FR 41283 through 41299) and section II.H.4.d. of the preamble of the FY
2020 IPPS/LTCH PPS final rule (84 FR 42185 through 42187) for a
complete discussion of the new technology add-on payment application,
coding and payment amount for KYMRIAH[supreg] and YESCARTA[supreg] for
FY 2019 and FY 2020.
Our policy is that a medical service or technology may continue to
be considered ``new'' for purposes of new technology add-on payments
within 2 or 3 years after the point at which data begin to become
available reflecting the inpatient hospital code assigned to the new
service or technology. Our practice has been to begin and end new
technology add-on payments on the basis of a fiscal year, and we have
generally followed a guideline that uses a 6-month window before and
after the start of the fiscal year to determine whether to extend the
new technology add-on payment for an additional fiscal year. In
general, we extend new technology add-on payments for an additional
year only if the 3-year anniversary date of the product's entry onto
the U.S. market occurs in the latter half of the fiscal year (70 FR
47362).
With regard to the newness criterion for KYMRIAH[supreg] and
YESCARTA[supreg], as discussed in the FY 2019 IPPS/LTCH PPS final rule,
according to the applicant for YESCARTA[supreg], the first commercial
shipment of YESCARTA[supreg] was received by a certified treatment
center on November 22, 2017. As previously stated, we use the earliest
market availability date submitted as the beginning of the newness
period for both KYMRIAH[supreg] and YESCARTA[supreg]. Therefore, we
consider the beginning of the newness period for both KYMRIAH[supreg]
and YESCARTA[supreg] to commence November 22, 2017. Because the 3-year
anniversary date of the entry of the technology onto the U.S. market
(November 22, 2020) will occur in the first half of FY 2021, we are
proposing to discontinue new technology add-on payments for this
technology for FY 2021. We are inviting public comments on our proposal
to discontinue new technology add-on payments for KYMRIAH[supreg] and
YESCARTA[supreg] for FY 2021.
As discussed in section II.D.2.b. of the preamble of this proposed
rule, currently procedures involving CAR T-cell therapies are
identified with ICD-10-PCS procedure codes XW033C3 (Introduction of
engineered autologous chimeric antigen receptor t-cell immunotherapy
into peripheral vein, percutaneous approach, new technology group 3)
and XW043C3 (Introduction of engineered autologous chimeric antigen
receptor t-cell immunotherapy into central vein, percutaneous approach,
new technology group 3), which became effective October 1, 2017. As
discussed in section II.D.2.b. of the preamble of this proposed rule,
we are proposing to create a new MS-DRG 018 for cases reporting ICD-10-
PCS procedure codes XW033C3 or XW043C3 for FY 2021. We also refer
readers to section II.F.5.i of the preamble of this proposed rule for a
complete discussion of our proposal that, effective for FY 2022, for
applications for new technology add-on payments and for previously
approved technologies that may continue to receive new technology add-
on payments, the proposed threshold for the upcoming fiscal year for a
proposed new MS-DRG would be used to evaluate the cost criterion for
any new technologies that would be assigned to a proposed new MS-DRG.
As we also discuss in section II.F.5.i. of the preamble of this
proposed rule, in light of the significant variance in the threshold
amount for proposed new MS-DRG 018 for cases involving CAR T-cell
therapies, we are proposing to apply this policy in evaluating the CAR
T-cell therapy technologies for FY 2021 new technology add-on payments.
This would include both the new FY 2021 CAR T-cell therapy
applications, KTE-X19 and Liso-cel, and those CAR T-cell therapy
technologies previously approved for new technology add-on payments,
KYMRIAH[supreg] and YESCARTA[supreg]. Therefore, even if
KYMRIAH[supreg] and/or YESCARTA[supreg] were still considered new and
within the 3-year anniversary date of the entry of the technology onto
the U.S. market, in determining whether these technologies would
continue to be eligible for the new technology add-on payment, we are
proposing to evaluate whether they meet the cost criterion using the
proposed threshold for the proposed new MS-DRG 018 for FY 2021 payment.
We refer readers to section II.F.5.i. of the preamble of this proposed
rule for a complete discussion on our proposal to use the proposed
threshold for proposed new MS-DRG 018 to evaluate the cost criterion
for CAR T-cell therapy technologies for purposes of FY 2021 new
technology add-on payments.
Per the applicants' cost analyses in the FY 2019 IPPS/LTCH PPS
final rule (83 FR 41291), the final inflated average case-weighted
standardized charge per case for KYMRIAH[supreg] and YESCARTA[supreg]
is $39,723 (not including the charges related to the technology) and
$118,575 (not including the charges related to the technology),
respectively. However, we now have cases involving the use of CAR T-
cell therapy within the FY 2019 MedPAR data that we believe represent
cases that would be eligible for KYMRIAH[supreg] and YESCARTA[supreg]
and which can be used to estimate the average standardized charge per
case for purposes of this proposed rule. This charge information from
the FY 2019 MedPAR data can be found in the FY 2021 Proposed Before
Outliers Removed (BOR) File (available on the CMS website) for Version
38 of the MS-DRGs. Based on information from the FY 2021 Proposed BOR
File for Version 38 of the MS-DRGs, the standardized charge per case
for MS-DRG 018 is $913,224. The average case-weighted threshold amount
based on the proposed new MS-DRG 018 is $1,237,393. Because this
estimated average case-weighted standardized charge per case for
KYMRIAH[supreg] and YESCARTA[supreg] ($913,224) does not exceed the
average case-weighted threshold amount for proposed new MS-DRG 018
($1,237,393), we do not

[[Page 32574]]

believe that the technology would meet the cost criterion and, as
previously stated, are proposing to discontinue new technology add-on
payments for this technology for FY 2021. We are inviting public
comment on our proposals.
b. VYXEOS^TM (Daunorubicin and Cytarabine) Liposome for
Injection
Jazz Pharmaceuticals, Inc. submitted an application for new
technology add-on payments for the VYXEOS^TM technology for
FY 2019. VYXEOS^TM was approved by FDA on August 3, 2017, for
the treatment of adults with newly diagnosed therapy-related acute
myeloid leukemia (t-AML) or AML with myelodysplasia-related changes
(AML- MRC). CMS approved VYXEOS^TM for new technology add on
payments for FY 2019 (83 FR 41299). We refer readers to section
II.H.5.b. of the preamble of the FY 2019 IPPS/LTCH PPS final rule (83
FR 41299 through 41305) and section II.H.4.e. of the preamble of the FY
2020 IPPS/LTCH PPS final rule (84 FR 42187 through 42188) for a
complete discussion of the new technology add on payment application,
coding, and payment amount for VYXEOS^TM for FY 2019 and FY
2020.
With regard to the newness criterion for VYXEOS^TM, we
consider the beginning of the newness period to commence when
VYXEOS^TM was approved by the FDA (August 3, 2017). Because
the 3-year anniversary date of the entry of the VYXEOS^TM
onto the U.S. market (August 3, 2020) will occur in FY 2020, we are
proposing to discontinue new technology add-on payments for this
technology for FY 2021. We are inviting public comments on our proposal
to discontinue new technology add-on payments for VYXEOS^TM
for FY 2021.
c. VABOMERE^TM> (Meropenem and Vaborbactam)
Melinta Therapeutics, Inc., submitted an application for new
technology add-on payments for VABOMERE^TM for FY 2019.
VABOMERE^TM is indicated for use in the treatment of adult
patients who have been diagnosed with complicated urinary tract
infections (cUTIs), including pyelonephritis caused by designated
susceptible bacteria. VABOMERE^TM received FDA approval on
August 29, 2017 and was approved for new technology add on payments for
FY 2019 (83 FR 41311). We refer readers to section II.H.5.c. of the
preamble of the FY 2019 IPPS/LTCH PPS final rule (83 FR 41305 through
41311) and section II.H.4.f. of the preamble of the FY 2020 IPPS/LTCH
PPS final rule (84 FR 42188 through 42189) for a complete discussion of
the new technology add on payment application, coding, and payment
amount for VABOMERE^TM for FY 2019 and FY 2020.
With regard to the newness criterion for VABOMERE^TM, we
consider the beginning of the newness period to commence when
VABOMERE^TM received FDA approval (August 29, 2017). Because
the 3-year anniversary date of the entry of VABOMERE^TM onto
the U.S. market (August 29, 2020) will occur in FY 2020, we are
proposing to discontinue new technology add-on payments for this
technology for FY 2021. We are inviting public comments on our proposal
to discontinue new technology add-on payments for VABOMERE^TM
for FY 2021.
d. Remed[emacr][supreg] System
Respicardia, Inc. submitted an application for new technology add-
on payments for the remed[emacr][supreg] System for FY 2019. The
remed[emacr][supreg] System is indicated for use as a transvenous
phrenic nerve stimulator in the treatment of adult patients who have
been diagnosed with moderate to severe central sleep apnea (CSA). On
October 6, 2017, the remed[emacr][supreg] System was approved by FDA.
The remed[emacr][supreg] System was approved for new technology add on
payments for FY 2019. We refer readers to section II.H.5.d. of the
preamble of the FY 2019 IPPS/LTCH PPS final rule (83 FR 41311 through
41320) and section II.H.4.g. of the preamble of the FY 2020 IPPS/LTCH
PPS final rule (84 FR 42189 through 42190) for a complete discussion of
the new technology add on payment application, coding and payment
amount for the remed[emacr][supreg] System for FY 2019 and FY 2020.
With regard to the newness criterion for the remed[emacr][supreg]
System, as we have discussed in prior rulemaking, we consider the
beginning of the newness period to commence when the
remed[emacr][supreg] System was approved by FDA on October 6, 2017.
However, as we summarized in the FY 2020 IPPS/LTCH PPS final rule (84
FR 42189 through 42190), a commenter on the FY 2020 IPPS/LTCH PPS
proposed rule, who was also the applicant, believed that the newness
period for the remed[emacr][supreg] System should start on February 1,
2018, instead of the FDA approval date of October 6, 2017. The
commenter stated that due to the required build out of operational and
commercial capabilities, the remed[emacr][supreg] System was not
commercially available upon FDA approval and the first case involving
its use did not occur until February 1, 2018. The commenter asserted
that the date of the first implant should mark the start of the newness
period since before that, the technology was not commercially
available. In response to that comment, we indicated that we would
consider the additional information the applicant provided when
proposing whether to continue new technology add-on payments for the
remed[emacr][supreg] System for FY 2021.
As we have discussed in prior rulemaking (77 FR 53348), generally,
our policy is to begin the newness period on the date of FDA approval
or clearance or, if later, the date of availability of the product on
the U.S. market. With regard to the commenter's assertion that the date
of the first implant should mark the start of the newness period, we
note that while we may consider a documented delay in a technology's
availability on the U.S. market in determining when the newness period
begins, under our historical policy, we do not consider how frequently
the medical service or technology has been used in our determination of
newness (70 FR 47349). Without additional information from the
applicant, we cannot determine a newness date based on such a
documented delay in commercial availability (and not the first case
involving use of the remed[emacr][supreg] System on February 1, 2018).
However, even if we were to consider the newness period to commence on
February 1, 2018, as recommended by the commenter, such that the 3-year
anniversary date of the entry of the remed[emacr][supreg] System onto
the U.S. market would be February 1, 2021 rather than October 6, 2020,
that 3-year anniversary date would still occur within the first half of
FY 2021. Because the 3-year anniversary date of the entry of the
remed[emacr][supreg] System onto the U.S. market will occur in the
first half of FY 2021, we are proposing to discontinue new technology
add-on payments for this technology for FY 2021. We are inviting public
comments on our proposal to discontinue new technology add-on payments
for the remed[emacr][supreg] System for FY 2021.
e. ZEMDRI^TM (Plazomicin)
Achaogen, Inc. submitted an application for new technology add-on
payments for ZEMDRI^TM (plazomicin) for FY 2019. According to
the applicant, ZEMDRI^TM is a next generation aminoglycoside
antibiotic, which has been found in vitro to have enhanced activity
against many multidrug resistant (MDR) gram-negative bacteria. The
applicant received approval from FDA on June 25, 2018, for use in the
treatment of adults who have been diagnosed with cUTIs, including
pyelonephritis. ZEMDRI^TM was

[[Page 32575]]

approved for new technology add on payments for FY 2019 (83 FR 41334).
We refer readers to section II.H.5.f. of the preamble of the FY 2019
IPPS/LTCH PPS final rule (83 FR 41326 through 41334) and section
II.H.4.h. of the preamble of the FY 2020 IPPS/LTCH PPS final rule (84
FR 42190 through 42191) for a complete discussion of the new technology
add on payment application, coding and payment amount for
ZEMDRI^TM for FY 2019 and FY 2020.
With regard to the newness criterion for ZEMDRI^TM, we
consider the beginning of the newness period to commence when
ZEMDRI^TM was approved by FDA on June 25, 2018. As discussed
previously in this section, in general, we extend new technology add-on
payments for an additional year only if the 3-year anniversary date of
the product's entry onto the U.S. market occurs in the latter half of
the upcoming fiscal year. Because the 3-year anniversary date of the
entry of ZEMDRI^TM onto the U.S. market (June 25, 2021) will
occur in the second half of FY 2021, we are proposing to continue new
technology add-on payments for this technology for FY 2021. We are
proposing that the maximum new technology add-on payment amount for a
case involving the use of ZEMDRI^TM would remain at $4,083.75
for FY 2021 (we refer readers to the FY 2020 IPPS/LTCH PPS final rule
for complete discussion of the calculation of the new technology add on
payment amount for ZEMDRI^TM). Cases involving
ZEMDRI^TM that are eligible for new technology add-on
payments are identified by ICD-10-PCS procedure codes XW033G4
(Introduction of Plazomicin anti-infective into peripheral vein,
percutaneous approach, new technology group 4) or XW043G4 (Introduction
of Plazomicin antiinfective into central vein, percutaneous approach,
new technology group 4). We are inviting public comments on our
proposal to continue new technology add-on payments for
ZEMDRI^TM for FY 2021.
f. GIAPREZA^TM (Angiotensin II)
The La Jolla Pharmaceutical Company submitted an application for
new technology add-on payments for GIAPREZA^TM for FY 2019.
GIAPREZA^TM, a synthetic human angiotensin II, is
administered through intravenous infusion to raise blood pressure in
adult patients who have been diagnosed with septic or other
distributive shock. GIAPREZA^TM was granted a Priority Review
designation under FDA's expedited program and received FDA approval on
December 21, 2017, for the use in the treatment of adults who have been
diagnosed with septic or other distributive shock as an intravenous
infusion to increase blood pressure. GIAPREZA^TM was approved
for new technology add on payments for FY 2019 (83 FR 41342). We refer
readers to section II.H.5.g. of the preamble of the FY 2019 IPPS/LTCH
PPS final rule (83 FR 41334 through 41342) and section II.H.4.i. of the
preamble of the FY 2020 IPPS/LTCH PPS final rule (84 FR 42191) for a
complete discussion of the new technology add on payment application,
coding and payment amount for GIAPREZA^TM for FY 2019 and FY
2020.
With regard to the newness criterion for GIAPREZA^TM, we
consider the beginning of the newness period to commence when
GIAPREZA^TM was approved by FDA (December 21, 2017). As
discussed previously in this section, in general, we extend new
technology add-on payments for an additional year only if the 3-year
anniversary date of the product's entry onto the U.S. market occurs in
the latter half of the upcoming fiscal year. Because the 3-year
anniversary date of the entry of GIAPREZA^TM onto the U.S.
market (December 21, 2020) will occur in the first half of FY 2021, we
are proposing to discontinue new technology add-on payments for this
technology for FY 2021. We are inviting public comments on our proposal
to discontinue new technology add-on payments for GIAPREZA^TM
for FY 2021.
g. Cerebral Protection System (Sentinel[supreg] Cerebral Protection
System)
Claret Medical, Inc. submitted an application for new technology
add-on payments for the Cerebral Protection System (Sentinel[supreg]
Cerebral Protection System) for FY 2019. According to the applicant,
the Sentinel Cerebral Protection System is indicated for the use as an
embolic protection (EP) device to capture and remove thrombus and
debris while performing transcatheter aortic valve replacement (TAVR)
procedures. The device is percutaneously delivered via the right radial
artery and is removed upon completion of the TAVR procedure. The De
Novo request for the Sentinel[supreg] Cerebral Protection System was
granted by FDA on June 1, 2017. The Sentinel Cerebral Protection System
was approved for new technology add on payments for FY 2019 (83 FR
41348). We refer readers to section II.H.5.h. of the preamble of the FY
2019 IPPS/LTCH PPS final rule (83 FR 41342 through 41348) and section
II.H.4.j. of the preamble of the FY 2020 IPPS/LTCH PPS final rule (84
FR 42191 through 42192) for a complete discussion the new technology
add on payment application, coding, and payment amount for the
Sentinel[supreg] Cerebral Protection System for FY 2019 and FY 2020.
With regard to the newness criterion for the Sentinel[supreg]
Cerebral Protection System, we consider the beginning of the newness
period to commence when FDA granted the De Novo request for the
Sentinel[supreg] Cerebral Protection System (June 1, 2017). Because the
3-year anniversary date of the entry of the Sentinel[supreg] Cerebral
Protection System onto the U.S. market (June 1, 2020) will occur in FY
2020, we are proposing to discontinue new technology add-on payments
for this technology for FY 2021. We are inviting public comments on our
proposal to discontinue new technology add-on payments for the
Sentinel[supreg] Cerebral Protection System for FY 2021.
h. The AQUABEAM System (Aquablation)
PROCEPT BioRobotics Corporation submitted an application for new
technology add-on payments for the AQUABEAM System (Aquablation) for FY
2019. According to the applicant, the AQUABEAM System is indicated for
the use in the treatment of patients experiencing lower urinary tract
symptoms caused by a diagnosis of benign prostatic hyperplasia (BPH).
FDA granted the AQUABEAM System's De Novo request on December 21, 2017,
for use in the resection and removal of prostate tissue in males
suffering from lower urinary tract symptoms (LUTS) due to benign
prostatic hyperplasia. The AQUABEAM System was approved for new
technology add on payments for FY 2019 (83 FR 41355). We refer readers
to section II.H.5.i. of the preamble of the FY 2019 IPPS/LTCH PPS final
rule (83 FR 41348 through 41355) and section II.H.4.k. of the preamble
of the FY 2020 IPPS/LTCH PPS final rule (84 FR 42192 through 42193) for
a complete discussion of the new technology add on payment application,
coding, and payment for the AQUABEAM System for FY 2019 and FY 2020.
With regard to the newness criterion for the AQUABEAM System, we
consider the beginning of the newness period to commence on the date
FDA granted the De Novo request (December 21, 2017). As discussed
previously in this section, in general, we extend new technology add-on
payments for an additional year only if the 3-year anniversary date of
the product's entry onto the U.S. market occurs in the latter half of
the upcoming fiscal year. Because the 3-year anniversary date of the
entry of the AQUABEAM System

[[Page 32576]]

onto the U.S. market (December 21, 2020) will occur in the first half
of FY 2021, we are proposing to discontinue new technology add-on
payments for this technology for FY 2021. We are inviting public
comments on our proposal to discontinue new technology add-on payments
for the AQUABEAM System for FY 2021.
i. AndexXa^TM (Coagulation Factor Xa (Recombinant),
Inactivated-zhzo)
Portola Pharmaceuticals, Inc. (Portola) submitted an application
for new technology add-on payments for FY 2019 for the use of
AndexXa^TM (coagulation factor Xa (recombinant), inactivated-
zhzo). AndexXa^TM received FDA approval on May 3, 2018, and
is indicated for use in the treatment of patients who are receiving
treatment with rivaroxaban and apixaban, when reversal of
anticoagulation is needed due to life-threatening or uncontrolled
bleeding. AndexXa^TM was approved for new technology add on
payments for FY 2019 (83 FR 41362). We refer readers to section
II.H.5.j. of the preamble of the FY 2019 IPPS/LTCH PPS final rule (83
FR 41355 through 41362) and section II.H.4.k. of the preamble of the FY
2020 IPPS/LTCH PPS final rule (84 FR 42193 through 42194) for a
complete discussion of the new technology add on payment application,
coding, and payment amount for AndexXa^TM for FY 2019 and FY
2020.
With regard to the newness criterion for AndexXa^TM, we
consider the beginning of the newness period to commence when
AndexXa^TM received FDA approval (May 3, 2018). As discussed
previously in this section, in general, we extend new technology add-on
payments for an additional year only if the 3-year anniversary date of
the product's entry onto the U.S. market occurs in the latter half of
the upcoming fiscal year. Because the 3-year anniversary date of the
entry of AndexXa^TM onto the U.S. market (May 3, 2021) will
occur in the second half of FY 2021, we are proposing to continue new
technology add-on payments for this technology for FY 2021. We are
proposing that the maximum new technology add-on payment for a case
involving AndexXa^TM would remain at $18,281.25 for FY 2021
(we refer readers to the FY 2020 IPPS/LTCH PPS final rule for complete
discussion of the calculation of the new technology add on payment
amount for AndexXa^TM). Cases involving the use of
AndexXa^TM that are eligible for new technology add-on
payments are identified by ICD-10-PCS procedure codes XW03372
(Introduction of inactivated coagulation factor Xa into peripheral
vein, percutaneous approach, new technology group 2) or XW04372
(Introduction of inactivated coagulation factor Xa into central vein,
percutaneous approach, new technology group 2). We are inviting public
comments on our proposal to continue new technology add-on payments for
AndexXa^TM for FY 2021.
j. AZEDRA[supreg] (Iobenguane Iodine-131) Solution
Progenics Pharmaceuticals, Inc. submitted an application for new
technology add-on payments for AZEDRA[supreg] (iobenguane Iodine-131)
for FY 2020. AZEDRA[supreg] is a drug solution formulated for
intravenous (IV) use in the treatment of patients who have been
diagnosed with obenguane avid malignant and/or recurrent and/or
unresectable pheochromocytoma and paraganglioma (PPGL). AZEDRA was
approved by FDA on July 30, 2018, as a radioactive therapeutic agent
indicated for the treatment of adult and pediatric patients 12 years
and older with iobenguane scan positive, unresectable, locally advanced
or metastatic pheochromocytoma or paraganglioma who require systemic
anticancer therapy. AZEDRA[supreg] was approved for new technology add
on payments for FY 2020. We refer readers to section II.H.5.a. of the
preamble of the FY 2020 IPPS/LTCH PPS final rule (84 FR 42194 through
42201) for a complete discussion of the new technology add on payment
application, coding and payment amount for AZEDRA[supreg] for FY 2020.
With regard to the newness criterion for AZEDRA[supreg], we
consider the beginning of the newness period to commence when
AZEDRA[supreg] was approved by FDA (July 30, 2018). As discussed
previously in this section, in general, we extend new technology add-on
payments for an additional year only if the 3-year anniversary date of
the product's entry onto the U.S. market occurs in the latter half of
the upcoming fiscal year. Because the 3-year anniversary date of the
entry of AZEDRA[supreg] onto the U.S. market (July 30, 2021) will occur
in the second half of FY 2021, we are proposing to continue new
technology add-on payments for this technology for FY 2021. We are
proposing that the maximum new technology add-on payment for a case
involving AZEDRA[supreg] would remain at $98,150 for FY 2021 (we refer
readers to the FY 2020 IPPS/LTCH PPS final rule for complete discussion
of the calculation of the new technology add on payment amount for
AZEDRA[supreg]). Cases involving the use of AZEDRA[supreg] that are
eligible for new technology add-on payments are identified by ICD-10-
PCS procedure codes XW033S5 (Introduction of Iobenguane I-131
antineoplastic into peripheral vein, percutaneous approach, new
technology group 5), and XW043S5 (Introduction of Iobenguane I-131
antineoplastic into central vein, percutaneous approach, new technology
group 5). We are inviting public comments on our proposal to continue
new technology add-on payments for AZEDRA[supreg] for FY 2021.
k. CABLIVI[supreg] (Caplacizumab-yhdp)
The Sanofi Company submitted an application for new technology add-
on payments for CABLIVI[supreg] (caplacizumab-yhdp) for FY 2020. The
applicant described CABLIVI[supreg] as a humanized bivalent nanobody
consisting of two identical building blocks joined by a tri alanine
linker, which is administered through intravenous and subcutaneous
injection to inhibit microclot formation in adult patients who have
been diagnosed with acquired thrombotic thrombocytopenic purpura
(aTTP). CABLIVI[supreg] received FDA approval on February 6, 2019, for
the treatment of adult patients with acquired aTTP, in combination with
plasma exchange and immunosuppressive therapy. CABLIVI[supreg] was
approved for new technology add on payments for FY 2020. We refer
readers to section II.H.5.b. of the preamble of the FY 2020 IPPS/LTCH
PPS final rule (84 FR 42201 through 42208) for a complete discussion of
the new technology add on payment application, coding, and payment
amount for CABLIVI[supreg] for FY2020.
With regard to the newness criterion for CABLIVI[supreg], we
consider the beginning of the newness period to commence when
CABLIVI[supreg] was approved by FDA (February 6, 2019). Because the 3-
year anniversary date of the entry of CABLIVI[supreg] onto the U.S.
market (February 6, 2022) will occur after FY 2021, we are proposing to
continue new technology add-on payments for this technology for FY
2021. We are proposing that the maximum new technology add-on payment
for a case involving CABLIVI[supreg] would remain at $33,215 for FY
2021 (we refer readers to the FY 2020 IPPS/LTCH PPS final rule for
complete discussion of the calculation of the new technology add on
payment amount for CABLIVI[supreg]). Cases involving the use of
CABLIVI[supreg] that are eligible for new technology add-on payments
are identified by ICD-10-PCS procedure codes XW013W5 (Introduction of
Caplacizumab into subcutaneous tissue, percutaneous approach, new
technology group 5), XW033W5 (Introduction of

[[Page 32577]]

Caplacizumab into peripheral vein, percutaneous approach, new
technology group 5) and XW043W5 (Introduction of Caplacizumab into
central vein, percutaneous approach, new technology group 5). We are
inviting public comments on our proposal to continue new technology
add-on payments for CABLIVI[supreg] for FY 2021.
l. ELZONRIS^TM (Tagraxofusp-erzs)
Stemline Therapeutics submitted an application for new technology
add-on payments for ELZONRIS^TM for FY 2020.
ELZONRIS^TM (tagraxofusp-erzs) is a targeted therapy for the
treatment of blastic plasmacytoid dendritic cell neoplasm (BPDCN)
administered via infusion. On December 21, 2018, the FDA approved
ELZONRIS^TM for the treatment of blastic plasmacytoid
dendritic cell neoplasm in adults and in pediatric patients 2 years old
and older. ELZONRIS^TM was approved for new technology add on
payments for FY 2020. We refer readers to section II.H.5.e. of the
preamble of the FY 2020 IPPS/LTCH PPS final rule (84 FR 42231 through
42237) for a complete discussion of the new technology add on payment
application, coding and payment amount for ELZONRIS^TM for FY
2020.
With regard to the newness criterion for ELZONRIS^TM, we
consider the beginning of the newness period to commence when
ELZONRIS^TM was approved by FDA (December 21, 2018). Because
the 3-year anniversary date of the entry of ELZONRIS^TM onto
the U.S. market (December 21, 2021) will occur after FY 2021, we are
proposing to continue new technology add-on payments for this
technology for FY 2021. We are proposing that the maximum new
technology add-on payment for a case involving ELZONRIS^TM
would remain at $125,448.05 for FY 2021 (we refer readers to the FY
2020 IPPS/LTCH PPS final rule for complete discussion of the
calculation of the new technology add on payment amount for
ELZONRIS^TM). Cases involving the use of
ELZONRIS^TM that are eligible for new technology add-on
payments are identified by ICD-10-PCS procedure codes XW033Q5
(Introduction of Tagraxofusp-erzs antineoplastic into peripheral vein,
percutaneous approach, new technology, group 5) and XW043Q5
(Introduction of Tagraxofusp-erzs antineoplastic into central vein,
percutaneous approach, new technology group 5). We are inviting public
comments on our proposal to continue new technology add-on payments for
ELZONRIS^TM for FY 2021.
m. Balversa^TM (Erdafitinib)
Johnson & Johnson Health Care Systems, Inc. (on behalf of Janssen
Oncology, Inc.) submitted an application for new technology add-on
payments for Balversa^TM for FY 2020. Balversa^TM
is indicated for the second line treatment of adult patients who have
been diagnosed with locally advanced or metastatic urothelial carcinoma
whose tumors exhibit certain fibroblast growth factor receptor (FGFR)
genetic alterations as detected by an FDA-approved test, and who have
disease progression during or following at least one line of prior
chemotherapy including within 12 months of neoadjuvant or adjuvant
chemotherapy. Balversa^TM received FDA approval on April 12,
2019. Balversa^TM was approved for new technology add on
payments for FY 2020. We refer readers to section II.H.5.f. of the
preamble of the FY 2020 IPPS/LTCH PPS final rule (84 FR 42237 through
42242) for a complete discussion of the new technology add on payment
application, coding and payment amount for Balversa^TM for FY
2020.
With regard to the newness criterion for Balversa^TM, we
consider the beginning of the newness period to commence when
Balversa^TM was approved by FDA (April 12, 2019). Because the
3-year anniversary date of the entry of Balversa^TM onto the
U.S. market (April 12, 2022) will occur after FY 2021, we are proposing
to continue new technology add-on payments for this technology for FY
2021. We are proposing that the maximum new technology add-on payment
for a case involving Balversa^TM would remain at $3,563.23
for FY 2021 (we refer readers to the FY 2020 IPPS/LTCH PPS final rule
for complete discussion of the calculation of the new technology add on
payment amount for Balversa^TM). Cases involving the use of
Balversa^TM that are eligible for new technology add-on
payments are identified by ICD-10-PCS procedure code XW0DXL5
(Introduction of Erdafitinib antineoplastic into mouth and pharynx,
external approach, new technology group 5). We are inviting public
comments on our proposal to continue new technology add-on payments for
Balversa^TM for FY 2021.
n. ERLEADA^TM (Apalutamide)
Johnson & Johnson Health Care Systems Inc., on behalf of Janssen
Products, LP, Inc., submitted an application for new technology add-on
payments for ERLEADA^TM (apalutamide) for FY 2020. This oral
drug is an androgen receptor inhibitor indicated for the treatment of
patients who have been diagnosed with non-metastatic castration-
resistant prostate cancer (nmCRPC). ERLEADA^TM received FDA
approval on February 14, 2018. ERLEADA^TM was approved for
new technology add on payments for FY 2020. We refer readers to section
II.H.5.g. of the preamble of the FY 2020 IPPS/LTCH PPS final rule (84
FR 42242 through 42247) for a complete discussion of the new technology
add on payment application, coding and payment amount for
ERLEADA^TM for FY 2020.
With regard to the newness criterion for ERLEADA^TM, we
consider the beginning of the newness period to commence when
ERLEADA^TM was approved by FDA (February 14, 2018). As
discussed previously in this section, in general, we extend new
technology add-on payments for an additional year only if the 3-year
anniversary date of the product's entry onto the U.S. market occurs in
the latter half of the upcoming fiscal year. Because the 3-year
anniversary date of the entry of ERLEADA^TM onto the U.S.
market (February 14, 2021) will occur in the first half of FY 2021, we
are proposing to discontinue new technology add-on payments for this
technology for FY 2021. We are inviting public comments on our proposal
to discontinue new technology add-on payments for ERLEADA^TM
for FY 2021.
o. SPRAVATO^TM (Esketamine)
Johnson & Johnson Health Care Systems, Inc., on behalf of Janssen
Pharmaceuticals, Inc., submitted an application for new technology add-
on payments for SPRAVATO^TM (Esketamine) nasal spray for FY
2020. The FDA-approved indication for SPRAVATO^TM is
treatment resistant depression (TRD). SPRAVATO^TM Nasal Spray
was approved by FDA March 5, 2019. SPRAVATO^TM was approved
for new technology add on payments for FY 2020. We refer readers to
section II.H.5.h. of the preamble of the FY 2020 IPPS/LTCH PPS final
rule (84 FR 42247 through 42256) for a complete discussion of the new
technology add on payment application, coding and payment amount for
SPRAVATO^TM for FY 2020.
With regard to the newness criterion for SPRAVATO^TM, we
consider the beginning of the newness period to commence when
SPRAVATO^TM was approved by FDA (March 5, 2019). Because the
3-year anniversary date of the entry of SPRAVATO^TM onto the
U.S. market (March 5, 2022) will occur after FY 2021, we are proposing
to continue new technology add-on payments for

[[Page 32578]]

this technology for FY 2021. We are proposing that the maximum new
technology add-on payment for a case involving SPRAVATO^TM
would remain at $1,014.79 for FY 2021 (we refer readers to the FY 2020
IPPS/LTCH PPS final rule for complete discussion of the calculation of
the new technology add on payment amount for SPRAVATO^TM).
In the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19329), we noted
that the applicant had submitted a request to the ICD-10 Coordination
and Maintenance Committee for approval for a unique ICD-10-PCS
procedure code to specifically identify cases involving the use of
SPRAVATO^TM, beginning in FY 2020. As of the time of the
development of the FY 2020 IPPS/LTCH PPS final rule, a unique ICD-10-
PCS procedure code to specifically identify cases involving the use of
SPRAVATO^TM had not yet been finalized in response to the
applicant's request. Therefore, we stated that cases reporting
SPRAVATO^TM would be identified by ICD-10-PCS procedure code
3E097GC (Introduction of other therapeutic substance into nose, via
natural or artificial opening) for FY 2020. Subsequent to the FY 2020
IPPS/LTCH PPS final rule, a unique ICD-10-PCS procedure code to
specifically identify cases involving the use of SPRAVATO^TM
was finalized, effective October 1, 2020. As a result, cases involving
the use of SPRAVATO^TM that are eligible for new technology
add-on payments would be identified by ICD-10-PCS procedure code
XW097M5 (Introduction of Esketamine Hydrochloride into nose, via
natural or artificial opening, new technology group 5) for FY 2021.
Because new ICD-10-PCS procedure code XW097M5 is not effective until
October 1, 2020, ICD-10-PCS procedure code 3E097GC is the only code
available to report the use of the SPRAVATO^TM for FY 2020.
For FY 2021, beginning with discharges on or after October 1, 2020,
cases involving SPRAVATO^TM that are eligible for new
technology add-on payments will be identified using the new ICD-10-PCS
procedure code XW097M5 (that is effective for FY 2021). We are inviting
public comments on our proposal to continue new technology add-on
payments for SPRAVATO^TM for FY 2021.
p. XOSPATA[supreg] (Gilteritinib)
Astellas Pharma U.S., Inc. submitted an application for new
technology add-on payments for XOSPATA[supreg] (gilteritinib) for FY
2020. XOSPATA[supreg] received FDA approval November 28, 2018 and is
indicated for the treatment of adult patients who have been diagnosed
with relapsed or refractory acute myeloid leukemia (AML) with a FMS-
like tyrosine kinase 3 (FLT3) mutation as detected by an FDA approved
test. XOSPATA[supreg] was approved for new technology add on payments
for FY 2020. We refer readers to section II.H.5.i. of the preamble of
the FY 2020 IPPS/LTCH PPS final rule (84 FR 42256 through 42260) for a
complete discussion of the new technology add on payment application,
coding and payment amount for XOSPATA[supreg].
With regard to the newness criterion for XOSPATA[supreg], we
consider the beginning of the newness period to commence when
XOSPATA[supreg] was approved by FDA (November 28, 2018). Because the 3-
year anniversary date of the entry of XOSPATA[supreg] onto the U.S.
market (November 28, 2021) will occur after FY 2021, we are proposing
to continue new technology add-on payments for this technology for FY
2021. We are proposing that the maximum new technology add-on payment
for a case involving XOSPATA[supreg] would remain at $7,312.50 for FY
2021 (we refer readers to the FY 2020 IPPS/LTCH PPS final rule for
complete discussion of the calculation of the new technology add on
payment amount for XOSPATA[supreg]). Cases involving the use of
XOSPATA[supreg] that are eligible for new technology add-on payments
are identified by ICD-10-PCS procedure code XW0DXV5 (Introduction of
Gilteritinib antineoplastic into mouth and pharynx, external approach,
new technology group 5). We are inviting public comments on our
proposal to continue new technology add-on payments for XOSPATA[supreg]
for FY 2021.
q. JAKAFI^TM (Ruxolitinib)
Incyte Corporation submitted an application for new technology add-
on payments for JAKAFI^TM (ruxolitinib) for FY 2020.
According to the applicant, JAK inhibition represents a therapeutic
approach for the treatment of acute graft-versus-host disease (aGVHD)
in patients who have had an inadequate response to corticosteroids.
JAKAFI^TM received FDA approval on May 24, 2019 for the
treatment of steroid-refractory aGVHD in adult and pediatric patients
12 years and older. JAKAFI^TM was approved for new technology
add on payments for FY 2020. We refer readers to section II.H.5.k. of
the preamble of the FY 2020 IPPS/LTCH PPS final rule (84 FR 42265
through 42273) for a complete discussion of the new technology add on
payment application, coding and payment amount for JAKAFI^TM
for FY 2020.
With regard to the newness criterion for JAKAFI^TM, we
consider the beginning of the newness period to commence when
JAKAFI^TM was approved by FDA (May 24, 2019). Because the 3-
year anniversary date of the entry of JAKAFI^TM onto the U.S.
market (May 24, 2022) will occur after FY 2021, we are proposing to
continue new technology add-on payments for this technology for FY
2021. We are proposing that the maximum new technology add-on payment
for a case involving JAKAFI^TM would remain at $3,977.06 for
FY 2021 (we refer readers to the FY 2020 IPPS/LTCH PPS final rule for
complete discussion of the calculation of the new technology add on
payment amount for JAKAFI^TM). Cases involving the use of
JAKAFI^TM that are eligible for new technology add-on
payments are identified by ICD-10-PCS procedure code XW0DXT5
(Introduction of Ruxolitinib into mouth and pharynx, external approach,
new technology group 5). We are inviting public comments on our
proposal to continue new technology add-on payments for
JAKAFI^TM for FY 2021.
r. T2Bacteria[supreg] Panel (T2Bacteria Test Panel)
T2Biosystems, Inc. submitted an application for new technology add-
on payments for the T2Bacteria Test Panel (T2Bacteria[supreg] Panel)
for FY 2020. The T2Bacteria[supreg] Panel received 510(k) clearance
from FDA on May 24, 2018 for use as an aid in the diagnosis of
bacteremia, bacterial presence in the blood, which is a precursor for
sepsis. Per the FDA cleared indication, results from the
T2Bacteria[supreg] Panel are not intended to be used as the sole basis
for diagnosis, treatment, or other patient management decisions in
patients with suspected bacteremia. Concomitant blood cultures are
necessary to recover organisms for susceptibility testing or further
identification, and for organisms not detected by the
T2Bacteria[supreg] Panel. The T2Bacteria[supreg] Panel was approved for
new technology add on payments for FY 2020. We refer readers to section
II.H.5.m. of the preamble of the FY 2020 IPPS/LTCH PPS final rule (84
FR 42278 through 42288) for a complete discussion of the new technology
add on payment application, coding and payment amount for the
T2Bacteria[supreg] Panel for FY 2020.
With regard to the newness criterion for the T2Bacteria[supreg]
Panel, we consider the beginning of the newness period to commence when
the T2Bacteria[supreg] Panel was cleared by FDA (May 24, 2018). As
discussed previously in this section, in general, we extend new
technology add-on payments for an additional year only if the 3-year
anniversary date of the product's entry onto the U.S. market

[[Page 32579]]

occurs in the latter half of the upcoming fiscal year. Because the 3-
year anniversary date of the entry of the T2Bacteria[supreg] Panel onto
the U.S. market (May 24, 2021) will occur in the second half of FY
2021, we are proposing to continue new technology add-on payments for
this technology for FY 2021. We are proposing that the maximum new
technology add-on payment for a case involving the T2Bacteria[supreg]
Panel would remain at $97.50 for FY 2021 (we refer readers to the FY
2020 IPPS/LTCH PPS final rule for complete discussion of the
calculation of the new technology add on payment amount for the
T2Bacteria[supreg] Panel). Cases involving the use of the
T2Bacteria[supreg] Panel that are eligible for new technology add-on
payments are identified by ICD-10-PCS procedure code XXE5XM5
(Measurement of infection, whole blood nucleic acid-base microbial
detection, new technology group 5). We are inviting public comments on
our proposal to continue new technology add-on payments for the
T2Bacteria[supreg] Panel for FY 2021.
BILLING CODE 4120-01-P

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BILLING CODE 4120-01-C
5. Proposed FY 2021 Applications for New Technology Add-On Payments
(Traditional Pathway)
a. Accelerate Pheno Test BC kit for Use With Accelerate Pheno System
Accelerate Diagnostics, Inc. submitted an application for new
technology add-on payments for the Accelerate PhenoTest^TM BC
kit for FY 2021. According to the applicant, the Accelerate
PhenoTest^TM BC kit is for use with the Accelerate
Pheno^TM system and is the only commercially available
technology in the U.S. that provides microorganism (bacteria and yeast)
identification (ID) and phenotypic (MIC-based) antimicrobial
susceptibility test (AST) results for patients with bacteremia/fungemia
and a positive blood culture. The applicant stated that the Accelerate
Pheno^TM system is a novel technology for fast diagnosis of
bloodstream infection that provides these results in approximately 7
hours, as opposed to standard of care methods that typically take 2-3
days.
The applicant stated that other methods that provide phenotypic AST
results such as current automated ID/AST systems, antibiotic gradient
strips and disk diffusion require overnight culturing of the bacteria
to produce an isolated colony of the pathogen, and therefore take 1-2
days longer than the Accelerate PhenoTest^TM BC kit. The
applicant explained that other isolate-based methods include matrix-
assisted laser desorption/ionization time-of-flight mass spectrometry
(MALDI-TOF MS) and biochemical methods which only provide
identification results, but not antibiotic susceptibilities which would
indicate possible drug resistance in common pathogens and the efficacy
of the drugs of choice for particular infections. The applicant stated
that similarly, T2 Dx Biosystems with T2 Bacterial Panel provides a
rapid organism ID but does not provide antibiotic susceptibility
results.
The applicant explained that the Accelerate PhenoTest^TM
BC kit identifies the following Gram-positive and Gram-negative
bacteria and yeast utilizing fluorescent in-situ hybridization (FISH)
probes targeting organism-specific ribosomal RNA sequences and tests
the antimicrobial agents and resistance phenotypes in the organism(s)
identified in the following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.119

[[Page 32582]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.120

The applicant stated that the laboratory workflow for the
Accelerate PhenoTest^TM BC kit is simple and requires ~2
minutes of hands on laboratory technologist time, in three steps: (1)
Aliquot 0.5 mL positive blood culture into sample vial; (2) load the
sample into the Accelerate PhenoTest^TM BC kit; and (3) load
the Accelerate PhenoTest^TM BC kit into the Accelerate
Pheno^TM system.
The applicant explained and stated the following regarding use of
the Accelerate PhenoTest^TM BC kit:
Microorganism identification (ID) is performed using
fluorescence in situ hybridization (FISH). Colocalization of target
(green fluorescence) and universal (red fluorescence) probe signal
confirms presence and identity of the target organism while
differentiating from non-specific staining. ID results are produced in
approximately 2 hours. AST is performed using morphokinetic cellular
analysis (MCA), which measures morphological and kinetic changes over
time of organisms exposed to antibiotics.
MCA is a computer vision-based analytical method that uses
digital microscopy inputs and machine learning technology to observe
individual live cells and recognize patterns of change over time. This
technology tracks and analyzes multiple morphological and kinetic
changes of individual cells and microcolonies under a variety of
conditions. These changes include morphokinetic features such as cell
morphology, mass as measured by light intensity of a growing cells,
division rate, anomalous growth patterns, and heterogeneity. During
this period, morphokinetic features are measured and used for analysis;
the precise quantitative measurement of individual cell growth rate
over time is a powerful indicator of antimicrobial efficacy. Onboard
software algorithms derive minimum inhibitory concentration (MIC)
values from the measured features, and apply appropriate expert rules
for proper interpretation and reporting of categorical interpretations:
S, I, or R (susceptible, intermediate, or resistant). According to the
applicant, AST results are reported in approximately 7 hours from the
start of the run.
The applicant stated that rapid ID/genotypic resistance marker
tests using polymerase chain reaction (PCR) provide partial results and
no MIC values. The applicant further stated that the clinically
actionable results using resistant marker tests are less definitive in
that the absence or presence of a resistance gene does not necessarily
indicate susceptibility or resistance to an antibiotic.
According to the applicant, theoretical studies and research not
conducted with the Accelerate PhenoTest^TM BC kit have
illustrated the strong connection between time to appropriate
antimicrobial therapy and clinical outcomes for bacteremic patients.
The applicant stated that time to phenotypic susceptibility results is
critical for patients with serious infections as studies show a
measurable increase in mortality for each hour appropriate treatment is
delayed in patients with septic shock.\1\ The applicant further stated
that based on these and other results, guidelines from the Surviving
Sepsis Campaign recommend prescribing empiric broad- spectrum
antimicrobials within 1 hour of recognition for both sepsis and septic
shock.\2\ However, the applicant explained that initial empiric therapy
can be inappropriate in as high as 30-50 percent of
cases.^{3 4} The applicant stated that patients treated with
appropriate versus inappropriate initial antimicrobial therapy have
been shown to have improved patient outcomes including mortality,
hospital length of stay (LOS), intensive care unit (ICU) LOS, and days
on mechanical ventilation.\5\
---------------------------------------------------------------------------

\1\ Kumar A, et al. Duration of hypotension before initiation of
effective antimicrobial therapy is the critical determinant of
survival in human septic shock. Crit Care Med 2006; 34(6):1589-96.
\2\ Rhodes A, et al. Surviving Sepsis Campaign: International
Guidelines for Management of Severe Sepsis and Septic Shock: 2016.
Intensive Care Med 2017; 43(3):304-77.
\3\ Hecker MT, et al. Unnecessary Use of Antimicrobials in
Hospitalized Patients. Arch Intern Med 2003; 163:972-8.
\4\ Herzke CA, et al. Empirical Antimicrobial Therapy for
Bloodstream Infection Due to Methicillin-Resistant Staphylococcus
aureus: No Better Than a Coin Toss. Infect Control Hosp Epidemiol
2009; 30(11):1057-61.
\5\ Burnham J, et al. Clinical Impact of Expedited Pathogen
Identification and Susceptibility Testing for Gram-negative
Bacteremia and Candidemia Using the Accelerate PhenoTM System.
Poster presented at: IDWeekTM; October 2017, San Diego, CA.
---------------------------------------------------------------------------

With respect to the newness criterion, the Accelerate
PhenoTest^TM BC kit received FDA de novo clearance on
February 23, 2017. According to applicant, the technology was on the

[[Page 32583]]

market immediately after FDA approval in February 2017. According to
the applicant, on September 22, 2019, Accelerate Diagnostics, Inc.
(AXDX) submitted a 510(k) submission to FDA, which details several
changes to the Accelerate PhenoTest^TM BC kit. According to
the applicant, the purpose of the 510(k) submission is to present
product enhancements and include an additional organism-antimicrobial
combination to the panel. There are currently no ICD-10-PCS procedure
codes that uniquely identify the use of the Accelerate
Pheno^TM BC kit. We note the applicant submitted a request
for approval for a unique ICD-10-PCS procedure code to identify use of
the technology beginning in FY 2021. The applicant provided the
following ICD-10 codes that they stated would identify cases for which
their technology is used, in the interim.

[[Page 32584]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.121

As discussed previously, if a technology meets all three of the
substantial similarity criteria, it would be considered substantially
similar to an existing technology and would not be considered ``new''
for purposes of new technology add-on payments.
With regard to the first criterion, whether a product used the same
or similar mechanism of action to achieve a therapeutic outcome,
according to the applicant, the Accelerate PhenoTest^TM BC
kit for use with the Accelerate Pheno^TM system is the only
fast, automated, phenotypic, direct-from-positive blood culture ID/AST
technology available. The applicant

[[Page 32585]]

explained that it provides MIC values as well as SIR categorical
designations (that is, susceptible, intermediate, resistant). The
applicant further explained that MIC results are used to not only
choose which antimicrobial(s) is/are active for a patient's infection,
but also may be used to modify dosing, based on the relative degree of
resistance to an antimicrobial the MIC indicates. The applicant also
stated that both results are significantly faster than other methods
(approximately 40 hours faster).
The applicant stated that in support of the uniqueness of the test
compared to other technologies, in 2017 the Accelerate
PhenoTest^TM BC kit used with the Accelerate
Pheno^TM system was granted marketing authorization by the
FDA under the de novo pathway, which is reserved for devices of a new
type with low-to-moderate risk for which there are no legally marketed
predicates.
The applicant explained that other FDA-cleared identification (ID)
technologies include Bruker Daltonics MALDI TOF-MS, bioMerieux
Vitek[supreg] MS. Additionally, the applicant noted several FDA-cleared
AST methods, which are based on broth microdilution (BMD), including
bioMerieux VITEK[supreg]2, ThermoFisher Sensititre^TM AST
system, BD Phoenix^TM AST system, and Beckman Coulter
MicroScan Walkaway. Additionally, the applicant noted that AST can be
determined using antibiotic gradient strips and disk diffusion. The
applicant notes all of these technologies require overnight culturing
to produce an isolated colony of the pathogen, and therefore take 1 to
2 days longer than the Accelerate PhenoTest^TM BC kit.
According to the applicant, FDA-cleared genotypic technologies
provide organism identification results and presence/absence of some
antibiotic resistance genes. The applicant explained that knowledge
that a gene is present can be used to rule out therapy, but the absence
of a resistance gene generally does not allow a clinician to rule-in
antibiotic therapy, unlike phenotypic AST, which can do both. According
to the applicant, genotypic tests that are FDA cleared and available in
the US include the BioFire[supreg] FilmArray, Luminex[supreg]
Verigene[supreg] Nanosphere, GenMark ePlex[supreg] BCID Panel, Curetis
Unyvero A50 system, iCubate[supreg] iC-system^TM, T2 Dx
Biosystems with T2 Bacterial Panel, and Cepheid GeneXpert[supreg]
(Table 2). The applicant explained that rapid ID/genotypic resistance
marker tests can provide fast results in hours directly from positive
blood culture; however these methods only provide partial results,
resulting in less diagnostic certainty. The applicant further explained
that unlike phenotypic AST results, the absence or presence of a
resistance gene does not definitively indicate susceptibility or
resistance to an antibiotic, respectively. The applicant noted that
resistance can be caused by multiple mutations across >1 gene (that is,
porin or efflux pump), and resistance depends not only on the presence
of a gene, but also on its level of expression. The applicant further
explained that while clinicians can use these partial results to
prescribe effective therapy in select cases, patients are often left on
overly broad spectrum therapy, which may or may not be effective for
that individual because the resistance marker results only allow
clinicians to rule-out certain therapies.\6\
---------------------------------------------------------------------------

\6\ Dien Bard J. and Lee F. Why Can't We Just Use PCR? The Role
of Genotypic versus Phenotypic Testing for Antimicrobial Resistance
Testing. Clin Microb 40(11): 87.
---------------------------------------------------------------------------

According to the applicant, in contrast, phenotypic MIC-based
results are key drivers for clinical decisions when determining
antibiotics, dose regimen, and de-escalation. The applicant also stated
that in a recent conference publication, one institution that
implemented a genotypic resistance marker test found that even after 5
years of use, clinicians did not de-escalate from empiric
antimicrobials for 62 percent of patients with E. coli and Klebsiella
pneumoniae bloodstream infections until phenotypic antimicrobial
susceptibility results were available.\7\ To address whether the
version of the Accelerate PhenoTest BC kit currently pending 510(k)
clearance uses the same or similar mechanism of action to achieve a
therapeutic outcome as the version that has been on the market since
February 2017, the applicant provided the following table describing
the differences between the two products:
---------------------------------------------------------------------------

\7\ Mead P., Raimondi T., Farrell J. Money For Nothing--
Prospective Examination of Impact of Biofire BC ID PCR on Empiric
Antibiotic Treatment in Escherichia coli & Klebsiella pneumoniae
Bacteremia. Poster presented at: ASM Microbe; June 2019, San
Francisco, CA.
---------------------------------------------------------------------------

BILLING CODE 4120-01-P

[[Page 32586]]

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[GRAPHIC] [TIFF OMITTED] TP29MY20.123

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[GRAPHIC] [TIFF OMITTED] TP29MY20.124

BILLING CODE 4120-01-C
According to the applicant, while this product originally received
FDA de novo status in February 2017, it should still be considered new
for the following two reasons. First, the applicant stated that there
is still no other comparable integrated rapid ID and rapid AST
diagnostic for positive blood cultures commercially available in the
US. The applicant stated that this technology was completely novel when
it was launched and remains alone in its class today. The applicant
added that this particular technology has yet to experience widespread
adoption in U.S. hospitals. Second, the applicant stated that it
submitted an FDA 510(k) submission on Sept. 22, 2019 for a product
addendum, which contains clinically relevant modifications to the
originally cleared product, impacting both the organism identification
and the antibiotic susceptibility testing reportability. The applicant
stated that it believes the software updates and assay changes
contained in this submission, and as set forth in the previous table,
are substantive and meet the criteria for newness.
With respect to the second criterion, the applicant did not
indicate whether the Accelerate PhenoTest^TM BC kit would be
assigned to the same MS-DRGs as cases representing patients who receive
diagnostic information from competing technologies, or from the version
of the Accelerate PhenoTest^TM BC kit that was approved in
February 2017. However, we believe that cases involving the use of the
technology would be assigned to the same MS-DRGs as cases involving the
use of the previous version of the Accelerate PhenoTest^TM BC
Kit that was approved in 2017, as well as cases representing patients
who receive diagnostic information from competing technologies.
With respect to the third criterion, the applicant did not specify
whether the Accelerate PhenoTest^TM BC kit involves the
treatment of the same or similar type of disease and the same or
similar patient population as existing technologies, including the
version of the Accelerate PhenoTest^TM BC kit that was
approved in February 2017. However, we believe that both the current
version of the Accelerate PhenoTest^TM BC kit and the
predicate version of the Accelerate PhenoTest^TM BC kit, as
well as competing technologies that may also aid in diagnosing patients
with bloodstream infections, would treat the same or similar type of
disease and patient population.
The applicant is seeking new technology add-on payments for the
version of the Accelerate PhenoTest^TM BC kit that is the
subject of the September 2019 510(k) submission to FDA. We are
concerned that this updated technology may be substantially similar to
the first version of the Accelerate PhenoTest^TM BC kit that
was first available on the U.S. market in February 2017 and, therefore,
the technology would not meet the newness criterion. It is not clear
that the changes made to the product currently pending 510(k) clearance
would distinguish the mechanism of action of this updated product from
the mechanism of action of the first version of the technology, which
received FDA de novo clearance on February 23, 2017. Although we
understand that the updated version includes software updates and assay
changes, we believe both tests may nonetheless use the same mechanism
of action, consisting of phenotypic, direct-from-positive blood culture
identification and AST technology that provides MIC values as well as
SIR categorical designations.

[[Page 32589]]

Furthermore, like other available diagnostic tests, the Accelerate
Phenotype^TM BC Kit uses positive blood cultures to identify
microorganisms.
We also are concerned with regard to the lack of information from
the applicant regarding the second and third substantial similarity
criteria. Because the first version of the Accelerate
PhenoTest^TM BC kit was first available on the U.S. market in
February 2017 and because we believe the version that is currently
pending 510(k) clearance may be substantially similar, we are concerned
that the product may not be considered new for the purposes of new
technology add-on payments. We believe the costs associated with the
Accelerate PhenoTest^TM BC kit should be reflected in the
relative payment weights for the MS-DRGs to which cases involving
treatment with the Accelerate PhenoTest^TM BC kit would be
assigned, because the product has been on the market and available
since 2017. Also, similar to our discussion in the FY 2006 IPPS final
rule (70 FR 47349), whether a technology has yet to experience
widespread adoption in U.S. hospitals is not relevant to the
determination of whether the technology is ``new.'' Consistent with the
statute, a technology no longer qualifies as ``new'' once it is more
than 2 to 3 years old, irrespective of how frequently it has been used
in the Medicare population. Therefore, if a product is more than 2 to 3
years old, we consider its costs to be included in the MS-DRG relative
weights whether its use in the Medicare population has been frequent or
infrequent. We are inviting public comments on whether the Accelerate
PhenoTest^TM BC kit is substantially similar to other
technologies, including the version of this technology that received
FDA de novo clearance on February 23, 2017, and whether the Accelerate
PhenoTest^TM BC kit meets the newness criterion.
With regard to the cost criterion, the applicant conducted the
following analysis to demonstrate that the technology meets the cost
criterion. The applicant identified 43 ICD-10-CM diagnosis codes that
apply to conditions for which its technology may be used, and then
applied these 43 codes to the MEDPAR Limited Data Set (LDS)--Hospital
(National) FY 2018 (Proposed Rule) data, in order to identify cases for
which the use of Accelerate PhenoTest^TM BC kit could be
appropriate. These diagnosis codes are the 41 diagnosis codes listed in
the previous table, along with ICD-10-CM codes R78.81 (Bacteremia) and
B49 (Unspecified mycosis).
According to the applicant, this process resulted in 27,971 cases
spanning 411 MS-DRGs, with approximately 80 percent of those cases
mapping to the following top 8 MS-DRGs:
[GRAPHIC] [TIFF OMITTED] TP29MY20.125

The applicant performed two analyses to demonstrate that the
technology meets the cost criterion. The first analysis was based on
100 percent of the claims that included the specified ICD-10 codes,
while the second analysis was based on the 80 percent of claims that
mapped to the top 8 MS-DRGs listed previously.
Under both analyses, the applicant removed charges for prior
technology or technology being replaced. Using Accelerate Diagnostics
customer cost and utilization information and the National Average
Laboratory Cost-to-Charge Ratio (CCR) of 0.109 (84 FR 42179), the
applicant estimated the charge for prior technology as approximately
$339. Specifically, the applicant multiplied an 80 percent utilization
by a cost of $15 for the MALDI-TOF MS-based test and multiplied a 25
percent utilization by a cost of $100 for the Molecular BCID. The
applicant then added these calculations, reaching a sum of $37 of
estimated cost. The applicant divided this cost by the National Average
Laboratory CCR (0.109), reaching an estimated charge of $339.45. The
applicant also removed other charges related to the prior technology,
assuming cost savings related to reduced LOS, vancomycin avoidance, C.
difficile infection avoidance, and acute kidney injury avoidance based
on data from provided studies.^{8 9 10 11 12 13 14}
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\8\ Zimlichman E, et al. Health Care-Associated Infections: A
Meta-analysis of Costs and Financial Impact on the US Health Care
System. JAMA Intern Med 2013; 173(22):2039-46.
\9\ Chertow GM, et al. Acute kidney injury, mortality, length of
stay, and costs in hospitalized patients. J Am Soc Nephrol 2005;
16:3365-70.
\10\ Sheth S, et al. Impact of Rapid Identification (ID) and
Antimicrobial Susceptibility Testing (AST) on Antibiotic Therapy and
Outcomes for Patients with Bacteraemia/Candidaemia. Poster presented
at: ECCMID; April 2019, Amsterdam, Netherlands.
\11\ Henry J Kaiser Family Foundation. Hospital Adjusted
Expenses per Inpatient Day by Ownership. KFF website: https://www.kff.org/health-costs/state-indicator/expenses-per-inpatient-day-by-ownership. Published 2016. Accessed June 6, 2019.
\12\ Suryadevara M, et al. Inappropriate Vancomycin Therapeutic
Drug Monitoring in Hospitalized Pediatric Patients Increases
Pediatric Trauma and Hospital Costs. J Pediatr Pharmacol Ther 2012;
17(2):159-65.
\13\ Zimlichman E, et al. Health Care-Associated Infections: A
Meta-analysis of Costs and Financial Impact on the US Health Care
System. JAMA Intern Med 2013; 173(22):2039-46.
\14\ Dare R, et al. Impact of Accelerate Pheno^TM
Rapid Blood Culture Detection System on Laboratory and Clinical
Outcomes in Bacteremic Patients. Oral presentation at:
IDWeek^TM; October 2018, San Francisco, CA.
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The applicant then standardized the charges and applied the 2-year
outlier inflation factor of 11.1 percent used to update the outlier
threshold in the FY 2020 IPPS final rule (84 FR 42629). The applicant
indicated an estimated per patient cost for the Accelerate
PhenoTest^TM BC kit of $375.17 (based on current average
sales price of the Accelerate PhenoTest^TM BC kit, plus
market data on several other associated elements of per-patient cost
enumerated by the applicant). The applicant then added charges for the
Accelerate PhenoTest^TM BC kit by dividing the average
hospital cost per patient of $375.17 by the National Average Laboratory
CCR of 0.109.
The applicant reported that these analyses met the cost criterion
in each instance. For the analysis based on 100 percent of cases, the
applicant

[[Page 32590]]

computed a final inflated average case weighted standardized charge per
case of $107,432, as compared to an average case-weighted threshold
amount of $75,101. For the analysis based on the 80 percent of cases in
the top eight MS-DRGs, the applicant computed a final inflated average
case weighted standardized charge per case of $86,956, as compared to
the average case-weighted threshold amount of $71,401. Because the
final inflated average case-weighted standardized charge per case
exceeded the average case-weighted threshold amount under both analyses
described previously, the applicant asserted that the technology meets
the cost criterion.
We are inviting public comments on whether the Accelerate
PhenoTest^TM BC Kit meets the cost criterion.
With respect to the substantial clinical improvement criterion, the
applicant asserted that the Accelerate PhenoTest BC kit represents a
substantial clinical improvement over existing technology because data
from studies show that it offers the ability to diagnose a medical
condition earlier than allowed by currently available methods.
Additionally, the applicant stated that these studies suggest the
Accelerate PhenoTest BC kit improves clinical outcomes relative to
services or technologies previously available. Specifically, according
to the applicant, the studies demonstrate a reduction in clinically
significant adverse events such as lower mortality, a decrease in
inappropriate therapy, a more rapid resolution, and the termination of
antibiotic therapy.
The applicant submitted fifteen published peer-reviewed articles
that the applicant stated demonstrate the ability to diagnose a medical
condition earlier than allowed by currently available methods. Per the
applicant, the results demonstrated the following: reduction in time to
AST results, de-escalation or escalation, and hands-on time; decreased
time to step-down therapy, initiation of definitive therapy (TTDT),
optimal therapy (TTOT), effective therapy (TTET) and active therapy;
and decreased use of aminopenicillin + B-lactamase, cefepime,
aminoglycosides, piperacillin-tazobactam, and vancomycin. The applicant
also asserted that the results demonstrated reduced length of stay,
total antibiotic days on therapy (DOT), antibiotic intensity score,
average number of antibiotic days, median days of broad-spectrum
antibiotics, time to first antibiotic modification and first Gram
negative antibiotic modification, and inpatient mortality. We summarize
the studies the applicant provided as follows:
Brazelton de Cardenas, et al.\15\ is an equivalency
performance (methods comparison) paper and showed identification
sensitivity of 91.2 percent and AST categorical agreement (CA) of 91.2-
91.8 percent. The applicant explained that the time to results for the
Accelerate PhenoTest^TM BC kit for use with the Accelerate
Pheno^TM system were 40.1 hours faster than standard of care
(VITEK[supreg]2 and BMD).
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\15\ Brazelton de Cardenas JN, Su Y, Rodriguez A, et al.
Evaluation of rapid phenotypic identification and antimicrobial
susceptibility testing in a pediatric oncology center. Diagn
Microbiol Infect Dis 2017; 89: 52-7.
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Bowler, et al.\16\ is an equivalency performance paper
that examined Acinetobacter clinical isolates showing ID sensitivity of
97.6 percent and specificity of 86.6 percent and AST essential
agreement of 98.0 percent. The applicant stated that standard of care
was MALDI-TOF MS for ID and broth microdilution (BMD) for AST.
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\16\ Bowler et al. Evaluation of the Accelerate
Pheno^TM System for identification of Acinetobacter
clinical isolates and minocycline susceptibility testing. J Clin
Microbiol. 2019 57(3):e01711-18.
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Burnham, et al.\17\ is an equivalency performance paper
showing ID sensitivity of 91.5 percent and specificity of 99.6 percent
and AST CA of 91.0 percent. The applicant explained that the time to
results for the Accelerate PhenoTest^TM BC kit for use with
the Accelerate Pheno^TM system was 40.8 hours faster than
standard of care (VITEK[supreg]2 or DD for AST).
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\17\ Burnham JP, Wallace MA, Fuller BM, et al. Clinical Effect
of Expedited Pathogen Identification and Susceptibility Testing for
Gram-Negative Bacteremia and Candidemia by Use of the Accelerate
Pheno^TM System. J Appl Lab Med 2019. 3(6):569.
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Charnot-Katsikas, et al.\18\ is an equivalency performance
paper showing ID sensitivity of 95.6 percent and specificity of 99.5
percent and AST EA of 95.1 percent and CA of 95.5 percent. The
applicant explained that the time to results for the Accelerate
PhenoTest^TM BC kit for use with the Accelerate
Pheno^TM system was 41.86 hours faster than standard of care
(VITEK MS for ID and VITEK2 for AST) and reduction in hands-on time was
25.5 minutes per culture.
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\18\ Charnot-Katsikas A, Tesic V, Love N, et al. Use of the
Accelerate Pheno^TM System for Identification and
Antimicrobial Susceptibility Testing of Pathogens in Positive Blood
Cultures and Impact on Time to Results and Workflow. J Clin
Microbiol 2018; 56.
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De Angelis, et al.\19\ is an equivalency performance paper
showing antimicrobial susceptibility testing (AST) categorical
agreement (CA) of 92.7 percent for gram-positive and 99.0 percent for
gram-negative organisms. The applicant explained that the standard of
care was BMD for AST.
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\19\ De Angelis G, Posteraro B, Menchinelli G, et al.
Antimicrobial susceptibility testing of pathogens isolated from
blood culture: a performance comparison of Accelerate
Pheno^TM and VITEK[supreg]2 systems with broth
microdilution method. J Antimicrob Chemother 2019. 74
(Supplement_1):i24-i31.
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Descours, et al.\20\ is an equivalency performance paper
showing ID sensitivity of 96.2 percent and AST EA of 92.3 percent and
CA of 93.7 percent. The applicant explained that the time to results
for the Accelerate PhenoTest^TM BC kit for use with the
Accelerate Pheno^TM system was 24.4 hours faster than MALDI-
TOF MS for ID and VITEK[supreg]2/traditional BMD for AST. According to
the applicant, the study concluded that overall categorical agreement
was decreased for beta-lactams (cefepime 84.4 percent, piperacillin-
tazobactam 86.5 percent, ceftazidime 87.6 percent) or Pseudomonas
aeruginosa (71.9 percent; with cefepime 33.3 percent, piperacillin-
tazobactam 77.8 percent, ceftazidime 0 percent).
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\20\ Descours G, Desmurs L, Hoang TLT, et al. Evaluation of the
Accelerate Pheno^TM system for rapid identification and
antimicrobial susceptibility testing of Gram-negative bacteria in
bloodstream infections. Eur J Clin Microbiol Infect Dis 2018; 37:
1573-83.
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Giordano, et al.\21\ is an equivalency performance paper
showing ID sensitivity of 97 percent and AST CA of 91.3 percent
(breakdown of 94.7 percent gram-positive (GP) and 90.2 percent gram-
negative (GN) organisms) and EA of 81.8 percent. Standard of care was
MALDI-TOF MS for ID and Sensitire/traditional BMD for AST. According to
the applicant, the paper concluded that both methodologies provided
comparable results, showing no statistically significant differences.
The study concluded that the time to obtain ID and AST as well as costs
are lower for Alfred 60AST combined with MALDI-TOF MS; however, the
PhenoTest BC kit provides both identification and MIC determination in
one cartridge. The study noted that both systems were determined to
allow for proper diagnostic stewardship in order to hinder sepsis and
minimize the spread of bacterial resistance.
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\21\ Giordano C, Piccoli E, Brucculeri V, et al. A Prospective
Evaluation of Two Rapid Phenotypical Antimicrobial Susceptibility
Technologies for the Diagnostic Stewardship of Sepsis. Biomed Res
Int 2018; 2018: 6976923.
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Lutgring et al.\22\ is an equivalency performance paper
showing ID sensitivity of 94.7 percent and

[[Page 32591]]

specificity of 98.9 percent and AST CA of 94.1 percent. The applicant
explained that the time to results for the Accelerate
PhenoTest^TM BC kit for use with the Accelerate
Pheno^TM system was 48.4 hours faster than standard of care
(MicroScan WalkAway (ID and AST), MALDI or biochemical or API strips
(ID)).
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\22\ Lutgring JD, Bittencourt C, McElvania TeKippe E, et al.
Evaluation of the Accelerate Pheno^TM System: Results from
Two Academic Medical Centers. J Clin Microbiol 2018; 56.
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The applicant explained that Marschal, et al.\23\ is an
equivalency performance paper showing ID sensitivity of 97.1 percent
and AST CA of 96.4 percent. The applicant explained that the time to
results for the Accelerate PhenoTest^TM BC kit for use with
the Accelerate Pheno^TM system was 40.39 hours faster than
standard of care (MALDI-TOF MS for ID and VITEK[supreg]2/Etest for
AST).
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\23\ Marschal M, Bachmaier J, Autenrieth I, et al. Evaluation of
the Accelerate Pheno System for Fast Identification and
Antimicrobial Susceptibility Testing from Positive Blood Cultures in
Bloodstream Infections Caused by Gram-Negative Pathogens. J Clin
Microbiol 2017; 55: 2116-26.
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Pancholi, et al.\24\ is an equivalency performance paper
showing ID sensitivity of 97.5 percent and specificity of 99.5 percent
and AST CA of 97.6 percent (GP) and 95.4 percent (GN) and AST EA of
97.9 percent (GP) and 94.3 percent GN. The applicant noted that
standard of care was VITEK[supreg]2 for ID and BMD or DD for AST.
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\24\ Pancholi P, Carroll KC, Buchan BW, et al. Multicenter
Evaluation of the Accelerate PhenoTest^TM BC Kit for Rapid
Identification and Phenotypic Antimicrobial Susceptibility Testing
Using Morphokinetic Cellular Analysis. J Clin Microbiol 2018; 56.
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Pantel, et al.\25\ is an equivalency performance paper
showing ID sensitivity of 100 percent and AST CA of 94.9 percent. The
applicant explained that the standard of care was VITEK MS and
VITEK[supreg]2 for ID and DD Etest for AST.
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\25\ Pantel A, Monier J, Lavigne JP. Performance of the
Accelerate Pheno^TM system for identification and
antimicrobial susceptibility testing of a panel of multidrug-
resistant Gram-negative bacilli directly from positive blood
cultures. J Antimicrob Chemother 2018; 73: 1546-52.
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Sofjan, et al.,\26\ is an equivalency performance paper
showing ID sensitivity of 98.0 percent and specificity of 99.5 percent
and AST EA of 97.4 percent and CA of 97.9 percent. The applicant
explained that the time to results for the Accelerate
PhenoTest^TM BC kit for use with the Accelerate
Pheno^TM system was 63.3 hours faster than standard of care
(VITEK2 (ID and AST), Etest (AST)).
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\26\ Sofjan AK, Casey BO, Xu BA, et al. Accelerate
PhenoTest^TM BC Kit Versus Conventional Methods for
Identification and Antimicrobial Susceptibility Testing of Gram-
Positive Bloodstream Isolates: Potential Implications for
Antimicrobial Stewardship. Ann Pharmacother 2018; 52: 754-62.
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Schneider, et al.\27\ is an equivalency performance paper
showing an AST CA of 94.7 percent. The applicant explained that the
time to results for the Accelerate PhenoTest^TM BC kit for
use with the Accelerate Pheno^TM system was 22.6 hours faster
than standard of care (VITEK2 (AST)).
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\27\ Schneider JG, Wood JB, Smith NW, et al. (2019) Direct
antimicrobial susceptibility testing of positive blood cultures: A
comparison of the accelerate Pheno^TM and VITEK[supreg]2
systems. Diagn Microbiol Infect Dis [epub ahead of print].
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Ward, et al.\28\ is an equivalency performance paper
showing ID sensitivity of 88.0 percent and AST EA of 91.6 percent and
CA of 93.4 percent. According to the applicant, the time to results for
the Accelerate PhenoTest^TM BC kit for use with the
Accelerate Pheno^TM system was 41.95 hours faster than
standard of care (MALDI-TOF MS for ID and VITEK2 + Verigene (BC-GP) for
AST).
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\28\ Ward E, Weller K, Gomez J, et al. Evaluation of a Rapid
System for Antimicrobial Identification and Antimicrobial
Susceptibility Testing in Pediatric Bloodstream Infections. J Clin
Microbiol 2018. 56(9). pii: e00762-18.
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Starr, et al.\29\ is an equivalency performance paper
showing AST EA of 96.5 percent and CA of 94.6 percent. The applicant
explained that the average time to ID was reduced by 24.9
6.9 hours and AST by 36.7 18.9 hours compared with standard
of care (MALDI-TOF MS for ID and MicroScan and BMD for AST).
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\29\ Starr KF, Robinson DC, and Hazen KC. Performance of the
Accelerate Diagnostics Pheno^TM system with resin-
containing BacT/ALERT[supreg] Plus blood culture bottles. Diagn
Microbiol Infect Dis 2019 pii: S0732-8893(18)30345-6.
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Additionally, the applicant provided four outcomes peer reviewed
articles that it stated suggest the Accelerate PhenoTest^TM
BC kit for use with the Accelerate Pheno^TM system improves
clinical outcomes relative to services or technologies previously
available as demonstrated by reducing clinically significant adverse
events.
Ehren, et al.\30\ is a prospective outcome study that
found statistically significant reduction for (1) time to step-down Abx
therapy (p=0.019), (2) time to optimal antibiotic therapy (p=0.024),
and (3) time to definitive therapy (p=0.005). The applicant noted that
statistical significance was achieved despite low sample size of 204.
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\30\ Ehren K, Mei[beta]ner A, Jazmati N, et al. Clinical impact
of rapid species identification from positive blood cultures with
same-day phenotypic antimicrobial susceptibility testing on the
management and outcome of bloodstream infections. Clin Infect Dis
2019. ciz406 [Epub ahead of print].
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Henig, et al., 2018 \31\ is a retrospective outcome study
reporting time to effective therapy (TTET) and time to definitive
therapy (TTDT) of 25.9 h (Interquartile Range (IQR) 18.5, 42.1) and
47.6 h (IQR, 24.9, 79.6), respectively. The applicant explained that
almost half of the patients had potential improvement in TTET and/or
TTDT with Accelerate Pheno^TM system. The applicant explained
that in patients who would have had a benefit the median potential
decreases in TTET and TTDT were 16.6 h (IQR, 5.5 to 30.6) and 29.8 h
(IQR, 13.6 to 43), respectively.
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\31\ Henig O, Kaye KS, Chandramohan S, et al. The Hypothetical
Impact of Accelerate Pheno^TM (ACC) on Time to Effective
Therapy and Time to Definitive Therapy for bloodstream infections
due to drug-resistant Gram-negative bacilli. Antimicrob Agents
Chemother. 2018. Epub ahead of print.
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Henig, et al., 2019 \32\ is a retrospective outcome study
reporting a median time to effective therapy (TTET) of 2.4 h (IQR 0.5,
15.1), and Accelerate Pheno^TM system results could have
improved TTET in 4 patients (2.4%) by a median decrease of 18.9 h (IQR
11.3, 20.4). The applicant explained that the median time to definitive
therapy (TTDT) was 41.4 h (IQR 21.7, 73.3) and Accelerate
Pheno^TM system results could have improved TTDT among 51
patients (30.5%), by a median decrease of 25.4 h (IQR 18.7, 37.5). The
applicant explained that the Accelerate Pheno^TM system
implementation could have led to decreased usage of cefepime (16%
less), aminoglycosides (23%), piperacillin-tazobactam (8%), and
vancomycin (4%). The study noted that the impact of the Accelerate
Pheno^TM system on TTET was small, likely related to the
availability of other rapid diagnostic tests at the study location.
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\32\ Henig O, Cooper CC, Kaye KS, et al. The hypothetical impact
of Accelerate Pheno on time to effective therapy and time to
definitive therapy in an institution with an established
antimicrobial stewardship program current utilizing rapid genotypic
organism/resistance marker identification. J Antimicrob Chemother
2019. 74 (Supplement_1):i32-i39.
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Schneider, et al.\33\ paper had both an outcome and a
performance component. The applicant explained that if Accelerate
PhenoTest results had been available to inform patient care, 25 percent
of patients could have been put on active therapy sooner, while 78
percent of patients who had therapy optimized during hospitalization
could have had therapy optimized sooner. The applicant explained that
additionally, Accelerate Pheno^TM system results

[[Page 32592]]

could have reduced time to de-escalation (16 versus 31 h) and
escalation (19 versus 31 h) compared with SOC. The applicant further
explained that the paper reported an ID sensitivity of 95.9 percent,
specificity of 99.9 percent, AST EA of 94.5 percent, and CA of 93.5
percent. The applicant explained that the time to results for the
Accelerate PhenoTest^TM BC kit for use with the Accelerate
Pheno^TM system was 26 hours faster than SOC (Verigene BCID-
GN and MALDI-TOF MS for ID, and VITEK2 and BMD for AST).
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\33\ Schneider JC, Wood JB, Bryan H, et al. Susceptibility
Provision Enhances Effective De-Escalation (SPEED). Utilizing Rapid
Phenotypic Susceptibility Testing in Gram-Negative Bloodstream
Infections and its Potential Clinical Impact. J Antimicrob Chemother
2019. 74 (Supplement_1):i16-i23.
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Additionally, the applicant provided six posters that were
presented at conferences to support its claims of substantial clinical
improvement.
Dare, et al.\34\ poster provided an interim analysis of a
dataset (N=154) from single center, retrospective chart review study
that showed 3-day reduction in length of stay (LOS) (p=0.03), 2-day
reduction in days on therapy (DOT) (p=0.05), and 36-hour reduction in
time to optimal therapy (TTOT) (p<0.001).
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\34\ Dare, R., McCain, K., Lusardi, K., et al. Impact of
Accelerate Pheno^TM Rapid Blood Culture Detection System
on Laboratory and Clinical Outcomes in Bacteremic Patients. Poster
presented at: ID Week; October 2018, San Francisco, CA. https://idsa.confex.com/idsa/2018/webprogram/Paper70067.html.
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Sheth, et al.\35\ poster provided an interim analysis of a
dataset (N=173) from a quasi-experimental outcome study (with a
prospective and retrospective arm). The applicant explained that it
showed a 2-day reduction in length of stay (LOS) (p=0.002), reduction
in antibiotic intensity score (p=0.0002), and reduction of median days
broad-spectrum antibiotics (p<0.0001).
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\35\ Sheth S, Miller M, Baker S. Impact of rapid identification
and antimicrobial susceptibility testing on antibiotic therapy and
outcomes for patients with Gram-negative bacteraemia or candidaemia
at an acute care hospital. Poster presented at: The 2019 European
Congress of Clinical Microbiology and Infectious Disease (ECCMID);
Amsterdam.
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Chirca, et al.\36\ poster provided a prospective analysis
of positive blood cultures. The applicant explained that it showed that
after the implementation of the Accelerate Pheno^TM system,
there was a decrease in sepsis due to bloodstream infections (BSI) as a
percentage of inpatient mortality and average number of antibiotic
days.
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\36\ Chirca I, Albrecht A, Patel A, et al. Integration of a new
rapid diagnostic test with antimicrobial stewardship in a community
hospital. Poster presented at: The Society for Healthcare
Epidemiology of America 2019 Boston, MA.
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Banerjee, et al.\37\ was a prospective randomized study of
448 patients. The applicant explained that it showed a significant
reduction in the time to results (AST: 13 vs. 54.6 h, p<0.001), time to
first antibiotic modification (8.6 vs. 14.9 h, p=0.02) and time to gram
negative antibiotic modification (17.4 vs. 42.1 h, p<0.0001).
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\37\ Banerjee R, Komarow L, Virk A, et al. Randomized Clinical
Trial Evaluating Clinical Impact of RAPid IDentification and
Antimicrobial Susceptibility Testing for Gram-Negative Bacteremia
(RAPIDS-GN). Poster presented at: ID Week; October 2019, Washington,
DC.
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Pearson, et al.,\38\ provided a quasi-experimental before/
after study of 496 patients. The applicant explained that it showed
significant reduction in length of stay (LOS) (9.54 vs 11.89 days,
p<0.01). reduction in time to optimal therapy days (TTOT) (1.58 v 2.69,
p<0.01), and reduction in time to optimal treatment (95.4% vs 84.6%,
p<0.01).
---------------------------------------------------------------------------

\38\ Pearson C, Lusardi K, McCain K, et al. Impact of Accelerate
Pheno^TM Rapid Blood Culture Detection System with Real
Time Notification versus Standard Antibiotic Stewardship on Clinical
Outcomes in Bacteremic Patients. Abstract and Poster presented at:
ID Week; October 2019, Washington, DC.
---------------------------------------------------------------------------

Kinn, et al.\39\ showed that recommendations (bug-drug
mismatch, de-escalation, dose optimization, and infectious disease
consult) were accepted at a rate of 97.4 percent, according to the
applicant.
---------------------------------------------------------------------------

\39\ Kinn et al. Real-World Impact of Accelerate Pheno
Implementation with Antimicrobial Stewardship Intervention. Poster
presented at IDWeek^TM 2019.
---------------------------------------------------------------------------

The applicant also explained that an oral presentation by Walsh, et
al.\40\ detailed the clinical improvements an institution realized
since implementing the Accelerate PhenoTest^TM BC kit,
including a 4.6 day reduction in days of antimicrobial therapy, a 2.2
day reduction in ICU length of stay, and a decrease in sepsis-related
readmission rates from 21.8 percent to 14.3 percent.
---------------------------------------------------------------------------

\40\ Walsh, Thomas. Impact of Accelerate Pheno^TM
System on Management of Gram Negative Bacteremia at an Academic
Medical Center. Oral presentation given at SCACM West Virginia 2019.
---------------------------------------------------------------------------

The applicant asserted that these studies supported that the
technology represents a substantial clinical improvement, for the
following reasons:
The claim of reduction in time to AST results is supported
by evidence, per the applicant, from 10 out of 19 studies that show the
time to AST results over standard of care (SOC) are 40.1, 40.8, 41.86,
24.4, 48.4, 40.39, 63.3, 22.6, 41.96, and 36.7 hours, which averages to
40.05 hours. The applicant asserted that this reduction shows the
ability to diagnose a medical condition (antibiotic resistance or
susceptibility) earlier than allowed by currently available methods.
The applicant cited the following studies to support this claim:
Brazelton,\41\ Burnham,\42\ Charnot-Katsikas,\43\ Descours,\44\
Lutgring,\45\ Marschal,\46\ Sofjan,\47\ Schneider,\48\ Ward,\49\ and
Starr.\50\
---------------------------------------------------------------------------

\41\ Brazelton de Cardenas JN, Su Y, Rodriguez A, et al.
Evaluation of rapid phenotypic identification and antimicrobial
susceptibility testing in a pediatric oncology center. Diagn
Microbiol Infect Dis 2017; 89: 52-7.
\42\ Burnham JP, Wallace MA, Fuller BM, et al. Clinical Effect
of Expedited Pathogen Identification and Susceptibility Testing for
Gram-Negative Bacteremia and Candidemia by Use of the Accelerate
Pheno^TM System. J Appl Lab Med 2019. 3(6):569.
\43\ Charnot-Katsikas A, Tesic V, Love N, et al. Use of the
Accelerate Pheno^TM System for Identification and
Antimicrobial Susceptibility Testing of Pathogens in Positive Blood
Cultures and Impact on Time to Results and Workflow. J Clin
Microbiol 2018; 56.
\44\ Descours G, Desmurs L, Hoang TLT, et al. Evaluation of the
Accelerate Pheno^TM system for rapid identification and
antimicrobial susceptibility testing of Gram-negative bacteria in
bloodstream infections. Eur J Clin Microbiol Infect Dis 2018; 37:
1573-83.
\45\ Lutgring JD, Bittencourt C, McElvania TeKippe E, et al.
Evaluation of the Accelerate Pheno^TM System: Results from
Two Academic Medical Centers. J Clin Microbiol 2018; 56.
\46\ Marschal M, Bachmaier J, Autenrieth I, et al. Evaluation of
the Accelerate Pheno System for Fast Identification and
Antimicrobial Susceptibility Testing from Positive Blood Cultures in
Bloodstream Infections Caused by Gram-Negative Pathogens. J Clin
Microbiol 2017; 55: 2116-26.
\47\ Sofjan AK, Casey BO, Xu BA, et al. Accelerate
PhenoTest^TM BC Kit Versus Conventional Methods for
Identification and Antimicrobial Susceptibility Testing of Gram-
Positive Bloodstream Isolates: Potential Implications for
Antimicrobial Stewardship. Ann Pharmacother 2018; 52: 754-62.
\48\ Schneider JG, Wood JB, Smith NW, et al. (2019) Direct
antimicrobial susceptibility testing of positive blood cultures: A
comparison of the accelerate Pheno^TM and VITEK[supreg] 2
systems. Diagn Microbiol Infect Dis [epub ahead of print].
\49\ Ward E, Weller K, Gomez J, et al. Evaluation of a Rapid
System for Antimicrobial Identification and Antimicrobial
Susceptibility Testing in Pediatric Bloodstream Infections. J Clin
Microbiol 2018. 56(9). pii: e00762-18.
\50\ Starr KF, Robinson DC, and Hazen KC. Performance of the
Accelerate Diagnostics Pheno^TM system with resin-
containing BacT/ALERT[supreg] Plus blood culture bottles. Diagn
Microbiol Infect Dis 2019 pii: S0732-8893(18)30345-6.
---------------------------------------------------------------------------

The claim of reduction in hands-on time is supported,
according to the applicant, by evidence from the Charnot-Katsikas \51\
study, which the applicant stated shows a reduction in hands on time
observed of 25.5 min per culture over standard of care methods.
---------------------------------------------------------------------------

\51\ Charnot-Katsikas A, Tesic V, Love N, et al. Use of the
Accelerate Pheno^TM System for Identification and
Antimicrobial Susceptibility Testing of Pathogens in Positive Blood
Cultures and Impact on Time to Results and Workflow. J Clin
Microbiol 2018; 56.
---------------------------------------------------------------------------

The applicant stated that the Ehren \52\ study supports
four of its

[[Page 32593]]

claims regarding substantial clinical improvement.
---------------------------------------------------------------------------

\52\ Ehren K, Mei[beta]ner A, Jazmati N, et al. Clinical impact
of rapid species identification from positive blood cultures with
same-day phenotypic antimicrobial susceptibility testing on the
management and outcome of bloodstream infections. Clin Infect Dis
2019. Ciz406 [Epub ahead of print].
---------------------------------------------------------------------------

++ Per the applicant, the claim of decreased time to step-down
therapy is supported by the findings in that study that the time to
step-down antimicrobial therapy was significantly decreased in the
Accelerate Pheno^TM BC kit with antimicrobial stewardship
intervention (12 h; p= 0.019).
++ Per the applicant, the claim of decreased time to initiation of
definitive therapy (TTDT) is supported by the findings that the time to
recommendation of definitive therapy (26.5 vs. 7.7 h, p=0.000) and time
to definitive therapy (TTDT) (25.7 vs. 7.5 h, p=0.005) was
significantly shorter using the Accelerate Pheno^TM BC kit
with antimicrobial stewardship intervention.
++ Per the applicant, the claim of decreased time to optimal
therapy (TTOT) is supported by the findings that the use of Accelerate
Pheno^TM BC kit significantly decreased time from Gram stain
to ID (23 vs. 2.2 h, p<0.001) and AST (23 vs. 7.4 hours, p<0.001) and
decreased time from Gram stain to optimal therapy (11 vs. 7 hours,
p=0.024) and to step-down antimicrobial therapy (27.8 vs. 12 hours,
p=0.019).
++ Per the applicant, the claim of decreased use of aminopenicillin
+ [szlig]-lactamase is supported by the findings that within 5 days
after blood culture draw, utilization of aminopenicillins + [szlig]-
lactamase inhibitors was significantly reduced (26.4 vs. 9.7 h,
p<0.001) in the group with Accelerate Pheno^TM BC kit with
antimicrobial stewardship.
The applicant stated that the first Henig \53\ study
supports two of its claims regarding substantial clinical improvement.
---------------------------------------------------------------------------

\53\ Henig O, Kaye KS, Chandramohan S, et al. The Hypothetical
Impact of Accelerate Pheno^TM (ACC) on Time to Effective
Therapy and Time to Definitive Therapy for bloodstream infections
due to drug-resistant Gram-negative bacilli. Antimicrob Agents
Chemother. 2018. Epub ahead of print.
---------------------------------------------------------------------------

++ Per the applicant, the claim of time to effective therapy (TTET)
is supported by the findings that the TTET was 25.9 h, and almost half
of the patients had potential improvement in TTET and/or TTDT with
Accelerate Pheno^TM BC kit. The applicant explained that in
patients who would have had a benefit, the median potential decrease in
TTET was 16.6 h.
++ Per the applicant, the claim of time to definitive therapy
(TTDT) is supported by the findings that the TTDT was 47.6 h, and
almost half of the patients had potential improvement in TTET and/or
TTDT with Accelerate Pheno^TM BC kit. The applicant explained
that in patients who would have had a benefit, the median potential
decrease in TTDT was 29.8 h.
The applicant stated that the second Henig \54\ study
supports three of its claims regarding substantial clinical
improvement.
---------------------------------------------------------------------------

\54\ Henig O, Cooper CC, Kaye KS, et al. The hypothetical impact
of Accelerate Pheno^TM on time to effective therapy and
time to definitive therapy in an institution with an established
antimicrobial stewardship program current utilizing rapid genotypic
organism/resistance marker identification. J Antimicrob Chemother
2019. 74 (Supplement_1):i32-i39.
---------------------------------------------------------------------------

++ Per the applicant, the claim of time to effective therapy (TTET)
is supported by the conclusion that had the Accelerate
Pheno^TM BC kit results been available, TTET could have been
improved in 2.4 percent of patients by a median decrease of 18.9 h,
with 75 percent of these patients having blood stream infections with
ESBL-producing Enterobaceriaceae.
++ Per the applicant, the claim of decreased use of cefepime,
aminoglycosides, piperacillin-tazobactam, and vancomycin is supported
by the findings that with the Accelerate Pheno^TM BC kit,
results show there was a decreased usage of cefepime (16% less),
aminoglycosides (23%), piperacillin-tazobactam (8%) and vancomycin
(4%).
++ Per the applicant, the claim of time to definitive therapy
(TTDT) is supported by the findings that nearly one-third of patients,
30.5 percent, could have received definitive therapy more rapidly had
Accelerate Pheno^TM BC kit results been available in real
time. Additionally, the applicant explained that a potential benefit in
TTDT was demonstrated in 53 percent of patients with CRE, 61.5 percent
of patients with ESBL,\55\ and 20 percent of patients with non-
fermenting bacteria. The applicant explained that the potential median
decrease in TTDT among those who could have had a benefit if Accelerate
Pheno^TM BC kit results had been available was 25.4 h (IQR,
18.7, 37.5).
---------------------------------------------------------------------------

\55\ CRE = Carbapenem-resistant Enterobacteriaceae, ESBL =
Extended Spectrum Beta-Lactamases.
---------------------------------------------------------------------------

The applicant stated that the Schneider \56\ study
supports two of its claims regarding substantial clinical improvement.
---------------------------------------------------------------------------

\56\ Schneider JC, Wood JB, Bryan H, et al. Susceptibility
Provision Enhances Effective De-Escalation (SPEED). Utilizing Rapid
Phenotypic Susceptibility Testing in Gram-Negative Bloodstream
Infections and its Potential Clinical Impact. J Antimicrob Chemother
2019. 74 (Supplement_1):i16-i23.
---------------------------------------------------------------------------

++ Per the applicant, the claim of decreased time to active therapy
and time to optimal therapy (TTOT) is supported by the findings that if
Accelerate PhenoTest results had been available to inform patient care
25 percent of patients could have been put on active therapy sooner,
and 78 percent of patients who had therapy optimized could have had
therapy optimized sooner.
++ Per the applicant, the claim of ``reduce time to de-escalation
or escalation'' is supported by the findings that the Accelerate
PhenoTest could have reduced the time to de-escalation (16 versus 31 h)
and escalation (19 versus 31 h) compared with standard of care (SOC).
The applicant stated that the Dare \57\ study supports
three of its claims regarding substantial clinical improvement.
---------------------------------------------------------------------------

\57\ Dare, R., McCain, K., Lusardi, K., et al. Impact of
Accelerate Pheno^TM Rapid Blood Culture Detection System
on Laboratory and Clinical Outcomes in Bacteremic Patients. Poster
presented at: ID Week; October 2018, San Francisco, CA.
---------------------------------------------------------------------------

++ Per the applicant, the claim of decreased time to active therapy
and time to optimal therapy (TTOT) is supported by the findings of a
decrease in length of stay from a mean of 12.1 days under the standard
of care to 9.1 days under the Accelerate PhenoTest system.
++ Per the applicant, the claim of time to optimal therapy (TTOT)
is supported by the findings of a reduction from 73.5 hours under the
standard of care to 37.5 hours under the Accelerate PhenoTest system.
++ Per the applicant, the claim of total antibiotic days on therapy
(DOT) is supported by the findings of a reduction from 9 days under the
standard of care to 7 days under the Accelerate PhenoTest system.
The applicant stated that the Sheth \58\ study supports
three of its claims regarding substantial clinical improvement.
---------------------------------------------------------------------------

\58\ Sheth S, Miller M, Baker S. Impact of rapid identification
and antimicrobial susceptibility testing on antibiotic therapy and
outcomes for patients with Gram-negative bacteraemia or candidaemia
at an acute care hospital. Poster presented at: The 2019 European
Congress of Clinical Microbiology and Infectious Disease (ECCMID);
Amsterdam.
---------------------------------------------------------------------------

++ Per the applicant, the claim of reduced length of stay (LOS) is
supported by the findings of a reduction in length of stay from 8 days
with VERIGENE to 6 days with the Accelerate PhenoTest system.
++ Per the applicant, the claim of reduction in antibiotic
intensity score is supported by the findings of a reduction from 16
with VERIGENE to 12 with the Accelerate PhenoTest system.
++ Per the applicant, the claim of reduction of median days broad-

[[Page 32594]]

spectrum antibiotics is supported by the findings of a reduction of
median days on broad-spectrum antibiotics from 2 days with VERIGENE to
1 day with the Accelerate PhenoTest system.
The applicant stated that the Chirca \59\ study supports
two of its claims regarding substantial clinical improvement.
---------------------------------------------------------------------------

\59\ Chirca I, Albrecht A, Patel A, et al. Integration of a new
rapid diagnostic test with antimicrobial stewardship in a community
hospital. Poster presented at: The Society for Healthcare
Epidemiology of America 2019 Boston, MA.
---------------------------------------------------------------------------

++ Per the applicant, the claim of reduction of inpatient mortality
is supported by the findings of a decrease in sepsis due to BSIs \60\
(as a percentage of inpatient mortality) from 10.9 percent to 7 percent
for the duration of the study, with a consistent downward slope. The
applicant noted a statistically significant decrease in inpatient
mortality in cases of proven BSI; the rate of decrease is estimated at
0.27 percent per month with a 95 percent confidence interval of (0.12%-
0.41%) per month, p = 0.001.
---------------------------------------------------------------------------

\60\ BSI = bloodstream infections.
---------------------------------------------------------------------------

++ Per the applicant, the claim of reduction in average number of
antibiotic days is supported by the finding that the average number of
antibiotic days per patient encounter was reduced by 1 full day, from
6.8 to 5.8 days.
The applicant stated that the Banerjee \61\ study supports
three of its claims regarding substantial clinical improvement.
---------------------------------------------------------------------------

\61\ Banerjee R, Komarow L, Virk A, et al. Randomized Clinical
Trial Evaluating Clinical Impact of RAPid IDentification and
Antimicrobial Susceptibility Testing for Gram-Negative Bacteremia
(RAPIDS-GN). Poster presented at: ID Week; October 2019, Washington,
DC.
---------------------------------------------------------------------------

++ Per the applicant, the claim of time to results is supported by
the findings that the Accelerate Pheno^TM system provided
identification (ID) results (2.7 vs. 15.6 h, p<0.001) and antimicrobial
susceptibility test (AST) results (13 vs. 54.6 h, p<0.001) faster than
standard of care (SOC).
++ Per the applicant, the claim of time to first antibiotic
modification is supported by the finding that the average time to first
antibiotic modification was reduced from 14.9 hours to 8.6 hours.
++ Per the applicant, the claim of time to first gram negative
antibiotic modification is supported by the finding that the time to
first gram negative antibiotic modification was reduced from 42.1 hours
to 17.4 hours. The applicant also explained that time to antimicrobial
therapy change was reduced by 24.8 hours for patients with Gram-
negative bacteremia.
The applicant stated that the Pearson \62\ study supports
three of its claims regarding substantial clinical improvement.
---------------------------------------------------------------------------

\62\ Pearson C, Lusardi K, McCain K, et al. Impact of Accelerate
Pheno^TM Rapid Blood Culture Detection System with Real
Time Notification versus Standard Antibiotic Stewardship on Clinical
Outcomes in Bacteremic Patients. Poster presented at: ID Week;
October 2019, Washington, DC.
---------------------------------------------------------------------------

++ Per the applicant, the claim of reduction in length of stay
(LOS) is supported by the findings that the Accelerate
Pheno^TM system showed a significant reduction in length of
stay (9.54 vs 11.89 days, p<0.01).
++ Per the applicant, the claim of time to optimal therapy (TTOT)
is supported by the finding that the Accelerate Pheno^TM
system showed a significant reduction in time to optimal therapy days
(TTOT) (1.58 v 2.69, p<0.01).
++ Per the applicant, the claim of time to optimal treatment
achieved is supported by the finding that the Accelerate
Pheno^TM system showed a significant reduction in time to
optimal treatment (95.4% vs 84.6%, p<0.01). The applicant also noted
that time to optimal antimicrobial therapy was reduced by 19.2 hours,
overall days of antimicrobial therapy were reduced by 1.6 days, and
length of stay was reduced by 2.4 days.
The applicant stated that its claim of acceptance of therapeutic
recommendations is supported by the Kinn \63\ study, which the
applicant stated found that recommendations of bug-drug mismatch, de-
escalation, dose optimization, and infectious disease consultation were
accepted at a rate of 97.4 percent. The applicant also noted that time
to optimal antimicrobial therapy was reduced by 15.3 hours for
bacterimic patients.
---------------------------------------------------------------------------

\63\ Kinn P, Percival K, Ford B, et al. Real-World Impact of
Accelerate Pheno^TM system Implementation with
Antimicrobial Stewardship Intervention. Poster presented at: ID
Week; October 2019, Washington, DC.
---------------------------------------------------------------------------

After reviewing the information submitted by the applicant as part
of its FY 2021 new technology add-on payment application, we are
concerned that the studies the applicant provided are either unclear
about which version of the Accelerate PhenoTest^TM BC kit was
used or indicate that the first version of the device was used in the
study. The applicant appears to rely mainly on studies conducted on the
first version of the device, which has been on the market since
February 2017, as compared to other products to establish substantial
clinical improvement, although it was not always clear in each study
which version was being used. The applicant submitted its application
for new technology add-on payments for the updated version of the
Accelerate PhenoTest^TM BC kit submitted to FDA for 510(k)
clearance in 2019. However, the applicant did not present any clinical
data to distinguish the clinical outcomes achieved by the updated
version as compared to the original version. We would be interested in
additional information on which studies involved the first version of
the device, which has been commercially available since February 2017,
and which studies involved the updated version of the device for which
the applicant submitted its new technology add-on payment application.
We note that several of the studies submitted by the applicant in
support of substantial clinical improvement showed empirical results
that were less favorable to the Accelerate PhenoTest^TM BC
kit as compared to the current standard of care. For instance, an
analysis of discrepant results in Decours et al. found impaired
performance of the Accelerate Pheno^TM system for beta-
lactams (except cefepime) in Enterobacteriales (six very major errors)
and poor performance in P. aeruginosa.\64\ In addition, Giordano et al.
did not show superiority for the Accelerate PhenoTest^TM BC
kit against SOC comparisons (MALDI-TOF for ID and Sensitive/traditional
BMD for AST), on any of several measures including sensitivity and time
to get results back from the testing.\65\
---------------------------------------------------------------------------

\64\ Descours G, Desmurs L, Hoang TLT, et al. Evaluation of the
Accelerate Pheno^TM system for rapid identification and
antimicrobial susceptibility testing of Gram-negative bacteria in
bloodstream infections. Eur J Clin Microbiol Infect Dis 2018; 37:
1573-83.
\65\ Giordano C, Piccoli E, Brucculeri V, et al. A Prospective
Evaluation of Two Rapid Phenotypical Antimicrobial Susceptibility
Technologies for the Diagnostic Stewardship of Sepsis. Biomed Res
Int 2018; 2018: 6976923.
---------------------------------------------------------------------------

We invite public comments on whether the updated version of the
Accelerate PhenoTest^TM BC kit meets the substantial clinical
improvement criterion.
In this section, we summarize and respond to written comments we
received in response to the New Technology Town Hall meeting notice
published in the Federal Register regarding the substantial clinical
improvement criterion for the Accelerate PhenoTest^TM BC kit.
Comment: In response to a question presented at the New Technology
Town Hall meeting, the applicant provided a table with study details on
the clinical outcomes studies they presented, which are also referenced
and summarized in part previously, as well as for study data comparing
clinical outcomes resulting

[[Page 32595]]

from use of the Accelerate PhenoTest[supreg] BC kit to use of standard
of care methodologies for determining antibiotic susceptibility
testing. Regarding Banerjee R., et al., the applicant explained that
the study was conducted at Mayo Clinic and University of California,
Los Angeles; the study type was a multicenter, prospective randomized
controlled trial with a sample of 448 (226 SOC, 222 AXDX); SOC testing
included rapid MALDI-TOF mass spectrometry ID and agar dilution or
broth microdilution AST; and the conclusions were median (interquartile
range) hours to first Gram-negative antibiotic modification (including
escalation and de-escalation) 24.7 hours faster in the AXDX than SOC
group 17.4 (4.9, 72) vs. 42.1 (10.1, 72), p<0.001.\66\ Regarding
Pearson C., et al., the applicant explained that the study was
conducted by University of Arkansas for Medical Science; the study type
was a single center, quasi-experimental study of bacteremic adult
inpatients before and after implementation of AXDX; the N was 496 (188
historical, 155 Intervention 1, 153 Intervention 2); SOC was historical
ID/AST performed using VITEK[supreg] MS and VITEK[supreg]2; and
conclusions were reduced inpatient length of stay (LOS) by 2.4 days,
reduced days on therapy (DOT) by 1.6 days, reduced broad-spectrum Gram-
positive antibiotic therapy by 0.7 days, and reduced broad-spectrum
Gram-negative antibiotic therapy by 1.7 days.\67\ Regarding Kinn P., et
al., the applicant explained that the study was conducted at the
University of Iowa; the study type was observational, which included an
interrupted time series sub-study; the N was 690 (417 in A; 273 in B);
SCO as MALDI for organism identification and VITEK[supreg]2 and/or
Sensititre^TM for AST; and conclusions were implementation of
AXDX with AST review resulted in fast identification and antibiotic
susceptibility results with early optimization of antimicrobial
therapy.\68\ Regarding Walsh T., the applicant explained that the study
was conducted at Allegheny General Hospital (AGH); it was a quasi-
experimental study of bacteremic patients before and after
implementation of AXDX with positive blood cultures tested at AGH from
both AGH and West Penn Hospital; the N was 208 (of non-ICU patients, 78
in the pre-AXDX arm and 63 in the post-AXDX arm, and of ICU patients:
36 in the pre-AXDX arm and 31 in the post-Accelerate arm);
VITEK[supreg]2 was used for both ID and AST results in the control arm;
and conclusions were DOT reduced by 4.6 days, 2.2 day reduction in ICU
LOS, and readmission rate reduced from 21.8 percent to 14.3
percent.\69\ Regarding Sheth S., et al., the applicant explained that
the study was conducted at Peninsula Regional Medical Center; the study
consisted of a retrospective (pre-implementation group with
VERIGENE[supreg] system testing for 100 patients) arm and a prospective
(postimplementation of fast ID/AST with AXDX for 100 patients) group;
the N was 173 (84 in the pre-implementation arm and 89 in the AXDX
arm); SOC was the VERIGENE[supreg] system; and conclusions were reduced
inpatient LOS by 2.0 days, reduced broad-spectrum days on therapy by
2.0 days.\70\
---------------------------------------------------------------------------

\66\ Banerjee R, Komarow L, Virk A, et al. Randomized Clinical
Trial Evaluating Clinical Impact of RAPid IDentification and
Antimicrobial Susceptibility Testing for Gram-Negative Bacteremia
(RAPIDS-GN). Poster presented at: ID Week; October 2019, Washington,
DC.
\67\ Pearson C, Lusardi K, McCain K, et al. Impact of Accelerate
Pheno^TM Rapid Blood Culture Detection System with Real
Time Notification versus Standard Antibiotic Stewardship on Clinical
Outcomes in Bacteremic Patients. Presented at: ID Week; October
2019, Washington, DC.
\68\ Kinn et al., Real-World Impact of Accelerate Pheno
Implementation with Antimicrobial Stewardship Intervention. Poster
presented at IDWeek^TM 2019.
\69\ Walsh, Thomas. Impact of Accelerate Pheno^TM
System on Management of Gram Negative Bacteremia at an Academic
Medical Center. Oral presentation given at SCACM West Virginia 2019.
\70\ Sheth S, Miller M, Baker S. Impact of rapid identification
and antimicrobial susceptibility testing on antibiotic therapy and
outcomes for patients with Gram-negative bacteraemia or candidaemia
at an acute care hospital. Presented at: The 2019 European Congress
of Clinical Microbiology and Infectious Disease (ECCMID); Amsterdam.
---------------------------------------------------------------------------

Response: We appreciate the applicant's further explanation of
these study details and data. We will take this information into
consideration when deciding whether to approve new technology add-on
payments for the Accelerate PhenoTest[supreg] BC kit.
Comment: In response to a question presented at the New Technology
Town Hall meeting, the applicant explained that T2 Biosystems'
instrument is designed for whole blood samples. The applicant stated
that T2 Biosystems has two FDA-cleared assays, a Candida panel with
five target organisms and a Bacteria panel with five target organisms.
The applicant stated that the assay turnaround times for T2 Biosystems
vary from 3 hours to 5 hours. The applicant further stated that neither
of the T2 Biosystems FDA-cleared products provide antibiotic
susceptibility testing results; in other words, they perform
identification only, but do not yield antimicrobial susceptibility/
resistance results. The applicant explained that, in contrast, the
Accelerate PhenoTest[supreg] BC kit contains 116 assays, providing
organism identification results (16 assays: 8 Gram-negative bacterial
targets, 6 Gram-positive bacterial targets and 2 Candida spp.) as well
as antibiotic susceptibility testing (100 assays) information for
approximately 91 percent of positive blood cultures and that it has a
turnaround time of approximately 7 hours after blood culture
positivity. The applicant also stated that antimicrobial susceptibility
testing with the Accelerate PhenoTest[supreg] BC kit is included for
Gram-positive organisms: Ampicillin, Ceftaroline, Erythromycin,
Daptomycin, Linezolid, Vancomycin, Methicillin resistance (cefoxitin),
MLSb (Erythromycin-clindamycin); and for Gram-negative organisms:
Ampicillin-sulbactam, Piperacillin-tazobactam, Cefepime, Ceftazidime,
Ceftriaxone, Ertapenem, Meropenem, Amikacin, Gentamicin, Tobramycin,
Ciprofloxacin, Aztreonam.
Response: We appreciate the applicant's explanation of the
Accelerate PhenoTest[supreg] BC kit and how the technology differs from
T2 Biosystems' instrument. We will take this information into
consideration when deciding whether to approve new technology add-on
payments for the Accelerate PhenoTest[supreg] BC kit.
b. BioFire[supreg] FilmArray[supreg] Pneumonia Panel
BioFire Diagnostics, LLC submitted an application for new
technology add-on payments for the BioFire[supreg] FilmArray[supreg]
Pneumonia Panel for FY 2021. According to the applicant, the
BioFire[supreg] FilmArray[supreg] Pneumonia Panel identifies 33
clinically relevant targets, including bacterial and viral targets,
from sputum (including endotracheal aspirate) and bronchoalveolar
lavage (including mini-BAL) samples in about an hour. The applicant
also stated that for 15 bacteria, the BioFire[supreg] FilmArray[supreg]
Pneumonia Panel provides semi-quantitative results, which may help
determine whether an organism is a colonizer or a pathogen.
According to the applicant, lower respiratory tract infections are
a leading cause of morbidity and mortality. The applicant stated that
world-wide, they are the leading cause of infectious disease death and
the 5th leading overall cause of death.\71\ The applicant

[[Page 32596]]

also asserted that in the United States, community acquired pneumonia
(CAP) is the second most common cause of hospitalization and the most
common infectious disease cause of death.^{72 73} The applicant
also stated that in addition to CAP, Hospital-acquired Pneumonia (HAP)
and Ventilator-associated Pneumonia (VAP) are the most common hospital
acquired infections (HAI) accounting for 22 percent of all HAIs.\74\
According to the applicant, HAP and VAP are of particular concern for
patients admitted to intensive care units (ICUs) where mortality rates
can be up to 50 percent.^{75 76}
---------------------------------------------------------------------------

\71\ Troeger, C., Forouzanfar, M., Rao, P.C., Khalil, I., Brown,
A., Swartz, S., Fullman, N., Mosser, J., Thompson, R.L., Reiner Jr,
R.C. and Abajobir, A., ``Estimates of the global, regional, and
national morbidity, mortality, and aetiologies of lower respiratory
tract infections in 195 countries: a systematic analysis for the
Global Burden of Disease Study 2015,'' The Lancet Infectious
Diseases, 2017, vol. 17(11), pp.1133-1161.
\72\ Xu, J. Murphy SL, Kochanek KD, Bastian BA, ``Deaths: Final
Data for 2013'' Natl Vital Stat Rep, 2016, vol. 64(2), p. 1.
\73\ Pfuntner, A., Wier, L.M., & Stocks, C. ``Most frequent
conditions in US hospitals, 2011,'' Healthcare Cost and Utilization
Project (HCUP) Statistical Brief #162, 2013.
\74\ Magill, S.S., Edwards, J.R., Bamberg, W., Beldavs, Z.G.,
Dumyati, G., Kainer, M.A., Lynfield, R., Maloney, M., McAllister-
Hollod, L., Nadle, J. and Ray, S.M., ``Multistate point-prevalence
survey of health care-associated infections,'' N. Engl. J. of Med.,
2014, vol. 370(13), pp.1198-1208.
\75\ Sopena, N., Sabri[agrave], M. and Neunos 2000 Study Group,
``Multicenter study of hospital-acquired pneumonia in non-ICU
patients,'' Chest, 2005, vol. 127(1), pp. 213-219.
\76\ Esperatti, M., Ferrer, M., Giunta, V., Ranzani, O.T.,
Saucedo, L.M., Bassi, G.L., Blasi, F., Rello, J., Niederman, M.S.
and Torres, A., ``Validation of predictors of adverse outcomes in
hospital-acquired pneumonia in the ICU,'' Crit. Care Med., 2013.
Vol. 41(9), pp.2151-2161.
---------------------------------------------------------------------------

According to the applicant, timely administration of effective
antibiotics is essential for ensuring a good prognosis. The applicant
stated that mortality increases for each hour of delay in initiating
antibiotic therapy for hospitalized pneumonia patients,^{77 78}
and ideally, antimicrobial therapy would be pathogen specific and
guided by the results of microbiology tests. However, the applicant
stated that current microbiologic methods are slow and fail to identify
a causative pathogen in over 50 percent of patients, even when
comprehensive methods are used.\79\ As a result, the applicant noted
that current guidelines recommend empiric treatment with broad spectrum
antibiotics,\80\ and that broad-spectrum antibiotics lead to overuse of
antibiotics, which increases the risk of an antibiotic related adverse
event (for example, diarrhea, allergic reactions, C. difficile
infection) for the patient and contributes to the well-known problem of
antimicrobial resistance. In addition, the applicant noted that 6-15
percent of hospitalized patients with CAP fail to respond to the
initial antibiotic treatment, in part due to ineffective antibiotic
therapy.^{81 82 83 84}
---------------------------------------------------------------------------

\77\ Benenson, R., Magalski, A., Cavanaugh, S. and Williams, E.,
``Effects of a pneumonia clinical pathway on time to antibiotic
treatment, length of stay, and mortality,'' Acad. Emerg. Med., 1999,
vol. 6(12), pp.1243-1248.
\78\ Houck, P.M., Bratzler, D.W., Nsa, W., Ma, A. and Bartlett,
J.G., ``Timing of antibiotic administration and outcomes for
Medicare patients hospitalized with community-acquired pneumonia,''
Arch. Intern. Med., 2004, vol. 164(6), pp.637-644.
\79\ Jain, S., Self, W.H., Wunderink, R.G., Fakhran, S., Balk,
R., Bramley, A.M., Reed, C., Grijalva, C.G., Anderson, E.J.,
Courtney, D.M. and Chappell, J.D., ``Community-acquired pneumonia
requiring hospitalization among US adults,'' N. Engl. J. Med., 2015,
vol. 373(5), pp.415-427.
\80\ Kalil, A.C., Metersky, M.L., Klompas, M., Muscedere, J.,
Sweeney, D.A., Palmer, L.B., Napolitano, L.M., O'Grady, N.P.,
Bartlett, J.G., Carratal[agrave], J. and El Solh, A.A., ``Management
of adults with hospital-acquired and ventilator-associated
pneumonia: 2016 clinical practice guidelines by the Infectious
Diseases Society of America and the American Thoracic Society,''
Clin. Infect. Dis., 2016, vol. 63(5), pp.e61-e111.
\81\ Ros[oacute]n, B., Carratala, J., Fern[aacute]ndez-
Sab[eacute], N., Tubau, F., Manresa, F. and Gudiol, F., ``Causes and
factors associated with early failure in hospitalized patients with
community-acquired pneumonia,'' Arch. Intern. Med., 2004, vol.
164(5), pp.502-508.
\82\ Menendez, R., Torres, A., Zalacain, R., Aspa, J.,
Villasclaras, J.M., Border[iacute]as, L., Moya, J.B., Ruiz-Manzano,
J., de Castro, FR, Blanquer, J. and P[eacute]rez, D., ``Risk factors
of treatment failure in community acquired pneumonia: implications
for disease outcome,'' Thorax, 2004. Vol. 59(11), pp. 960-965.
\83\ Arancibia, F., Ewig, S., Martinez, J.A., Ruiz, M., Bauer,
T., Marcos, M.A., Mensa, J. and Torres, A., ``Antimicrobial
treatment failures in patients with community-acquired pneumonia:
causes and prognostic implications,'' Am. J. Respir. Crit. Care
Med., 2000, vol. 162(1), pp.154-160.
\84\ Men[eacute]ndez, R., Torres, A., Rodr[iacute]guez de
Castro, F., Zalaca[iacute]n, R., Aspa, J., Mart[iacute]n
Villasclaras, J.J., Border[iacute]as, L., Ben[iacute]tez, J.M.M.,
Ruiz-Manzano, J., Blanquer, J. and P[eacute]rez, D., ``Reaching
stability in community-acquired pneumonia: the effects of the
severity of disease, treatment, and the characteristics of
patients,'' Clin. Infect. Dis., 2004, vol. 39(12), pp.1783-1790.
---------------------------------------------------------------------------

According to the applicant, there are three current methods for
determining the causative organism of pneumonia: bacterial culture, lab
developed and commercial singleplex PCR (Polymerase Chain Reaction)
tests, and off-label use of upper respiratory multiplex syndromic
panels.
According to the applicant, semi-quantitative bacterial culture is
routinely performed on lower respiratory specimens. The applicant
explained that a calibrated loop is used to spread sample on
appropriate media. A quadrant streak method is generally employed and,
depending on how many of the quadrants the organism grows in,
determines its semi-quantification. According to the applicant, normal
flora will often grow in all 4 quadrants and technicians must
differentiate between potential pathogens and normal flora, and
potential pathogens are picked from the plate and isolated on another
media plate. According to the applicant, after growing isolate, final
identification and susceptibility is performed.
According to the applicant, there are also FDA and lab developed
tests for single targets that cause pneumonia. The applicant stated
that that these are for the more serious pathogens (for example.
Methicillin resistant Staphylococcus aureus, MRSA) or fastidious
organisms (for example Mycobacterium tuberculosis). According to the
applicant, these tests range from sample-to-answer (Cepheid[supreg]
Xpert[supreg] MTB/RIF) to lab developed tests that are often multi-step
and multiple pieces of equipment that require isolating nucleic acid
from a sample and then adding appropriate reagents to perform a PCR
assay on the isolated nucleic acid.
According to the applicant, a number of academic hospital labs have
also performed off label validation of commercially available
respiratory panels designed for upper respiratory syndromes. The
applicant stated that these tests are used primarily on BAL specimens
for the rapid detection of viral causes of Pneumonia.
With respect to the newness criterion, the BioFire[supreg]
FilmArray[supreg] Pneumonia Panel received FDA clearance via 510(k) on
November 9, 2018, based on a determination of substantial equivalence
to a legally marketed predicate device (Curetis Unyvero^TM).
According to the applicant, the Pneumonia Panel was launched globally
on December 11, 2018. According to the applicant, there was a delay
between FDA clearance date and U.S. market availability (global launch
date) in order to satisfy documentation requirements in preparation of
the global launch. The applicant stated that it has been granted a
Proprietary Laboratory Analyses (PLA) code by the American Medical
Association; PLA Code 0151U was published on October 1st, 2019 and
became effective on January 1st, 2020. According to the applicant, the
PLA code assigned to the BioFire[supreg] FilmArray[supreg] Pneumonia
Panel uniquely identifies this test and no other technologies use this
code. Currently, there are no ICD-10-PCS procedure codes to uniquely
identify procedures involving the BioFire[supreg] FilmArray[supreg]
Pneumonia Panel. We note that the applicant has submitted a request for
approval for a unique ICD-10-PCS code for the administration of the
BioFire[supreg] FilmArray[supreg] Pneumonia Panel beginning in FY 2021.
As discussed previously, if a technology meets all three of the
substantial similarity criteria, it would be considered substantially
similar to an existing technology and would not be

[[Page 32597]]

considered ``new'' for purposes of new technology add-on payments.
With regard to the first criterion, whether a product uses the same
or similar mechanism of action to achieve a therapeutic outcome,
according to the applicant, the BioFire[supreg] FilmArray[supreg]
Pneumonia Panel is the only sample-to-answer, rapid (~1 hour), and
comprehensive molecular panel available for the diagnosis of the major
causes of infectious pneumonia. The applicant further explained that
the BioFire[supreg] FilmArray[supreg] Pneumonia Panel is also the only
semi-quantitative molecular solution available for rapidly diagnosing
infectious causes of pneumonia. The applicant noted that this important
feature allows labs and clinicians to better differentiate whether an
organism is normal flora or the cause of the patient's illness. The
applicant asserted that the current best practice is standard culture
technique, discussed previously. The applicant further stated that
other comprehensive molecular technologies include Curetis
Unyvero^TM which is a multi-step process, only has bacterial
targets, and only provides qualitative results for all of its targets.
With respect to the second criterion, whether a product is assigned
to the same or a different MS-DRG, the applicant stated that potential
cases representing patients who may be eligible for treatment involving
the BioFire[supreg] FilmArray[supreg] Pneumonia Panel would be assigned
to the same MS-DRGs as cases representing patients who receive
diagnostic information from competing technologies.
With respect to the third criterion, whether the new use of the
technology involves the treatment of the same or similar type of
disease and the same or similar patient population, according to the
applicant, the BioFire[supreg] FilmArray[supreg] Pneumonia Panel is the
only FDA cleared comprehensive molecular panel approved for use on both
sputum (including endotracheal aspirate) and bronchoalveolar lavage
(including mini-BAL) samples allowing for diagnosis of pneumonia in
hospital, community, and ventilator associated populations. The
applicant stated that the BioFire[supreg] FilmArray[supreg] Pneumonia
Panel is also the only molecular panel that detects both bacterial and
viral causes of lower respiratory infections and pneumonia.
In addition, the applicant added that the ability of the
BioFire[supreg] FilmArray[supreg] Pneumonia Panel to detect pathogens
and related susceptibility traits is a unique feature of the panel that
differentiates it from existing respiratory panels that have been
designed and approved for use on upper respiratory specimens and not
lower respiratory specimens. The applicant stated that Furukawa, D., et
al., evaluated the ability of the BioFire[supreg] FilmArray[supreg]
Pneumonia Panel to detect pathogens and related susceptibility traits,
specifically looking at the impact of MRSA detection, and showed that
the BioFire[supreg] FilmArray[supreg] Pneumonia panel has the potential
to significantly expedite time to MRSA results allowing for rapid
escalation or de-escalation of therapy.\85\
---------------------------------------------------------------------------

\85\ Furukawa, D., Kim, B., Jeng, A., BioFire[supreg]
FilmArray[supreg] Pneumonia Panel: A Powerful Rapid Diagnostic Test
for Antimicrobial Stewardship. Poster presented at Infectious
Disease Week; 2019 October 2-6. Washington, DC.
---------------------------------------------------------------------------

Based on the applicant's statements as presented previously, we are
concerned there is insufficient information to determine whether the
BioFire[supreg] FilmArray[supreg] Pneumonia Panel mechanism of action
is different from existing products. In the FDA decision summary, the
test is described as a multiplex nucleic acid test, or PCR accompanied
by the applicant's software. However, it is unclear from the new
technology add-on payment application how the mechanism of action is
new or different from other products that utilize PCR. While the
applicant described this test as the only sample-to-answer, rapid (~1
hour), and comprehensive molecular panel available for the diagnosis of
the major causes of infectious pneumonia and as also semi-quantitative,
and further described another comprehensive molecular product (Curetis
Unyvero^TM) as having only bacterial targets and providing
only qualitative results for all of its targets, we are uncertain how
the underlying mechanism of action of the BioFire[supreg]
FilmArray[supreg] Pneumonia Panel is different from existing PCR-based
tests. Additionally, based on the information provided by the
applicant, it appears as though the product does not treat a different
disease or population compared to other products. Finally, with respect
to the Furukawa study, which the applicant cited to support that the
BioFire has the potential to specifically expedite time to MRSA results
allowing for rapid escalation or de-escalation of therapy, we note that
the study authors also concluded that the BioFire[supreg]
FilmArray[supreg] Pneumonia Panel ``has good agreement with SOC for
detection of bacteria and viruses'' and that the BioFire[supreg]
FilmArray[supreg] Pneumonia Panel ``detects additional S. aureus
bacteria not reported by SOC,'' but that ``[a]dditional S. aureus
detection are more likely to be at low concentration and are of unclear
clinical significance.'' We are inviting public comments on whether the
BioFire[supreg] FilmArray[supreg] Pneumonia Panel is substantially
similar to other technologies and whether the BioFire[supreg]
FilmArray[supreg] Pneumonia Panel meets the newness criterion.
With regard to the cost criterion, the applicant conducted the
following analysis to demonstrate that the technology meets the cost
criterion.
The applicant stated that it used 2018 data from Definitive Health
Care at defhc.com, and that it searched these data for cases in MS-DRGs
193, 194, and 195 (Simple Pneumonia and Pleurisy with MCC, with CC, and
without CC/MCC, respectively), which resulted in 297,956 cases. The
applicant indicated that the data was from proprietary data drawn from
one hospital in Indianapolis in 2018. However, the scope of the data as
described by the applicant is unclear to us, as it seems unlikely that
a single hospital in Indiana would have observed 297, 956 cases of
simple pneumonia in 1 year. It is also not clear how these cases
correspond to any of the later steps in the cost analysis. For example,
the applicant did not indicate whether the charge values from the data
are based on the same 297,956 cases identified in the three MS-DRGs.
In its analysis, the applicant stated that no charges were removed
for any prior technologies as the BioFire[supreg] FilmArray[supreg]
Pneumonia Panel does not eliminate culture testing of specimens. The
applicant standardized the charges and then inflated the charges. The
applicant reported using an inflation factor of 5.50 percent based on
the charge inflation factor published by CMS in the FY 2020 IPPS/LTCH
PPS final rule (84 FR 42629). The applicant appears to have made a
minor error in this inflation factor, since the actual, 1-year
inflation factor in the FY 2020 IPPS/LTCH PPS final rule was 5.4
percent. To estimate the cost of the technology, the applicant used the
per-test list price cost of the BioFire[supreg] FilmArray[supreg]
Pneumonia Panel. The applicant indicated that it did not incorporate an
estimate of technician time spent administering the test, asserting
that ``2-5 minutes of technician time is nearly obsolete due to ease of
use of the test.'' The applicant also indicated that it did not
incorporate an estimate of instrumentation cost into its costing of the
BioFire[supreg] FilmArray[supreg] Pneumonia Panel, noting that ``a
number of'' labs already have sufficient instrumentation to run the
BioFire[supreg] FilmArray[supreg] Pneumonia Panel test. The applicant
added charges for the BioFire[supreg] FilmArray[supreg] Pneumonia Panel
based on an estimated range of projected

[[Page 32598]]

patient charges for the BioFire[supreg] FilmArray[supreg] Pneumonia
Panel technology. The applicant stated that the charge to the patient
varies by location and the methodology of the hospital or lab charge
master. The applicant noted that the estimate was based on patient
charges for other BioFire products that had been reported by hospitals
and reference labs. Based on this analysis, the applicant computed a
final inflated average case-weighted standardized charge per case of
$78,156, as compared to an average case-weighted threshold amount of
$42,812. Because the final inflated average case-weighted standardized
charge per case exceeded the average case-weighted threshold amount,
the applicant asserted that the technology meets the cost criterion.
We are concerned that many of the calculated values in the
applicant's analysis, such as the average-cost-per case, unweighted and
unstandardized, were reportedly based on proprietary claims data that
came from one hospital in Indianapolis. We are concerned that an
analysis based on one hospital would not adequately represent the cost
of cases using the BioFire[supreg] FilmArray[supreg] Pneumonia Panel as
the data could be skewed or biased based on one hospital. We are also
concerned with the lack of description of how the BioFire[supreg]
FilmArray[supreg] Pneumonia Panel maps to the three MS-DRGs for simple
pneumonia (that is, MS-DRGs 193, 194 and 195); for example, whether the
analysis included all the cases in these MS-DRGs or was limited to
specific cases. We note there are several additional pneumonia-related
MS-DRGs to which we believe potential cases that may be eligible for
the use of the product could be mapped, but which were not included in
the cost analysis; for example, MS-DRGs 177, 178 and 179 (Respiratory
Infections and Inflammations with MCC, with CC, and without CC/MCC,
respectively) and MS-DRGs 974, 975, and 976 (HIV with Major Related
Condition with MCC, with CC, and without CC/MCC, respectively).
We are inviting public comments on whether the BioFire[supreg]
FilmArray[supreg] Pneumonia Panel meets the cost criterion.
With respect to the substantial clinical improvement criterion, the
applicant asserted that data from studies conducted with the
BioFire[supreg] FilmArray[supreg] Pneumonia Panel show that it can
detect major causes of pneumonia with a high degree of sensitivity and
specificity in a clinically relevant timeframe. The applicant explained
that results from the BioFire[supreg] FilmArray[supreg] Pneumonia Panel
also have the potential to impact antibiotic usage and lead to improved
stewardship and possible cost savings.
The applicant submitted four studies presented as posters at
national conferences to support its assertion that the product
represents a substantial clinical improvement, noting that data for
this test is still new and has not yet been published in academic
journals.
According to the applicant, Buchan, et al. compared the results of
conventional testing (bacterial culture and clinician directed
molecular testing for viruses and atypical bacteria) with the results
from the BioFire[supreg] FilmArray[supreg] Pneumonia Panel for 259 BAL
and 48 sputum samples.\86\ We note that in their poster, Buchan, et al.
specified that conventional testing specifically included bacterial
culture and PCR based on clinician order. Also, while Buchan, et al.
did report on the BAL specimens, the poster did not appear to report
information regarding sputum samples. According to Buchan, et al.,
specimens were obtained from inpatients aged 18 years and older with
symptoms of respiratory tract infection at 8 hospitals in the US. Chart
review was conducted to determine type and duration of antibiotic
therapy for each subject. According to the applicant, at least one
bacterial pathogen was identified by standard methods and by the
BioFire[supreg] FilmArray[supreg] Pneumonia Panel for 23 percent of
BALs samples (n=60) and 35 percent (n=17) of sputum samples; however,
the BioFire[supreg] FilmArray[supreg] Pneumonia Panel detected a
bacterial pathogen in an additional 15 percent (n=40) of BAL samples
and 21 percent (n=10) of the sputum samples. For the 259 BAL samples,
75 bacteria were identified by both standard methods and by the
BioFire[supreg] FilmArray[supreg] Pneumonia Panel. The applicant noted
that the BioFire[supreg] FilmArray[supreg] Pneumonia Panel identified
an additional 84 bacteria, with the most common detections for
Staphylococcus aureus (N=21), Haemophilus influenzea (n=19), Moxaella
catarrhalis (n=8), Pseudomonas aeruginosa (n=6) and Klebsiella oxytoca
(n=6). The applicant also explained that an evaluation of the medical
and laboratory records for the affected patients found that 50 percent
had been on antibiotics within 72 hours of samples collection, 42
percent of the organisms may have been present in the culture but were
not reported (due either to low quantification (<10\4\ cfu/mL) or the
presence of mixed colonies) and only 8 percent of the detections were
unexplained.
---------------------------------------------------------------------------

\86\ Buchan, B.W., Windham, S., Faron, M.L., et al. Clinical
Evaluation and Potential Impact of a Semi-Quantitative Multiplex
Molecular Assay for the Identification of Pathogenic Bacteria and
Viruses in Lower Respiratory Specimens. Poster presented at American
Thoracic Society; 2018 May 02. San Diego, CA.
---------------------------------------------------------------------------

According to the applicant, an important feature of the
BioFire[supreg] FilmArray[supreg] Pneumonia Panel is the inclusion of
assays for viral agents. The applicant noted that in Buchan, et al.,
the BioFire[supreg] FilmArray[supreg] Pneumonia Panel identified at
least 1 virus in 19 percent of 259 BAL samples from hospitalized adults
\87\ and viruses were the only pathogen detection in 12 percent (n=31)
of BAL specimens, while 7 percent (n=18) had both bacterial and viral
pathogen detections. The applicant summarized that the most common
viral pathogens were human rhinovirus (n=17), coronavirus (n=9) and
influenza (n=5). Twenty-three percent of the samples with a viral
detection had a corresponding test ordered as part of standard of care.
The applicant stated that this finding highlights that the role of
viruses in pneumonia is still under appreciated. The applicant further
stated that identification of a viral agent in the absence of a
bacterial detection may allow reduction in the use of antibiotics.
---------------------------------------------------------------------------

\87\ Ibid.
---------------------------------------------------------------------------

According to the applicant, the ability of the BioFire[supreg]
FilmArray[supreg] Pneumonia Panel to impact patient management has been
evaluated by two different groups (Buchan, et al. and Enne, et al). The
applicant stated that Buchan, et al., performed a theoretical outcomes
analysis by using the result of the BioFire[supreg] FilmArray[supreg]
Pneumonia Panel to modify antimicrobial therapy and then judge if the
modification was correct using the final microbiology results. The
applicant explained that in this analysis of 243 BAL samples, 68
percent (n=165) could have had an antibiotic adjustment; 48 percent
(n=122) would have had antibiotics appropriately de-escalated or
discontinued, 31 percent (n=78) would have had no change, and 2 percent
(n=5) would have had appropriate escalation or initiation of
antibiotics.\88\ Alternately, 17 percent (n=42) would have received
inappropriate escalation and 2 percent (n=6) would have received
inappropriate de-escalation when compared to culture results. The
applicant summarized that the most common de-escalations occurred due
to discontinuation of vancomycin due to non-detection of MRSA (35
percent) and discontinuation of piperacillin/tazobactam due to non-
detection of Enterobacteriaceae (23 percent).

[[Page 32599]]

According to the applicant, the de-escalation due to non-detection of
these pathogens is possible because the increased sensitivity of the
BioFire[supreg] FilmArray[supreg] Pneumonia Panel for detection of
bacterial pathogen provides a high negative predictive value for these
non-detections. The applicant explained that the authors estimated the
results could have potentially saved >18,000 antibiotic hours equating
to an average of 6.5 days/patient (we note that in the poster by
Buchan, et al., they reported an average of 6.2 d/patient rather than
6.5 mentioned in the application).\89\
---------------------------------------------------------------------------

\88\ Ibid.
\89\ Ibid.
---------------------------------------------------------------------------

According to the applicant, in an analysis of 120 ICU patients (79
males and 41 females; 33 children, with a median age of 1; and adults
with a median age of 68) in the UK by Enne, et al., patients were
divided into a group with positive outcomes (pneumonia resolved within
21 days) and negative outcomes (pneumonia not resolved in 21 days or
contributed to the patient's death). Enne, et al., evaluated the
appropriateness of antimicrobials used for HAP/VAP versus both routine
culture and two rapid PCR tests, BioFire[supreg] FilmArray[supreg]
Pneumonia Panel (1h) and Curetis Unyvero^TM Pneumonia Panel
(5.5h). Consented or assented ICU patients were recruited at 4 diverse
UK hospitals: 1 district general, 1 tertiary referral, 1 children's and
1 private. Patients were those starting or changing antibiotics for
suspected pneumonia, already hospitalized for >48h and with a timely
respiratory sample. According to the applicant, the results of the
BioFire[supreg] FilmArray[supreg] Pneumonia Panel and routine culture
were evaluated to determine if the test results would have identified
the antibiotic therapy as active or inactive. The applicant explained
that in the group with positive outcomes, the results of the
BioFire[supreg] FilmArray[supreg] Pneumonia Panel were able to
correctly classify the patient's therapy as active for 35 percent of
patients compared to only 20 percent for routine culture (p=0.005). The
applicant also explained that in the group of 27 percent of patients
that had negative outcomes, the results of the BioFire[supreg]
FilmArray[supreg] Pneumonia Panel would have classified the initial
antibiotic therapy as inactive for 41 percent of patients compared to
only 15.6 percent for routine culture.\90\ The study authors also
reported that routine microbiology and Curetis Unyvero^TM
detected a potential pathogen in 41.7 percent and 59.2 percent of
specimens respectively, whereas BioFire[supreg] FilmArray[supreg]
Pneumonia Panel detected a potential pathogen in 66.7 percent of
respiratory samples from patients enrolled in the study. The applicant
stated that these study results indicate that the test results of the
BioFire[supreg] FilmArray[supreg] Pneumonia Panel provide information
that can lead to more targeted and effective therapy in a shorter
period of time, and may help to improve patient outcomes.
---------------------------------------------------------------------------

\90\ Enne, V.I., Baldan, R., Russell, C., et al. INHALE WP2:
Appropriateness of Antimicrobial Prescribing for Hospital-acquired
and Ventilator-associated Pneumonia (HAP/VAP) in UK ICUs assessed
against PCR-based Molecular Diagnostic Tests. Poster presented at
European Congress of Clinical Microbiology and Infectious Disease;
2019 April 13-16. Amsterdam, Netherlands.
---------------------------------------------------------------------------

The applicant also submitted Rand et al., which conducted a
retrospective analysis of BAL (n=197) and endotracheal aspirates (n=93)
samples from 270 unique hospitalized patients that were collected and
stored at -70 [deg]C until thawed and tested on the BioFire[supreg]
FilmArray[supreg] Pneumonia Panel compared to routine microbiology
results.\91\ Patient data were extracted from the electronic medical
record. Cultures were performed by standard methods and identified by
Vitek II and mass spectrometry. The applicant explained that the
authors found a high correlation between standard methods and
BioFire[supreg] FilmArray[supreg] results and that the authors
concluded the BioFire[supreg] FilmArray[supreg] Pneumonia Panel would
have had a significant impact on time to result which could potentially
lead to more rapid and appropriate use of antibiotics. The applicant
also noted that the authors found significant association with
clinical/outcome variables and that the BioFire[supreg]
FilmArray[supreg] Pneumonia Panel's semi-quantification was ``at least
as strong'' as standard culture methods, which according to the
applicant, have been developed and improved over decades.
---------------------------------------------------------------------------

\91\ Rand, K.H., Beal S.G., Cherabuddi, K., et al. Relationship
of a Multiplex Molecular Pneumonia Panel (PP) Results with Hospital
Outcomes and Clinical Variables. Poster presented at Infectious
Disease Week; 2019 October 2-6. Washington, DC.
---------------------------------------------------------------------------

The applicant also submitted White et al., which conducted a
comparison of the BioFire[supreg] FilmArray[supreg] Pneumonia Panel on
sputum samples to a multi-test diagnostic bundle for patients admitted
from the emergency department (ED) with community acquired pneumonia
(CAP).\92\ We note that White et al., specifically described the
diagnostic bundle as including the following: (1) Blood Cultures; (2)
Sputum culture and sensitivity; (3) Urine antigens: Legionella and S.
pneumoniae; (4) Nasal swab (NS) PCR for MRSA and S. pneumoniae; (5)
FilmArray (Biofire) PCR Panel (NS): Detects 17 viruses, 4 bacteria. Of
585 enrolled patients, 278 were evaluable. The applicant explained that
the authors found that the BioFire[supreg] FilmArray[supreg] Pneumonia
Panel detected a higher rate of potential pathogens than the multi-test
bundle (90.6 percent versus 81 percent). The applicant also noted that
the authors determined that the urine antigen testing, S. aureus and S.
pnuemoniae, and PCR upper respiratory panel use could be eliminated for
this sample/patient type in the future.\93\
---------------------------------------------------------------------------

\92\ White, E., Ferdosian, S., Gelfer, G., et al., Sputum
FilmArray Pneumonia Panel Outperforms A Diagnostic Bundle in
Hospitalized CAP Patients. Poster presented at Infectious Disease
Week; 2019 October 2-6. Washington, DC.
\93\ Ibid.
---------------------------------------------------------------------------

The applicant also submitted a poster by Furukawa et al., which
reported a retrospective case review of 43 samples (17 used for
clinical use and 26 obtained randomly by microbiology lab) in which
BioFire[supreg] FilmArray[supreg] Multiplex PCR was utilized.\94\
According to the applicant, initial use of BioFire FilmArray Pneumonia
panel had 100 percent intervention rate leading to de-escalation or
prevention of inappropriate antibiotics and the authors found that
there was a low risk of unnecessary antibiotics being administered due
to the increased sensitivity of the BioFire[supreg] FilmArray[supreg]
Pneumonia panel. The applicant added that the authors believe that with
additional data they may be able to discontinue empiric broad spectrum
coverage due to the rapid and sensitive nature of the BioFire FilmArray
Pneumonia Panel. The applicant also noted that they have a number of
ongoing prospective studies being conducted to further support their
claims.
---------------------------------------------------------------------------

\94\ Furukawa, D., Kim, B., Jeng, A., BioFire[supreg]
FilmArray[supreg] Pneumonia Panel: A Powerful Rapid Diagnostic Test
for Antimicrobial Stewardship. Poster presented at Infectious
Disease Week; 2019 October 2-6. Washington, DC.
---------------------------------------------------------------------------

The applicant asserted that Buchan, et al. and Rand et al. support
their claim of decreased time to actionable results based on-- (1) the
conclusion in Buchan, et al., that greater than 60 percent of patients
potentially could have had an antibiotic adjustment 3-4 days earlier
than standard methods based on BioFire[supreg] FilmArray[supreg]
Pneumonia Panel results, and (2) the conclusion in Rand et al., that
the BioFire[supreg] FilmArray[supreg] Pneumonia Panel would have a
major impact on the time to report potential pathogens that may cause
Pneumonia in intubated/ICU patients.
The applicant asserted that Buchan, et al., and Enne V.I. et al.
support their

[[Page 32600]]

claim of improved antibiotic stewardship. The applicant pointed to the
conclusions in Buchan, et al., that >60 percent of patients potentially
could have had an antibiotic adjustment with BioFire[supreg]
FilmArray[supreg] Pneumonia Panel results and 50 percent of potential
antibiotic adjustments from BioFire[supreg] FilmArray[supreg] Pneumonia
Panel testing were discontinuation or narrowing, as well as the
estimate that the BioFire[supreg] FilmArray[supreg] Pneumonia Panel
results enabled >18,000 antibiotic hours saved on 243 patients. The
applicant pointed to Enne V.I. et al., for the results that of the 27
percent of patients who had negative outcomes, 15.6 percent had a
pathogen resistant to initial therapy based on culture and 41.9 percent
were resistant to initial therapy based on BioFire[supreg]
FilmArray[supreg] Pneumonia Panel results (p=0.029).
The applicant asserted that White E., et al., and Enne, et al.
support its claim of increased diagnostic yield because White et al.
concluded that of patients with a final diagnosis of pneumonia,
BioFire[supreg] FilmArray[supreg] Pneumonia Panel detected a potential
pathogen in 90.6 percent compared to 81 percent with standard methods,
and Enne, et al. reported that routine methods detected a pathogen in
41.7 percent of specimens compared to the BioFire[supreg]
FilmArray[supreg] Pneumonia Panel which detected a pathogen in 66.7
percent of specimens.
In summary, the applicant explained that lower respiratory tract
infections are a common and serious health care problem, current
diagnostic tests are slow and do not identify a causative pathogen in
over 50 percent of patients, and the BioFire[supreg] FilmArray[supreg]
Pneumonia Panel is an easy-to-use multiplex panel that has been shown
to increase diagnostic yield and significantly decrease time to results
when compared to standard testing both because of improved test
sensitivity and because it includes assays for typical bacteria,
viruses and selected antibiotic resistance genes. According to the
applicant, retrospective review of BioFire[supreg] FilmArray[supreg]
Pneumonia Panel and patient data indicates a potential to impact
antibiotic utilization to ensure patients are on appropriate therapy in
a timely manner. The applicant also noted that molecular testing for
pneumonia is relatively new and there is a lot to learn about how to
best use these tests, and that there are currently several prospective
studies underway to clarify the role that this tool may play in
improving the outcomes for patients with pneumonia, reducing use of
unnecessary antibiotics, improving targeted therapy and potentially
reducing health care costs due to more directed and efficient patient
management. According to the applicant, early theoretical outcomes
evaluations provide reason to be optimistic.
We note that the studies the applicant submitted to support its
assertions regarding substantial clinical improvement were presented
only as posters, and that information pertaining to full manuscripts
with further study details were not provided. It is also unclear if the
studies described in the posters have been submitted for peer-reviewed
publication or whether full manuscripts with detailed methods and data
tables are available.
We are concerned that the studies do not appear to be designed or
powered to be able to show conclusive evidence of clinical impact. In
particular, the studies appear to describe analysis of clinical results
for patients and state that there is potential for the results to
impact clinical decisions about antimicrobial therapy. However, it
appears the applicant did not submit evidence of the BioFire[supreg]
FilmArray[supreg] Pneumonia Panel product in real world, prospective
use (randomized or non-randomized) with actual antimicrobial decisions
or effect on patient management. This may require larger sample sizes.
We are also concerned that only one study provided by the applicant
(Enne, V.I., et al.) compared BioFire[supreg] FilmArray[supreg]
Pneumonia Panel to Curetis Unyvero^TM, which is another PCR-
based technology, and that a statistical difference was not reported
between BioFire and Unyvero for the outcomes reported in the poster.
While we understand that Curetis Unyvero^TM may be somewhat
slower than BioFire[supreg] FilmArray[supreg] Pneumonia Panel and does
not include viruses, the clinical impact of the differences between
these two products is unclear. We are also uncertain how Buchan, et al.
calculated their estimate that >18,000 antibiotic hours were saved on
243 patients using the BioFire[supreg] FilmArray[supreg] Pneumonia
Panel results. The applicant stated that there are currently several
prospective studies underway to clarify the role that this tool may
play in improving the outcomes for patients with pneumonia, reducing
use of unnecessary antibiotics, improving targeted therapy and
potentially reducing health care costs due to more directed and
efficient patient management; however, data or results from those
studies were not included with the application.
We welcome public comment on whether the BioFire[supreg]
FilmArray[supreg] Pneumonia Panel meets the substantial clinical
improvement criterion.
We did not receive any written public comments in response to the
New Technology Town Hall meeting notice published in the Federal
Register regarding the substantial clinical improvement criterion for
the BioFire[supreg] FilmArray[supreg] Pneumonia Panel or at the New
Technology Town Hall meeting.
c. ContaCT
Viz.ai Inc. submitted an application for new technology add-on
payments for ContaCT for FY 2021. The individual components of ContaCT
are currently marketed by Viz.ai, Inc. under the tradenames ``Viz LVO''
(for the algorithm), ``Viz Hub'' (for the text messaging and calling
platform), and ``Viz View'' (for the mobile image viewer). According to
the applicant, ContaCT is a radiological computer-assisted triage and
notification software system intended for use by hospital networks and
trained clinicians. The applicant asserted that ContaCT analyzes
computed tomography angiogram (CTA) images of the brain acquired in the
acute setting, sends notifications to a neurovascular specialist(s)
that a suspected large vessel occlusion (LVO) has been identified, and
recommends review of those images.
The applicant asserted early notification of the stroke team can
reduce time to treatment and increase access to effective specialist
treatments, like mechanical thrombectomy. Specifically, the applicant
asserted that shortening the time to identification of LVO is critical
because the efficacy of thrombectomy in patients with acute ischemic
stroke decreases as the time from symptom onset to treatment increases.
The applicant also asserted in a condition like stroke, where 1.9
million neurons die every minute and for which 34 percent of patients
hospitalized are under the age of 65, reducing time to treatment
results in reduced disability.\95\ The applicant asserted ContaCT
streamlines the standard workflow using artificial intelligence to
substantially shorten the period of time between when a patient
receives a stroke CT/CTA and when the patient is referred to a stroke
neurologist and neurointerventional surgeon.
---------------------------------------------------------------------------

\95\ Hall MJ, Levant S, DeFrances CJ. Hospitalization for stroke
in U.S. hospitals, 1989-2009. NCHS data brief, no 95. Hyattsville,
MD: National Center for Health Statistics. 2012. https://www.cdc.gov/nchs/data/databriefs/db95.pdf.
---------------------------------------------------------------------------

With respect to the newness criterion, according to the applicant,
FDA granted marketing authorization to ContaCT on February 13, 2018
under the de novo pathway, which is only available to devices of a new
type with low-to-

[[Page 32601]]

moderate risk for which there are no legally marketed predicates, and
classified it as a Class II medical device. We note that FDA issued a
de novo order memorandum describing ContaCT as ``an artificial
intelligence algorithm [used] to analyze images for findings suggestive
of a pre-specified clinical condition and to notify an appropriate
medical specialist of these findings in parallel to standard of care
image interpretation.'' The order specified that ``identification of
suspected findings is not for diagnostic use beyond notification.''
The applicant asserted ContaCT was not available immediately after
FDA's marketing authorization due to establishing Quality Management
Systems and processes for distributing ContaCT as well as staff
training and installation. Per the applicant, ContaCT was not
commercially available until October 2018.
We note the applicant has submitted a request to the ICD-10
Coordination and Maintenance Committee for approval for a unique ICD-
10-PCS procedure code, effective in FY 2021, to describe procedures
that use ContaCT. Currently, there are no ICD-10-PCS procedure codes to
uniquely identify procedures involving the use of ContaCT.
As discussed above, if a technology meets all three of the
substantial similarity criteria, it would be considered substantially
similar to an existing technology and would not be considered ``new''
for purposes of new technology add-on payments.
With regard to the first criterion, whether a product uses the same
or a similar mechanism of action to achieve a therapeutic outcome, the
applicant asserted no existing technology is comparable to ContaCT. The
applicant further asserted, because of the technology's novelty, the
product was reviewed under FDA's de novo pathway. The applicant first
outlined the clinical workflow for patients presenting to a hospital
with signs or symptoms of LVO prior to the availability of ContaCT:

1--Patient presents with stroke/suspected stroke to hospital emergency
department (ED).
2--Patient receives stroke CT/CTA imaging after brief initial
evaluation by hospital ED physician.
3--Technologist processes and reconstructs the CT/CTA imaging and
manually routes to hospital picture archiving and communication system
(PACS).
4--Radiologist reads CT/CTA imaging.
5--If needed, a neuroradiology consult is sought.
6--A radiological diagnosis of LVO is made.
7--The radiologist informs hospital ED physician of positive LVO either
verbally or in the radiologist report.
8--ED physician performs comprehensive exam and refers the patient to a
stroke neurologist.
9--The stroke neurologist reviews the CT/CTA imaging and clinical
history and determines whether to prescribe or recommend prescription
of thrombolysis with tissue plasminogen activator (tPA).
10--The stroke neurologist refers the patient to a neurointerventional
surgeon. Together they decide whether the patient is a candidate for
mechanical thrombectomy.
11--If appropriate, the patient proceeds to treatment with mechanical
thrombectomy.

The applicant asserted that facilities utilizing the ContaCT system
can substantially shorten the period of time between when the patient
receives stroke CT/CTA imaging (step 2) and when the patient is
referred to a stroke neurologist and neurointerventional surgeon (steps
9 and 10). They further assert that ContaCT streamlines this workflow
using artificial intelligence to analyze CTA images of the brain
automatically and notifies the stroke neurologist and
neurointerventional surgeon that a suspected LVO has been identified,
and then enables them to review imaging and make a treatment decision
faster. The applicant concludes that shortening the time to
identification of LVO is critical because the efficacy of thrombectomy
in patients with acute ischemic stroke decreases as the time from
symptom onset to treatment increases.
With regard to the second criterion, whether the technology is
assigned to the same or a different MS-DRG, the applicant did not
specifically address whether the technology meets this criterion.
However, we believe that cases involving the use of the technology
would be assigned to the same MS-DRGs as cases without the technology
where the patient moves through the hospital according to the
traditional workflow outlined above.
With regard to the third criterion, whether the new use of the
technology involves the treatment of the same or similar type of
disease and the same or similar patient population, the applicant also
did not specifically address whether the technology meets this
criterion. However, we believe cases involving the use of the
technology would treat the same or similar type of disease and the same
or similar patient population as the traditional workflow outlined
above.
We note that the applicant described ContaCT's mechanism of action
as shortening the time to identification of LVO through artificial
intelligence (AI). Specifically, the applicant asserted that facilities
utilizing the ContaCT system can substantially shorten the period of
time between when the patient receives stroke CT/CTA imaging and when
the patient is referred to a stroke neurologist and neurointerventional
surgeon. We are unclear as to whether the streamlining of hospital
workflow would represent a unique mechanism of action. Rather, it seems
that the mechanism of action for ContaCT would be the use of AI to
analyze images and notify physicians rather than streamlining hospital
workflow. However, we refer the reader to our discussion below
regarding our concerns with respect to general parameters for
identifying a unique mechanism of action based on the use of AI, an
algorithm and/or software.
To the extent that the applicant asserted that streamlined hospital
workflow through the use of ContaCT represents a unique mechanism of
action, it is unclear to us the degree to which ContaCT changes the
traditional workflow. Per the FDA, ``ContaCT is limited to analysis of
imaging data and should not be used in-lieu of full patient evaluation
or relied upon to confirm diagnosis.'' \96\ It is unclear to CMS how
ContaCT shortens time to treatment via AI if the CT machine still
performs the scanning and clinicians are still needed to view the
images to diagnose an LVO and perform a full patient evaluation for the
best course of treatment. The applicant has also indicated to CMS that
the use of ContaCT is not automatic, and the E.R. physician must submit
an order to utilize it specifically when suspecting an LVO. We are
unclear how ContaCT streamlines the workflow for stroke treatment via
AI if it is not to be used for diagnostic purposes per the FDA and
still requires personnel to order the scan and make the diagnosis.
---------------------------------------------------------------------------

\96\ U.S. Food and Drug Administration, DEN170073. Evaluation of
Automatic Class III Designation for ContaCT Decision Summary.
---------------------------------------------------------------------------

We also are generally concerned as to whether the use of AI, an
algorithm, or software, which are not tangible, may be considered or
used to identify a unique mechanism of action. In addition, we question
how updates to AI, an algorithm or software would affect an already
approved technology or a competing technology, including whether
software changes for an already approved technology could be

[[Page 32602]]

considered a new mechanism of action. We also question whether, if
there were competing technologies to an already approved AI new
technology, an improved algorithm by a competitor would represent a
unique mechanism of action if the outcome is the same as the technology
first approved. We welcome comments from the public regarding the
general parameters for identifying a unique mechanism of action based
on the use of AI, an algorithm and/or software.
We also invite public comments on whether the applicant meets the
newness criterion, including specifically with respect to the mechanism
of action.
With respect to the cost criterion, the applicant provided the
following analysis. First, the applicant extracted claims from the FY
2018 MedPAR dataset. The applicant explained that many patients present
to the emergency department with signs or symptoms suggesting a LVO.
That presentation would be the basis for ordering a CTA with the
ContaCT added. Of these patients, some will be identified as stroke and
LVO, some as stroke but not from a LVO, and others will have diagnoses
completely unrelated to stroke. As a result, according to the
applicant, there may be a very broad range of principal diagnoses and
MS-DRGs representing patients who would be eligible for and receive a
CTA with ContaCT. The applicant noted that it used admitting diagnoses
codes rather than principal or secondary diagnosis codes to identify
cases of stroke due to LVO, stroke not due to LVO, and no stroke. The
applicant utilized a multi-step approach:
Step 1: The applicant first extracted claims from the
stroke-related MS-DRGs (023, 024, 061, 062, 063, 064, 065, 066, 067,
068, and 069).
Step 2: The applicant analyzed the admitting diagnosis on
claims extracted in Step 1 to identify the reason for admission. The
applicant found that the top five admitting diagnoses for patients in
the stroke-related MS-DRGs included: Cerebral infarction, unspecified
(I63.9), transient cerebral ischemic attack, unspecified (G45.9),
slurred speech (R4781), aphasia (R4701), and facial weakness (R29.810).
Step 3: The applicant identified all MS-DRGs assigned to
the admitting diagnosis codes identified in step 2 to identify ContaCT
cases that did not map to one of the stroke MS-DRGs.
Step 4: The applicant identified a list of unique MS-DRGs
and admitting diagnosis code combinations to which cases involving
ContaCT would map. The applicant stated that it reviewed with clinical
experts the MS-DRG and admitting diagnosis combinations and eliminated
any that were unlikely to include the use of ContaCT.
The applicant identified a total of 375,925 cases across 143 MS-
DRGs, with approximately 66% of cases mapping to MS-DRGs 039, 057, 064,
065, 066, 069 and 312. The average unstandardized case-weighted charge
per case was $52,001. The applicant noted it did not remove any charges
for a prior technology, as it asserted that no other technology is
comparable to ContaCT. Based on the results of a research study,\97\
the applicant assumed ContaCT cases resulting in mechanical
thrombectomy would have charges reduced by 38% as a result of reduced
specialty care days and therefore removed the related charges, which
only affected cases mapping to MS-DRGs 023, 024, 025, and 026. The
applicant standardized the charges and applied an inflation factor of
11.1%, which is the same inflation factor used by CMS to update the
outlier threshold in the FY 2020 IPPS/LTCH PPS final rule (84 FR
42629), to update the charges from FY 2018 to FY 2020.
---------------------------------------------------------------------------

\97\ Goldstein ED, Schnusenberg L, Mooney L, et al. Reducing
Door-to-Reperfusion Time for Mechanical Thrombectomy With a
Multitiered Notification System for Acute Ischemic Stroke. Mayo Clin
Proc Innov Qual Outcomes. 2018;2(2): 119-128.
---------------------------------------------------------------------------

The applicant then added the charges for the new technology. The
applicant explained it calculated the cost per patient by dividing the
total overall cost of ContaCT per year per hospital by the number of
total estimated cases for which ContaCT was used at each hospital that
currently subscribes to ContaCT (based on the estimated number of cases
receiving CTA), and averaging across all such hospitals. The following
is the methodology the applicant used to determine the cost per case:
Step 1: The applicant first determined the estimated total
cases (both Medicare and non-Medicare) for each current subscriber
hospital. The applicant explained it used total cases for both Medicare
and non-Medicare cases since the cost per case is not specific to
Medicare cases. In order to determine total cases, which include both
Medicare and non-Medicare cases, the applicant divided the total
Medicare cases per subscriber hospital from the FY 2018 MedPAR data by
the percentage of Medicare beneficiaries (71 percent) in the CONTACT
FDA research study (for example, 1,136 Medicare cases divided by 0.71
equals 1,600 total Medicare and non-Medicare cases).
Step 2: To analyze actual rates (percentages) of CTA
across subscriber hospital cases, the applicant first used the
beneficiary ID in the FY 2018 SAF data set to find matching physician
claims in the carrier file for CT and CTA services with a site of
service of 21 (Inpatient hospital) or 23 (emergency department) and a
date of service consistent with the inpatient stay. The applicant then
calculated provider-specific CTA rates (percentages) for each
subscriber hospital. The applicant dropped five hospitals with a low
volume of Medicare inpatient stays that had no matching services in the
carrier file. The applicant calculated an average CTA rate of 21.6
percent across all hospitals that subscribe to ContaCT.
Step 3: The applicant determined the estimated total
number of cases that received CTA for each current subscriber hospital
by multiplying the total cases (Medicare and non-Medicare) for each
subscriber hospital in step 1 by the provider-specific CTA rate
calculated in Step 2. In cases where a provider had fewer than 11 cases
in the carrier file or where a provider had a CTA rate that was an
outlier, the applicant multiplied the total cases for the provider by
the average CTA rate of 21.6 percent.
Step 4: The applicant then calculated the cost per year
per hospital. If a hospital had multiple sites under the same CCN, the
applicant multiplied the total overall cost of ContaCT per hospital by
the number of sites. For example, if the cost for ContaCT was $25,000
per year and Hospital A had only one site under its CCN, then the total
cost for ContaCT for Hospital A would be $25,000. However, if Hospital
B had three sites under its CCN, then the total cost for ContaCT for
Hospital B would be $75,000 per year ($25,000 x 3).
Step 5: The applicant then divided the cost per year per
hospital by the total cases that received CTA for each customer
hospital in step 3 to determine the estimated cost per case for each
customer hospital. If Hospital A from the example in Step 4 had 50
patients, then the total hospital cost per case would be $500 per
patient ($25,000/50). If Hospital B (with three sites under its CCN)
also had 50 patients, then the total hospital cost per case would be
$1,500 per patient ($75,000/50).
Step 6: The applicant averaged the cost per case across
all hospitals to determine the average cost per patient. The average
cost per case across Hospital A and Hospital B in the previous example
would be $1,000.
Step 7: To convert the cost of the technology in Step 6 to
charges, the applicant divided the average cost per patient by the
national average cost-to-

[[Page 32603]]

charge (CCR) of 0.14 for the Radiology cost center from the FY 2020
IPPS/LTCH PPS final rule. (84 FR 42179). Although the applicant
submitted data related to the cost of the technology, the applicant
noted that the cost of the technology was proprietary information.
The applicant calculated a case-weighted threshold amount of
$51,358 and a final inflated average case-weighted standardized charge
per case of $62,006. Based on this analysis, the applicant believes
that ContaCT meets the cost criterion because the final inflated
average case-weighted standardized charge per case exceeds the case-
weighted threshold amount.
The applicant submitted three additional cost analyses to
demonstrate that it meets the cost criterion using the same methodology
above but with limits on the cases. The first alternative limited the
analysis to only those cases in the primary stroke-related MS-DRGs 023,
024, 061, 062, 063, 064, 065, 066, 067, 068, and 069. This first
alternative method resulted in a case-weighted threshold of $53,885 and
a final inflated average case weighted standardized charge per case of
$62,175. The second alternative limited the analysis to cases in MDC 01
(Diseases and Disorders of the Nervous System) with the following MS-
DRGs:
[GRAPHIC] [TIFF OMITTED] TP29MY20.126

This second alternative method resulted in a case-weighted
threshold of $55,053 and a final inflated average case weighted
standardized charge per case of $63,741. The third alternative limited
cases to MS-DRGs where the total volume of cases was greater than 100.
This third alternative method resulted in a case-weighted threshold of
$49,652 and a final inflated average case weighted standardized charge
per case of $59,365. Across all cost-analysis methods, the applicant
maintained that the technology meets the cost criterion because the
final inflated average case weighted standardized charge per case
exceeds the average case-weighted threshold amount.
We note that we believe a case weight would provide more accuracy
in determining the average cost per case as compared to the average of
costs per case across all hospitals that was used by the applicant in
step 6 as summarized previously. We therefore computed a case weighted
cost per case across all current subscriber hospitals. We then inflated
the case weighted cost per case to a charge based on step 7 above and
used this amount in the comparison of the case weighted threshold
amount to the final inflated average case weighted standardized charge
per case (rather than the applicant's average cost per case). In all
the scenarios above, the final inflated average case-weighted
standardized charge per case exceeded the case-weighted threshold
amount by an average of $2,961.
We have the following concerns regarding whether the technology
meets the cost criterion. The applicant used a single list price of
ContaCT per hospital with a cost per patient that can vary based on the
volume of cases. We are concerned that the cost per patient varies
based on the utilization of the technology by the hospitals. The cost
per patient could be skewed by the small number of hospitals utilizing
the technology and their low case volumes. It is possible, if hospitals
with large patient populations adopt ContaCT, the cost per patient
would be significantly lower.
An alternative to the applicant's calculation may be a methodology
that expands the applicant's sample from total cases (which include
both Medicare and non-Medicare cases) receiving CTA at subscriber
hospitals in Step 1 to all inpatient hospitals for the use of ContaCT
(and then using the same steps after Step 1 for the rest of the
analysis). In this alternative, the applicant would continue to extract
cases representing patients that are eligible for the use of ContaCT
from MedPAR, but the cost per patient would be determined by dividing
the overall cost per year per hospital by the average number of
patients eligible for the use of ContaCT across all such hospitals. For
example, if the cost for ContaCT is $25,000 per year and the average
hospital has 500 patients who are eligible to receive ContaCT per year,
then under this alternative methodology, the total cost per patient
would be $50 ($25,000/500).
We note, if ContaCT were to be approved for new technology add-on
payments for FY 2021, we believe the cost per case from the cost
analysis above may also be used to determine the maximum new technology
add on payment (that is, 65 percent of the cost determined above). We
understand there are unique circumstances to determining a cost per
case for a technology that utilizes a subscription for its cost. We
welcome comments from the public as to the appropriate method to
determine a cost per case for such technologies, including comments on
whether the cost per case should be estimated based on subscriber
hospital data as described previously, and if so,

[[Page 32604]]

whether the cost analysis should be updated based on the most recent
subscriber data for each year for which the technology may be eligible
for the new technology add-on payment.
We also invite public comments on whether the applicant meets the
cost criterion.
With respect to the substantial clinical improvement criterion,
according to the applicant, ContaCT represents an advance that
substantially improves the ability to diagnose a large vessel occlusion
stroke earlier by automatically identifying suspected disease in CTA
images and notifying the neurovascular specialist in parallel to the
standard of care. The applicant further asserted a major limitation in
the traditional acute stroke workflow is the time delay from initial
image acquisition of a suspected LVO patient (CT, CT angiography, and
CT perfusion), notification of the interventional team, and execution
of an endovascular thrombectomy. The time from stroke onset to
reperfusion (tissue damage caused when blood supply returns to tissue
after a period of ischemia or lack of oxygen) is negatively correlated
with the probability of an independent functional status.\98\ The
applicant states the time from initial presentation to eventual
reperfusion can be long, resulting in poor outcomes, using the existing
standard of care. The median onset-to-revascularization time has been
reported as 202.0 minutes for patients presenting directly to
interventional centers (or comprehensive stroke centers), and 311.5
minutes for patients that initially presented to a non-interventional
center.\99\ The applicant further states that part of that time is the
time from initial CTA-scan to the time that the neurovascular
specialist is notified of a possible LVO (the CTA to notification
time). A retrospective study examined work-flow for stroke patients and
demonstrated an initial CT to CSC (Comprehensive Stroke Center)
notification time per standard of care >60 minutes in patients
transferred for endovascular reperfusion in acute ischemic stroke.\100\
---------------------------------------------------------------------------

\98\ Khatri P, Abruzzo T, Yeatts SD, et al. Good clinical
outcome after ischemic stroke with successful revascularization is
time-dependent. Neurology. 2009;73(13):1066-1072.
\99\ Froehler MT, Saver JL, Zaidat 00, et al. Interhospital
transfer before thrombectomy is associated with delayed treatment
and worse outcome in the STRATIS registry. Circulation. 2017;
136(24):2311-2321.
\100\ Sun CH, Nogueira J, Glenn RG, et al. Picture-to-puncture:
A novel time metric to enhance outcomes in patients transferred for
endovascular reperfusion in acute ischemic stroke. Circulation.
2013;127:1139-1148.
---------------------------------------------------------------------------

The applicant asserted that ContaCT facilitates a workflow parallel
to the standard of care workflow and results in a notified specialist
entering the workflow earlier. In a study comparing the performance of
ContaCT with standard of care workflow, ContaCT resulted in faster
specialist notification. According to the applicant, the average time
to specialist notification for ContaCT was 7.32 minutes [95%CI: 5.51,
9.13] whereas time to notification for standard of care workflow was
58.72 minutes [95%CI: 46.21, 71.23]. The applicant also asserted that
ContaCT saved an average of 51.4 minutes, an improvement that could
markedly improve time to intervention for LVO patients. In addition,
the applicant noted that the standard deviation was reduced from 41.14
minutes in the standard of care workflow to 5.95 minutes with ContaCT,
demonstrating ContaCT's potential to reduce variation in care and
patient outcome across geographies and time of day.\101\
---------------------------------------------------------------------------

\101\ U.S. Food and Drug Administration (FDA). Center for
Devices and Radiological Health. Evaluation of Automatic Class III
Designation for ContaCT. Decision Memorandum No. 170073 (DEN170073).
2018. Retrieved from: https://www.accessdata.fda.gov/cdrh_docs/reviews/DEN170073.pdf.
---------------------------------------------------------------------------

To support the applicant's assertion that ContaCT substantially
improves the ability to diagnose a large vessel occlusion stroke
earlier, the applicant presented a multicenter prospective
observational trial, DISTINCTION, which is ongoing and compares a
prospective cohort of patients in which ContaCT is used (intervention
arm) to a retrospective cohort in which ContaCT was not used (control
arm). Patients are also segmented based on whether they initially
present to a non-interventional center or an interventional center. Per
the applicant, early data from one non-interventional hospital in the
Erlanger Health System indicates that for the control arm the median
time from CTA to clinician notification was 59.0. For the intervention
arm, early data indicates that the median time from CTA to clinician
notification was 5.3 min. The applicant stated that these early data
indicate time savings of approximately 53 min, which is consistent with
the 51.4 min. time savings demonstrated in the studies sponsored/
conducted by the De Novo requester.\102\
---------------------------------------------------------------------------

\102\ U.S. Food and Drug Administration (FDA). Center for
Devices and Radiological Health. Evaluation of Automatic Class III
Designation for ContaCT. Decision Memorandum No. 170073 (DEN170073).
2018. Retrieved from: https://www.accessdata.fda.gov/cdrh_docs/reviews/DEN170073.pdf.
---------------------------------------------------------------------------

Next, the applicant presented the Automated Large Artery Occlusion
Detection In Stroke Imaging Study (ALADIN), a multi-center
retrospective analysis of CTAs randomly picked from a retrospective
cohort of acute ischemic stroke patients, with and without anterior
circulation LVOs, admitted at three tertiary stroke centers, from 2014-
2017. Per the applicant, ALADIN evaluated ContaCT's performance
characteristics including area under the curve, sensitivity,
specificity, positive predictive value, negative predictive value, and
processing or running time. The applicant asserted that, through this
study, researchers concluded that the ContaCT algorithm may permit
early and accurate identification of LVO stroke patients and timely
notification to emergency teams, enabling quick decision-making for
reperfusion therapies or transfer to specialized centers if
needed.^{103 104 105}
---------------------------------------------------------------------------

\103\ Barreira C, Bouslama M, Lim J, et al. E-108 ALADIN study:
Automated large artery occlusion detection in stroke imaging study--
a multicenter analysis. J Neurointerv Surg. 2018;10(Suppl 2):A101-
A102.
\104\ Barreira C, Bouslama M, Haussen D, et al. Abstract WP61:
Automated large artery occlusion detection in stroke imaging--ALADIN
study. Stroke. 2018;49:AWP61.
\105\ Rodrigues GM, Barreira CM, Bouslama M, et al. Automated
large artery occlusion detection in stroke imaging study (ALADIN).
Abstract WP71: Multicenter ALADIN: Automated large artery occlusion
detection in stroke imaging using artificial intelligence. Stroke.
30 Jan 2019;50:AWP71.
---------------------------------------------------------------------------

According to the applicant, the use of ContaCT to facilitate a
faster diagnosis and treatment decision directly affects management of
the patient by enabling early notification of the neurovascular
specialist and faster time to treatment utilizing mechanical
thrombectomy to remove the large vessel occlusion. The applicant stated
that mechanical thrombectomy with stent retrievers is one of the
standards of care for treatment of acute ischemic stroke patients
caused by LVO and that mechanical thrombectomy therapy is highly time-
critical with each minute saved in onset-to-treatment time resulting in
a reported average of 4.2 days of extra healthy life.\106\ According to
the applicant, the use of ContaCT affects the management of the patient
by facilitating early identification of patients with suspected LVO and
early notification of the neurovascular specialist. The applicant
asserted that

[[Page 32605]]

this may affect the management of the patient in two ways. First, it
may offer improved access to mechanical thrombectomy for patients who
would otherwise not have access because of factors such as time of day
and the specialty capabilities of the hospital they are in, and second,
it may involve the neurovascular team earlier, decreasing the time to
thrombectomy. The applicant stated that ContaCT saved an average of
51.4 minutes in time to notification relative to standard of care
workflow and reduced standard deviation in time to notification from
41.14 minutes (standard of care workflow) to 5.95 minutes
(ContaCT).\107\ Furthermore, the applicant stated that ContaCT could
markedly improve time to intervention for LVO patients and has the
potential to reduce variation in care and patient outcome across
geographies and time of day.
---------------------------------------------------------------------------

\106\ Fransen PS, Berkhemer OA, Lingsma HF, et al. Time to
reperfusion and treatment effect for acute ischemic stroke: A
randomized clinical trial. JAMA Neurol. 2016;73:190-196; Meretoja A,
Keshtkaran M, Tatlisumak T, Donnan GA and Churilov L. Endovascular
therapy for ischemic stroke: Save a minute--save a week. Neurology.
2017;88(22):2123-2127.
\107\ U.S. Food and Drug Administration (FDA). Center for
Devices and Radiological Health. Evaluation of Automatic Class III
Designation for ContaCT. Decision Memorandum No. 170073 (DEN170073).
2018. Retrieved from: https://www.accessdata.fda.gov/cdrh_docs/reviews/DEN170073.pdf.
---------------------------------------------------------------------------

The applicant stated that according to five clinical trials, the
clinical efficacy of endovascular mechanical thrombectomy has been
demonstrated for patients with LVO strokes up to 6 hours after onset of
stroke.\108\ The applicant also stated that two meta-analyses of these
randomized trials have been completed.\109\ Campbell et al., performed
a patient-level pre-specified pooled meta-analysis of four randomized
clinical trials which concluded that thrombectomy for large vessel
ischemic stroke is safe and highly effective at reducing disability.
Goyal et al., pooled and analyzed patient-level data from all five
trials. Per the applicant, the results indicated that mechanical
thrombectomy leads to significantly reduced disability. According to
the applicant, together, these five randomized trials and two meta-
analyses, have demonstrated that treatment for intracranial large
vessel occlusion with mechanical thrombectomy with stent retrievers is
the standard of care.
---------------------------------------------------------------------------

\108\ Berkhemer OA, Fransen PS, Beumer D, et al. MR CLEAN
Investigators. A randomized trial of intraarterial treatment for
acute ischemic stroke. N Engl J Med. 2015;372:11-20.doi: 10.1056/
NEJMoa1411587; Campbell BCV, Mitchell PJ, Kleinig TJ, et al.
Endovascular therapy for ischemic stroke with perfusion-imaging
selection. N Engl J Med. 2015;372(11):1009-1018; Jovin TG, Chamorro
A, Cobo E, de Miquel MA, Molina CA, Rovira A, et al.; REVASCAT Trial
Investigators. Thrombectomy within 8 hours after symptom onset in
ischemic stroke. N Engl J Med. 2015;372(24):2296-2306.
\109\ Campbell BC, Hill MD, Rubiera M et al. Safety and efficacy
of solitaire stent thrombectomy: Individual patient data meta-
analysis of randomized trials. Stroke. 2016;47(3):798-806; Goyal M,
Menon BK, van Zwam WH, et al. Endovascular thrombectomy after large-
vessel ischaemic stroke: A meta-analysis of individual patient data
from five randomised trials. Lancet N Am Ed. 2016;387(10029):1723-
1731.
---------------------------------------------------------------------------

The applicant also asserted that real world evidence further
supports the efficacy of mechanical thrombectomy. Data from the STRATIS
registry (Systematic Evaluation of Patients Treated With
Neurothrombectomy Devices for Acute Ischemic Stroke), which
prospectively enrolled patients treated in the United States with a
Solitaire Revascularization Device and Mindframe Capture Low Profile
Revascularization Device within 8 hours from symptom onset, was
compared with the interventional cohort from the patient-level meta-
analysis from Campbell et al., to assess whether similar process
timelines and technical and functional outcomes could be achieved in a
large real world cohort as in the randomized trials. The conclusion of
the article was that the results indicate that randomized trials can be
reproduced in the real-world (Mueller-Kronast et al., 2017).\110\
---------------------------------------------------------------------------

\110\ Mueller-Kronast NH, Zaidat OO, Froehler MT, et al.
Systematic evaluation of patients treated with neurothrombectomy
devices for acute ischemic stroke: Primary results of the STRATIS
registry. Stroke. 2017;48(10):2760-2768.
---------------------------------------------------------------------------

The applicant stated that based on these data, U.S. clinical
guidelines now recommend mechanical thrombectomy for the treatment of
large vessel occlusion strokes when performed <=6 hours from symptom
onset. The American Stroke Association/American Heart Association (ASA/
AHA) ``2018 Guidelines for the Early Management of Patients With Acute
Ischemic Stroke'' recommends mechanical thrombectomy with a stent
retriever in patients that meet the following criteria: (1) Prestroke
modified Rankin Scale (mRS) 0-1, (2) causative occlusion of the
internal carotid artery (ICA) or middle cerebral artery (MCA) segment 1
(M1), (3) age >=18, (4) National Institute of Health Stroke Scale
(NIHSS) >=6, (5) Alberta Stroke Program Early CT Score (ASPECTS) >=6,
and (6) treatment can be initiated within 6 h of symptom onset (Powers
et al., 2018). The ASA/AHA notes the need for expeditious treatment
with both intravenous thrombolysis and mechanical thrombectomy.\111\
---------------------------------------------------------------------------

\111\ Powers WJ, Rabinstein AA, Ackerson T et al. On behalf of
the American Heart Association Stroke Council. 2018 Guidelines for
the early management of patients with acute ischemic stroke: A
guideline for healthcare professionals from the American Heart
Association/American Stroke Association. Stroke. 2018;49:e46-e110.
---------------------------------------------------------------------------

The applicant also stated that recently, randomized trials have
demonstrated the clinical efficacy of mechanical thrombectomy for large
vessel occlusion strokes for select patients from 6 to 24 hours after
symptom onset.\112\ Among patients with acute stroke who were last
known well 6 to 24 hours earlier and who had a mismatch between
clinical deficit and infarct, outcomes for disability at 90 days were
better with thrombectomy plus standard care compared with standard care
alone.
---------------------------------------------------------------------------

\112\ Albers GW, Marks MP, Kemp S, et al. Thrombectomy for
stroke at 6 to 16 hours with selection by perfusion imaging. N Engl
J Med. 2018;378(8):708-718; Nogueira RG, Jadhav AP, Haussen DC, et
al. Thrombectomy 6 to 24 hours after stroke with a mismatch between
deficit and infarct. N Engl J Med. 2018;378(1):11-21.
---------------------------------------------------------------------------

The applicant asserted that the use of ContaCT reduces time to
treatment, by notifying the stroke team faster than the standard of
care and enabling the team to diagnose and treat the patient earlier,
which is known to improve clinical outcomes in stroke, and that
mechanical thrombectomy has been shown to reduce disability, reduce
length of stay and recovery time (Campbell, BCV et al. 2017).\113\
---------------------------------------------------------------------------

\113\ Campbell BCV, Mitchell PJ, Churilov L, et al. Endovascular
Thrombectomy for Ischemic Stroke Increases Disability-Free Survival,
Quality of Life, and Life Expectancy and Reduces Cost. Front Neurol.
2017;8:657.
---------------------------------------------------------------------------

According to the applicant, other studies have also demonstrated
that time to reperfusion is a predictor of patient outcomes. The
applicant asserted that several major randomized controlled trials for
mechanical thrombectomy have demonstrated improvements in functionality
with faster time to reperfusion. The primary outcome of some of these
trials was the modified Rankin scale (mRs) score, a categorical scale
measure of functional outcome, with scores ranging from 0 (no symptoms)
to 6 (death) at 90 days.\114\ Pooled patient-level data from these five
trials demonstrated that in the mechanical thrombectomy group the odds
of better disability outcomes at 90

[[Page 32606]]

days (mRS scale distribution) declined with longer time from symptom
onset to expected arterial puncture. Among the mechanical thrombectomy
plus medical therapy group patients in whom substantial reperfusion was
achieved, delays in reperfusion times were associated with increased
levels of 3-month disability.\115\
---------------------------------------------------------------------------

\114\ Berkhemer OA, Fransen PS, Beumer D, et al. MR CLEAN
Investigators. A randomized trial of intraarterial treatment for
acute ischemic stroke. N Engl J Med. 2015;372:11-20.doi: 10.1056/
NEJMoa1411587; Campbell BCV, Mitchell PJ, Kleinig TJ, et al.
Endovascular therapy for ischemic stroke with perfusion-imaging
selection. N Engl J Med. 2015;372(11):1009-1018; Goyal M, Demchuk
AM, Menon BK, Eesa M, Rempel JL, Thornton J, et al.; ESCAPE Trial
Investigators. Randomized assessment of rapid endovascular treatment
of ischemic stroke. N Engl J Med. 2015;372(11):1019-1030; Jovin TG,
Chamorro A, Cobo E, de Miquel MA, Molina CA, Rovira A, et al.;
REVASCAT Trial Investigators. Thrombectomy within 8 hours after
symptom onset in ischemic stroke. N Engl J Med. 2015;372(24):2296-
2306; Saver JL, Goyal M, Bonafe A, Diener HC, Levy EI, Pereira VM,
et al.; SWIFT PRIME Investigators. Stent-retriever thrombectomy
after intravenous t-PA vs. t-PA alone in stroke. N Engl J Med. 2015
Jun 11;372(24):2285-95.
\115\ Saver JL, Goyal M, van der Lugt A, et al.; HERMES
Collaborators. Time to treatment with endovascular thrombectomy and
outcomes from ischemic stroke: A meta-analysis. JAMA. 2016;316:1279-
1288.
---------------------------------------------------------------------------

The applicant referred to the American Stroke Association/American
Heart Association (ASA/AHA) ``2018 Guidelines for the Early Management
of Patients With Acute Ischemic Stroke,'' which recognize that the
benefit of mechanical thrombectomy is time dependent, with earlier
treatment within the therapeutic window leading to bigger proportional
benefits. The guidelines also state that any cause for delay to
mechanical thrombectomy, including observing for a clinical response
after IV alteplase, should be avoided.\116\
---------------------------------------------------------------------------

\116\ Powers WJ, Rabinstein AA, Ackerson T et al. On behalf of
the American Heart Association Stroke Council. 2018 Guidelines for
the early management of patients with acute ischemic stroke: A
guideline for healthcare professionals from the American Heart
Association/American Stroke Association. Stroke. 2018;49:e46-e110.
---------------------------------------------------------------------------

The applicant asserted that the phrase ``time is brain'' emphasizes
that human nervous tissue is rapidly lost as stroke progresses. Per the
applicant, recent advances in quantitative neurostereology and stroke
neuroimaging permit calculation of just how much brain is lost per unit
time in acute ischemic stroke. To illustrate this point, the applicant
stated that in the event of a large vessel acute ischemic stroke, the
typical patient loses 1.9 million neurons, 13.8 billion synapses, and
12 km (7 miles) or axonal fibers each minute in which stroke is
untreated. Furthermore, for each hour in which treatment fails to
occur, the brain loses as many neurons as it does in almost 3.6 years
of normal aging.\117\ The applicant asserted that given the time-
dependent nature of treatment in acute ischemic stroke patients,
ContaCT could play a critical role in preserving human nervous tissue,
as the application results in faster detection in more than 95% of
cases and saves an average of 51.4 minutes in time to
notification.\118\
---------------------------------------------------------------------------

\117\ Saver JL. Time is brain--quantified. Stroke. 2006
Jan;37(1):263-6.
\118\ U.S. Food and Drug Administration (FDA). Center for
Devices and Radiological Health. Evaluation of Automatic Class III
Designation for ContaCT. Decision Memorandum No. 170073 (DEN170073).
2018. Retrieved from: https://www.accessdata.fda.gov/cdrh_docs/reviews/DEN170073.pdf.
---------------------------------------------------------------------------

We have the following concerns regarding whether the technology
meets the substantial clinical improvement criterion. The applicant
provided a total of 19 articles specifically for the purposes of
addressing the substantial clinical improvement criterion: Four
retrospective studies/analyses, nine randomized clinical trials (RCTs),
three meta-analyses, one registry, one guideline, and one systematic
review.
The four retrospective studies/analyses included the FDA decision
memorandum, a single site of a RCT, and two abstracts related to the
Automated Large Artery Occlusion Detection in Stroke Imaging (ALADIN)
study. The applicant stated that the studies sponsored/conducted by the
De Novo requester indicated that ContaCT substantially shortens the
time to notifying the specialist for LVO cases as compared with the
standard of care. However, the sample size was limited to only 85 out
of 300 patients having sufficient data of CTA to notification time
available. To calculate the sensitivity and specificity of ContaCT,
neuro-radiologists reviewed images and established the empirical
evidence. Specifically, the sensitivity and specificity was 87.8% (95%
CI 81.2-92.5%) and 89.6% (83.7-93.9%) respectively. We have concerns
regarding whether this represents a substantial clinical improvement,
as ContaCT missed approximately 12% of images with a true LVO and
incorrectly identified approximately 10% as having a LVO. Additionally,
the small sample size of less than 100 raises concerns for
generalizability. Additionally, we agree with FDA that ContaCT is
limited to analysis of imaging data and should not be used in-lieu of
full patient evaluation or relied upon to make or confirm
diagnosis.\119\
---------------------------------------------------------------------------

\119\ U.S. Food and Drug Administration (FDA). Center for
Devices and Radiological Health. Evaluation of Automatic Class III
Designation for ContaCT. Decision Memorandum No. 170073 (DEN170073).
2018. Retrieved from: https://www.accessdata.fda.gov/cdrh_docs/reviews/DEN170073.pdf.
---------------------------------------------------------------------------

With respect to the study that was a single site of a RCT \120\
presented by the applicant, the study conducted a retrospective review
of the time between an initial CT at an outside hospital and the
notification to the comprehensive stroke center. This retrospective
analysis was conducted at one site, enrolled in one of the RCTs
(unspecified). The authors noted there was substantial difference in
the time between initial CT at the outside hospital to comprehensive
stroke center notification, due to multiple factors, including delays
in neurological assessments, interpretation of imaging, utilization of
advance modality imaging, and determination of tPA effectiveness.
Specifically, the authors noted in their study that obtainment of
advanced imaging contributed to a 57-minute delay in decision making
without substantial benefits in patient outcome. It is unclear whether
and how this time delay and the utilization of faster notification
would affect the clinical outcome of patients.
---------------------------------------------------------------------------

\120\ Sun CH, Nogueira J, Glenn RG, et al. Picture-to-puncture:
A novel time metric to enhance outcomes in patients transferred for
endovascular reperfusion in acute ischemic stroke. Circulation.
2013;127:1139-1148.
---------------------------------------------------------------------------

The applicant also submitted two separate abstracts for a
retrospective analysis of the ALADIN study, which only provide interim
results. The applicant noted for the primary analysis, the algorithm
obtained sensitivity of 0.97 and specificity of 0.52, with a positive
predictive value (PPV) of 0.74 and negative predictive NPV of 0.91, and
overall accuracy of 0.78. For the secondary analysis (M2 and proximal
ICA included), the algorithm obtained sensitivity of 0.92 and
specificity of 0.75, with a PPV of 0.92 and NPV of 0.75, and overall
accuracy of 0.88. We are concerned both that these are only partial
results as it is not clear what the full outcome of the ALADIN study
will indicate, and also that the initial overall accuracy of ContaCT
varied by 10% between the types of strokes.
The RCTs included the following: (1) Multicenter Randomized
Clinical Trial of Endovascular Treatment of Acute Ischemic Stroke in
the Netherlands (MR CLEAN), (2) Thrombolysis in Emergency Neurological
Deficits--Intra-Arterial (EXTEND-IA) Trial, (3) The Endovascular
Treatment for Small Core and Anterior Circulation Proximal Occlusion
with Emphasis on Minimizing CT to Recanalization Times (ESCAPE) trial,
(4) Randomized Trial of Revascularization with Solitaire FR Device
versus Best Medical Therapy in the Treatment of Acute Stroke Due to
Anterior Circulation Large Vessel Occlusion Presenting within Eight
Hours of Symptom Onset (REVASCAT), (5) Solitaire with the Intention for
Thrombectomy as Primary Endocascular Treatment (SWIFT PRIME) trial, (6)
Endovascular Therapy Following Imaging Evaluation for Ischemic Stroke,
(7) DWI or CTP Assessment with Clinical Mismatch in the Triage of Wake-
Up and Late Presenting Strokes Undergoing Neurointervention with Trevo
(DAWN) trial, and (8) Interventional Manage of Stroke (IMS) Phase I and
II trials. The MR CLEAN trial, EXTEND-IA trial, ESCAPE trial,

[[Page 32607]]

REVASCAT trial, SWIFT PRIME trial, Endovascular Therapy Following
Imaging Evaluation for Ischemic Stroke trial, and DAWN were all multi-
center prospective RCTs evaluating a treatment group of either a
microcatheter with a thrombolytic agent or mechanical thrombectomy
versus a control group of the standard care. These RCTs were evaluating
the outcomes from specific treatment for patients who suffered from
various strokes and not the time of imaging to treatment. While each
study may have included a time-element as an experimental analysis or
additional end-point, we are unsure how they support the use of ContaCT
as a substantial clinical improvement over existing technologies. Also,
while the IMS trials provided evidence to support a positive clinical
outcome following technically successful angiographic reperfusion using
time from stroke onset to procedure termination, they did not specify
which part of the overall standard of care treatment affected an
increase or decrease of time. The three meta-analyses utilized data
from the RCTs. The Safety and Efficacy of Solitaire Stent Thrombectomy
examined four trials, ESCAPE, REVASCAT, SWIFT PRIME, and EXTEND-IA. The
Highly Effective Reperfusion evaluated in Multiple Endovascular Stroke
Trials (HERMES) collaboration authored two of the three meta-analysis.
The HERMES collaboration examined data and results from five RCTs, MR
CLEAN, ESCAPE, REVASCAT, SWIFT PRIME, and EXTEND-IA. These meta-
analysis studies confirmed the results of each of the individual RCTs
of the benefits of thrombectomy versus the standard of care. However,
we have concerns as to whether these meta-analyses, along with the
RCTs, indicate a substantial clinical improvement with shorter
notification times of a LVO.
Two articles submitted by the applicant evaluated data using the
STRATIS registry. One article \121\ evaluated the use of mechanical
thrombectomy in consecutive patients with acute ischemic stroke because
of LVO in the anterior circulation. The two groups consisted of (1)
patients who presented directly to a comprehensive stroke center and
(2) patients who were transferred to a comprehensive stroke center.
This study identified a difference of 124 minutes between groups, which
was primarily related to longer door-to-tPA times at nonenrolling
hospitals, delay between IV-tPA and departure from the initial
hospital, and length of transport time. The author's primary outcome
was functional status at 90 days, which found those with shorter time
to treatment achieved better functional independence at 90 days. There
was no difference in mortality in the two groups. While this article
supports that shorter time to treatment may increase positive clinical
outcomes for functional status, the study indicated time to departure
from the nonenrolling hospital and transfer time as primary reasons in
delayed thrombectomy treatment. These two time lapses include multiple
covariates; for example, the distance between the facilities and the
response of available transport (for example, ambulance). These
potential confounders raise questions as to the use of ContaCT
shortening time to treatment.
---------------------------------------------------------------------------

\121\ Froehler MT, Saver JL, Zaidat 00, et al. Interhospital
transfer before thrombectomy is associated with delayed treatment
and worse outcome in the STRATIS registry. Circulation. 2017;
136(24):2311-2321.
---------------------------------------------------------------------------

Lastly, the applicant submitted the AHA/ASA guidelines and a
systematic literature review as support for clinical improvement. We
are concerned the guidelines do not support a finding of substantial
clinical improvement for ContaCT because the guidelines are for current
standard of care. The systematic literature review identified the
quantitative estimates of the pace of neural circuity loss in human
ischemic stroke. While this supports the urgency of stroke care, we are
unsure how it demonstrates a substantial clinical improvement in how
ContaCT supports the urgency of stroke care.
We invite public comment as to whether ContaCT meets the
substantial clinical improvement criterion.
In this section, we summarize and respond to written public
comments received in response to the New Technology Town Hall meeting
notice published in the Federal Register regarding the substantial
clinical improvement criterion for ContaCT.
Comment: Several commenters asserted that the studies conducted to
date specifically demonstrate the important relationship between time
to treatment and improved clinical outcomes in ischemic stroke. The
commenters emphasized the concept of ``time is brain,'' that human
nervous tissue is rapidly lost as stroke progresses and emergent
evaluation and therapy are required. They stated that in patients
experiencing a typical large vessel acute ischemic stroke, 120 million
neurons, 830 billion synapses, and 714 km (447 miles) of myelinated
fibers are lost each hour, and that 1.9 million neurons, 14 billion
synapses, and 12 km (7.5 miles) of myelinated fibers are destroyed
every minute. The commenters noted that, compared with the normal rate
of neuron loss in brain aging, the ischemic brain ages 3.6 years each
hour without treatment. They also re-emphasized the time dependency of
stroke interventions, stating that the sooner the reperfusion therapy
is commenced, the better the outcome. A commenter stated that,
following implementation of ContaCT in May 2019, CTA time at stroke
center (PSC) to time of arrival at comprehensive stroke center (CSC)
was significantly reduced by an average of 66 min. (mean CTA to time of
arrival, 171.29 110.58 min. vs 105.27 62.09
min; p = 0.0163). Another commenter stated that, following
implementation of ContaCT in January 2019, the spoke door-in to groin
puncture at CSC was reduced by 26.0 min (14%) while also reducing the
standard deviation by 25.0 min (38%). (Median CTA to time of groin
puncture, 188.5 65.5 min. vs 162.5 40.5 min).
Commenters stated that although sample sizes are currently too small to
identify meaningful differences in clinical outcomes, the incorporation
of ContaCT was associated with a significant improvement in transfer
times for LVO patients and that given what is known about the
importance of decreasing time to treatment, time savings achieved
should result in better outcomes.
Response: We thank the commenters for their input and will take
this information into consideration when deciding whether to approve
new technology add-on payments for ContaCT.
Comment: The applicant responded to the questions received at the
New Technology Town Hall Meeting held in December 2019.
First, the applicant was asked how the time prior to emergency
department (ED) arrival affects the benefit of reduced time-to-
notification from ContaCT and whether the benefit from the algorithm
would reach a limit such that there would still be loss of brain
function due to delays prior to ED arrival. The applicant responded
that there is a large body of clinical evidence showing that delay in
treatment (thrombectomy) in patients with stroke with large vessel
occlusion leads to poorer outcomes and that time from symptoms to
treatment may be broken down into 3 discrete windows: (1) Initiation of
symptoms to arrival of emergency medical services (EMS), (2) EMS
arrival at the patient's location to transport to an emergency
department, and (3) arrival at an emergency department to start of
treatment (``door to puncture''). They further stated that
interventions to reduce the times in each of these windows
independently can help improve patient outcomes. The

[[Page 32608]]

applicant stated that the ContaCT system is designed to optimize
processes inside the hospital but acknowledged that process changes
that reduce the time interval between EMS arrival and enrolling
hospital arrival may further benefit patients with acute ischemic
stroke, but the opportunity to improve processes outside the hospital
does not reduce or limit the benefit of reducing time to treatment by
improving processes inside the hospital through use of the ContaCT
system.
Second, the applicant was asked how the algorithm driving ContaCT
is maintained. The applicant responded that changes to the algorithm
code are controlled via a software development life-cycle procedure
(SDLC) that is designed to comply with FDA requirements and IEC62304
(Medical device software--Software life cycle processes). The applicant
stated that the procedure includes a regulatory evaluation, performed
according to relevant FDA guidance and that the manufacturer maintains
the performance of the ContaCT device using user feedback where issues
and complaints are logged, tracked and investigated according to the
manufacturer's quality management system (QMS), designed in compliance
with relevant FDA regulations (21 CFR part 820) and inspected on a
quarterly basis during management review. Also, medical annotators
routinely review scans, and an analysis of sensitivity and specificity
(overall and per institution) is reviewed by management during the
quarterly management review. Criteria for acceptance of said
performance are predefined in the QMS.
Third, the applicant was asked if the results for ContaCT are only
generalizable to those centers where mechanical thrombectomy is
performed or whether ContaCT works only in specialized stroke centers.
The applicant stated that the benefits of this parallel workflow are
not limited to tertiary stroke centers and that conclusions from the
STRATIS Registry suggest there is an opportunity to optimize processes
both inside and outside the hospital.
Lastly, the applicant was asked if there is clinical evidence
demonstrating that ContaCT directly improves clinical outcomes. The
applicant acknowledged that there is no data directly evaluating
patient outcomes from ContaCT but stated that there is evidence from
randomized controlled trials and real world studies of reduction in
time from ED presentation to notification for treatment of LVO. The
applicant also noted that there is a large and well-established body of
evidence that reduced time to notification and treatment of LVO
improves patient outcomes in patients with ischemic stroke. Per the
applicant, this body of evidence supports the conclusion that ContaCT
provides substantial clinical improvement over current standard of care
in Medicare beneficiaries with acute ischemic stroke.
Response: We appreciate the applicant's responses to questions
asked at the New Technology Town Hall Meeting. We will take the
responses to our questions into consideration when deciding whether to
approve new technology add-on payments for ContaCT.
d. Supersaturated Oxygen (SSO2) Therapy (DownStream[supreg]
System)
TherOx, Inc. submitted an application for new technology add-on
payments for Supersaturated Oxygen (SSO2) Therapy (the
TherOx DownStream[supreg] System) for FY 2021. We note that the
applicant previously submitted an application for new technology add-on
payments for FY 2019, which was withdrawn prior to the issuance of the
FY 2019 IPPS/LTCH PPS final rule. We also note that the applicant again
submitted an application for new technology add-on payments for FY
2020, but CMS was unable to determine that SSO2 Therapy
represents a substantial clinical improvement over the currently
available therapies used to treat STEMI patients.
Per the applicant, The DownStream[supreg] System is an adjunctive
therapy that creates and delivers superoxygenated arterial blood
directly to reperfused areas of myocardial tissue which may be at risk
after an acute myocardial infarction (AMI), or heart attack. Per FDA,
SSO2 Therapy is indicated for the preparation and delivery
of SuperSaturated Oxygen Therapy (SSO2 Therapy) to targeted
ischemic regions perfused by the patient's left anterior descending
coronary artery immediately following revascularization by means of
percutaneous coronary intervention (PCI) with stenting that has been
completed within 6 hours after the onset of anterior acute myocardial
infarction (AMI) symptoms caused by a left anterior descending artery
infarct lesion. The applicant stated that the net effect of the
SSO2 Therapy is to reduce the size of the infarction and,
therefore, lower the risk of heart failure and mortality, as well as
improve quality of life for STEMI patients.
SSO2 Therapy consists of three main components: the
DownStream[supreg] System; the DownStream cartridge; and the
SSO2 delivery catheter. The DownStream[supreg] System and
cartridge function together to create an oxygen-enriched saline
solution called SSO2 solution from hospital-supplied oxygen
and physiologic saline. A small amount of the patient's blood is then
mixed with the SSO2 solution, producing oxygen-enriched
hyperoxemic blood, which is delivered to the left main coronary artery
(LMCA) via the delivery catheter at a flow rate of 100 ml/min. The
duration of the SSO2 Therapy is 60 minutes and the infusion
is performed in the catheterization laboratory. The oxygen partial
pressure (pO2) of the infusion is elevated to ~1,000 mmHg,
therefore providing oxygen locally to the myocardium at a hyperbaric
level for 1 hour. After the 60-minute SSO2 infusion is
complete, the cartridge is unhooked from the patient and discarded per
standard practice. Coronary angiography is performed as a final step
before removing the delivery catheter and transferring the patient to
the intensive care unit (ICU).
The applicant for the SSO2 Therapy received conditional
premarket approval from FDA on April 2, 2019. FDA noted the applicant
must conduct ``a post-approval study to confirm the safety and
effectiveness of the TherOx DownStream System for use of delivery of
SuperSaturated Oxygen Therapy (SSO2 Therapy) to targeted
ischemic regions of the patient's coronary vasculature in qualifying
anterior acute myocardial infarction (AMI) patients who have undergone
successful percutaneous coronary intervention (PCI) with stenting
within 6 hours of experiencing AMI symptoms.'' \122\ The applicant
stated that use of the SSO2 Therapy can be identified by the
ICD-10-PCS procedure codes 5A0512C (Extracorporeal supersaturated
oxygenation, intermittent) and 5A0522C (Extracorporeal supersaturated
oxygenation, continuous).
---------------------------------------------------------------------------

\122\ https://www.accessdata.fda.gov/cdrh_docs/pdf17/P170027A.pdf.
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[[Page 32609]]

of action as it delivers a localized hyperbaric oxygen equivalent to
the coronary arteries immediately after administering the standard-of-
care, PCI with stenting, in order to restart metabolic processes within
the stunned myocardium and reduce infarct size. Therefore, we stated
that we believe SSO2 Therapy is not substantially similar to
existing technologies and meets the newness criterion. We also stated
that we would consider the beginning of the newness period to commence
when SSO2 Therapy was approved by the FDA on April 2, 2019.
We refer the reader to the FY 2020 final rule for the complete
discussion of how SSO2 Therapy meets the newness criterion.
We welcome any additional information or comments in response to this
proposed rule regarding whether SSO2 Therapy is
substantially similar to an existing technology and whether it meets
the newness criterion for purposes of its application for new
technology add-on payments for FY 2021.
With regard to the cost criterion, the applicant conducted the
following analysis to demonstrate that SSO2 Therapy meets
the cost criterion. The applicant searched the FY 2018 MedPAR file for
claims reporting diagnoses of anterior STEMI by ICD-10-CM diagnosis
codes I21.01 (ST elevation (STEMI) myocardial infarction involving left
main coronary artery), I21.02 (ST elevation (STEMI) myocardial
infarction involving left anterior descending coronary artery), or
I21.09 (ST elevation (STEMI) myocardial infarction involving other
coronary artery of anterior wall) as a principal diagnosis, which the
applicant believed would describe potential cases representing
potential patients who may be eligible for treatment involving the
SSO2 Therapy. The applicant identified 9,111 cases mapping
to 4 MS-DRGs, with approximately 95 percent of all potential cases
mapping to MS-DRG 246 (Percutaneous Cardiovascular Procedures with
Drug-Eluting Stent with MCC or 4+ Arteries/Stents) and MS-DRG 247
(Percutaneous Cardiovascular Procedures with Drug-Eluting Stent without
MCC). The remaining 5 percent of potential cases mapped to MS-DRG 248
(Percutaneous Cardiovascular Procedures with Non-Drug-Eluting Stent
with MCC or 4+ Arteries/Stents) and MS-DRG 249 (Percutaneous
Cardiovascular Procedures with Non-Drug-Eluting Stent without MCC).
The applicant determined that the average case-weighted
unstandardized charge per case was $97,049. The applicant then
standardized the charges. The applicant did not remove charges for the
current treatment because, as previously discussed, SSO2
Therapy would be used as an adjunctive treatment option following
successful PCI with stent placement. The applicant then added charges
for the technology, which accounts for the use of 1 cartridge per
patient, to the average charges per case. The applicant did not apply
an inflation factor to the charges for the technology. The applicant
also added charges related to the technology, to account for the
additional supplies used in the administration of SSO2
Therapy, as well as 70 minutes of procedure room time, including
technician labor and additional blood tests. The applicant inflated the
charges related to the technology. In the applicant's analysis, the
inflated average case-weighted standardized charge per case was
$150,115 and the average case-weighted threshold amount was $98,332.
Because the inflated average case-weighted standardized charge per case
exceeds the average case-weighted threshold amount, the applicant
maintained that the technology meets the cost criterion.
We invite public comments on whether the SSO2 Therapy
meets the cost criterion.
With regard to the substantial clinical improvement criterion, the
applicant asserted that SSO2 Therapy represents a
substantial clinical improvement over existing technologies because it
improves clinical outcomes for STEMI patients as compared to the
currently available standard-of-care treatment, PCI with stenting
alone. Specifically, the applicant asserted that: (1) Infarct size
reduction improves mortality outcomes; (2) infarct size reduction
improves heart failure outcomes; (3) SSO2 Therapy
significantly reduces infarct size; (4) SSO2 Therapy
prevents left ventricular dilation; and (5) SSO2 Therapy
reduces death and heart failure at 1 year. The applicant highlighted
the importance of the SSO2 Therapy's mechanism of action,
which treats hypoxemic damage at the microvascular or microcirculatory
level. Specifically, the applicant noted that microvascular impairment
in the myocardium is irreversible and leads to a greater extent of
infarction. According to the applicant, the totality of the data on
myocardial infarct size, ventricular remodeling, and clinical outcomes
strongly supports the substantial clinical benefit of SSO2
Therapy administration over the standard-of-care.
As stated above, TherOx, Inc. submitted an application for new
technology add-on payments for FY 2020 that was denied on the basis of
substantial clinical improvement. In the FY 2020 IPPS/LTCH PPS final
rule (84 FR 42278), we stated that we were not approving new technology
add-on payments for SSO2 Therapy for FY 2020 because, after
consideration of the comments received, we remained concerned that the
current data did not adequately support a sufficient association
between the outcome measures of heart failure, rehospitalization, and
mortality with the use of SSO2 Therapy specifically to
determine that the technology represents a substantial clinical
improvement over existing available options. The applicant resubmitted
its application for new technology add-on payments for FY 2021 with new
information that, per the applicant, demonstrates that there is an
unmet medical need for STEMI, and that SSO2 Therapy provides
a treatment option for a patient population unresponsive to currently
available treatments. Below we summarize the studies the applicant
submitted with both its FY 2020 and FY 2021 applications, followed by
the new information the applicant submitted with its FY 2021
application to support that the technology is represents a substantial
clinical improvement.
In the FY 2020 application, as summarized in the FY 2020 IPPS/LTCH
PPS final rule (84 FR 42275), and the FY 2021 application, the
applicant cited an analysis of the Collaborative Organization for
RheothRx Evaluation (CORE) trial and a pooled patient-level analysis to
support the claims that infarct size reduction improves mortality and
heart failure outcomes.
The CORE trial was a prospective, randomized, double-
blinded, placebo-controlled trial of Poloxamer 188, a novel therapy
adjunctive to thrombolysis at the time the study was conducted.\123\
The applicant sought to relate left ventricular ejection fraction (EF),
end-systolic volume index (ESVI) and infarct size (IS), as measured in
a single, randomized trial, to 6-month mortality after myocardial
infarction treated with thrombolysis. According to the applicant,
subsets of clinical centers participating in CORE also participated in
one or two radionuclide sub-studies: (1) Angiography for measurement of
EF and absolute, count-based LV volumes; and (2) single-photon emission
computed tomographic sestamibi measurements of IS. These sub-studies
were performed in 1,194 and 1,181 patients, respectively, of the 2,948

[[Page 32610]]

patients enrolled in the trial. Furthermore, ejection fraction, ESVI,
and IS, as measured by central laboratories in these sub-studies, were
tested for their association with 6-month mortality. According to the
applicant, the results of the study showed that ejection fraction
(n=1,137; p=0.0001), ESVI (n=945; p=0.055) and IS (n=1,164; p=0.03)
were all associated with 6-month mortality, therefore, demonstrating
the relationship between these endpoints and mortality.\124\
---------------------------------------------------------------------------

\123\ Burns, R.J., Gibbons, R.J., Yi, Q., et al., ``The
relationships of left ventricular ejection fraction, end-systolic
volume index and infarct size to six-month mortality after hospital
discharge following myocardial infarction treated by thrombolysis,''
J Am Coll Cardiol, 2002, vol. 39, pp. 30-6.
\124\ Ibid.
---------------------------------------------------------------------------

The pooled patient-level analysis was performed from 10
randomized, controlled trials (with a total of 2,632 patients) that
used primary PCI with stenting.\125\ The analysis assessed infarct size
within 1 month after randomization by either cardiac magnetic resonance
(CMR) imaging or technetium-99m sestamibi single-photon emission
computed tomography (SPECT), with clinical follow-up for 6 months.
Infarct size was assessed by CMR in 1,889 patients (71.8 percent of
patients) and by SPECT in 743 patients (28.2 percent of patients)
including both inferior wall and more severe anterior wall STEMI
patients. According to the applicant, median infarct size (or percent
of left ventricular myocardial mass) was 17.9 percent and median
duration of clinical follow-up was 352 days. The Kaplan-Meier estimated
1-year rates of all-cause mortality, re-infarction, and HF
hospitalization were 2.2 percent, 2.5 percent, and 2.6 percent,
respectively. The applicant noted that a strong graded response was
present between infarct size (per 5 percent increase) and the 2 outcome
measures of subsequent mortality (Cox-adjusted hazard ratio: 1.19 [95
percent confidence interval: 1.18 to 1.20]; p<0.0001) and
hospitalization for heart failure (adjusted hazard ratio: 1.20 [95
percent confidence interval: 1.19 to 1.21]; p<0.0001), independent of
other baseline factors.\126\ The applicant concluded from this study
that infarct size, as measured by CMR or technetium-99m sestamibi SPECT
within 1 month after primary PCI, is strongly associated with all-cause
mortality and hospitalization for heart failure within 1 year.
---------------------------------------------------------------------------

\125\ Stone, G.W., Selker, H.P., Thiele, H., et al.,
``Relationship between infarct size and outcomes following primary
PCI,'' J Am Coll Cardiol, 2016, vol. 67(14), pp. 1674-83.
\126\ Ibid.
---------------------------------------------------------------------------

In the FY 2020 application, the applicant also cited the AMIHOT I
and II studies to support the claim that SSO2 Therapy
significantly reduces infarct size.
The AMIHOT I clinical trial was designed as a prospective,
randomized evaluation of patients who had been diagnosed with AMI,
including both anterior and inferior patients, and received treatment
with either PCI with stenting alone or with SSO2 Therapy as
an adjunct to successful PCI within 24 hours of symptom onset.\127\ The
study included 269 randomized patients and 3 co-primary endpoints:
Infarction size reduction, regional wall motion score improvement at 3
months, and reduction in ST segment elevation. The study was designed
to demonstrate superiority of the SSO2 Therapy group as
compared to the control group for each of these endpoints, as well as
to demonstrate non-inferiority of the SSO2 Therapy group
with respect to 30-day Major Adverse Cardiac Event (MACE). The
applicant stated that results for the control versus SSO2
Therapy group comparisons for the three co-primary effectiveness
endpoints demonstrated a nominal improvement in the test group,
although this nominal improvement did not achieve clinical and
statistical significance in the entire population. The applicant
further stated that a pre-specified analysis of the SSO2
Therapy patients who were revascularized within 6 hours of AMI symptom
onset and who had anterior wall infarction showed a marked improvement
in all 3 co-primary endpoints as compared to the control group.\128\
Key safety data revealed no statistically significant differences in
the composite primary endpoint of 1-month (30 days) MACE rates between
the SSO2 Therapy and control groups. MACE includes the
combined incidence of death, re-infarction, target vessel
revascularization, and stroke. In total, 9/134 (6.7 percent) of the
patients in the SSO2 Therapy group and 7/135 (5.2 percent)
of the patients in the control group experienced 30-day MACE
(p=0.62).\129\
---------------------------------------------------------------------------

\127\ O'Neill, W.W., Martin, J.L., Dixon, S.R., et al., ``Acute
Myocardial Infarction with Hyperoxemic Therapy (AMIHOT), J Am Coll
Cardiol, 2007, vol. 50(5), pp. 397-405.
\128\ Ibid.
\129\ Ibid.
---------------------------------------------------------------------------

The AMIHOT II trial randomized 301 patients who had been
diagnosed with and receiving treatment for anterior AMI with either PCI
plus the SSO2 Therapy or PCI alone.\130\ The AMIHOT II trial
had a Bayesian statistical design that allows for the informed
borrowing of data from the previously completed AMIHOT I trial. The
primary efficacy endpoint of the study required proving superiority of
the infarct size reduction, as assessed by Tc-99m Sestamibi SPECT
imaging at 14 days post PCI/stenting, with the use of SSO2
Therapy as compared to patients who were receiving treatment involving
PCI with stenting alone. The primary safety endpoint for the AMIHOT II
trial required a determination of non-inferiority in the 30-day MACE
rate, comparing the SSO2 Therapy group with the control
group, within a safety delta of 6.0 percent.\131\ Endpoint evaluation
was performed using a Bayesian hierarchical model that evaluated the
AMIHOT II result conditionally in consideration of the AMIHOT I 30-day
MACE data. According to the applicant, the results of the AMIHOT II
trial showed that the use of SSO2 therapy, together with PCI
and stenting, demonstrated a relative reduction of 26 percent in the
left ventricular infarct size and absolute reduction of 6.5 percent
compared to PCI and stenting alone.\132\
---------------------------------------------------------------------------

\130\ Stone, G.W., Martin, J.L., de Boer, M.J., et al., ``Effect
of Supersaturated Oxygen Delivery on Infarct Size after Percutaneous
Coronary Intervention in Acute Myocardial Infarction,'' Circ
Cardiovasc Intervent, 2009, vol. 2, pp. 366-75.
\131\ Ibid.
\132\ Ibid.
---------------------------------------------------------------------------

Next, to support the claim that SSO2 Therapy prevents
left ventricular dilation, the applicant cited the Leiden study, which
represents a single-center, sub-study of AMIHOT I patients treated at
Leiden University in the Netherlands. The study describes outcomes of
randomized selective treatment with intracoronary aqueous oxygen (AO),
the therapy delivered by SSO2 Therapy, versus standard care
in patients who had acute anterior wall myocardial infarction within 6
hours of onset. Of the 50 patients in the sub-study, 24 received
treatment using adjunctive AO and 26 were treated according to standard
care after PCI, with no significant differences in baseline
characteristics between groups. LV volumes and function were assessed
by contrast echocardiography at baseline and 1 month. According to the
applicant, the results demonstrated that treatment with aqueous oxygen
prevents LV remodeling, showing a reduction in LV volumes (3 percent
decrease in LV end-diastolic volume and 11 percent decrease in LV end-
systolic volume) at 1 month as compared to baseline in AO-treated
patients, as compared to increasing LV volumes (14 percent increase in
LV end diastolic volume and 18 percent increase in LV end-systolic
volume) at 1 month in control patients.\133\ The results also show that

[[Page 32611]]

treatment using AO preserves LV ejection fraction at 1 month, with AO-
treated patients experiencing a 10 percent increase in LV ejection
fraction as compared to a 2 percent decrease in LV ejection fraction
among patients in the control group.\134\
---------------------------------------------------------------------------

\133\ Warda, H.M., Bax, J.J., Bosch, J.G., et al., ``Effect of
intracoronary aqueous oxygen on left ventricular remodeling after
anterior wall ST-elevation acute myocardial infarction,'' Am J
Cardiol, 2005, vol. 96(1), pp. 22-4.
\134\ Ibid.
---------------------------------------------------------------------------

Finally, to support the claim that SSO2 Therapy reduces
death and heart failure at 1 year, the applicant submitted the results
from the IC- HOT clinical trial, which was designed to confirm the
safety and efficacy of the use of the SSO2 Therapy in those
individuals presenting with a diagnosis of anterior AMI, who have
undergone successful PCI with stenting of the proximal and/or mid left
anterior descending artery within 6 hours of experiencing AMI symptoms.
It is an IDE, nonrandomized, single arm study. The study primarily
focused on safety, utilizing a composite endpoint of 30-day Net Adverse
Clinical Events (NACE). A maximum observed event rate of 10.7 percent
was established based on a contemporary PCI trial of comparable
patients who had been diagnosed with anterior wall STEMI. The results
of the IC-HOT trial exhibited a 7.1 percent observed NACE rate, meeting
the study endpoint. Notably, no 30-day mortalities were observed, and
the type and frequency of 30-day adverse events occurred at similar or
lower rates than in contemporary STEMI studies of PCI-treated patients
who had been diagnosed with anterior AMI.\135\ Furthermore, according
to the applicant, the results of the IC-HOT study supported the
conclusions of effectiveness established in AMIHOT II with a measured
30-day median infarct size = 19.4 percent (as compared to the AMIHOT II
SSO2 Therapy group infarct size = 20.0 percent).\136\ The
applicant stated that notable measures include 4-day microvascular
obstruction (MVO), which has been shown to be an independent predictor
of outcomes, 4-day and 30-day left ventricular end diastolic and end
systolic volumes, and 30-day infarct size.\137\ The applicant also
stated that the IC-HOT study results exhibited a favorable MVO as
compared to contemporary trial data, and decreasing left ventricular
volumes at 30 days, compared to contemporary PCI populations that
exhibit increasing left ventricular size.\138\ The applicant asserted
that the IC-HOT clinical trial data continue to demonstrate the
substantial clinical benefit of the use of SSO2 Therapy as
compared to the standard-of-care, PCI with stenting alone.
---------------------------------------------------------------------------

\135\ David, SW, Khan, Z.A., Patel, N.C., et al., ``Evaluation
of intracoronary hyperoxemic oxygen therapy in acute anterior
myocardial infarction: The IC-HOT study,'' Catheter Cardiovasc
Interv, 2018, pp. 1-9.
\136\ Ibid.
\137\ Ibid.
\138\ Ibid.
---------------------------------------------------------------------------

The applicant also performed controlled studies in both porcine and
canine AMI models to determine the safety, effectiveness, and mechanism
of action of the SSO2 Therapy.^{139 140} According
to the applicant, the key summary points from these animal studies are:
---------------------------------------------------------------------------

\139\ Spears, J.R., Henney, C., Prcevski, P., et al., ``Aqueous
Oxygen Hyperbaric Reperfusion in a Porcine Model of Myocardial
Infarction,'' J Invasive Cardiol, 2002, vol. 14(4), pp. 160-6.
\140\ Spears, J.R., Prcevski, P., Xu, R., et al., ``Aqueous
Oxygen Attenuation of Reperfusion Microvascular Ischemia in a Canine
Model of Myocardial Infarction,'' ASAIO J, 2003, vol. 49(6), pp.
716-20.
---------------------------------------------------------------------------

SSO2 Therapy administration post-AMI acutely
improves heart function as measured by left ventricular ejection
fraction (LVEF) and regional wall motion as compared with non-treated
control subjects.
SSO2 Therapy administration post-AMI results in
tissue salvage, as determined by post-sacrifice histological
measurements of the infarct size. Control animals exhibit larger
infarcts than the SSO2-treated animals.
SSO2 Therapy has been shown to be non-toxic to
the coronary arteries, myocardium, and end organs in randomized,
controlled swine studies with or without induced acute myocardial
infarction.
SSO2 Therapy administration post-AMI has
exhibited regional myocardial blood flow improvement in treated animals
as compared to controls.
A significant reduction in myeloperoxidase (MPO) levels in
the SSO2-treated animals versus controls, which indicate
improvement in underlying myocardial hypoxia.
Transmission electron microscopy (TEM) photographs showing
amelioration of endothelial cell edema and restoration of capillary
patency in ischemic zone cross-sectional histological examination of
the SSO2- treated animals, while non-treated controls
exhibit significant edema and vessel constriction at the microvascular
level.
In the FY 2020 final rule (84 FR 42278), after consideration of all
the information from the applicant, as well as the public comments we
received, we stated that we were unable to determine that
SSO2 Therapy represented a substantial clinical improvement
over the currently available therapies used to treat STEMI patients. We
stated that we remained concerned that the current data does not
adequately support a sufficient association between the outcome
measures of heart failure, rehospitalization, and mortality with the
use of SSO2 Therapy specifically to determine that the
technology represented a substantial clinical improvement over existing
available options. Therefore, we did not approve new technology add-on
payments for SSO2 Therapy for FY 2020.
For FY 2021, the applicant submitted new information that,
according to the applicant, demonstrates that there is an unmet medical
need for STEMI, and that SSO2 Therapy provides a treatment
option for a patient population unresponsive to currently available
treatments. The applicant presented this information in the context of
CMS's concerns as identified in the FY 2020 IPPS/LTCH PPS proposed and
final rules, specifically that (1) it is unclear whether use of the
SSO2 Therapy would demonstrate the same clinical improvement
as compared to the current standard of care; (2) that the current data
does not adequately support a sufficient association between the
outcome measures of heart failure, rehospitalization, and mortality
with the use of SSO2 Therapy, and (3) that SSO2
may not provide long-term clinical benefits in patients with AMI. Below
we summarize this information, which the applicant believes addresses
these concerns.
With regard to CMS's concern that it is unclear whether use of
SSO2 Therapy would demonstrate the same clinical improvement
as compared to the current standard-of care, the applicant restated our
concern as whether ``these data [AMIHOT I and AMIHOT II are] adequate
to show the relevant outcomes in the control (standard of care
percutaneous coronary intervention (PCI)''. In response to this
concern, the applicant asserted that patient outcomes post-PCI have
remained relatively stable over the past 10 years and there is a strong
clinical need for new therapies like SSO2 in addition to PCI
in the management of patients with anterior STEMI to reduce the risk
and severity of heart failure and death. To support its assertion of an
unmet clinical need for anterior wall STEMI treatment, the applicant
presented data from multiple references to illustrate the following:
A plateauing in STEMI 1-year mortality rates at 10 percent
with the advent of drug-eluting stents, according to reports from the
SWEDEHEART registry. This statistic is in agreement with the 9% 1year
STEMI mortality rate

[[Page 32612]]

following PCI reported in a 2015 paper by Bullock et al.\141\
---------------------------------------------------------------------------

\141\ Bulluck H, Yellon DM, and Hausenloy DJ. Reducing
myocardial infarct size: Challenges and future opportunities. Heart
2016;102:341-48.
---------------------------------------------------------------------------

No improvement in U.S. in-hospital post-PCI STEMI
mortality rates between 2001 and 2011 based on work done by Sugiyama et
al.\142\
---------------------------------------------------------------------------

\142\ Sugiyama T, Hasegawa K, Kobayashi Y, Takahashi O, Fukui T,
Tsugawa Y. Differential time trends of outcomes and costs of care
for acute myocardial infarction hospitalizations by ST elevation and
type of intervention in the United States, 2001-2011. J AmHeart
Assoc. 2015;4:e001445. doi:10.1161/JAHA.114.001445
---------------------------------------------------------------------------

No decrease in one-year mortality risk as illustrated by
Kalesan et al.,\143\ a meta-analysis of 15 clinical trials totaling
7,867 patients that compared outcomes data for STEMI patients treated
with bare metal stents versus drug eluting stents.\144\
---------------------------------------------------------------------------

\143\ Kalesan B, Pilgrim T, Heinimann K, et al. Comparison of
drug-eluting stents with bare metal stents in patients with ST-
segment elevation myocardial infarction. Eur Heart J 2012;33:977-87.
\144\ Id.
---------------------------------------------------------------------------

A markedly higher one-year mortality rate at 19.4% for the
Medicare population as compared to the total population of PCI-treated
anterior wall STEMI patients, according to the most recent Medicare
Standard Analytic File (SAF) data (2017).
No improvement in congestive heart failure (CHF) rates
after STEMI treated pPCI; the applicant referenced Szummer et al.'s
\145\ work which indicated 1 year post primary PCI CHF rates of 10
percent as well as a statistical analysis of CHF readmission outcomes
that showed heart failure rates for this patient population have
remained stable at 9 to 10 percent from 2012 to 2017.
---------------------------------------------------------------------------

\145\ Szummer K, Wallentin L, Lindhagen L, et al. Improved
outcomes in patients with ST-elevation myocardial infarction during
the last 20 years are related to implementation of evidence-based
treatments: Experiences from the SWEDEHEART registry 1995-2014. Eur
Heart J 2017;38:3056-65.
---------------------------------------------------------------------------

A decrease in 30-day STEMI re-hospitalizations due to the
evolution of PCI therapy; the applicant cited the work of Kim et
al.,\146\ noting the readmission rates trended slightly downward from
approximately 12 percent in 2010 to 10 percent in 2014. According to
the applicant, these data illustrate that PCI treats macrovascular
aspects of STEMI events, but does not address the underlying infarct
damage, which is highly correlated with worse long-term outcomes.
---------------------------------------------------------------------------

\146\ Kim LK, Yeo I, Cheung, JW, et al. Thirty-Day Readmission
Rates, Timing, Causes, and Costs after ST-Segment Myocardial
Infarction in the United States: A National Readmission Database
Analysis 2010-2014. J Am Heart Assoc 2018;7(18):1-34.
---------------------------------------------------------------------------

The applicant reiterated statements from its prior application
that, in order to reduce outcomes like mortality and heart failure in
the STEMI population, therapies must be available above and beyond PCI
to reduce the size of the infarct that results from a STEMI event. Per
the applicant, the benefits shown in the AMIHOT I 6-hour sub-study,
AMIHOT II and IC-HOT studies show statistically significant and
clinically meaningful improvements in infarct size, left ventricular
size and function, and long term outcomes that support the claim that
SSO2 offers a substantial clinical improvement over PCI by
filling an important gap in therapy with PCI, and specifically the need
to reduce infarct size beyond simply opening occluded large vessels
alone.
With regard to CMS's second concern that the current data does not
adequately support a sufficient association between the outcome
measures of heart failure, rehospitalization, and mortality with the
use of SSO2 Therapy, the applicant restated our concern as
``the importance of the reduction of infarct size as an outcome for
patients with anterior STEMI.'' The applicant provided multiple animal
and human studies to illustrate how TherOx SSO2 potentially
impacts outcome measures of heart failure, rehospitalization and
mortality. Regarding animal studies, the applicant cited the porcine
and canine study by Spears et al. and summarized above to illustrate
how aqueous oxygen hyperoxemic perfusion attenuates microvascular
ischemia.^{147 148} Regarding human studies, the applicant
cited a 2004 review by Gibbons et al. to support its assertion that the
best physical measure of the consequences of AMI in post-intervention
patients is the quantification of the extent of necrosis or infarction
in the muscle. In this 2004 review article, Gibbons et al. sought to
summarize published evidence for quantification of infarct size using
data from studies that assessed biomarkers, cardiac SPECT sestamibi and
magnetic resonance imaging.\149\ Regarding the use of cardiac SPECT
sestamibi imaging, Gibbons et al. found five separate lines of clinical
evidence that validated the use of SPECT sestamibi imaging for
determining infarct size.\150\ The applicant also referenced the CORE
trial that it submitted with its original application and which we
summarize above. Per the applicant, a substudy of CORE trial data by
Burns et al. demonstrated that an absolute infarct size reduction of 3
percent was associated with a mortality benefit.\151\ Specifically, the
trial showed that six-month mortality was significantly related to
infarct size. Per the applicant, among the 753 patients who underwent
ejection fraction measurements, the odds ratio for infarct size for
six-month mortality was 1.033--that is, for each 1 percent increase in
infarct size, mortality in the next 6 months was 1.033 times more
likely. A 5 percent increase in infarct size would therefore mean that
6-month mortality was 1.176 times more likely. A patient with an
infarct size that was greater by 5 percent of the left ventricle would
therefore have a 17.6 percent greater chance of dying within the next 6
months.\152\
---------------------------------------------------------------------------

\147\ Spears JR, Henney C, Prcevski P, et al. Aqueous Oxygen
Hyperbaric Reperfusion in a Porcine Model of Myocardial Infarction.
J Invasive Cardiol 2002; 14(4):160-6.
\148\ Spears JR, Prcevski P, Xu R, et al. Aqueous Oxygen
Attenuation of Reperfusion Microvascular Ischemia in a Canine Model
of Myocardial Infarction. ASAIO J 2003; 49(6):716-20.
\149\ Gibbons RJ, Valeti US, Araoz PA, et al. The quantification
of infarct size. J Am Coll Cardiol 2004; 44:1533-42.
\150\ Id.
\151\ Burns RJ, Gibbons RJ, Yi Q, et al. The relationships of
left ventricular ejection fraction, end-systolic volume index and
infarct size to six-month mortality after hospital discharge
following myocardial infarction treated by thrombolysis. J Am Coll
Cardiol 2002; 39:30-6.
\152\ Id.
---------------------------------------------------------------------------

The applicant further noted the CORE trial and associated studies
were conducted when thrombolytic therapy was the standard of care for
coronary artery reperfusion. The transition to PCI led directly to a
measured absolute infarct size reduction of 5.1 percent in STEMI
patients treated with PCI as compared to thrombolytic therapy, which
correlated to a significant decrease in cardiovascular events. The
applicant asserted that the infarct size reduction demonstrated with
PCI compared to thrombolytic therapy helped establish PCI as the
preferred standard of care, and that the results demonstrating the
importance of infarct size reduction hold true in randomized PCI trials
of STEMI patients, with infarct size evaluated by either Tc-99
sestabmibi SPECT imaging or cardiac MRI. The applicant referred to the
substudy of CORE trial data by Burns et al., which found that, among
the three clinical prognostic outcomes studied, ejection fraction (EF)
was superior to infarct size (IS) and end-systolic volume index (ESVI)
in predicting 6-month mortality.\153\ The authors also noted that all
three radionuclide measures were significantly associated with each
other, and that the strongest correlation was between ESVI and EF. The
study noted that infarct size was significantly correlated with both EF
and ESVI despite being determined from a different radionuclide
measurement,

[[Page 32613]]

and that infarct location was not found to be significant.\154\
---------------------------------------------------------------------------

\153\ Id.
\154\ Id.
---------------------------------------------------------------------------

The applicant also provided a study by Stone et al.\155\ to address
our concern that the current data does not adequately support a
sufficient association between the outcome measures of heart failure,
rehospitalization, and mortality with the use of SSO2
Therapy. The applicant provided Stone et al.'s recent analysis of 10
pooled randomized trials involving 2,632 subjects, including some
subjects from the AMIHOT II trial. Stone et al. set out to determine
the strength of the relationship between infarct size assessed within 1
month after pPCI in STEMI and subsequent all-cause mortality,
reinfarction and hospitalization for heart failure.\156\ Infarct size
was assessed using cardiac SPECT sestamibi or cardiac magnetic
resonance and clinical follow-up data greater than or equal to 6
months. The authors found infarct size reduction measured by either
imaging method within 1 month correlated strongly with reduced
mortality and heart failure hospitalization at 1 year. The applicant
asserted that the results demonstrated that every 5 percent absolute
increase in left ventricular infarct size was associated with a 19
percent increase in 1-year mortality, correlating well with the 17.6
percent estimate established from earlier data and underscoring the
important, independent relationship between infarct size and mortality
regardless of the treatment modality. The applicant asserted that the
published analysis also demonstrated that infarct size measured within
1 month after pPCI for STEMI using either imaging method is a powerful
independent predictor of hospitalization for heart failure at 1 year.
The applicant reiterated that overall, a 5 percent absolute infarct
size increase was associated with a 20 percent increase in either death
or heart failure at 1 year. The applicant explained that because
infarct size is the quantification of the extent of scarring of the
left ventricle post-AMI, it is a direct measure of the health of the
myocardium and indirectly of the heart's structure and function. A
large infarct means the muscle cannot contract normally, leading to
left ventricular enlargement, reduced ejection fraction, clinical heart
failure, and death. Per the applicant, the Kaplan-Meier curves for the
rates of heart failure at 12 months as a function of infarct size also
show that a 5 percent increase in left ventricle infarct size
corresponded to a 50-100 percent increase in the risk of heart failure
at 12 months for the most severe infarcts. The applicant concluded that
reducing infarct size 5 or more percentage points provides a clear and
dramatic clinical benefit for patients as demonstrated by a wealth of
trial data. Significantly, the applicant noted that even as treatment
of the primary occlusion improved, the relationship between infarct
size and mortality and heart failure persisted and remained present
throughout the study data.
---------------------------------------------------------------------------

\155\ Stone GW, Selker, HP, Thiele H, et al. Relationship
between infarct size and outcomes following primary PCI. JACC
2016;67(14):1674-83.
\156\ Id.
---------------------------------------------------------------------------

Finally, with regard to CMS's third concern that SSO2
may not provide long-term clinical benefits in patients with AMI, the
applicant again referred to the 1-year outcomes data collected from
patients in the IC-HOT trial and which were compared to a control
population from the INFUSE AMI study after propensity-matching. The
applicant asserted that STEMI patients treated with SSO2
Therapy showed statistically significant and clinically meaningful
improvements in several critically important outcomes for patients with
anterior STEMI at 1 year, such as--
Death;
New onset of heart failure and readmission for heart
failure;
Composite rate of death and new onset of heart failure;
Composite rate of death, new onset of heart failure or
readmission for heart failure, or clinically-driven target vessel
revascularization;
Composite of death, reinfarction/spontaneous MI,
clinically driven target vessel revascularization or new onset heart
failure or readmission for heart failure.
The applicant concluded that, taken together, there is abundant
evidence to support the claim that SSO2 Therapy represents a
substantial clinical improvement over PCI alone in the management of
patients with anterior STEMI. Per the applicant, there remains a strong
unmet need for new therapies like SSO2 in addition to PCI in
the management of patients with anterior STEMI to reduce the risk and
severity of heart failure and death. The applicant maintained that the
timely delivery of supersaturated oxygen therapy improves microvascular
and tissue level flow, reduces infarct size, facilitates recovery of
left ventricular function and preserves left ventricular stability, and
improves patient outcomes, most notably lowering mortality and heart
failure rates at 1 year post-procedure.
We thank the applicant for the additional information to address
the concerns discussed in the FY 2020 IPPS/LTCH PPS final rule. We
appreciate how this information, and specifically the seven studies
referenced in response to the applicant's restatement of our first
concern, illustrates a potential unmet medical need. However, we are
concerned that the AMIHOT I and AMIHOT II data may not adequately
demonstrate the relevant outcomes in the control (standard of care PCI)
because the standard of care has evolved since the two trials were
performed. Additionally, we are concerned that the results presented in
these seven studies may be based on patients with all types of STEMI
and are not specific to the FDA-approved indicated use of
SSO2 Therapy for the treatment of anterior STEMI.
Ultimately, we remain concerned that the current data does not support
a sufficient association between the outcome measures of heart failure,
rehospitalization, and mortality with the use of SSO2
Therapy specifically to determine that the technology represents a
substantial clinical improvement over existing available options.
Therefore, we are inviting public comment on whether SSO2
meets the substantial clinical improvement criterion.
We are inviting public comments on whether the SSO2
Therapy meets the substantial clinical improvement criterion.
In this section we summarize and respond to written public comments
we received in response to the New Technology Town Hall meeting notice
published in the Federal Register regarding the substantial clinical
improvement criterion for SSO2 Therapy.
Comment: Several commenters were supportive of the new technology
add-on payment application for SSO2 Therapy. These comments
were primarily in response to CMS's previous concerns about whether
SSO2 Therapy satisfied the substantial clinical improvement
criterion. The commenters noted that there is still an unmet need for
additional therapies for large anterior STEMIs in patients over the age
of 65 years. A commenter emphasized that the evolution in STEMI care
since the advent of stenting was in the improvement of stent materials
and the organization of medical care, including reducing time from
symptom onset to first medical contact, door to balloon time, total
ischemic time, and improving antithrombotic therapy, but that these
efforts all occur before the therapeutic intervention, which has
remained unchanged since the advent of drug-eluting stents. Another
commenter

[[Page 32614]]

noted that improvements in short-term mortality in STEMI are largely
due to the adoption of reperfusion therapy, and in particular
percutaneous coronary angioplasty (PCI) with stenting. The commenter
asserted that while more widespread adoption of this standard of care
has been vital in reducing hospital readmission rates, the mortality
and incidence of heart failure for STEMI patients treated with PCI have
not improved since the AMIHOT II study was conducted. The commenter
concluded that there remains a significant unmet need for additional
therapies to address reperfusion injury, microvascular damage, and
infarct size, especially in the case of large anterior STEMIs in
patients over the age of 65 years, where current data show that
patients treated with PCI demonstrate a 1-year mortality of nearly 20
percent and an incidence of heart failure over 10 percent.
Another commenter asserted that SSO2 was shown to be
safe and effective and did not increase the already known early
complications associated with an acute myocardial infarction combined
with acute coronary intervention. The commenters supported the
applicant's assertion that SSO2 Therapy reduced infarct
size, which is a surrogate for improved clinical outcomes. A commenter
noted that the 6.5 percent reduction in infarct size achieved with
SSO2 Therapy in AMIHOT trials has major clinical relevance
and is further confirmed by the results of the IC-HOT study, where
SSO2 therapy was associated with superior one-year clinical
outcomes compared with the current standard of care with PCI alone.
This commenter noted that IC-HOT patients also demonstrated favorable
effects on ventricular remodeling consistent with findings in the
AMIHOT trials, and also demonstrated favorable effects for
microvascular obstruction, which the commenter asserted is an
additional independent predictor of outcomes. This commenter referenced
the meta-analysis by Stone et al. that showed reducing infarction size
led to reduced mortality, improved long-term clinical outcomes,
improved quality of life, and reduced heart failure and related medical
expenses.\157\
---------------------------------------------------------------------------

\157\ Stone GW, Selker, HP, Thiele H, et al. Relationship
between infarct size and outcomes following primary PCI. JACC
2016;67(14):1674-83.
---------------------------------------------------------------------------

Response: We appreciate the information provided by the commenters.
We will take these comments into consideration when deciding whether to
approve new technology add-on payments for SSO2 Therapy for
FY 2021.
e. Eluvia^TM Drug-Eluting Vascular Stent System (Eluvia)
Boston Scientific submitted an application for new technology add-
on payments for the Eluvia^TM Drug-Eluting Vascular Stent
System for FY 2021. Eluvia^TM, a drug-eluting stent for the
treatment of lesions in the femoropopliteal arteries, received FDA
premarket approval (PMA) September 18, 2018. The applicant asserts that
Eluvia^TM was first commercially available on the market on
October 4, 2018 and the first procedure with Eluvia^TM
following FDA approval in the U.S. occurred on October 5, 2018. We note
that the applicant submitted an application for new technology add-on
payments for FY 2020. In the FY 2020 IPPS/LTCH PPS final rule (84 FR
42231), we stated that we remain concerned that we do not have enough
information to determine that the Eluvia^TM device represents
a substantial clinical improvement over existing technologies.
Therefore, we did not approve the Eluvia^TM device for FY
2020 new technology add-on payments. We refer the reader to the FY 2020
IPPS/LTCH PPS final rule (84 FR 42220 through 42231) for a complete
discussion regarding the Eluvia^TM device's FY 2020 new
technology application.
According to the applicant, the Eluvia^TM system is a
sustained release drug-eluting stent indicated for the treatment of
lesions in the femoropopliteal arteries and is designed to restore
blood flow in the peripheral arteries above the knee--specifically the
superficial femoral artery (SFA) and proximal popliteal artery (PPA).
The applicant asserts that this device/drug combination product for
endovascular treatment of peripheral artery disease (PAD) utilizes a
polymer that carries and protects the drug before and during the
procedure and ensures that the drug is released into the tissue in a
controlled, sustained manner to prevent the restenosis of the vessel.
The applicant further asserts that Eluvia^TM system's stent
platform is purpose-built to address the mechanical challenges of the
SFA with an optimal amount of strength, flexibility and fracture
resistance. According to the applicant, Eluvia^TM's polymer-
based drug delivery system is uniquely designed to sustain the release
of paclitaxel beyond 1year to match the restenotic process in the SFA.
The Eluvia^TM system is indicated for improving luminal
diameter in the treatment of symptomatic de-novo or restenotic lesions
in the native SFA and/or PPA with reference vessel diameters (RVD)
ranging from 4.0 to 6.0 mm and total lesion lengths up to 190mm,
according to the applicant.
The applicant asserts that the Eluvia^TM system is
comprised of the implantable endoprosthesis and the stent delivery
system. The stent is a laser cut self-expanding stent composed of a
nickel titanium alloy (nitinol). On both the proximal and distal ends
of the stent, radiopaque markers made of tantalum increase visibility
of the stent to aid in placement. The triaxial designed delivery system
consists of an outer shaft to stabilize the stent delivery system, a
middle shaft to protect and constrain the stent, and an inner shaft to
provide a guidewire lumen. The delivery system is compatible with 0.035
in (0.89 mm) guidewires. The Eluvia^TM stent is available in
a variety of diameters and lengths. The delivery system is offered in
two working lengths including 75 and 130 cm.
Peripheral artery disease (PAD) is a circulatory problem in which
narrowed arteries reduce blood flow to the limbs, usually in the legs.
Symptoms of PAD may include lower extremity pain due to varying degrees
of ischemia and claudication, which is characterized by pain induced by
exercise and relieved with rest. Risk factors for PAD include age >=70
years; age 50 to 69 years with a history of smoking or diabetes; age 40
to 49 with diabetes and at least one other risk factor for
atherosclerosis; leg symptoms suggestive of claudication with exertion,
or ischemic pain at rest; abnormal lower extremity pulse examination;
known atherosclerosis at other sites (for example, coronary, carotid,
renal artery disease); smoking; hypertension, hyperlipidemia, and
homocysteinemia.\158\ PAD is primarily caused by atherosclerosis--the
buildup of fatty plaque in the arteries. PAD can occur in any blood
vessel, but it is more common in the legs than the arms. Approximately
8.5 million people in the United States have PAD, including 12-20% of
individuals older than age 60.\159\
---------------------------------------------------------------------------

\158\ Neschis, David G. & MD, Golden, M. (2018). Clinical
features and diagnosis of lower extremity peripheral artery disease.
Retrieved October 29, 2018, from https://www.uptodate.com/contents/clinical-features-and-diagnosis-of-lower-extremity-peripheral-artery-disease.
\159\ Centers for Disease Control and Prevention. (2018).
Peripheral Arterial Disease (PAD) Fact Sheet. Retrieved from https://www.cdc.gov/DHDSP/data_statistics/fact_sheets/fs_PAD.htm.
---------------------------------------------------------------------------

A diagnosis of PAD is established with the measurement of an ankle-
brachial index (ABI) <=0.9. The ABI is a comparison of the resting
systolic blood pressure at the ankle to the higher systolic brachial
pressure. Duplex ultrasonography is commonly used in conjunction with
the ABI to identify the

[[Page 32615]]

location and severity of arterial obstruction.\160\
---------------------------------------------------------------------------

\160\ Berger, J. & Davies, M. (2018). Overview of lower
extremity peripheral artery disease. Retrieved October 29, 2018 from
https://www.uptodate.com/contents/overview-of-lower-extremity-peripheral-artery-disease.
---------------------------------------------------------------------------

Management of disease is aimed at improving symptoms, improving
functional capacity, and preventing amputations and death. Management
of patients with lower extremity PAD may include medical therapies to
reduce the risk for future cardiovascular events related to
atherosclerosis, such as myocardial infarction, stroke, and peripheral
arterial thrombosis. Such therapies may include antiplatelet therapy,
smoking cessation, lipid-lowering therapy, and treatment of diabetes
and hypertension. For patients with significant or disabling symptoms
unresponsive to lifestyle adjustment and pharmacologic therapy,
intervention (percutaneous, surgical) may be needed. Surgical
intervention includes angioplasty, a procedure in which a balloon-tip
catheter is inserted into the artery and inflated to dilate the
narrowed artery lumen. The balloon is then deflated and removed with
the catheter. For patients with limb-threatening ischemia (for example
pain while at rest and or ulceration), revascularization is a priority
to reestablish arterial blood flow. According to the applicant,
treatment of the SFA is problematic due to multiple issues, including
high rate of restenosis and significant forces of compression.
The applicant asserts that the Eluvia^TM Drug-Eluting
Vascular Stent System is a sustained-release drug-eluting self-
expanding, nickel titanium alloy (nitinol) mesh stent used to
reestablish blood flow to stenotic arteries. According to the
applicant, the Eluvia^TM system is the first stent
specifically designed for deployment in the SFA and/or PPA that
utilizes the anti-restenotic drug paclitaxel in conjunction with a
polymer. Eluvia^TM is built on the Innova^TM Stent
System platform, consisting of a self-expanding nitinol stent and an
advanced, 6F low-profile triaxial delivery system for added support and
placement accuracy. The Eluvia^TM stent is coated with the
drug paclitaxel, which helps prevent the artery from restenosis. The
Eluvia^TM Stent System is comprised of the implantable
endoprosthesis and the stent delivery system (SDS).
According to the applicant, there are four principal treatment
options for PAD, including two endovascular approaches (angioplasty and
stenting):
Medical therapy, typically for those with mild to medium
symptoms. This may include pharmacotherapy (for example, cilostazil)
and exercise therapy.
Angioplasty, a procedure in which a catheter with a
balloon on the tip is inserted into an artery and inflated to expand
the artery and reduce the blockage. The balloon is then deflated and
removed with the catheter. Some procedures use drug coated balloons, in
which a drug is applied to the lesion at the time of balloon inflation.
Stenting via a procedure in which a stent is placed in the
artery to keep the artery open and prevent it from re-narrowing. This
can be done with a bare metal stent or with a drug-eluting stent, which
also releases a drug that helps slow the re-narrowing of the vessel.
For patients with severe narrowing that is blocking blood
flow, bypass surgery may be warranted. In the procedure, a healthy vein
is used to make a new path around the narrowed or blocked artery.
The applicant further asserts that aside from Eluvia^TM,
the alternative existing endovascular approaches (angioplasty and
stenting) do not provide a sustained release application of a drug and
that Eluvia^TM is the first polymer-based, drug-eluting stent
designed to treat and restore blood flow in the peripheral arteries
above the knee, and the eluted medication helps to prevent tissue
regrowth during the entire period most commonly associated with
restenosis. According to the applicant, the sustained release of the
anti-restenotic drug is intentionally designed to elute over a 12-15-
month period delivering the drug when restenosis is most likely to
occur, which the applicant states is a significantly longer period than
the two-month duration of drug eluted from drug-coated balloons and the
paclitaxel-coated Zilver PTX drug eluting stent.
The Eluvia^TM stent system was granted approval for the
following ICD-10-PCS procedure codes effective October 1, 2019:

[[Page 32616]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.127

As discussed previously, if a technology meets all three of the
substantial similarity criteria, it would be considered substantially
similar to an existing technology and would therefore not be considered
``new'' for purposes of new technology add-on payments. We note that in
the FY 2020 IPPS/LTCH PPS final rule (84 FR 42227), we stated that
after consideration of the applicant's comments, we believe that the
Eluvia^TM device uses a unique mechanism of action to achieve
a therapeutic outcome when compared to existing technologies such as
the paclitaxel-coated stent. Therefore, we stated that the
Eluvia^TM device meets the newness criterion. We refer the
reader to the FY 2020 final rule for the complete discussion of how the
Eluvia^TM device meets the newness criterion. The applicant
noted in its FY 2021 application that for FY 2020, CMS concluded that
the Eluvia^TM device met the newness criterion. The applicant
stated that it believes there is no basis for CMS to reach a contrary
conclusion with regard to whether the Eluvia^TM system meets
the newness criterion for FY 2021. The applicant also reiterated that
the Eluvia^TM device uses a unique mechanism of action
because it utilizes a sustained-release of a low-dose of paclitaxel. We
welcome any additional information or comments in response to this
proposed rule regarding whether the Eluvia^TM device is
substantially similar to an existing technology and whether it meets
the newness criterion for purposes of its application for new
technology add-on payments for FY 2021.
With regard to the cost criterion, the applicant conducted two
analyses based on 100 percent of identified claims and 76 percent of
identified claims. To identify potential cases where
Eluvia^TM could be utilized, the applicant searched the FY
2018 MedPAR file for ICD-10-PCS codes from the Peripheral Drug Eluting
Stent and Peripheral Bare Metal Stent categories. For the analysis
using 100 percent of cases, the applicant identified a total of 11,051
cases spanning 150 MS-DRGs. The applicant then removed charges for the
technology being replaced. The applicant stated that because it was
unable to determine a more specific percentage reduction, it chose the
most conservative approach for calculation purposes and removed 100% of
charges associated with service category Medical/Surgical Supply Charge
Amount, which included revenue center 027x. The applicant then
standardized the charges and applied an inflation factor of 11.1%,
which is the same inflation factor used by CMS to update the outlier
threshold in the FY 2020 IPPS/LTCH PPS final rule, to update the
charges from FY 2018 to FY 2020 (84 FR 42629). The applicant added
charges for the new technology by multiplying the cost of the
technology by the national CCR for implantable devices (0.299) from the
FY 2020 IPPS final rule. Under the analysis based on 100% of identified
claims, the applicant determined an average case-

[[Page 32617]]

weighted threshold amount of $100,851 and a final average inflated
standardized charge per case of $157,343.
Under the analysis based on 76 percent of identified claims, the
applicant used the same methodology, which identified 8,335 cases
across 8 MS-DRGs. The applicant determined the average case-weighted
threshold amount of $98,196 and a final inflated average standardized
charge per case of $147,343. Because the final inflated average
standardized charge per case exceeded the case-weighted threshold
amount under both analyses, the applicant asserted that the technology
meets the cost criterion. We invite public comments on whether
Eluvia^TM meets the cost criterion.
With regard to the substantial clinical improvement criterion, the
applicant asserts that Eluvia^TM represents a substantial
clinical improvement over existing technologies because it achieves
superior primary patency; reduces the rate of subsequent therapeutic
interventions; decreases the number of future hospitalizations or
physician visits; reduces hospital readmission rates; reduces the rate
of device related complications; and achieves similar functional
outcomes and EQ-5D index values while associated with half the rate of
TLRs.
As stated above, Boston Scientific submitted an application for new
technology add-on payments for the Eluvia^TM device for FY
2020 that was not approved. In the FY 2020 IPPS/LTCH PPS final rule (84
FR 42231), we noted the FDA's preliminary review of data that
identified a potentially concerning signal of increased long-term
mortality in study subjects treated with paclitaxel-coated products
compared to patients treated with uncoated devices, and stated that we
remained concerned that we did not have enough information to determine
that the Eluvia^TM device represents a substantial clinical
improvement over existing technologies. The applicant resubmitted its
application for new technology add-on payments for FY 2021 with updated
two-year primary patency results to demonstrate that the
Eluvia^TM device represents a substantial clinical
improvement over existing technologies. Below we summarize the studies
the applicant submitted with both its FY 2020 and FY 2021 applications,
followed by the new information the applicant submitted with its FY
2021 application to support that the technology represents a
substantial clinical improvement.
The applicant submitted the results of the MAJESTIC study, a
single-arm first-in-human study of Eluvia^TM. The MAJESTIC
\161\ study is a prospective, multicenter single-arm, open label study.
Per the applicant, the MAJESTIC study demonstrated long-term treatment
durability among patients whose femoropopliteal arteries were treated
with the Eluvia^TM stent. The MAJESTIC study enrolled 57
patients with symptomatic lower limb ischemia and lesions in the
superficial femoral artery or proximal popliteal artery. Efficacy
measures at 2 years included primary patency, defined as duplex
ultrasound peak systolic velocity ratio of <2.5 and the absence of
target lesion revascularization (TLR) or bypass. Safety monitoring
through 3 years included adverse events and TLR. The 24-month clinic
visit was completed by 53 patients; 52 had Doppler ultrasound evaluable
by the core laboratory, and 48 patients had radiographs taken for stent
fracture analysis. The 3-year follow-up was completed by 54 patients.
At 2 years, 90.6% (48/53) of patients had improved by one or more
Rutherford categories as compared with the pre-procedure level without
the need for TLR (when those with TLR were included, 96.2% sustained
improvement); only one patient exhibited a worsening in level, 66.0%
(35/53) of patients exhibited no symptoms (category 0) and 24.5% (13/
53) had mild claudication (category 1) at the 24-month visit. Mean ABI
improved from 0.73 0.22 at baseline to 1.02
0.20 at 12 months and 0.93 0.26 at 24 months. At 24
months, 79.2% (38/48) of patients had an ABI increase of at least 0.1
compared with baseline or had reached an ABI of at least 0.9. According
to the applicant, the primary patency rate at 12 months was 96.4%. With
regard to the Eluvia^TM stent achieving superior primary
patency, the applicant submitted the results of the IMPERIAL \162\
trial in which the Eluvia^TM stent is compared, head-to-head,
to the Zilver[supreg] PTX[supreg] drug-eluting stent. The IMPERIAL
study is a global, multi-center, randomized controlled trial consisting
of 465 subjects. Eligible patients were aged 18 years or older and had
symptomatic lower-limb ischaemia, defined as Rutherford category 2, 3,
or 4 and stenotic, restenotic (treated with a drug-coated balloon >12
months before the study or standard percutaneous transluminal
angioplasty only), or occlusive lesions in the native superficial
femoral artery or proximal popliteal artery, with at least one
infrapopliteal vessel patent to the ankle or foot. Patients had to have
stenosis of 70% or more (via angiographic assessment), vessel diameter
between 4 mm and 6 mm, and total lesion length between 30 mm and 140
mm.
---------------------------------------------------------------------------

\161\ M[uuml]ller-H[uuml]lsbeck S et al. Long-Term Results from
the MAJESTIC Trial of the Eluvia Paclitaxel-Eluting Stent for
Femoropopliteal Treatment: 3-Year Follow-up. Cardiovasc Intervent
Radiol. 2017 Dec;40(12):1832-1838.
\162\ Gray WA et al. A polymer-coated, paclitaxel-eluting stent
(Eluvia) versus a polymer-free, paclitaxel-coated stent (Zilver PTX)
for endovascular femoropopliteal intervention (IMPERIAL): A
randomised, non-inferiority trial. Lancet. 2018 Sep 24.
---------------------------------------------------------------------------

Subjects who had previously stented target lesion/vessels treated
with drug-coated balloon <12 months prior to randomization/enrollment
and subjects who had undergone prior surgery of the SFA/PPA in the
target limb to treat atherosclerotic disease were excluded from the
study. Two concurrent single-group (Eluvia^TM only) sub
studies were done: A non-blinded, non-randomized pharmacokinetic sub
study and a non-blinded, non-randomized study of patients with long
lesions (>140 mm). The IMPERIAL study is a prospective, multicenter,
single-blinded randomized, controlled (RCT) non-inferiority trial.
Patients were randomized (2:1) to implantation of either a paclitaxel-
eluting polymer stent (Eluvia^TM) or a paclitaxel-coated
stent (Zilver[supreg] PTX[supreg]) after the treating physician had
successfully crossed the target lesion with a guide wire. The primary
endpoints of the study are Major Adverse Events defined as all causes
of death through 1 month, Target Limb Major Amputation through 12
months and/or Target Lesion Revascularization (TLR) through 12 months,
and primary vessel patency at 12 months post-procedure. Secondary
endpoints included the Rutherford categorization, Walking Impairment
Questionnaire, and EQ- 5D assessments at 1 month and 6 months post-
procedure. Patient demographic and characteristics were balanced
between Eluvia^TM stent and Zilver[supreg] PTX[supreg] stent
groups.
The applicant noted that lesion characteristics for the
Eluvia^TM stent vs Zilver[supreg] PTX[supreg] stent arms were
comparable. Clinical follow-up visits related to the study were
scheduled for 1 month, 6 months, and 12 months after the procedure,
with follow-up planned to continue through 5 years, including clinical
visits at 24 months and 5 years and clinical or telephone follow-up at
3 and 4 years.
The applicant asserts that in the IMPERIAL study, the
Eluvia^TM stent demonstrated superior primary patency over
the Zilver[supreg] PTX[supreg] stent, with 86.8% vs. 77.5% respectively
(p=0.0144). The non-inferiority primary efficacy endpoint was also met.
The applicant asserts that the SFA presents unique challenges with
respect to maintaining long-term patency. There are distinct

[[Page 32618]]

pathological differences between the SFA and coronary arteries. The SFA
tends to have higher levels of calcification and chronic total
occlusions when compared to coronary arteries. Following an
intervention within the SFA, the SFA produces a healing response which
often results in restenosis or re-narrowing of the arterial lumen. This
cascade of events leading to restenosis starts with inflammation,
followed by smooth muscle cell proliferation and matrix formation.\163\
Because of the unique mechanical forces in the SFA, this restenotic
process of the SFA can continue well beyond 300 days from the initial
intervention. Primary patency at 12 months, by Kaplan-Meier estimate,
was significantly greater for Eluvia^TM than for
Zilver[supreg] PTX[supreg], with 88.5% and 79.5% respectively
(p=0.0119). According to the applicant, these results are consistent
with the 96.4% primary patency rate at 12 months in the MAJESTIC study,
the single-arm first-in-human study of Eluvia^TM.
---------------------------------------------------------------------------

\163\ Forrester JS, Fishbein M, Helfant R, Fagin J. A paradigm
for restenosis based on cell biology: Clues for the development of
new preventive therapies. J Am Coll Cardiol. 1991 Mar 1;17(3):758-
69.
---------------------------------------------------------------------------

The IMPERIAL study included two concurrent single-group
(Eluvia^TM only) sub studies: A non-blinded, non-randomized
pharmacokinetic sub study and a non-blinded, non-randomized study of
patients with long lesions (>140 mm). For the pharmacokinetic sub
study, patients had venous blood drawn before stent implantation, at
intervals ranging from 10 minutes to 24 hours post implantation, and
then at either 48 hours or 72 hours post implantation. The
pharmacokinetics sub study confirmed that plasma paclitaxel
concentrations after Eluvia^TM implantation were well below
thresholds associated with toxic effects in studies in patients with
cancer (0[middot]05 [mu]M or ~43 ng/mL).
The IMPERIAL sub study long lesion subgroup consisted of 50
patients with average lesion length of 162.8 mm that were each treated
with two Eluvia^TM stents. Twelve-month outcomes for the long
lesion subgroup are 87% primary patency and 6.5% Target Lesion
Revascularization (TLR). In a subgroup analysis of patients 65 years
and older (Medicare population), the primary patency rate in the
Eluvia^TM stent group is 92.6%, compared to 75.0% for the
Zilver[supreg] PTX[supreg] stent group (p=0.0386).
With regard to reducing the rate of subsequent therapeutic
interventions, secondary outcomes in the IMPERIAL study included repeat
re-intervention on the same lesion, target lesion revascularization
(TLR). The rate of subsequent interventions, or TLRs, in the
Eluvia^TM stent group was 4.5% compared to 9.0% in the
Zilver[supreg] PTX[supreg] stent group. The applicant asserts that TLR
rate in the Eluvia^TM group represents a substantial
reduction in re-intervention on the target lesion compared to that of
the Zilver[supreg] PTX[supreg] stent group.
With regard to decreasing the number of future hospitalizations or
physician visits, the applicant asserts that the substantial reduction
in the lesion revascularization rate led to a reduced need to provide
additional intensive care, distinguishing the Eluvia^TM group
from the Zilver[supreg] PTX[supreg] group. In the IMPERIAL study,
Eluvia^TM-treated patients required fewer days of re-
hospitalization. There were 13.9 post procedure in-hospital days in the
Eluvia^TM group for all adverse events compared to 17.7 post
procedure in-hospital days in the Zilver[supreg] PTX[supreg] group.
There were 2.8 post procedure in-hospital days in the
Eluvia^TM group for TLR/Total Vessel Revascularization (TVR)
compared to 7.1 post procedure in-hospital days in the Zilver[supreg]
PTX[supreg] group. And lastly, there were 2.7 post-procedure in-
hospital days from the Eluvia^TM group for procedure/device
related adverse events compared to 4.5 post procedure in-hospital days
for the Zilver[supreg] PTX[supreg] group.
With regard to reducing hospital readmission rates, the applicant
asserts that patients treated in the Eluvia^TM group
experienced reduced rates of hospital readmission following the index
procedure compared to those in the Zilver[supreg] PTX[supreg] group.
Hospital readmission rates at 12 months were 3.9% for the
Eluvia^TM group compared to 7.1% for the Zilver[supreg]
PTX[supreg] group. Similar results were noted at 1 and 6 months; 1.0%
vs 2.6% and 2.4% vs 3.8% respectively.
With regard to reducing the rate of device related complications,
the applicant asserts that while the rates of adverse events were
similar in total between treatment arms in the IMPERIAL study, there
were measurable differences in device-related complications. Device-
related adverse-events were reported in 8% of patients in the
Eluvia^TM group compared to 14% of patients in the
Zilver[supreg] PTX[supreg] group.
Lastly, with regard to achieving similar functional outcomes and
EQ-5D index values, while associated with half the rate of TLRs, the
applicant asserts that narrowed or blocked arteries within the SFA can
limit the supply of oxygen-rich blood throughout the lower extremities,
causing pain or discomfort when walking. The applicant further asserts
that performing physical activities is often challenging because of
decreased blood supply to the legs, typically causing symptoms to
become more challenging overtime unless treated. The applicant asserts
that while functional outcomes appear similar between the
Eluvia^TM and Zilver[supreg] PTX[supreg] groups at 12 months,
these improvements for the Zilver[supreg] PTX[supreg] group are
associated with twice as many TLRs to achieve similar EQ-5D index
values.\164\ At 12 months, of the patients with complete Rutherford
assessment data, 241 (86 percent) of 281 patients in the
Eluvia^TM group and 120 (85 percent) of 142 patients in the
Zilver[supreg] PTX[supreg] group had symptoms reported as Rutherford
Category 0 or 1 (none to mild claudication). The mean ankle-brachial
index was 1[middot]0 (SD 0[middot]2) in both groups at 12 months
(baseline mean ankle-brachial index 0[middot]7 [SD 0[middot]2] for
Eluvia^TM 0[middot]8 [0[middot]2] for Zilver[supreg]
PTX[supreg]), with sustained hemodynamic improvement for approximately
80 percent of the patients in both groups. Walking function improved
significantly from baseline to 12 months in both groups, as measured
with the Walking Impairment Questionnaire and the 6-minute walk test.
In both groups, the majority of patients had sustained improvement in
the mobility dimension of the EQ-5D and roughly half had sustained
improvement in the pain or discomfort dimension. No significant
between-group differences were observed in the Walking Impairment
Questionnaire, 6-minute walk test, or EQ-5D. Secondary endpoint results
for the Eluvia^TM stent and Zilver[supreg] PTX[supreg] stent
groups are as follows:
---------------------------------------------------------------------------

\164\ Gray WA, Keirse K, Soga Y, et al. A polymer-coated,
paclitaxel-eluting stent (Eluvia) versus a polymer-free, paclitaxel-
coated stent (Zilver PTX) for endovascular femoropopliteal
intervention (IMPERIAL): A randomized, non-inferiority trial. Lancet
2018; published online Sept 22. http://dx.doi.org/10.1016/S0140-6736(18)32262-1.
---------------------------------------------------------------------------

Hemodynamic improvement in walking--80.8 percent versus
78.7 percent;
Walking impairment questionnaire scores (change from
baseline)--40.8 (36.5) versus 35.8 (39.5);
Distance (change from baseline)--33.2 (38.3) versus 29.5
(38.2);
Speed (change from baseline)--18.3 (29.5) versus 18.1
(28.7);
Stair climbing (change from baseline)--19.4 (36.7) versus
21.1 (34.6); and
6-Minute walk test distance (m) (change from baseline)--
44.5 (119.5) versus 51.8 (130.5).
As summarized in the FY 2020 IPPS/LTCH PPS final rule (84 FR
42230), in our discussion of the comments

[[Page 32619]]

received regarding substantial clinical improvement with respect to the
new technology add-on payment application for Eluvia^TM for
FY 2020, we received a comment expressing safety concerns with
paclitaxel-coated devices used to treat PAD. The commenter stated they
were aware of an FDA alert concerning paclitaxel-coated devices. The
commenter stated the applicant and other manufacturers of devices using
paclitaxel should consider an alternative to paclitaxel.
We stated in response that we are aware of FDA's March 15, 2019
letter to healthcare providers regarding the ``Treatment of Peripheral
Arterial Disease with Paclitaxel-Coated Balloons and Paclitaxel-Eluting
Stents Potentially Associated with Increased Mortality.'' We noted that
in March 2019, FDA conducted a preliminary analysis of long-term
follow-up data (up to 5 years in some studies) of the pivotal premarket
randomized trials for paclitaxel-coated products indicated for PAD. We
stated that while the analyses are ongoing, according to FDA, the
preliminary review of the data had identified a potentially concerning
signal of increased long-term mortality in study subjects treated with
paclitaxel-coated products compared to patients treated with uncoated
devices.\165\ Of the three trials with 5-year follow-up data, each
showed higher mortality in subjects treated with paclitaxel-coated
products than subjects treated with uncoated devices. In total, among
the 975 subjects in these 3 trials, there was an approximately 50
percent increased risk of mortality in subjects treated with
paclitaxel-coated devices versus those treated with control devices
(20.1 percent versus 13.4 percent crude risk of death at 5 years).
---------------------------------------------------------------------------

\165\ https://www.fda.gov/medical-devices/letters-health-care-providers/update-treatment-peripheral-arterial-disease-paclitaxel-coated-balloons-and-paclitaxel-eluting.
---------------------------------------------------------------------------

We also noted that FDA stated that the data should be interpreted
with caution for several reasons. First, there is large variability in
the risk estimate of mortality due to the limited amount of long-term
data. Second, the studies were not originally designed to be pooled,
introducing greater uncertainty in the results. Third, the specific
cause and mechanism of the increased mortality is unknown.
We further stated that based on the preliminary review of available
data, FDA made the following recommendations regarding the use of
paclitaxel-coated balloons and paclitaxel-eluting stents: That health
care providers consider the following until further information is
available; continue diligent monitoring of patients who have been
treated with paclitaxel-coated balloons and paclitaxel-eluting stents;
when making treatment recommendations and as part of the informed
consent process, consider that there may be an increased rate of long-
term mortality in patients treated with paclitaxel-coated balloons and
paclitaxel-eluting stents; discuss the risks and benefits of all
available PAD treatment options with your patients; for most patients,
alternative treatment options to paclitaxel-coated balloons and
paclitaxel-eluting stents should generally be used until additional
analysis of the safety signal has been performed; for some individual
patients at particularly high risk for restenosis, clinicians may
determine that the benefits of using a paclitaxel-coated product may
outweigh the risks; ensure patients receive optimal medical therapy for
PAD and other cardiovascular risk factors as well as guidance on
healthy lifestyles including weight control, smoking cessation, and
exercise.
We also noted that FDA further stated that paclitaxel-coated
balloons and stents are known to improve blood flow to the legs and
decrease the likelihood of repeat procedures to reopen blocked blood
vessels. However, because of this concerning safety signal, FDA stated
that it believes alternative treatment options should generally be used
for most patients while FDA continues to further evaluate the increased
long-term mortality signal and its impact on the overall benefit-risk
profile of these devices. FDA stated it intends to conduct additional
analyses to determine whether the benefits continue to outweigh the
risks for approved paclitaxel-coated balloons and paclitaxel-eluting
stents when used in accordance with their indications for use. FDA
stated it will also evaluate whether these analyses impact the safety
of patients treated with these devices for other indications, such as
treatment of arteriovenous access stenosis or critical limb ischemia.
Furthermore, we stated that because of concerns regarding this
issue, FDA convened an Advisory Committee meeting of the Circulatory
System Devices Panel on June 19 and 20, 2019 to: Facilitate a public,
transparent, and unbiased discussion on the presence and magnitude of a
long-term mortality signal; discuss plausible reasons, including any
potential biological mechanisms, for a long-term mortality signal; re-
examine the benefit-risk profile of this group of devices; consider
modifications to ongoing and future US clinical trials evaluating
devices containing paclitaxel, including added surveillance, updated
informed consent, and enhanced adjudication for drug-related adverse
events and deaths; and guide other regulatory actions, as needed. The
June 19 and 20, 2019 Advisory Committee meeting of the Circulatory
System Devices Panel concluded that analyses of available data from
FDA-approved devices show an increase in late mortality (between 2 and
5 years) associated with paclitaxel-coated devices intended to treat
femoropopliteal disease.\166\ However, causality for the late mortality
rate increase could not be determined. Additional data may be needed to
further assess the magnitude of the late mortality signal, determine
any potential causes, identify patient sub-groups that may be at
greater risk, and to update benefit-risk considerations of this device
class.\167\
---------------------------------------------------------------------------

\166\ https://www.fda.gov/advisory-committees/advisory-committee-calendar/june-19-20-2019-circulatory-system-devices-panel-medical-devices-advisory-committee-meeting#event-materials.
\167\ https://www.fda.gov/advisory-committees/advisory-committee-calendar/june-19-20-2019-circulatory-system-devices-panel-medical-devices-advisory-committee-meeting#event-materials.
---------------------------------------------------------------------------

We stated that FDA continues to recommend that health care
providers report any adverse events or suspected adverse events
experienced with the use of paclitaxel-coated balloons and paclitaxel-
eluting stents. FDA stated that it will keep the public informed as any
new information or recommendations become available.
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42231), after
consideration of the public comments we received and the latest
available information from the FDA advisory panel, we noted the FDA
panel's preliminary review of the data had identified a potentially
concerning signal of increased long-term mortality in study subjects
treated with paclitaxel-coated products compared to patients treated
with uncoated devices. We stated that additionally, since FDA has
stated that it believes alternative treatment options should generally
be used for most patients while it continues to further evaluate the
increased long-term mortality signal and its impact on the overall
benefit-risk profile of these devices, we remained concerned that we
did not have enough information to determine that the
Eluvia^TM device represents a substantial clinical
improvement over existing technologies. Therefore, we stated that we
were not approving the Eluvia^TM device for FY 2020 new
technology add-on payments. We also stated that we would monitor any
new information or

[[Page 32620]]

recommendations as they become available.
Since the FY 2020 IPPS/LTCH PPS final rule, the FDA issued an
August 7, 2019 update: ``Treatment of Peripheral Arterial Disease with
Paclitaxel-Coated Balloons and Paclitaxel-Eluting Stents Potentially
Associated with Increased Mortality.'' \168\ In its update, the FDA
included recommendations to healthcare providers for assessing and
treating patients with PAD using paclitaxel-coated devices. Based on
the FDA's review of available data and the Advisory Panel conclusions,
the FDA recommends that healthcare providers consider the following:
---------------------------------------------------------------------------

\168\ https://www.fda.gov/medical-devices/letters-health-care-providers/august-7-2019-update-treatment-peripheral-arterial-disease-paclitaxel-coated-balloons-and-paclitaxel.
---------------------------------------------------------------------------

Continue diligent monitoring of patients who have been
treated with paclitaxel-coated balloons and paclitaxel-eluting stents.
When making treatment recommendations, and as part of the
informed consent process, consider that there may be an increased rate
of long-term mortality in patients treated with paclitaxel-coated
balloons and paclitaxel-eluting stents.
Discuss the risks and benefits of all available PAD
treatment options with your patients. For many patients, alternative
treatment options to paclitaxel-coated balloons and paclitaxel-eluting
stents provide a more favorable benefit-risk profile based on currently
available information.
For individual patients judged to be at particularly high
risk for restenosis and repeat femoropopliteal interventions,
clinicians may determine that the benefits of using a paclitaxel-coated
device outweigh the risk of late mortality.
In discussing treatment options, physicians should explore
their patients' expectations, concerns and treatment preferences.
Ensure patients receive optimal medical therapy for PAD
and other cardiovascular risk factors as well as guidance on healthy
lifestyles including weight control, smoking cessation, and exercise.
Report any adverse events or suspected adverse events
experienced with the use of paclitaxel-coated balloons and paclitaxel-
eluting stents.
In addition, the August 7, 2019 update noted the following. Based
on the conclusions of its analysis and recommendations of the advisory
panel, FDA stated that it is taking additional steps to address this
signal, including working with manufacturers on updates to device
labeling and clinical trial informed consent documents to incorporate
information about the late mortality signal. FDA also stated that it is
continuing to actively work with the manufacturers and investigators on
additional clinical evidence development for assessment of the long-
term safety of paclitaxel-coated devices. FDA noted that paclitaxel-
coated balloons and stents improve blood flow to the legs and decrease
the likelihood of repeat procedures to reopen blocked blood vessels
compared to uncoated devices. The update stated that the panel
concluded that the benefits of paclitaxel-coated devices (for example,
reduced reinterventions) should be considered in individual patients
along with potential risks (for example, late mortality).
The applicant stated in its FY 2021 application that while CMS
denied the application for new technology add-on payments for
Eluvia^TM for FY 2020 because of its concerns about
paclitaxel, the available evidence and policymaking from the FDA would
suggest that this device is safe, effective and a substantial clinical
improvement. To address the substantial clinical improvement concerns
stated in the FY 2020 final rule, the applicant stated that
Eluvia^TM is not associated with increased all-cause
mortality and that two-year all-cause mortality data are consistent
with FDA-published rates for uncoated angioplasty devices. The
applicant further asserted that most recent publications on peripheral
paclitaxel-coated devices do not replicate the strong mortality signal
identified in the meta-analysis. The applicant stated that it submitted
information on Eluvia^TM to the FDA for the June 19-20
Circulatory System Devices Panel of the Medical Devices Advisory
Committee meeting. The applicant further asserted that the FDA
continues to find that paclitaxel devices are effective, specifically
that ``Paclitaxel-coated balloons and stents improve blood flow to the
legs and decrease the likelihood of repeat procedures to reopen blocked
blood vessels compared to uncoated devices.'' \169\ The applicant
stated that the FDA, following months of investigation, multiple
letters to health care providers and an advisory panel meeting, has not
changed the marketed status of peripheral paclitaxel devices.
Therefore, the applicant respectfully requested that CMS consider that
Eluvia^TM satisfies the substantial clinical improvement
criterion in light of this information. The applicant referred to the
FDA's meta-analysis of long-term follow-up data from the pivotal
premarket randomized trials for paclitaxel-coated devices used to treat
PAD. The FDA's meta-analysis of these trials \170\ identified a late
mortality signal in study subjects treated with paclitaxel-coated
devices compared to patients treated with uncoated devices.
Specifically, in three randomized trials which enrolled a total of 1090
patients, the crude mortality rate at 5 years was 19.8% (range 15.9%-
23.4%) in patients treated with paclitaxel-coated devices compared to
12.7% (range 11.2%-14.0%) in subjects treated with uncoated devices.
The relative risk for increased mortality at 5 years was 1.57 (95%
confidence interval 1.16--2.13), which corresponds to a 57% relative
increase in mortality in patients treated with paclitaxel-coated
devices.
---------------------------------------------------------------------------

\169\ FDA Letter to Health Care Providers, August 7, 2019. Last
accessed at https://www.fda.gov/medical-devices/letters-health-care-providers/august-7-2019-update-treatment-peripheral-arterial-disease-paclitaxel-coated-balloons-and-paclitaxel on September 10,
2019.
\170\ https://www.fda.gov/medical-devices/letters-health-care-providers/update-treatment-peripheral-arterial-disease-paclitaxel-coated-balloons-and-paclitaxel-eluting.
---------------------------------------------------------------------------

In its application for FY 2021, the applicant stated that they
respectfully disagree with CMS's conclusion that Eluvia^TM
did not satisfy the substantial clinical improvement criterion as the
IMPERIAL randomized controlled trial demonstrates superiority over the
closest comparative device. In its application for FY 2021, in response
to these concerns related to peripheral paclitaxel devices, the
applicant referred to the updated bulletin FDA issued in August 2019 to
provide the latest information on its analysis of long-term follow-up
data from premarket trials and to provide summary information from its
June 2019 advisory panel meeting. Specifically, the applicant noted
that FDA stated that paclitaxel-coated balloons and stents improve
blood flow to the legs and decrease the likelihood of repeat procedures
to reopen blocked blood vessels compared to uncoated devices. The June
2019 advisory panel concluded that the benefits of paclitaxel-coated
devices (for example, reduced reinterventions) should be considered in
individual patients along with potential risks (for example, late
mortality).
The applicant also noted that it has worked closely with FDA to
address questions about the late mortality signal associated with some
peripheral paclitaxel-coated devices, as identified in the meta-
analysis. The applicant

[[Page 32621]]

noted that Eluvia^TM was not included in the meta-analysis.
Additionally, the applicant stated that it has demonstrated (a) the
absence of a mortality signal with Eluvia^TM and (b) the
absence of a mortality signal with sustained-release drug eluting
paclitaxel stent technology in the large long-term data for the TAXUS
coronary stent.\171\
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\171\ Stone GW, Ellis SG, Colombo A, et al. Long-term safety and
efficacy of paclitaxel-eluting stents final 5-year analysis from the
TAXUS Clinical Trial Program. JACC Cardiovasc Interv. 2011;4(5):530-
542.
---------------------------------------------------------------------------

With regard to the absence of a mortality signal with
Eluvia^TM, the applicant further stated that
Eluvia^TM is not associated with increased all-cause
mortality. The applicant explained that Eluvia^TM shows no
mortality signal at 2 years in over 300 patients. Additionally, the
applicant noted that its parent company Boston Scientific has extensive
experience with sustained-release paclitaxel-eluting stent technology
and noted that TAXUS has over 10 years of clinical data, with long-term
mortality in clinical trials following approximately 2,800 patients,
without an observed mortality signal.
As it relates to Eluvia^TM, the applicant stated that
findings of the FDA analysis should be interpreted with caution for
several reasons. First, Eluvia^TM was not included in the FDA
meta-analysis. Second, the applicant stated the analysis failed to find
any plausible mechanism that could explain the observed mortality
signal. Third, the applicant asserted that the analysis contained
structural flaws that may have contributed to its findings, including
small sample size, presence of ascertainment bias and lack of patient
level data.
The applicant added that additional analyses have been conducted
since the publication of the meta-analysis. In a Medicare claims
analysis of over 150,000 patients who underwent femoropopliteal artery
revascularization, the applicant noted that no mortality signal was
seen in the group treated with paclitaxel-coated devices.\172\
According to the applicant, this finding was echoed by other studies.
---------------------------------------------------------------------------

\172\ Secemsky EA at al. Drug-Eluting Stent Implantation and
Long-Term Survival Following Peripheral Artery Revascularization. J
Am Coll Cardiol. 2019 May 28;73(20):2636-2638.
---------------------------------------------------------------------------

Finally, the applicant stated that it believes the FDA recognized
the value of allowing physicians to treat their PAD patients with
paclitaxel devices in its letter published on August 7, 2019,
acknowledging the signal in the meta-analysis and recognizing the
benefits that paclitaxel devices offer for these patients.
In summary, the applicant stated that Eluvia^TM should be
approved for new technology add-on payments based on the following:
Updated August 2019 FDA letter to providers issued after
the FY 2020 IPPS/LTCH PPS final rule, maintaining peripheral paclitaxel
devices on the market;
Multiple recently published studies ^{173 174}
demonstrating the absence of increased mortality associated with
peripheral paclitaxel devices;
---------------------------------------------------------------------------

\173\ 18Spreen MI, Martens JM, Knippenberg B, et al. Long-Term
Follow-up of the PADI Trial: Percutaneous Transluminal Angioplasty
Versus Drug-Eluting Stents for Infrapopliteal Lesions in Critical
Limb Ischemia. J Am Heart Assoc. 2017;6(4).
\174\ UPDATE: Treatment of Peripheral Arterial Disease with
Paclitaxel-Coated Balloons and Paclitaxel-Eluting Stents Potentially
Associated with Increased Mortality--Letter to Health Care
Providers. 2019; Last accessed at https://www.fda.gov/MedicalDevices/Safety/LetterstoHealthCareProviders/ucm633614.htm on
October 9, 2019.
---------------------------------------------------------------------------

An analysis of over 150,000 Medicare beneficiaries,
designed with FDA input, demonstrating no difference in mortality
between patients treated with peripheral paclitaxel devices compared to
those treated without paclitaxel devices;
Confounding factors in the 2018 JAHA Katsanos et al. meta-
analysis (meta-analysis) \175\ and ascertainment bias, as highlighted
at the 2019 Vascular Leaders Forum,\176\ and no plausible mechanism has
been identified for increased mortality;
---------------------------------------------------------------------------

\175\ https://www.ahajournals.org/doi/full/10.1161/JAHA.118.011245.
\176\ Varcoe R. Unintended Consequences of Various trial
Designs, Potential Effect on Mortality and Other Outcomes. Vascular
Leaders Forum, March 2019.
---------------------------------------------------------------------------

The rate of mortality for patients treated with
Eluvia^TM at 2 years is consistent with the rate of non-
paclitaxel-based peripheral devices.\177\
---------------------------------------------------------------------------

\177\ Pooled all-cause mortality rate includes IMPERIAL and
MAJESTIC Trials. 2-year all-cause mortality rate for IMPERIAL
(includes IMPERIAL RCT, Long Lesion, and PK sub-studies) is 7.0%.
MAJESTIC follow-up is final at 3 years. IMPERIAL follow-up is
complete through 2 years and ongoing through 5 years. As-treated
ELUVIA patients. FDA PTA reference based on FDA Executive Summary.
Two-year mortality rate within the PTA arm of ILLUMENATE was 7.4%
and within the PTA arm of IN.PACT SFA was 1.0%.
---------------------------------------------------------------------------

Although the Eluvia^TM system was not included in the
meta-analysis, we remain concerned with the conclusion of the meta-
analysis results. Specifically, we are concerned with the conclusion
that there is an increased risk of death following application of
paclitaxel[hyphen]coated balloons and stents in the femoropopliteal
artery of the lower limb and how it impacts substantial clinical
improvement for the Eluvia^TM system.
We also note the FDA's statement in the August 2019 letter that
because of the demonstrated short-term benefits of the devices, the
limitations of the available data, and uncertainty regarding the long-
term benefit-risk profile of paclitaxel-coated devices, the FDA
believes clinical studies of these devices may continue and should
collect long-term safety (including mortality) and effectiveness data.
Per the FDA, these studies require appropriate informed consent and
close safety monitoring to protect enrolled patients.
Below, we summarize and respond to a written public comment we
received during the open comment period regarding whether
Eluvia^TM meets the substantial clinical improvement
criterion in response to the New Technology Town Hall meeting.
Comment: With regard to the applicant's claim that the
Eluvia^TM stent achieves statistically superior primary
patency over Zilver[supreg] PTX[supreg], the applicant provided the
two-year results from the IMPERIAL global randomized controlled
clinical trial, comparing Eluvia^TM to Zilver[supreg]
PTX[supreg]. The applicant asserts that Eluvia^TM maintains
higher primary patency than Zilver[supreg] PTX[supreg] at 2 years,
83.0% compared to 77.1%. The applicant contends that guidelines
recognize the importance of primary patency in assessing the efficacy
of peripheral endovascular therapies.\178\ The applicant further
asserts that Eluvia's^TM two-year primary patency is the
highest reported in a superficial femoral artery U.S. pivotal trial for
a drug-eluting stent or drug-coated balloon.\179\ The applicant stated
that 2-year primary patency results are consistent with the 2-year
target lesion revascularization (TLR) results released earlier in
2019.\180\ According to the applicant, Eluvia^TM sustained a
statistically significant reduction in TLR at 2 years compared to

[[Page 32622]]

Zilver PTX, 12.9% vs. 20.5% (p=0.0472).\181\
---------------------------------------------------------------------------

\178\ Writing Committee Members, Gerhard-Herman MD, Gornik HL et
al. 2016 AHA/ACC Guideline on the Management of Patients with Lower
Extremity Peripheral Artery Disease: Executive Summary. Vasc Med.
2017 Jun;22(3):NP1-NP43.
\179\ Highest two-year primary patency based on 24-month Kaplan-
Meier estimates reported for IMPERIAL, IN.PACT SFA, ILLUMENATE,
LEVANT II and Primary Randomization for Zilver PTX RCT.
\180\ BSC Data on File. As-treated ELUVIA and PTxControl data
from IMPERIAL RCT.FDA PTA reference based on FDA Executive Summary
(median of PTA arms). Abbreviations: DES, drug-eluting stent; TLR,
target lesion revascularization; PTx, paclitaxel.
\181\ Boston Scientific Presentation to the Circulatory System
Devices Panel of the Medical Devices Advisory Committee Meeting,
June 19, 2019.
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Response: We appreciate the applicant's input. We will take these
comments into consideration when deciding whether to approve new
technology add-on payments for Eluvia^TM for FY 2021.
f. GammaTile
GT Medical Technologies, Inc. submitted an application for new
technology add-on payments for FY 2021 for the GammaTile^TM.
We note that Isoray Medical, Inc. and GammaTile, LLC previously
submitted an application for new technology add-on payments for
GammaTile^TM for FY 2018, which was withdrawn, and also for
FY 2019, however the technology did not receive FDA approval or
clearance by July 1, 2018 and, therefore, was not eligible for
consideration for new technology add-on payments for FY 2019. GT
Medical Technologies, Inc. submitted an application for FY 2020, which
was not approved as CMS was unable to make a determination that
GammaTile^TM technology represents a substantial clinical
improvement over existing therapies.
The GammaTile^TM is a brachytherapy device for use in the
treatment of patients who have been diagnosed with recurrent
intracranial neoplasms, which uses cesium-131 radioactive sources
embedded in a collagen matrix. GammaTile^TM is designed to
provide adjuvant radiation therapy to eliminate remaining tumor cells
in patients who required surgical resection of recurrent brain tumors.
According to the applicant, the GammaTile^TM constitutes a
new form of internal radiation, with collagen tile structural offsets
acting as an internal compensator for the delivery of cesium-131
brachytherapy sources embedded within the product. The applicant stated
that the technology has been manufactured for use in the setting of a
craniotomy resection site where there is a high chance of local
recurrence of a Central Nervous System (CNS) or dual-based tumor. The
applicant asserted that the use of the GammaTile^TM
technology provides a new, unique modality for treating patients who
require radiation therapy to augment surgical resection of malignancies
of the brain. By offsetting the radiation sources with a 3 mm gap of a
collagen matrix, the applicant asserted that the use of the
GammaTile^TM technology resolves issues with ``hot'' and
``cold'' spots associated with brachytherapy, improves safety, and
potentially offers a treatment option for patients with limited or no
other available options. The GammaTile^TM is biocompatible
and bioabsorbable, and is left in the body permanently without need for
future surgical removal. The applicant asserted that the commercial
manufacturing of the product will significantly improve on the process
of constructing customized implants with greater speed, efficiency, and
accuracy than is currently available, and requires less surgical
expertise in placement of the radioactive sources, allowing a greater
number of surgeons to utilize brachytherapy techniques in a wider
variety of hospital settings.
The GammaTile^TM technology received FDA Section 510(k)
clearance as a medical device on July 6, 2018. According to the
applicant, due to finalization of design and manufacturing activities,
the technology was not commercially available until January of 2019.
Subsequently, the FDA cleared GammaTile^TM as a Class II
medical device under the corporate name of GT Medical Technologies,
Inc. on March 13, 2019. The cleared indications for use state that
GammaTile^TM is intended to deliver radiation therapy
(brachytherapy) in patients who have been diagnosed with recurrent
intercranial neoplasms. The applicant submitted a request for approval
for a unique ICD-10-PCS code for the use of the GammaTile^TM
technology, which was approved effective October 1, 2017 (FY 2018). The
ICD-10-PCS procedure code used to identify procedures involving the use
of the GammaTile^TM technology is 00H004Z (Insertion of
radioactive element, cesium-131 collagen implant into brain, open
approach).
As discussed previously, if a technology meets all three of the
substantial similarity criteria, it would be considered substantially
similar to an existing technology and would therefore not be considered
``new'' for purposes of new technology add-on payments. We note that in
the FY 2020 IPPS/LTCH PPS final rule (84 FR 42261), we stated that
after consideration of comments, we believe that the
GammaTile^TM mechanism of action is different from current
forms of radiation therapy and brachytherapy as it is the first FDA
cleared device to use a manufactured collagen matrix which offsets
radiation sources for use for the treatment of recurrent intracranial
neoplasms. Therefore, we stated that the GammaTile^TM is not
substantially similar to existing brachytherapy technology and meets
the newness criterion. We refer the reader to the FY 2020 final rule
for the complete discussion of how the GammaTile^TM meets the
newness criterion. We welcome any additional information or comments in
response to this proposed rule regarding whether the
GammaTile^TM is substantially similar to an existing
technology and whether it meets the newness criterion for purposes of
its application for new technology add-on payments for FY 2021.
With regard to the cost criterion, the applicant conducted the
following analysis. The applicant worked with the Barrow Neurological
Institute at St. Joseph's Hospital and Medical Center (St. Joseph's) to
obtain actual claims from mid-2015 through mid-2016 for craniotomies
that did not involve placement of the GammaTile^TM
technology. The cases were assigned to MS-DRGs 025, 026, and 027
(Craniotomy and Endovascular Intracranial Procedures with MCC, with CC,
and without CC/MCC, respectively). For the 460 claims, the average
case-weighted unstandardized charge per case was $143,831. The
applicant standardized the charges for each case and inflated each
case's charges by applying the outlier charge inflation factor of 1.054
included in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42629) by the
age of each case (that is, the factor was applied to 2015 claims 4
times and 2016 claims 3 times). The applicant then calculated an
estimate for ancillary charges associated with placement of the
GammaTile^TM device, as well as standardized charges for the
GammaTile^TM device itself. The applicant determined it meets
the cost criterion because the final inflated average case-weighted
standardized charge per case (including the charges associated with the
GammaTile^TM device) of $270,445 exceeds the average case-
weighted threshold amount of $151,193 for MS-DRG 023 (Craniotomy with
Major Device Implant or Acute Complex CNS PDX with MCC or Chemotherapy
Implant or Epilepsy with Neurostimulator), the MS-DRG that would be
assigned for cases involving the GammaTile^TM device.
The applicant stated that its analysis does not include a reduction
in costs due to reduced operating room times. According to the
applicant, the cost analysis reflects the time associated with a
craniotomy and device placement. The applicant does not anticipate any
reduction in operating room time relative to prior operative methods.
We invite public comments on

[[Page 32623]]

whether the GammaTile^TM technology meets the cost criterion.
With regard to substantial clinical improvement, the applicant
stated that the GammaTile^TM technology offers a treatment
option for a patient population unresponsive to, or ineligible for,
currently available treatments for recurrent CNS malignancies and
significantly improves clinical outcomes when compared to currently
available treatment options. The applicant explained that therapeutic
options for patients who have been diagnosed with large or recurrent
brain metastases are limited (for example, stereotactic radiotherapy,
additional EBRT, or systemic immunochemotherapy). However, according to
the applicant, the GammaTile^TM technology provides a
treatment option for patients who have been diagnosed with
radiosensitive recurrent brain tumors that are not eligible for
treatment with any other currently available treatment options.
Specifically, the applicant stated that the GammaTile^TM
device may provide the only radiation treatment option for patients who
have been diagnosed with tumors located close to sensitive vital brain
sites (for example, brain stem) and patients who have been diagnosed
with recurrent brain tumors who may not be eligible for additional
treatment involving the use of external beam radiation therapy. There
is a lifetime limit for the amount of radiation therapy a specific area
of the body can receive. Patients whose previous treatment includes
external beam radiation therapy may be precluded from receiving high
doses of radiation associated with subsequent external beam radiation
therapy, and the GammaTile^TM technology can also be used to
treat tumors that are too large for treatment with external beam
radiation therapy. According to the applicant, patients who have been
diagnosed with these large tumors are not eligible for treatment with
external beam radiation therapy because the radiation dose to healthy
brain tissue would be too high.
The applicant summarized how the GammaTile^TM technology
improves clinical outcomes compared to existing treatment options,
including external beam radiation therapy and other forms of brain
brachytherapy as: (1) Providing a treatment option for patients with no
other available treatment options; (2) reducing the rate of mortality
compared to alternative treatment options; (3) reducing the rate of
radiation necrosis; (4) reducing the need for re-operation; (5)
reducing the need for additional hospital visits and procedures; and
(6) providing more rapid beneficial resolution of the disease process
treatment.
The applicant cited several sources of data to support these
assertions. The applicant referenced a paper by Brachman, Dardis et
al., which was published in the Journal of Neurosurgery on December 21,
2018.\182\ This study, a follow-up on the progress of 20 patients with
recurrent previously irradiated meningiomasis, is a feasibility or
superior progression-free survival study comparing the patient's own
historical control rate against subsequent treatment with
GammaTile^TM.
---------------------------------------------------------------------------

\182\ Brachman, D., et al., ``Resection and permanent
intracranial brachytherpay using modular, biocompatible cesium-131
implants: Results in 20 recurrent previously irradiated
meningiomas,'' J Neurosurgery, December 21, 2018.
---------------------------------------------------------------------------

An additional source of clinical data is from Gamma Tech's internal
review of data from two centers treating brain tumors with
GammaTile^TM; The two centers are the Barrow Neurological
Institute (BNI) at St. Joseph's Hospital and St. Joseph's Medical
Center, Phoenix, AZ, and this internal review is referred to here as
the ``BNI'' study.\183\ The BNI study summarized Gamma Tech's
experience with the GammaTile^TM technology. The applicant
also included a reference to its updated study, described on
ClinicalTrials.gov under NCT03088579, which includes 79 recurrent,
previously irradiated intracranial neoplasms.
---------------------------------------------------------------------------

\183\ Brachman, D., et al., ``Surgery and Permanent
Intraoperative Brachytherapy Improves Time to Progress of Recurrent
Intracranial Neoplasms,'' Society for Neuro-Oncology Conference on
Meningioma, June 2016.
---------------------------------------------------------------------------

Another source of data that the applicant cited to support its
assertions regarding substantial clinical improvement is an abstract by
Pinnaduwage, D., et al. Also submitted in the application were
abstracts from 2014 through 2018 in which updates from the progression-
free survival study and the BNI study were presented at specialty
society clinical conferences. The following summarizes the findings
cited by the applicant to support its assertions regarding substantial
clinical improvement.
Regarding the assertion of local control, the 2018 article which
was published in the Journal of Neurosurgery found that, with a median
follow-up of 15.4 months (range 0.03-47.5 months), there were 2
reported cases of recurrence out of 20 meningiomas, with median
treatment site progression time after surgery and brachytherapy with
the GammaTile^TM precursor and prototype devices not yet
being reached, compared to 18.3 months in prior instances. Median
overall survival after resection and brachytherapy was 26 months, with
9 patient deaths. In a presentation at the Society for Neuro-Oncology
in November 2014,\184\ the outcomes of 20 patients who were diagnosed
with 27 tumors covering a variety of histological types treated with
the GammaTile^TM prototype were presented. The applicant
noted the following with regard to the patients: (1) All tumors were
intracranial, supratentorial masses and included low- and high-grade
meningiomas, metastases from various primary cancers, high-grade
gliomas, and others; (2) all treated masses were recurrent following
treatment with surgery and/or radiation and the group averaged two
prior craniotomies and two prior courses of external beam radiation
treatment; and (3) following surgical excision, the prototype
GammaTile^TM were placed in the resection cavity to deliver a
dose of 60 Gray to a depth of 5 mm of tissue; and (4) all patients had
previously experienced regrowth of their tumors at the site of
treatment and the local control rate of patients entering the study was
0 percent.
---------------------------------------------------------------------------

\184\ Dardis, C., ``Surgery and Permanent Intraoperative
Brachytherapy Improves Times to Progression of Recurrent
Intracranial Neoplasms,'' Society for Neuro-Oncology, November 2014.
---------------------------------------------------------------------------

With regard to outcomes, the applicant stated that, after their
initial treatment, patients had a median progression-free survival time
of 5.8 months; post treatment with the prototype
GammaTile^TM, at the time of this analysis, only 1 patient
had progressed at the treatment site, for a local control rate of 96
percent; and median progression-free survival time, a measure of how
long a patient lives without recurrence of the treated tumor, had not
been reached (as this value can only be calculated when more than 50
percent of treated patients have failed the prescribed treatment).
The applicant stated that it received two peer-reviewed awards for
comprehensive clinical trial reporting on the treatment of 79 recurrent
brain tumors treated with GammaTile. The applicant provided a recent
summary presentation titled: ``Surgically Targeted Radiation Therapy: A
Prospective Trial in 79 Recurrent, Previously Irradiated Intracranial
Neoplasms.'' at The American Brachytherapy Society.\185\ The clinical
endpoints included time to

[[Page 32624]]

tumor progression and survival, which the applicant stated provided
objective, clinically important measures. The median local control
after GammaTile therapy versus prior treatment was 12.0 versus 9.5
months for high-grade glioma patients (p=0.13) and 48.8 months versus
23.3 months for menigioma patients (p=0.01). For the metastasis
patients, the median local control had not been reached versus 5.1
months with prior treatment (p=0.02). The median overall survival was
12.0 months for high grade glioma patients, 12.0 months for brain
metastasis patients, and 49.2 months for the meningioma patients.
According to the applicant, these data demonstrate dramatic, clinically
meaningful difference in Kaplan-Meier curves comparing time to local
recurrence at same site in the same patients. The applicant stated that
GammaTile^TM is significantly outperforming the initial
therapies attempted in this patient population.
---------------------------------------------------------------------------

\185\ Brachman D, Youssef E, Dardis C, et al.: Surgically
Targeted Radiation Therapy: Safety Profile of Collagen Tile
Brachytherapy in 79 Recurrent, Previously Irradiated Intracranial
Neoplasms on a Prospective Clinical Trial. Brachytherapy 18 (2019)
S35-36.
---------------------------------------------------------------------------

The applicant also cited the findings from Brachman, et al. to
support local control of recurrent brain tumors. At the Society for
Neuro-Oncology Conference on Meningioma in June 2016,\186\ a second set
of outcomes on the prototype GammaTile^TM was presented. This
study enrolled 16 patients with 20 recurrent Grade II or III
meningiomas, who had undergone prior surgical excision external beam
radiation therapy. These patients underwent surgical excision of the
tumor, followed by adjuvant radiation therapy with the prototype
GammaTile^TM. The applicant noted the following outcomes (1)
of the 20 treated tumors, 19 showed no evidence of radiographic
progression at last follow-up, yielding a local control rate of 95
percent; 2 of the 20 patients exhibited radiation necrosis (1
symptomatic, 1 asymptomatic); and (2) the median time to failure from
the prior treatment with external beam radiation therapy was 10.3
months and after treatment with the prototype GammaTile^TM
only 1 patient failed at 18.2 months. Therefore, according to the
applicant, the median treatment site progression-free survival time
after the prototype GammaTile^TM treatment had not yet been
reached (average follow-up of 16.7 months, range 1 to 37 months).
---------------------------------------------------------------------------

\186\ Brachman, D., et al., ``Surgery and Permanent
Intraoperative Brachytherapy Improves Time to Progress of Recurrent
Intracranial Neoplasms,'' Society for Neuro-Oncology Conference on
Meningioma, June 2016.
---------------------------------------------------------------------------

A third prospective study was accepted for presentation at the
November 2016 Society for Neuro-Oncology annual meeting.\187\ In this
study, 13 patients who were diagnosed with recurrent high-grade gliomas
(9 with glioblastoma and 4 with Grade III astrocytoma) were treated in
an identical manner to the cases previously described. Previously, all
patients had failed the international standard treatment for high-grade
glioma, a combination of surgery, radiation therapy, and chemotherapy
referred to as the ``Stupp regimen.'' For the prior therapy, the median
time to failure was 9.2 months (range 1 to 40 months). After therapy
with a prototype GammaTile^TM, the applicant noted the
following: (1) The median time to same site local failure had not been
reached and 1 failure was seen at 18 months (local control 92 percent);
and (2) with a median follow-up time of 8.1 months (range 1 to 23
months) 1 symptomatic patient (8 percent) and 2 asymptomatic patients
(15 percent) had radiation-related MRI changes. However, no patients
required re-operation for radiation necrosis or wound breakdown. Dr.
Youssef was accepted to present at the 2017 Society for Neuro-Oncology
annual meeting, where he provided an update of 58 tumors treated with
the GammaTile^TM technology. At a median whole group follow-
up of 10.8 months, 12 patients (20 percent) had a local recurrence at
an average of 11.33 months after implant. Six- and 18-month recurrence-
free survival was 90 percent and 65 percent, respectively. Five
patients had complications, at a rate that was equal to or lower than
rates previously published for patients without access to the
GammaTile^TM technology.
---------------------------------------------------------------------------

\187\ Youssef, E., ``C-131 Implants for Salvage Therapy of
Recurrent High Grade Gliomas,'' Society for Neuro-Oncology Annual
Meeting, November 2016.
---------------------------------------------------------------------------

In support of its assertion of a reduction in radiation necrosis,
the applicant also included discussion of a presentation by D.S.
Pinnaduwage, Ph.D., at the August 2017 annual meeting of the American
Association of Physicists in Medicine. Dr. Pinnaduwage compared the
brain radiation dose of the GammaTile^TM technology with
other radioactive seed sources. Iodine-125 and palladium-103 were
substituted in place of the cesium-131 seeds. The study reported
findings that other radioactive sources reported higher rates of
radiation necrosis and that ``hot spots'' increased with larger tumor
size, further limiting the use of these isotopes. The study concluded
that the larger high-dose volume with palladium-103 and iodine-125
potentially increases the risk for radiation necrosis, and the
inhomogeneity becomes more pronounced with increasing target volume.
The applicant also cited a presentation by Dr. Pinnaduwage at the
August 2018 annual meeting of the American Association of Physicists in
Medicine, in which research findings demonstrated that seed migration
in collagen tile implantations was relatively small for all tested
isotopes, with Cesium-13 showing the least amount of seed migration.
The applicant asserted that, when considered in total, the data
reported in these presentations and studies and the intermittent data
presented in their abstracts support the conclusion that a significant
therapeutic effect results from the addition of GammaTile^TM
radiation therapy to the site of surgical removal. According to the
applicant, the fact that these patients had failed prior best available
treatments (aggressive surgical and adjuvant radiation management)
presents the unusual scenario of a salvage therapy outperforming the
current standard of care. The applicant noted that follow-up data
continues to accrue on these patients.
Regarding the assertion that GammaTile^TM reduces
mortality, the applicant stated that the use of the
GammaTile^TM technology reduces rates of mortality compared
to alternative treatment options. The applicant explained that studies
on the GammaTile^TM technology have shown improved local
control of tumor recurrence. According to the applicant, the results of
these studies showed local control rates of 92 percent to 96 percent
for tumor sites that had local control rates of 0 percent from previous
treatment. The applicant noted that these studies also have not reached
median progression-free survival time with follow-up times ranging from
1 to 37 months. Previous treatment at these same sites resulted in
median progression-free survival times of 5.8 to 10.3 months.
The applicant further stated that the use of the
GammaTile^TM technology reduces rates of radiation necrosis
compared to alternative treatment options. The applicant explained that
the rate of symptomatic radiation necrosis in the
GammaTile^TM clinical studies of 5 to 8 percent is
substantially lower than the 26 percent to 57 percent rate of
symptomatic radiation necrosis requiring re-operation historically
associated with brain brachytherapy, and lower than the rates reported
for initial treatment of similar tumors with modern external beam and
stereotactic radiation techniques. The applicant

[[Page 32625]]

indicated that this is consistent with the customized and ideal
distribution of radiation therapy provided by the
GammaTile^TM technology.
The applicant also asserted that the use of the
GammaTile^TM technology reduces the need for re-operation
compared to alternative treatment options. The applicant explained that
patients receiving a craniotomy, followed by external beam radiation
therapy or brachytherapy, could require re-operation in the following
three scenarios:
Tumor recurrence at the excision site could require
additional surgical removal;
Symptomatic radiation necrosis could require excision of
the affected tissue; and
Certain forms of brain brachytherapy require the removal
of brachytherapy sources after a given period of time.
However, according to the applicant, because of the high local
control rates, low rates of symptomatic radiation necrosis, and short
half-life of cesium-131, the GammaTile^TM technology will
reduce the need for re-operation compared to external beam radiation
therapy and other forms of brain brachytherapy.
Additionally, the applicant stated that the use of the
GammaTile^TM technology reduces the need for additional
hospital visits and procedures compared to alternative treatment
options. The applicant noted that the GammaTile^TM technology
is placed during surgery, and does not require any additional visits or
procedures. The applicant contrasted this improvement with external
beam radiation therapy, which is often delivered in multiple fractions
that must be administered over multiple days. The applicant provided an
example where whole brain radiotherapy (WBRT) is delivered over 2 to 3
weeks, while the placement of the GammaTile^TM technology
occurs during the craniotomy and does not add any time to a patient's
recovery.
Based on consideration of all of the previously presented data, the
applicant believed that the use of the GammaTile^TM
technology represents a substantial clinical improvement over existing
technologies. We note that the clinical data submitted to date in
connection with its application for new technology add-on payments for
FY 2021 is essentially identical to what was submitted in connection
with its application for new technology add-on payments for FY 2020. As
we indicated in previous rulemaking (84 FR 42260 through 42265), the
findings presented appear to be derived from relatively small case-
studies and not data from clinical trials conducted under an FDA-
approved investigational device exemption application. We note that the
study performed on 74 patients with 79 tumors was a single-arm and
single-institution study, where each patient functioned as their own
control and the study goal was to compare the time to local recurrence
after GammaTile^TM treatment to the time of local recurrence
after initial treatment of intracranial tumors. That is, the control
arm were patients treated for initial intracranial brain tumors, and
the treatment arm or the GammaTile^TM treatment arm were the
same control patients now experiencing local recurrent intracranial
brain tumors in the same site with the same brain tumor type. In this
clinical trial, the applicant compared the time from initial treatment
to first local recurrence (control arm) vs. time from
GammaTile^TM treatment of first local recurrence to second
local recurrence of the same brain tumor site and tumor type. There was
a statistically significant difference between the control arm
treatment and GammaTile^TM treatment for patients with
recurrent meningioma and brain metastases and no statistically
significant difference between the control arm treatment and
GammaTile^TM treatment for patients with recurrent high-grade
glioma.
We continue to have concerns that, while the applicant described
increases in median time to disease recurrence for certain intra-
cranial tumors (in a small number of patients with different
histologies) in support of clinical improvement, the lack of analysis,
meta-analysis, or statistical tests indicates that the clinical
efficacy and safety data for seeded brachytherapy is limited. While we
acknowledge the difficulty in establishing randomized control groups in
studies involving recurrent brain tumors, we are concerned that
GammaTile^TM technology does not represent a substantial
clinical improvement over existing therapies and requires additional
clinical data to demonstrate substantial clinical improvement. We note
that the applicant has stated its intention to provide additional
clinical data and information in connection with its application for
new technology add-on payments for FY 2021, potentially including an
update on patient outcomes from the completed clinical trial
(ClinicalTrials.gov, NCT03088579), additional clinical data from early
adopting locations, and additional meta-analysis to address the
concerns previously raised by CMS.
We invite public comments on whether the GammaTile^TM
technology meets the substantial clinical improvement criterion. We did
not receive any written comments in response to the New Technology Town
Hall meeting notice published in the Federal Register regarding the
substantial clinical improvement criterion for GammaTile^TM
or at the New Technology Town Hall meeting.
g. Hemospray[supreg] Endoscopic Hemostat
Cook Medical submitted an application for new technology add-on
payments for the Hemospray[supreg] Endoscopic Hemostat (Hemospray) for
FY 2021. According to the applicant, Hemospray is indicated by the FDA
for hemostasis of nonvariceal gastrointestinal bleeding. Using an
endoscope to access the gastrointestinal tract, the Hemospray delivery
system is passed through the accessory channel of the endoscope and
positioned just above the bleeding site without making contact with the
GI tract wall. The Hemospray powder, Bentonite, is propelled through
the application catheter, either a 7 or 10 French polyethylene
catheter, by release of CO2 from the cartridge located in
the device handle and sprayed onto the bleeding site. Bentonite can
absorb 5 to 10 times its weight in water and swell up to 15 times its
dry volume. Bentonite rapidly absorbs water and becomes cohesive to
itself and adhesive to tissue forming a physical barrier to aqueous
fluid (for example, blood). Hemospray is not absorbed by the body and
does not require removal as it passes through the GI tract within 72
hours. Hemospray is single use and disposable.
According to the applicant, current standard of care hemostatic
modalities used for the management of nonvariceal gastrointestinal
bleeding have a failure rate of 8 to 15 percent and a rebleeding rate
of 10 to 25 percent, or worse, depending on patient etiology and
morbidity.\188\ The applicant asserted that the risk of morbidity,
mortality, and rebleeding can be predicted using validated scoring
methods such as the Rockall Score (RS).\189\ Cancerous lesions, which
are more frequently identified as a result of advances in locating and
determining the cause of

[[Page 32626]]

bleeding,\190\ have lower rates of hemostasis (as low as 40 percent),
with higher recurrent bleeding rates (over 50 percent within 1 month),
with high 3 month mortality.^{191 192} Continued bleeding that
is not controlled by conventional techniques, or recurrent bleeding
from the same lesion may be treated by repeated attempts at endoscopic
hemostasis, interventional radiology hemostasis (IRH) with guided
transarterial embolization (TAE), or surgery.\193\ According to the
applicant, a recent systematic review found minimally invasive options
like TAE had re-bleeding rates that were higher than those from surgery
with no significant difference in mortality.\194\ According to the
applicant, patients who are not surgical candidates have very few
options for ``rescue'' when conventional hemostasis techniques fail.
---------------------------------------------------------------------------

\188\ Lau J, Barkun A, Fan D, Kuipers E, Yang Y, Chan F.
Challenges in the management of acute peptic ulcer bleeding. Lancet
2013; 381: 2033-43.
\189\ Mokhtare M, Bozorgi V, Agah S et al. Comparison of
Glasgow-Blatchford score and full Rockall score systems to predict
clinical outcomes in patients with upper gastrointestinal bleeding.
Clin. Exp. Gastroenterol. 2016; 9: 337-43.
\190\ Heller SJ, Tokar JL, Nguyen MT, et al. Management of
bleeding GI tumors. Gastrointest Endosc 2010;72:817-24.
\191\ Kim YI, Choi IJ, Cho SJ, et al. Outcome of endoscopic
therapy for cancer bleeding in patients with unresectable gastric
cancer. J Gastroenterol Hepatol 2013;28:1489-95.
\192\ Roberts SE, Button LA, Williams JG. Prognosis following
upper gastrointestinal bleeding. PLoS One 2012;7:e49507.
\193\ Lau JY, Sung JJ, Lam YH, et al. Endoscopic retreatment
compared with surgery in patients with recurrent bleeding after
initial endoscopic control of bleeding ulcers. N Engl J Med 1999;
340: 751-756.
\194\ Beggs AD, Dilworth MP, Powell SL, et al. A systematic
review of transarterial embolization versus emergency surgery in
treatment of major nonvariceal upper gastrointestinal bleeding. Clin
Exp Gastroenterol 2014; 7: 93-104.
---------------------------------------------------------------------------

The applicant asserted that, in addition to increased morbidity and
mortality, the financial impact of failure to achieve hemostasis is
considerable. Based on a retrospective claims analysis by the applicant
of the 2012 MedPAR file and the Provider of Services file, 13,501 cases
were identified which showed all-cause mortality for patients requiring
more than 1 endoscopy (6%), IRH (9%), or surgery (14%) was
significantly higher than for patients requiring only 1 endoscopy
(3%).\195\ The median hospital costs for these patients were
considerable, with costs for patients requiring over 1 endoscopy of
$20,055, for patients requiring IRH of $34,730, and for patients
requiring surgery of $47,589. According to the applicant, Hemospray is
an alternative to IRH and surgery and the applicant asserts it would
avoid the costs associated with these procedures.
---------------------------------------------------------------------------

\195\ Roy A, Kim M, Hawes R, Varadarajulu S. The clinical and
cost implications of failed endoscopic hemostasis in gastroduodenal
ulcer bleeding. UEG Journal 2017; 5(3): 359-364.
---------------------------------------------------------------------------

With respect to the newness criterion, the applicant for Hemospray
received FDA de novo approval on May 7, 2018. The applicant stated
revisions to the instructions for use were required by the FDA and
therefore the device was not commercially available until July 1, 2018.
The FDA has classified Hemospray as a Class II device for intraluminal
gastrointestinal use. The applicant stated that currently, there is no
ICD-10-PCS code to uniquely identify procedures involving the
administration of Hemospray. We note the applicant submitted a request
for approval for a unique ICD-10-PCS code for the administration of
Hemospray beginning in FY 2021. The applicant stated this technology
does not have a HCPCS code.
According to information submitted by the applicant, Cook Medical
is voluntarily recalling Hemospray[supreg] Endoscopic Hemostat due to
complaints received that the handle and/or activation knob on the
device in some cases has cracked or broken when the device is activated
and in some cases has caused the carbon dioxide cartridge to exit the
handle. The applicant stated that Cook Medical has received 1 report of
a superficial laceration to the user's hand that required basic first
aid; however, there have been no reports of laceration, infection, or
permanent impairment of a body structure to users or to patients due to
the carbon dioxide cartridge exiting the handle. The applicant stated
that Cook Medical has initiated an investigation and will determine the
appropriate corrective action(s) to prevent recurrence of this issue.
According to the applicant, although the recall does restrict
availability of the device, they wish to continue their application for
new technology add-on payment as they believe the use of Hemospray
significantly improves clinical outcomes for certain patient
populations compared to currently available treatments.
As discussed earlier, if a technology meets all three of the
substantial similarity criteria, it would be considered substantially
similar to an existing technology and would not be considered ``new''
for purposed of new technology add-on payments. The applicant
identified three treatment options currently available for the
treatment of bleeding of the gastrointestinal system, which were
thermal modalities, injection needles, and mechanical modalities. The
applicant stated that thermal modalities are those endoscopic methods
that treat gastrointestinal hemorrhage by means of bipolar
electrocautery, hemostatic graspers, and argon plasma coagulation.
These devices generate heat resulting in edema, coagulation of tissue
protein, and contraction of vessels and indirect activation of the
coagulation cascade. The applicant stated that injection needles treat
gastrointestinal hemorrhage through the injection of various materials
including epinephrine, saline, histocryl, ethanolamine, and ethanol.
This method achieves hemostasis by both mechanical tamponade and
cytochemical mechanisms.\196\ The applicant stated that mechanical
modalities including hemostatic endoclips, detachable loop ligators and
multi-band ligators control gastrointestinal hemorrhage by applying
mechanical pressure to the bleeding site. The applicant claimed these
treatment options (thermal modalities, injection needles, and
mechanical modalities) are insufficient in achieving hemostasis as
evidenced by rates of failed hemostasis of 8 to 15 percent.\197\ The
applicant stated that all the current treatments result in injury to
the tissue, which in some cases can result in a worsening of the
severity of the bleeding or perforation. Furthermore, it stated that
with the exception of argon plasma coagulation, the current hemostatic
modalities require precise targeting of the source of the bleed, which
may limit their utility when diffuse or non-precise bleeding occurs.
According to the applicant, the primary benefit of all endoscopic
hemostasis procedures, including Hemospray, is the achievement of
hemostasis without conversion to interventional radiology or surgery,
both of which carry higher risk of mortality and morbidity.\198\
---------------------------------------------------------------------------

\196\ ASGE, The role of endoscopy in the management of acute
non-variceal upper GI bleeding, Gastrointestinal Endoscopy. 2012;
75(6): 1132-1138.
\197\ Lau J, Barkun A, Fan D, Kuipers E, Yang Y, Chan F.
Challenges in the management of acute peptic ulcer bleeding. Lancet
2013; 381: 2033-43.
\198\ Beggs AD, Dilworth MP, Powell SL, et al. A systematic
review of transarterial embolization versus emergency surgery in
treatment of major nonvariceal upper gastrointestinal bleeding. Clin
Exp Gastroenterol 2014; 7: 93-104.
---------------------------------------------------------------------------

With regard to the first criterion, whether a product uses the same
or similar mechanism of action to achieve a therapeutic outcome, the
application asserted that Hemospray is a novel device in which the
mechanism of action differs from alternative treatments by creating a
diffuse mechanical barrier over the site of bleeding with a non-
thermal, non-traumatic, noncontact modality.
With respect to the second criterion, whether a product is assigned
to the same or different MS-DRG, the applicant did not specifically
comment. The applicant stated that cases involving the use of Hemospray
would span a wide variety of MS-DRGs, but

[[Page 32627]]

that the technology would most likely be used for cases in MS-DRGs 377,
378, and 379 (G.I. Hemorrhage with MCC, with CC, and without CC/MCC,
respectively). We believe that cases involving the use of the
technology would be assigned to the same MS-DRG as cases involving the
current standard of care treatments.
With respect to the third criterion, whether the new use of the
technology involves the treatment of the same or similar type of
disease and the same or similar patient population, we note that the
applicant also did not comment specifically on this criterion. However,
we believe that this technology would be used to treat the same or
similar type of disease and the same or similar patient population as
the current standard of care treatments.
Based on the applicant's statements as summarized previously, the
applicant believes that Hemospray is not substantially similar to other
currently available therapies and/or technologies and meets the
``newness'' criterion. However, we are concerned that the mechanism of
action of Hemospray may be similar to existing endoscopic hemostatic
treatments. Specifically, we note that as described in literature
provided by the applicant, technologies such as Ankaferd Bloodstopper
and EndoClot Polysaccharide Hemostatic System appear to utilize a
similar mechanism of action as Hemospray to achieve hemostasis.\199\
Based on the literature provided by the applicant, EndoClot, a device
developed in California, USA, ``. . . consists of absorbable modified
polymer . . . [which is] biocompatible, non-pyogenic, and starch-
derived compound that rapidly absorbs water from serum and concentrates
platelets, red blood cells, and coagulation proteins at the bleeding
site to accelerate the clotting cascade.'' \200\ EndoClot received
510(k) premarket notification January 18, 2017 and is indicated by the
FDA to assist the delivery of a powdered hemostatic agent to the
treatment site in endoscopic surgeries. Therefore, we are concerned
with the similarity of this mechanism of action. Moreover, as
previously noted, the applicant asserted generally it did not meet the
substantial similarity criteria, but did not specifically address the
second and third substantial similarity criteria. We believe that cases
involving the use of the Hemospray would be assigned to the same MS-DRG
as cases involving the current standard-of-care treatments and that the
technology would be used to treat the same or similar type of disease
and the same or similar patient population as the current standard-of-
care treatments.
---------------------------------------------------------------------------

\199\ Barkun, A., Moosavi, S., & Martel, M. (2013). Topical
hemostatic agents: A systematic review with particular emphasis on
endoscopic application in GI bleeding. Gastrointestinal Endoscopy,
77(5), 692-700.
\200\ Ibid.
---------------------------------------------------------------------------

We are inviting public comments on whether Hemospray is
substantially similar to other currently available therapies and/or
technologies and whether this technology meets the newness criterion.
With regard to the cost criterion, the applicant provided the
following analysis to demonstrate the technology meets the cost
criterion. The applicant asserted patients who would use Hemospray are
identified by using a combination of one ICD-10-PCS procedure code and
one ICD-10-CM diagnosis code. The applicant provided a list of 39 ICD-
10-PCS procedure codes that included 21 Non O.R. digestive system
procedures and 18 Extensive O.R. digestive system procedures. The
applicant provided a list of 32 ICD-10-CM diagnosis codes that included
29 principal diagnoses in MS-DRGs 377, 378, and 379 (G.I. Hemorrhage
with MCC, with CC, and without CC/MCC, respectively) and 3 principal
diagnoses in MDC 06 (Diseases and Disorders of the Digestive System)
across 10 MS-DRG classifications. The applicant extracted claims from
the FY 2018 MedPAR final rule dataset based on the presence of one
procedure and one diagnosis code in the list provided. The applicant
stated MS-DRGs 377, 378, and 379 made up 3 of the top 4 MS-DRGs by
volume and about 64 percent of cases were grouped to these 3 MS-DRGs.
The applicant stated consequently they limited their analysis to the
cases assigned to MS-DRGs 377, 378, and 379 and those claims that would
be used for IPPS rate setting. The applicant identified a total of
40,012 cases.
The applicant first calculated a case weighted threshold of $46,568
based upon the dollar threshold for each MS-DRG grouping and the
proportion of cases in each MS-DRG. The applicant then calculated the
average charge per case. The applicant stated Hemospray may not replace
other therapies occurring during an inpatient stay and therefore chose
to not remove charges for the prior technology or technology being
replaced. Next the applicant calculated the average standardized charge
per case using the FY 2018 IPPS Final Rule Impact file. The 2-year
inflation factor of 11.1% (1.11100) was obtained from the FY 2020 IPPS/
LTCH PPS final rule and applied to the average standardized charge per
case. To determine the charges for Hemospray, the applicant used the
inverse of the FY 2020 IPPS/LTCH PPS final rule supplies and equipment
national average CCR of 0.299, based on an assumption that hospitals
would use the inverse of the national average CCR for supplies and
equipment to mark-up charges, and therefore assumed an average charge
for Hemospray of $8,361.20. The applicant calculated the final inflated
average case-weighted standardized charge per case by adding the
charges for the new technology to the inflated average standardized
charge per case. The applicant determined a final inflated average
case-weighted standardized charge per case of $60,193, which exceeds
the average case-weighted threshold amount of $46,568.
We are inviting public comments on whether Hemospray meets the cost
criterion.
With respect to the substantial clinical improvement criterion, the
applicant asserted that Hemospray represents a substantial clinical
improvement over existing technologies. According to the applicant,
Hemospray is a topically applied mineral powder that offers a novel
primary treatment option for endoscopic bleeding management, serves as
an option for patients who fail conventional endoscopic treatments, and
serves as an alternative to interventional radiology hemostasis (IRH)
and surgery. Broadly, the applicant outlined two treatment areas in
which it asserted Hemospray would provide a substantial clinical
improvement: (1) As a primary treatment or a rescue treatment after the
failure of a conventional method, and (2) in the use for the treatment
of malignant lesions.
The applicant provided eight articles specifically for the purpose
of addressing the substantial clinical improvement criterion. Three
articles are systematic reviews, three are prospective studies, and two
are retrospective studies.
The first article provided by the applicant was a prospective
single armed multicenter phase two safety and efficacy study performed
in France.\201\ From March 2013 to January 2015, 64 endoscopists in 20
centers enrolled 202 patients in the study in which Hemospray was used
as either a first line treatment (46.5%) or salvage therapy (53.5%)
following the unsuccessful treatment with another method. The
indication for Hemospray as a first-line therapy or salvage therapy

[[Page 32628]]

was at the discretion of the endoscopist. Of the 202 patients the mean
age was 68.9, 69.3 percent were male, and all patients were classified
into four primary etiologic groups: Ulcers (37.1%), malignant lesions
(30.2%), post-endoscopic bleeding (17.3%), and other (15.3%). Patients
were further classified by the American Society of Anesthesiologist
(ASA) physical status scores with 4.5 percent as a normal healthy
patient, 24.3 percent as a patient with mild systemic disease, 46
percent as a patient with severe systemic disease, 22.8 percent as a
patient with severe systemic disease that is a constant threat to life,
and 2.5 percent as a moribund patient who is not expected to survive
without an operation.^{202 203} Immediate hemostasis was
achieved in 96.5 percent across all patients; among treatment subtypes
immediate hemostasis was achieved in 96.8 percent of first-line treated
patients and 96.3 percent of salvage therapy patients. At day 30 the
overall rebleeding was 33.5 percent of 185 patients with cumulative
incidences of 41.4 percent for ulcers, 37.7 percent for malignant
lesions, 17.6 percent for post-endoscopic bleedings, and 25 percent for
others. When Hemospray was used as a first-line treatment, rebleeding
at day 30 occurred in 26.5 percent (22/83) of overall lesions, 30.8
percent of ulcers, 33.3 percent of malignant lesions, 13.6 percent of
post-endoscopic bleedings, and 22.2 percent of other. When Hemospray
was used as a salvage therapy, rebleeding at day 30 occurred in 39.2
percent (40/102) of overall lesions, 43.9 percent of ulcers, 50.0
percent of malignant lesions, 25.0 percent of post-endoscopic
bleedings, and 26.3 percent for others. According to the article, the
favorable hemostatic results seen from Hemospray are due to its
threefold mechanism of action: Formation of a mechanical barrier;
concentration of clotting factors at the bleeding site; and enhancement
of clot formation.\204\ No severe adverse events were noted, however
the authors note the potential for pain exists due to the use of carbon
dioxide. Lastly, the authors stated that while Hemospray was found to
reduce the need for radiological embolization and surgery as salvage
therapies, it was not found to be better than other hemostatic methods
in terms of preventing rebleeding of ulcers.
---------------------------------------------------------------------------

\201\ Haddara S, Jacques J, Lecleire S et al. A novel hemostatic
powder for upper gastrointestinal bleeding: A multicenter study (the
GRAPHE registry). Endoscopy 2016; 48: 1084-95.
\202\ Ibid.
\203\ ASA House of Delegates/Executive Committee. (2014, October
15). ASA Physical Status Classification System. Retrieved from
American Society of Anesthesiologists: https://www.asahq.org/standards-and-guidelines/asa-physical-status-classification-system.
\204\ Haddara S, Jacques J, Lecleire S et al. A novel hemostatic
powder for upper gastrointestinal bleeding: A multicenter study (the
GRAPHE registry). Endoscopy 2016; 48: 1084-95.
---------------------------------------------------------------------------

A second article provided by the applicant contained a systematic
review of published Hemospray case data summarizing 17 human and 2
animal studies.\205\ The authors do not provide the total number of
articles reviewed but do provide search terms and engines used to
conduct the review. The studies included in this review included 6 case
reports and 13 case series taking place in North America, Europe, Hong
Kong, and Egypt up until August 2014. A total of 234 cases were
identified of which 28.2 percent involved gastric bleeding, 6.4 percent
esophageal bleeding, 26.5 percent duodenal bleeding, 3.85 percent
bleeding of the gastroesophageal junction, and 11 percent bleeding of
the lower gastrointestinal tract. (We note it is unclear what form of
bleeding the remaining 24.1 percent of cases addressed.) The mean size
of the bleeding source was 37.4 mm ranging from 8 mm to 350 mm.
Hemospray was used as a primary and sole treatment in 83 percent of
cases while 17 percent of cases used Hemospray as a follow-up
treatment. Hemospray achieved hemostasis in 88.5 percent of all
reviewed cases. Within the 72-hour post-treatment period, rebleeding
occurred in 16.2 percent of patients and 27.3 percent of animal models.
The authors acknowledge the potential for rare adverse events such as
embolism, intestinal obstruction, and allergic reaction, but state no
procedure related adverse events were associated with Hemospray.\206\
---------------------------------------------------------------------------

\205\ Changela K, Papafragkakis H, Ofori E, et al. Hemostatic
powder spray: A new method for managing gastrointestinal bleeding.
Ther Adv Gastroenterol 2015; 8(3): 125-135.
\206\ Ibid.
---------------------------------------------------------------------------

The applicant provided a third article consisting of an abstract
from another systematic review article.\207\ The abstract purports to
cover a review of prospective, retrospective, and randomized control
trials evaluating Hemospray as a rescue therapy. Eighty-five articles
were initially identified and 23 were selected for review. Of those, 5
studies were selected which met the inclusion criteria of the analysis.
The median age of patients was 69, 68 percent were male. The abstract
concludes that when used as a rescue therapy after the failure of
conventional endoscopic modalities, in nonvariceal gastrointestinal
bleeding, Hemospray seems to have significantly higher rates of
immediate hemostasis.
---------------------------------------------------------------------------

\207\ Moole, V., Chatterjee, T., Saca, D., Uppu, A., Poosala,
A., & Duvvuri, A. A Systematic review and meta-analysis: Analyzing
the efficacy of hemostatic nanopowder (TC-325) as rescue therapy in
patients with nonvariceal upper gastrointestinal bleeding.
Gastroenterology 2019; 156(6), S-741.
---------------------------------------------------------------------------

A fourth article provided by the applicant described a single-arm
retrospective analytical study of 261 enrolled patients conducted at 21
hospitals in Spain.\208\ The mean age was 67 years old, 69 percent of
patients were male, and the overall technical success, defined as
correct assembled and delivery of Hemospray to a bleeding lesion, was
97.7 percent (95.1%-99.2%). The most common causes of bleeding in
patients were peptic ulcer (28%), malignancy (18.4%), therapeutic
endoscopy-related (17.6%), and surgical anastomosis (8.8%). Overall,
93.5 percent (89.5%-96%) of procedures achieved hemostasis. Recurrent
bleeding, defined as (1) a new episode of bleeding symptoms, (2) a
decrease in hemoglobin of >2 g/dL within 48 hours of an index endoscopy
or >3g/dL in 24 hours, or (3) direct visualization of active bleeding
at the previously treated lesion on repeat endoscopy, had a cumulative
incidence at 3 and 30 days of 16.1 percent (11.9%-21%) and 22.9 percent
(17.8%-28.3%) respectively. The overall risk of Hemospray failure at 3
and 30 days was 21.1 percent (16.4%-26.2%) and 27.4 percent (22.1%-
32.9%) respectively with no statistically significant differences
(p=0.07) between causes at 30 days (for example peptic ulcer,
malignancy, anastomosis, therapeutic endoscopy-related, and other
causes). With the use of multivariate analysis spurting bleeding vs.
nonspurting bleeding (subdistribution hazard ratio [sHR] 1.97 (1.24-
3.13)), hypotension vs. normotensive (sHR 2.14 (1.22-3.75)), and the
use of vasoactive drugs (sHR 1.80 (1.10-2.95)) were independently
associated with Hemospray failure. The overall 30-day survival was 81.9
percent (76.5%-86.1%) with 46 patients dying during follow-up and 22
experiencing bleeding related deaths; twenty patients (7.6%) with
intraprocedural hemostasis died before day 30. The authors indicated
the majority of Hemospray failures occurred within the first 3 days and
the rate of immediate hemostasis was similar to literature reports of
intraprocedural success rates of over 90 percent. The authors stated
that the hemostatic powder of Hemospray is eliminated from the GI tract
as early as 24 hours after use, which could explain the wide ranging
recurrent bleeding percentage. The authors reported that

[[Page 32629]]

importantly, adverse events are rare, but cases of abdominal
distension, visceral perforation, transient biliary obstruction, and
splenic infarct have been reported; one patient involved in this study
experienced an esophageal perforation without a definitive causal
relationship.
---------------------------------------------------------------------------

\208\ Rodriguez de Santiago E, Burgos-Santamaria D, Perez-Carazo
L, et al. Hemostatic spray TC-325 for GI bleeding in a nationwide
study: Survival analysis and predictors of failure via competing
risks analysis. Gastrointest Endosc 2019; 90(4), 581-590.
---------------------------------------------------------------------------

A fifth article provided by the applicant described a single-arm
multicenter prospective registry involving 314 patients in Europe which
collected data on days 0, 1, 3, 7, 14, and 30 after endotherapy with
Hemospray.\209\ The outcomes of interest in this study were immediate
endoscopic hemostasis (observed cessation of bleeding within 5 minutes
post Hemospray application) with secondary outcomes of rebleeding
immediately following treatment and during follow-up, 7 and 30 day all-
cause mortality, and adverse events. The sample was 74 percent male
with a median age of 71 with the most common pathologies of peptic
ulcer (53%), malignancy (16%), post-endoscopic bleeding (16%), bleeding
from severe inflammation (11%), esophageal variceal bleeding (2.5%),
and cases with no obvious cause (1.6%). The median baseline Blatchford
score (BS) and RS were 11 and 7 respectively. The BS ranges from 0 to
23 with higher scores indicating increasing risk for required
endoscopic intervention and is based upon the blood urea nitrogen,
hemoglobin, systolic blood pressure, pulse, presence of melena,
syncope, hepatic disease, and/or cardiac failure.\210\ The RS ranges
from 0 to 11 with higher scores indicating worse potential outcomes and
is based upon age, presence of shock, comorbidity, diagnosis, and
endoscopic stigmata of recent hemorrhage.\211\ Immediate hemostasis was
achieved in 89.5 percent of patients following the use of Hemospray;
only the BS was found to have a positive correlation with treatment
failure in multivariate analysis (OR 1.21 (1.10-1.34)). Rebleeding
occurred in 10.3 percent of patients who achieved immediate hemostasis
again with only the BS having a positive correlation with rebleeding
(OR: 1.13 (1.03-1.25)). At 30 days the all-cause mortality was 20.1
percent with 78 percent of these patients having achieved immediate
endoscopic hemostasis and a cause of death resulting from the
progression of other comorbidities. A subgroup analysis of treatment
type (monotherapy, combination therapy, and rescue therapy groups) was
performed showing no statistically significant difference in immediate
hemostasis across groups (92.4 percent, 88.7 percent, and 85.5 percent
respectively). Higher all-cause mortality rates at 30 days were highest
in the monotherapy group (25.4%, p=0.04) as compared to all other
groups. According to the authors, in comparison to major recent studies
they were able to show lower rebleeding rates overall and in all
subgroups despite the high-risk population.\212\ The authors further
note limitations in that the inclusion of patients was nonconsecutive
and at the discretion of the endoscopist, at the time of the endoscopy,
which allows for the potential introduction of selection bias, which
may have affected these study results.
---------------------------------------------------------------------------

\209\ Alzoubaidi D, Hussein M, Rusu R, et al. Outcomes from an
international multicenter registry of patients with acute
gastrointestinal bleeding undergoing endoscopic treatment with
Hemospray. Digestive Endoscopy 2019.
\210\ Saltzman, J. (2019, October). Approach to acute upper
gastrointestinal bleeding in adults. (M. Feldman, Editor) Retrieved
from UpToDate: https://www.uptodate.com/contents/approach-to-acute-upper-gastrointestinal-bleeding-in-adults.
\211\ Ibid.
\212\ Alzoubaidi D, Hussein M, Rusu R, et al. Outcomes from an
international multicenter registry of patients with acute
gastrointestinal bleeding undergoing endoscopic treatment with
Hemospray. Digestive Endoscopy 2019.
---------------------------------------------------------------------------

The fifth article also described the utility of Hemospray in the
treatment of malignant lesions. According to the applicant, malignant
lesions pose a significant clinical challenge as successful hemostasis
rates are as low as 40 percent with high recurrent bleeding over 50
percent within 1 month following standard treatments.^{213 214}
The applicant added that bleeding from tumors is often diffuse and
consists of friable mucosa decreasing the utility of traditional
treatments (for example, ligation, cautery). From the fifth article,
the applicant noted that 50 patients were treated for malignant
bleeding with an overall immediate hemostasis in 94 percent of
patients.\215\ Of the 50 patients, 33 were treated with Hemospray
alone, 11 were treated with Hemospray as the final treatment, and 4
were treated with Hemospray as a rescue therapy of which 100 percent,
84.6 percent and 75 percent experienced immediate hemostasis
respectively.\216\ Similarly, from the first discussed article, the
applicant noted that among malignant bleeding patients, 95.1 percent
achieved immediate hemostasis with lower rebleeding rates at 8 days
when Hemospray was used as a primary treatment as compared to when used
as a rescue therapy (17.1 percent vs. 46.7 percent respectively).\217\
The applicant concluded that Hemospray may provide an advantage as a
primary treatment to patients with malignant bleeding.
---------------------------------------------------------------------------

\213\ Kim YI, Choi IJ, Cho SJ, et al. Outcome of endoscopic
therapy for cancer bleeding in patients with unresectable gastric
cancer. J Gastroenterol Hepatol 2013;28:1489-95.
\214\ Roberts SE, Button LA, Williams JG. Prognosis following
upper gastrointestinal bleeding. PLoS One 2012;7:e49507.
\215\ Alzoubaidi D, Hussein M, Rusu R, et al. Outcomes from an
international multicenter registry of patients with acute
gastrointestinal bleeding undergoing endoscopic treatment with
Hemospray. Digestive Endoscopy 2019.
\216\ Alzoubaidi D, Hussein M, Rusu R, et al. Outcomes from an
international multicenter registry of patients with acute
gastrointestinal bleeding undergoing endoscopic treatment with
Hemospray. Digestive Endoscopy 2019.
\217\ Haddara S, Jacques J, Lecleire S et al. A novel hemostatic
powder for upper gastrointestinal bleeding: A multicenter study (the
GRAPHE registry). Endoscopy 2016; 48: 1084-95.
---------------------------------------------------------------------------

A sixth article provided by the applicant consisted of a systematic
review from January 1950 to August 2014 concerning all available
powdered topical hemostatic agents.\218\ Of an initial 3,799 articles,
105 were initially reviewed and after excluding nonendoscopic data,
review articles, in vitro studies, and animal models 61 articles were
ultimately included in the study. Three primary hemostatic agents were
identified in this review, the Ankaferd Blood Stopper (ABS), Hemospray,
and EndoClot. The applicant noted the authors of this article
identified 131 high risk patients treated with Hemospray, of which 28
had tumor bleeding. According to the applicant, all 28 patients
achieved immediate hemostasis with 25 percent experiencing rebleeding
at 7-day follow-up. The overall immediate hemostasis in this particular
study was 91.6 percent and 7-day rebleeding 25.8 percent among high-
risk rebleeding patients.\219\
---------------------------------------------------------------------------

\218\ Chen Y-I, Barkun A. Hemostatic powders in gastrointestinal
bleeding, a systematic review. Gastrointest Endoscopy Clin N Am
2015; 25: 535-552.
\219\ Ibid.
---------------------------------------------------------------------------

The applicant provided a seventh article which consisted of a
journal pre-proof article detailing a 1:1 randomized control trial of
20 patients treated with Hemospray versus the standard of care (for
example, thermal and injection therapies) in the treatment of malignant
gastrointestinal bleeding.\220\ The goals of this pilot study were to
determine the feasibility of a definitive trial. The primary outcome of
the study was immediate hemostasis (absence of bleeding after 3
minutes) with secondary outcomes of recurrent bleeding at days 1, 3,
30, 90, and 180 and adverse events at days 1, 30, and

[[Page 32630]]

180. The mean age of patients was 67.2, 75 percent were male, and on
average patients presented with 2.9 1.7 comorbidities. All
patients had active bleeding at endoscopy and the majority of patients
had an ASA score of 2 (45%) or 3 (40%). Immediate hemostasis was
achieved in 90 percent of Hemospray patients and 40 percent of standard
of care patients (5 injection alone, 3 thermal, 1 injection with clips,
and 1 unknown). Of those patients in the control group, 83.3 percent
crossed over to the Hemospray treatment. One patient died while being
treated with Hemospray from exsanguination; post-mortem examination
demonstrated that bleeding was caused by rupture of a malignant
inferior mesenteric artery aneurysm. Overall, 86.7 percent of patients
treated with Hemospray initially or as crossover treatment achieved
hemostasis. Recurrent bleeding was lower in the Hemospray group (20%)
as compared to the control group (60%) at 180 days. Forty percent of
the treated group received blood transfusions as compared to 70 percent
of the control group. The overall length of stay was 14.6 days among
treated patients as compared to 9.4 in the control group. Mortality at
180 days was 80 percent in both the treated and control groups. The
authors noted the potential for operator bias in the use of Hemospray
prior to switching to another method when persistent bleeding exists.
Lastly, the authors noted that while they did not occur during this
study, there are concerns around the risks of perforation, obstruction,
and systemic embolization with the use of Hemospray.
---------------------------------------------------------------------------

\220\ Chen Y-I, Wyse J, Lu Y, Martel M, Barkun AN, TC-325
hemostatic powder versus current standard of care in managing
malignant GI bleeding: A pilot randomized clinical trial.
Gastrointestinal Endoscopy (2019), doi: https://doi.org/10.1016/j.gie.2019.08.005.
---------------------------------------------------------------------------

An eighth article provided by the applicant described a single-arm
multicenter retrospective study from 2011 to 2016 involving 88 patients
who bled as a result of either a primary GI tumor or metastases to the
GI tract.\221\ In this study the authors define immediate hemostasis as
no further bleeding at least one minute after treatment with Hemospray
and recurrent bleeding was suspected if one of seven criteria were met:
(1) Hematemesis or bloody nasogastric tube >6 hours after endoscopy;
(2) melena after normalization of stool color; (3) hematochezia after
normalization of stool color or melena; (4) development of tachycardia
or hypotension after >1 hour of vital sign stability without other
cause; (5) decrease in hemoglobin level greater than or equal to 3
hours apart; (6) tachycardia or hypotension that does not resolve
within 8 hours after index endoscopy; or (7) persistent decreasing
hemoglobin of >3 g/dL in 24 hours associated with melena or
hematochezia). The sample for this study consisted of 88 patients (with
a mean age of 65 years old and 70.5 percent male) of which 33.3 percent
possessed no co-morbid illness, and 25 percent were on current
antiplatelet/anticoagulant medication. The mean BS was 8.7 plus or
minus 3.7 with a range from 0 to 18. Overall, 72.7 percent of patients
had a stage 4 adenocarcinoma, squamous cell carcinoma, or lymphoma.
Immediate hemostasis was achieved in 97.7 percent of patients.
Recurrent bleeding occurred among 13 of 86 (15%) and 1 of 53 (1.9%) at
3 and 30 days, respectively. A total of 25 patients (28.4%) died during
the 30-day follow up period. Overall, 27.3 percent of patients re-bled
within 30 days after treatment of which half were within 3 days. Using
multivariate analysis, the authors found patients with good performance
status, no end-stage cancer, or receiving any combination of definitive
hemostasis treatment modalities had significantly greater survival. The
authors acknowledged the recurrent bleeding rate post Hemospray
treatment at 30 days of 38 percent is comparable with that seen in sole
conventional hemostatic techniques and state this implies that
Hemospray does not differ from conventional techniques and remains
unsatisfactory.
---------------------------------------------------------------------------

\221\ Pittayanon R, Rerknimitr R, Barkun A. Prognostic factors
affecting outcomes in patients with malignana GI bleeding treated
with a novel endoscopically delivered hemostatic powder.
Gastrointest Endosc 2018; 87:991-1002.
---------------------------------------------------------------------------

Ultimately, the applicant concluded nonvariceal gastrointestinal
bleeding is associated with significant morbidity and mortality in
older patients with multiple co-morbid conditions. Inability to achieve
hemostasis and early rebleeding are associated with increased cost and
greater resource utilization. According to the applicant, patients with
bleeding from malignant lesions have few options that can provide
immediate hemostasis without further disrupting fragile mucosal tissue
and worsening the active bleed. The applicant asserted Hemospray is an
effective agent that provides immediate hemostasis in patients with GI
bleeding as part of multimodality treatment, as well as when used to
rescue patients who have failed more conventional endoscopic
modalities. Furthermore the applicant stated that in patients with
malignant bleeding in the GI tract, Hemospray provides a high rate of
immediate hemostasis and fewer recurrent bleeding episodes, which in
combination with definitive cancer treatment may lead to improvements
in long term survival. Lastly, the applicant asserted Hemospray is an
important new technology that permits immediate and long-term
hemostasis in GI bleeding cases where standard of care treatment with
clip ligation or cautery are not effective.
We note that the majority of studies provided lack a comparator
when assessing the effectiveness of Hemospray. Three of the articles
provided are systematic reviews of the literature. While we find these
articles helpful in establishing a background for the use of Hemospray,
we are concerned that they may not provide strong evidence of
substantial clinical improvement. Four studies appear to be single-
armed studies assessing the efficacy of Hemospray in the patient
setting. In all of these articles, comparisons are made between
Hemospray and standard of care treatments; however, without the ability
to control for factors such as study design, patient characteristics,
etc., it is difficult to determine if any differences seen result from
Hemospray or confounding variables. Furthermore, within the
retrospective and prospective studies lacking a control subset, some
level of selection bias appears to potentially be introduced in that
providers may be allowed to select the manner and order in which
patients are treated, thereby potentially influencing outcomes seen in
these studies.
Additionally, one randomized control trial provided by the
applicant appears to be in the process of peer-review and is not yet
published. Furthermore, this article is written as a feasibility study
for a potentially larger randomized control trial and contains a sample
of only 20 patients. This small sample size leaves us concerned that
the results are not representative of any larger population. Lastly, as
described we are concerned the control group can receive one of
multiple treatments which lack a clear designation methodology beyond
physician choice. For instance, 50 percent of the control patients
received injection therapy alone, which according to the literature
provided by the applicant is not an acceptable treatment for endoscopic
bleeding. Accordingly, it is not clear whether performance seen in the
treated group as compared to the control group is due to Hemospray
itself or due to confounding factors.
Third, we are concerned with the samples chosen in many of the
studies presented. Firstly, the Medicare population is a diverse group
of men and women. Many of the samples provided by the applicant are
overwhelmingly male. Secondly, many

[[Page 32631]]

of the studies provided were performed in European and other settings
outside of the United States. We are therefore concerned that the
samples chosen within the literature provided may not represent the
Medicare population.
Lastly, we are concerned about the potential for adverse events
resulting from Hemospray. It is unclear from the literature provided by
the applicant what the likelihood of these events is and whether or not
an evaluation for the safety of Hemospray was performed. About one-
third of the articles submitted specifically addressed adverse events
with Hemospray. However, the evaluation of adverse events was limited
and most of the patients in the studies died of disease progression. A
few of the provided articles mention the potential for severe adverse
reactions (for example, abdominal distension, visceral perforation,
biliary obstruction, splenic infarct). Specifically, one article \222\
recorded adverse events related to Hemospray, including abdominal
distention and esophageal perforation.
---------------------------------------------------------------------------

\222\ Rodriguez de Santiago E, Burgos-Santamaria D, Perez-Carazo
L, et al. Hemostatic spray TC-325 for GI bleeding in a nationwide
study: Survival analysis and predictors of failure via competing
risks analysis. Gastrointest Endosc 2019; 90(4), 581-590.
---------------------------------------------------------------------------

We are inviting public comments on whether Hemospray meets the
substantial clinical improvement criterion.
We did not receive any written comments in response to the New
Technology Town Hall meeting notice published in the Federal Register
regarding the substantial clinical improvement criterion for Hemospray
or at the New Technology Town Hall meeting.
h. IMFINZI[supreg] (Durvalumab)
AstraZeneca PLC submitted an application for new technology add-on
payments for IMFINZI[supreg] for FY 2021. According to the applicant,
IMFINZI[supreg] is a selective, high-affinity, human IgG1 monoclonal
antibody (mAb) that blocks programmed death-ligand 1 (PD-L1) binding to
programmed cell death-1 and CD80 without antibody-dependent cell-
mediated cytotoxicity.\223\ IMFINZI[supreg] has multiple indications
but is applying for new technology add-on payments for IMFINZI[supreg]
in combination with etoposide and either carboplatin or cisplatin for
the first-line treatment of patients with extensive-stage small cell
lung cancer (ES-SCLC). IMFINZI[supreg] for the first-line treatment of
patients with ES-SCLC is not yet approved by the FDA.
---------------------------------------------------------------------------

\223\ IMFINZI[supreg] (durvalumab) [Prescribing Information].
Wilmington, DE; AstraZeneca Pharmaceuticals LP, 2019.
---------------------------------------------------------------------------

According to the applicant, the FDA initially approved
IMFINZI[supreg] on May 1, 2017 for the indicated treatment of patients
with locally advanced or metastatic urothelial carcinoma who have
disease progression during or following platinum-containing
chemotherapy or who have disease progression within 12 months of
neoadjuvant or adjuvant treatment with platinum containing
chemotherapy. According to the applicant, this indication received
accelerated approval based on tumor response rate and duration of
response. Continued approval for this indication may be contingent upon
verification and description of clinical benefit in confirmatory
trials.\224\
---------------------------------------------------------------------------

\224\ Ibid.
---------------------------------------------------------------------------

The FDA subsequently approved IMFINZI[supreg] on February 16, 2018
for a second indication, treatment of patients with unresectable, Stage
III non-small cell lung cancer (NSCLC) whose disease has not progressed
following concurrent platinum-based chemotherapy and radiation therapy.
Small cell lung cancer (SCLC) is considered a rare disease, with
approximately 30,000 new cases diagnosed each year, compared to 200,000
cases of NSCLC.\225\ SCLC was among the cancers identified by the
National Cancer Institute for which to develop plans for research under
the Recalcitrant Cancer Research Act of 2012 which supports research
for cancers having a 5-year relative survival rate of less than 20
percent and estimated to cause approximately 30,000 deaths per year in
the U.S.\226\ SCLC is a rapidly progressive disease with poor prognosis
and limited treatment options. The overall 5-year survival rate (early
and late stage) is 6 percent, representing an ongoing significant unmet
need.\227\ The majority (75 percent) of patients are diagnosed in the
late/metastatic stage described as ES-SCLC and are considered
incurable, with a median overall survival of 9-11 months with standard
of care (SOC).^{228 229} The median overall survival for ES-
SCLC has remained the same for the past 20 years with essentially no
improvements or new therapies in 20 years.\230\ According to the
applicant, the current SOC for first line (1L) treatment of ES-SCLC is
systemic therapy with standard doublet chemotherapy with platinum plus
etoposide, administered for 4-6 cycles following diagnosis. Although
ES-SCLC is highly sensitive to platinum/etoposide in the 1L setting
with response rates of 50-60 percent, the majority of patients will
relapse within the first year of treatment, with a median progression
free survival (PFS) of 4-6 months.\231\ The applicant also asserts that
overall, responses to SOC are short-lived and long-term outcomes remain
poor.
---------------------------------------------------------------------------

\225\ Noone, A.M., Howlader, N., Krapcho, M., Miller, D., Brest,
A., Yu, M., Ruhl, J., Tatalovich, Z., Mariotto, A., Lewis, D.R.,
Chen, H.S., Feuer, E.J., Cronin, K.A. (eds). SEER Cancer Statistics
Review, 1975-2015, National Cancer Institute, Bethesda, MD, https://seer.cancer.gov/csr/1975_2015/, based on November 2017 SEER data
submission, posted to the SEER website, April 2018.
\226\ Accessed October 16, 2018 3. National Cancer Institute.
NCI Dictionary of Cancer Terms--small cell lung cancer; Available at
https://www.cancer.gov/about-nci/legislative/recent-public-laws#recalcitrant-cancer-research-act-of-2012-pl-112-239-s-amdt-3180-to-s-3254hr-4310-112th-congress.
\227\ https://www.cancer.net/cancer-types/lung-cancer-small-cell/statistics.
\228\ Sabari, J.K., Lok, B.H., Laird, J.H., et al.,
``Unravelling the biology of SCLC: Implications for therapy,''
Nature Reviews Clinical Oncology, 2017, 14(9), pp. 549-561.
\229\ Farago, A.F., Keane F.K., ``Current standards for clinical
management of small cell lung cancer,'' Translational Lung Cancer
Research, 2018, 7, pp. 69-79.
\230\ Ibid.
\231\ Hurwitz, J.L., McCoy, F., Scullin, P., et al., ``New
advances in the second-line treatment of small cell lung cancer,''
Oncologist, 2009, 14(10), pp. 986-994.
---------------------------------------------------------------------------

The applicant states that extensive stage small cell lung cancer is
the most rapidly progressive lung cancer, with growth of metastases
that can be extremely fast, with doubling times as low as three to four
days observed in one patient.\232\ The applicant further states that
diagnosis often occurs at later stages and SCLC patients may be sicker
at the time of diagnosis, presenting with other
comorbidities.^{233 234} For these reasons, the applicant
asserts that a significant number of patients present and are diagnosed
in the hospital inpatient setting. According to the applicant, ES-SCLC
is very responsive to chemotherapy treatment, with response rates to
platinum/etoposide ranging from 44 percent to 78 percent,\235\ and
given the severity of symptoms, it is recommended to initiate treatment
within two weeks of

[[Page 32632]]

diagnosis.\236\ According to the applicant, many patients have clinical
response and improvement of symptoms with the initiation of platinum/
etoposide, confirming the clinical observation that many SCLCs are
highly sensitive to platinum/etoposide in the first-line setting.\237\
The applicant suggests that based on the CASPIAN study design, as
discussed further in this section, patients should receive
IMFINZI[supreg] in combination with chemotherapy beginning in the first
cycle. Thus, the applicant expects patients to receive a single dose of
IMFINZI[supreg] while in the inpatient setting prior to discharge.
---------------------------------------------------------------------------

\232\ Haque, N., Raza, A., McGoey, R., et al., ``Small cell lung
cancer: time to diagnosis and treatment,'' Southern Medical Journal,
2012, 105(8), pp. 418-423.
\233\ Bennett, B.M., Wells, J.R., Panter, C., et al., ``The
humanistic burden of small cell lung cancer (SCLC): A systematic
review of health-related quality of life (HRQoL) literature,''
Frontiers in Pharmacology, 2017, 8, p. 339.
\234\ Aarts, M.J., Aerts, J.G., van den Borne, B.E., et al.,
``Comorbidity in patients with small-cell lung cancer: trends and
prognostic impact,'' Clinical Lung Cancer, 2015, 16(4), pp. 282-291.
\235\ Farago, A.F., Keane, F.K, ``Current standards for clinical
management of small cell lung cancer,'' Translational Lung Cancer
Research, 2018, 7, pp. 69-79.
\236\ Haque, N., Raza, A., McGoey, R., et al., ``Small cell lung
cancer: time to diagnosis and treatment,'' Southern Medical Journal,
2012, 105(8), pp. 418-423.
\237\ Ibid.
---------------------------------------------------------------------------

On November 29, 2019 the FDA accepted a supplemental Biologics
License Application and granted Priority Review for IMFINZI[supreg] for
the treatment of patients with previously untreated ES-SCLC. The FDA
granted IMFINZI[supreg] orphan drug designation in ES-SCLC on July 12,
2019.\238\ As previously noted, IMFINZI[supreg] for the first-line
treatment of patients with ES-SCLC is not yet approved by the FDA.
---------------------------------------------------------------------------

\238\ https://www.accessdata.fda.gov/scripts/opdlisting/oopd/detailedIndex.cfm?cfgridkey=691319.
---------------------------------------------------------------------------

The applicant states that there are no existing ICD-10-PCS codes
that uniquely identify the administration of IMFINZI[supreg]. The
applicant submitted a request for a unique ICD-10-PCS administration
code for the March 2020 ICD-10 Coordination and Maintenance Committee
Meeting.
As previously discussed, if a technology meets all three of the
substantial similarity criteria, it would be considered substantially
similar to an existing technology and, therefore, would not be
considered ``new'' for purposes of new technology add-on payments.
With respect to the first criterion, whether a product uses the
same or a similar mechanism of action to achieve a therapeutic outcome,
the applicant asserted that IMFINZI[supreg] offers a novel mechanism of
action for the treatment of ES-SCLC compared to the SOC chemotherapy.
The applicant states that first line SOC treatment of ES-SCLC is
standard chemotherapy, including a platinum agent (typically
carboplatin or cisplatin) plus etoposide.\239\ The mechanism of action
of platinum chemotherapy agents (including cisplatin and carboplatin)
is based on the agent's ability to crosslink with the purine bases on
the DNA; interfering with DNA repair mechanisms, causing DNA damage,
and subsequently inducing apoptosis in cancer cells.^{240 241}
---------------------------------------------------------------------------

\239\ Farago, A.F., Keane, F.K., ``Current standards for
clinical management of small cell lung cancer,'' Translational Lung
Cancer Research, 2018, 7, pp. 69-79.
\240\ Dasari, S., Tchounwou, P.B., ``Cisplatin in cancer
therapy: Molecular mechanisms of action,'' European Journal of
Pharmacology, 2014, 740, pp. 364-378.
\241\ Thirumaran R, Prendergast GC, Gilman PB, ``Cytotoxic
chemotherapy in clinical treatment of cancer,'' In: Prendergast,
G.C., Jaffee, E.M., editors, Cancer Immunotherapy: Immune
Suppression and Tumor Growth, USA: Elsevier Inc, 2007, pp. 101-116,
http://dx.doi.org/10.1016/B978-012372551-6/50071-7.
---------------------------------------------------------------------------

The applicant asserts that etoposide phosphate is a plant alkaloid
prodrug that is converted to its active moiety, etoposide, by
dephosphorylation. Further, the applicant explains etoposide causes the
induction of DNA strand breaks by an interaction with DNA-topoisomerase
II or the formation of free radicals, leading to cell cycle arrest,
primarily at the G2 stage of the cell cycle, and cell
death.^{242 243}
---------------------------------------------------------------------------

\242\ Ibid.
\243\ Etopophos[supreg] (etoposide phosphate) [Prescribing
Information]. Princeton, NJ; Bristol-Myers Squibb, 2019.
---------------------------------------------------------------------------

The applicant states IMFINZI[supreg] is a selective, high-affinity,
human IgG1[kappa] monoclonal antibody that blocks PD-L1 binding to
programmed cell death-1 and CD80 without antibody-dependent cell-
mediated cytotoxicity.\244\ The applicant asserts that IMFINZI[supreg],
in combination with chemotherapy, demonstrated a statistically and
clinically significant improvement in overall survival in a randomized
Phase III study (CASPIAN), which is discussed later in this
section.\245\
---------------------------------------------------------------------------

\244\ Pas-Ares, L., Jiang, H., Huang, Y., et al., A Phase III
Randomized Study of First-Line DurvalumabTremelumimab+Platinum-based Chemotherapy (EP) vs. EP Alone in
Extensive-Stage Disease Small Cell Lung Cancer (ED-SCLC):CASPIAN
[Poster]. Presented at: the ASCO annual meeting, Chicago, IL June 2-
6, 2017.
\245\ Paz-Ares, L., Chen, Y., Reinmuth, N., et al., Overall
Survival with Durvalumab Plus Platinum-Etoposide in First-Line
Extensive-Stage SCLC: Results from the CASPIAN Study [presentation],
Presented at: World Conference on Lung Cancer, Barcelona, Spain,
September 7-10, 2019.
---------------------------------------------------------------------------

With respect to the second criterion, whether a product is assigned
to the same or a different MS-DRG, the applicant asserted that
extensive stage small cell lung cancer patients are identified under
category C34 (Malignant neoplasm of bronchus and lung) of the ICD-10-CM
coding classification system. According to the applicant, category C34
is all encompassing and does not distinguish between the lung cancer
subtypes. The applicant also states that both non-small cell lung
cancer patients as well as earlier stages of small cell lung cancer
(that is, limited stage) are captured under category C34, all of which
have differing epidemiological considerations and treatment
interventions. The applicant concluded that patients diagnosed with ES-
SCLC, identified using category C34, map to MS-DRGs 180, 181, and 182
(Respiratory Neoplasms with MCC, with CC, and without CC/MCC,
respectively). The applicant stated that the existing ICD-10-PCS coding
system does not allow for visibility into the different MS-DRGs that
ES-SCLC patients map to versus NSCLC patients, making it difficult to
show that ES-SCLC patients receiving IMFINZI[supreg] would map to a
unique MS-DRG from NSCLC cases, where IMFINZI[supreg] and other immuno-
oncology therapies are already being used.
To further identify the patient population of interest, the
applicant pulled charge level data from the Premier Hospital Database
to determine which MS-DRGs these cases are mapping to, beyond relying
on the broad lung cancer category C34. The applicant asserts that the
Premier Hospital database is a large U.S. hospital-based, all payer
database that contains discharge information from geographically
diverse non-governmental, community, and teaching hospitals and health
systems across both rural and urban areas. The applicant stated that
this database contains data from standard hospital discharge files
providing access to all procedures, diagnoses, drugs, and devices
received for each patient regardless of the insurance or disease state.
The applicant used charge level hospital data from the Premier Hospital
Database to identify cases that used category C34 as well as
carboplatin or cisplatin plus etoposide, the chemotherapy doublet
specifically used for ES-SCLC patients. The applicant also looked for
the use of prophylactic cranial irradiation (PCI), a type of radiation
therapy used for ES-SCLC patients to address the frequent occurrence of
multiple brain metastases associated with SCLC. Based on this
assessment of hospital charge-level data, the applicant stated that
over 60 percent of ES-SCLC patients map to MS-DRGs 180 (Respiratory
Neoplasms with MCC), 181 (Respiratory Neoplasms with CC), and 164
(Major Chest Procedures with CC). We agree with the applicant that
patients receiving IMFINZI[supreg] would map to the same DRGs as
patients receiving standard therapy for ES-SCLC.
With respect to the third criterion, whether the new use of the
technology involves the treatment of the same or similar type of
disease and the same or similar patient population when compared to an
existing technology, the

[[Page 32633]]

applicant stated that IMFINZI[supreg], in combination with standard
chemotherapy, represents a new treatment option for patients with
extensive stage small cell lung cancer, demonstrating statistically and
clinically significant improved overall survival as compared to
standard chemotherapy (Hazard ration [HR] 0.73; 95 percent CI 0.59-
0.91; p=0.0047).\246\
---------------------------------------------------------------------------

\246\ Paz-Ares, L., Dvorkin, M., Chen, Y., et al., ``Durvalumab
plus platinum-etoposide versus platinum-etoposide in first-line
treatment of extensive-stage small-cell lung cancer (CASPIAN): a
randomized, controlled, open-label, phase 3 trial [article and
supplementary appendix],'' Lancet, 2019.
---------------------------------------------------------------------------

The applicant asserts that, if approved, IMFINZI[supreg] in
combination with chemotherapy would represent a new treatment option
for ES-SCLC patients.
According to the applicant, SCLC differs significantly from NSCLC,
in both its prevalence and prognosis. The applicant states that SCLC
represents only 10-15 percent of all lung cancers, with approximately
30,000 new cases each year in the US. In contrast, the applicant states
that NSCLC represents 84 percent of all lung cancers, with
approximately 200,000 new cases each year.\247\ The applicant states
SCLC has an extremely poor prognosis, as noted previously, with an
overall 5-year survival rate of 6 percent, and that ES-SCLC represents
the overwhelming majority of SCLC cases at diagnosis, approximately 75
percent, with a 5-year survival rate closer to 3
percent.^{248 249} The applicant also describes treatment
options as limited for ES-SCLC, as compared to patients with NSCLC. The
applicant also states that many recent studies of the treatment of
NSCLC have demonstrated positive outcomes with a variety of agents,
including with combination treatments that the applicant describes as
having different mechanisms of action.\250\
---------------------------------------------------------------------------

\247\ Farago, A.F. et al., ``Current standards for clinical
management of small cell lung cancer,'' Translational Lung Cancer
Research, 2018, 7(1), pp. 69-79.
\248\ Ibid.
\249\ Thirumaran, R., Prendergast, G.C., Gilman, P.B.,
``Cytotoxic chemotherapy in clinical treatment of cancer,'' In:
Prendergast, G.C., Jaffee, E.M., editors, Cancer immunotherapy:
immune suppression and tumor growth, USA: Elsevier Inc, 2007, p.
101-116, http://dx.doi.org/10.1016/B978-012372551-6/50071-7.
\250\ Yang, S., Zhang, Z., Wang, Q., ``Emerging therapies for
small cell lung cancer,'' Journal of Hematology & Oncology, 2019,
12(1), p. 47.
---------------------------------------------------------------------------

We note that we received an application for new technology add-on
payments for FY 2021 for TECENTRIQ[supreg], which received FDA approval
on March 18, 2019 and is indicated, in combination with carboplatin and
etoposide, for the first-line treatment of adult patients with ES-SCLC.
Both IMFINZI[supreg] and TECENTRIQ[supreg] seem to be intended for
similar patient populations and would involve the treatment of the same
conditions; patients with locally advanced or metastatic urothelial
carcinoma and patients with SCLC. We are interested in information on
how these two technologies may differ from each other with respect to
the substantial similarity criteria and newness criterion, to inform
our analysis of whether IMFINZI[supreg] and TECENTRIQ[supreg] are
substantially similar to each other and therefore should be considered
as a single application for purposes of new technology add-on payments.
We are inviting public comments on whether IMFINZI[supreg] is
substantially similar to an existing technology and whether it meets
the newness criterion.
With respect to the cost criterion, the applicant conducted the
following analysis to demonstrate that IMFINZI[supreg] meets the cost
criterion. To identify cases that may be eligible for the use of
IMFINZI[supreg], the applicant searched the FY 2018 MedPAR LDS file for
claims reporting an ICD-10-CM code of category C34 in combination with
Z51.11 (Encounter for antineoplastic chemotherapy) or Z51.12 (Encounter
for antineoplastic immunotherapy). The applicant also included any
cases within MS-DRGs 180, 181, 182 with an ICD-10-CM diagnosis code
from category C34 as the applicant believes hospitals may not always
capture the encounter for chemotherapy. Based on the FY 2018 MedPAR LDS
file, the applicant identified a total of 24,193 cases. Of the MS-DRGs
with more than 11 cases, the applicant found 23,933 cases which were
mapped to 12 unique MS-DRGs. The applicant excluded MS-DRGs with case
volume less than 11 total cases.
Using these 23,933 cases, the applicant then calculated the
unstandardized average charges per case for each MS-DRG. The applicant
determined that it did not need to remove any charges as
IMFINZI[supreg] is not expected to offset historical charges already
included within the MS-DRGs. The applicant expects that ES-SCLC
patients will receive their initial dose of IMFINZI[supreg] in the
inpatient setting. The applicant then standardized the charges and
inflated the charges by 1.11100 or 11.10 percent, the same inflation
factor used by CMS to update the outlier threshold in the FY 2020 IPPS/
LTCH PPS final rule (84 FR 42629). The applicant then added the charges
for IMFINZI[supreg] by converting the costs to a charge by dividing the
cost by the national average cost-to-charge ratio of 0.189 for drugs
from the FY 2020 IPPS/LTCH PPS final rule (84 FR 42179).
Based on the FY 2020 IPPS/LTCH PPS final rule correction notice
data file thresholds, the average case-weighted threshold amount was
$53,209. In the applicant's analysis, the final inflated average case-
weighted standardized charge per case was $111,093. Because the final
inflated average case-weighted standardized charge per case exceeds the
average case-weighted threshold amount, the applicant maintained that
the technology meets the cost criterion.
As noted previously, we received an application for new technology
add-on payments for FY 2021 for TECENTRIQ[supreg]. Both IMFINZI[supreg]
and TECENTRIQ[supreg] seem to be intended for similar patients. The
ICD-10-CM diagnosis codes and MS-DRGs in the cost analysis for
IMFINZI[supreg] differ from those used in the cost analysis for
TECENTRIQ[supreg]. Specifically, as noted previously, the applicant for
IMFINZI[supreg] searched for category C34 in combination with Z51.11 or
Z51.12, while the applicant for TECENTRIQ[supreg] only searched for
claims with category C34. We are concerned as to why the diagnosis
codes would differ between the cost analysis for IMFINZI[supreg] and
for TECENTRIQ[supreg] as one analysis may lend more accuracy to the
calculation depending which is more reflective of the applicable
patient population. We are inviting public comment on whether
IMFINZI[supreg] meets the cost criterion.
With respect to the substantial clinical improvement criterion, the
applicant asserts that IMFINZI[supreg] represents a substantial
clinical improvement over existing technologies because it offers a
treatment option for a patient population unresponsive to currently
available treatments. The applicant also believes that it represents a
substantial clinical improvement because the applicant states that the
technology reduces mortality, decreases disease progression, and
improves quality of life.
The CASPIAN clinical trial is a randomized, open-label, phase 3
trial at 209 sites across 23 countries. Eligible patients were adults
with untreated ES-SCLC, with World Health Organization (WHO)
performance status 0 or 1 and measurable disease as per Response
Evaluation Criteria in Solid Tumors. Patients were randomly assigned
(in a 1:1:1 ratio) to durvalumab plus platinum-etoposide; durvalumab
plus tremelimumab plus platinum-etoposide; or platinum-etoposide alone.
All drugs were administered intravenously. Platinum-etoposide consisted
of etoposide 80-100 mg/m2 on days 1-3 of each cycle with investigator's
choice of either

[[Page 32634]]

carboplatin area under the curve 5-6 mg/mL per min or cisplatin 75-80
mg/m2 (administered on day 1 of each cycle). Patients received up to
four cycles of platinum-etoposide plus durvalumab 1500 mg with or
without tremelimumab 75 mg every 3 weeks followed by maintenance
durvalumab 1500 mg every 4 weeks in the immunotherapy groups and up to
6 cycles of platinum-etoposide every 3 weeks plus prophylactic cranial
irradiation (investigator's discretion) in the platinum-etoposide
group. The primary endpoint was overall survival in the intention-to-
treat population. This study is registered at ClinicalTrials.gov,
NCT03043872, and is ongoing. The applicant stated that the median OS
was 13.0 months (95 percent CI, 11.5-14.8) for patients treated with
IMFINZI[supreg] plus chemotherapy vs. 10.3 months (95 percent CI, 9.3-
11.2) for SOC chemotherapy. It stated that the results also showed a
sustained OS benefit with 34 percent survival at 18 months following
treatment with IMFINZI[supreg] plus chemotherapy vs. 25 percent
following SOC chemotherapy. No data was provided on patients treated
with durvalumab plus tremelimumab plus platinum-etoposide as this was
an interim analysis.\251\
---------------------------------------------------------------------------

\251\ Paz-Ares, L., Dvorkin, M., Chen, Y., et al., ``Durvalumab
plus platinum-etoposide versus platinum-etoposide in first-line
treatment of extensive-stage small-cell lung cancer (CASPIAN): A
randomized, controlled, open-label, phase 3 trial,'' Lancet, 2019,
https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(19)32222-6/fulltext. Accessed October 7, 2019.
---------------------------------------------------------------------------

The applicant further states that other key secondary endpoints
demonstrated consistent and durable improvement for IMFINZI[supreg]
plus chemotherapy, including a higher progression-free survival (PFS)
rate at 12 months (17.5 percent vs. 4.7 percent), a 10 percent increase
in confirmed objective response rate (ORR) (67.9 percent vs. 57.6
percent), and improved duration of response at 12 months (22.7 percent
vs. 6.3 percent). The median Progression Free Survival was 5.1 months
with IMFINZI[supreg] versus 5.4 months for the control arm, which was
not significantly different.
The applicant states that in combination with etoposide and
platinum-based chemotherapy, IMFINZI[supreg] provided a significant
improvement in survival and notable changes in patient reported
outcomes. According to the applicant, patients receiving
IMFINZI[supreg] plus etoposide and platinum-based chemotherapy
experienced reduced symptom burden over 12 months for pre-specified
symptoms of fatigue, appetite loss, cough, dyspnea, and chest pain
(based on adjusted mean change from baseline, MMRM). The applicant
states a large difference over 12 months was observed for appetite loss
in favor of IMFINZI[supreg] plus etoposide and platinum-based
chemotherapy compared to standard-of-care etoposide and platinum-based
chemotherapy. The applicant further states that patients receiving
IMFINZI[supreg] plus etoposide and platinum-based chemotherapy also
experienced longer time to deterioration in a broad range of patient-
reported symptoms (for example, dyspnea, appetite loss, chest pain,
arm/shoulder pain, other pain, insomnia, constipation, diarrhea),
functioning (physical, cognitive, role, emotional, social), and Health
Related Quality of Life (HRQoL) indicators, compared to cisplatin
(EP).^{252 253 254 255}
---------------------------------------------------------------------------

\252\ AstraZeneca Press Release, September 9, 2019, Available
at: https://www.astrazeneca-us.com/content/az-us/media/press-releases/2019/imfinzi-is-first-immunotherapy-to-show-both-significant-survival-benefit-and-improved-durable-responses-in-extensive-stage-small-cell-lung-cancer-09092019.html.
\253\ Paz-Ares, L., Chen, Y., Reinmuth, N., et al., Overall
Survival with Durvalumab Plus Platinum-Etoposide in First-Line
Extensive-Stage SCLC: Results from the CASPIAN Study [presentation],
Presented at: World Conference on Lung Cancer, Barcelona, Spain,
September 7-10, 2019.
\254\ Paz-Ares, L., Dvorkin, M., Chen, Y., et al., ``Durvalumab
plus platinum-etoposide versus platinum-etoposide in first-line
treatment of extensive-stage small-cell lung cancer (CASPIAN): a
randomized, controlled, open-label, phase 3 trial,'' Lancet. 2019,
https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(19)32222-6/fulltext. Accessed October 7, 2019.
\255\ Paz-Ares, L., Goldman, J.W., Garassino, M.C., et al., PD-
L1 expression, patterns of progression and patient-reported outcomes
(PROs) with durvalumab plus platinum-etoposide in ES-SCLC: Results
from CASPIAN [presentation], Presented at European Society for
Medical Oncology; Barcelona, Spain, September 27-October 1, 2019.
---------------------------------------------------------------------------

As stated previously, the applicant asserted that IMFINZI[supreg]
represents a substantial clinical improvement over existing
technologies because it offers a treatment option for a patient
population unresponsive to currently available treatments. The
applicant explained that the CASPIAN study demonstrated the following
endpoints: patient population baseline characteristics, treatment
exposure, overall survival (including pre-specified subgroups),
progression free survival, sites of progression, objective response
rate, duration of response, and detailed safety analysis. All results
provided comparison of the active IMFINZI[supreg] plus chemotherapy arm
as compared to the standard of care chemotherapy alone arm.\256\ We are
concerned that the CASPIAN study is ongoing and the information is
preliminary. Specifically, the three arms in the study have not yet
been analyzed. Additionally, while the data shows a median survival
benefit of about 3 months with treatment with IMFINZI[supreg], we did
not see any data that demonstrates significant improvement in median
progression free survival. Also, while we recognize that the trials are
ongoing and that the analysis of the three study arms is not complete,
we are interested in additional information concerning adverse events
to help us better understand the safety profile of IMFINZI[supreg].
---------------------------------------------------------------------------

\256\ Paz-Ares, L., Dvorkin, M., Chen, Y., et al., ``Durvalumab
plus platinum-etoposide versus platinum-etoposide in first-line
treatment of extensive-stage small-cell lung cancer (CASPIAN): A
randomized, controlled, open-label, phase 3 trial [article and
supplementary appendix],'' Lancet, 2019.
---------------------------------------------------------------------------

We are inviting public comment on whether IMFINZI[supreg] meets the
substantial clinical improvement criterion.
We did not receive any written comments in response to the New
Technology Town Hall meeting notice published in the Federal Register
regarding the substantial clinical improvement criterion for
IMFINZI[supreg] or at the New Technology Town Hall meeting.
i. KTE-X19
Kite Pharma submitted an application for new technology add-on
payment for FY 2021 for KTE-X19. KTE-X19 is a CD19 directed genetically
modified autologous T-cell immunotherapy for the treatment of adult
patients with relapse and refractory (r/r) mantle cell lymphoma (MCL).
KTE-X19 is a form of chimeric antigen receptor (CAR) T-cell
immunotherapy that modifies the patient's own T-cells to target and
eliminate tumor cells. More specifically, according to the applicant,
KTE-X19 is a single infusion product consisting of autologous T-cells
that have been engineered to express an anti-CD19 chimeric antigen
receptor. According to the applicant, this therapy targets the CD19
antigen on the cell surface of normal and malignant B-cells. The
applicant stated that KTE-X19 is different from other previously
approved technologies because it has a distinct cellular product that
requires a unique manufacturing process. The applicant explained that
KTE-X19's unique manufacturing process, as compared to
YESCARTA[supreg], results in differences in potency, cellular
impurities, and formulation of the final products.
According to the applicant, MCL is a rare and aggressive subtype of
non-Hodgkin lymphoma (NHL) with distinct

[[Page 32635]]

characteristics ^{257 258} that accounts for 3-6% of all cases
of NHL in the United States and differs from diffuse large B-cell
lymphoma (another subtype of NHL).^{259 260 261} The applicant
cited that the overall incidence of MCL in the U.S. in 2018 was 3,500
with 5-year and 10-year prevalence of 12,000 and 18,000 cases.\262\
Additionally, the applicant stated that the median age at diagnosis for
patients with MCL is 68 years and the majority of patients are non-
Hispanic white males.\263\ MCL results from a malignant transformation
of the B lymphocyle in the outer edge of a lymph node follicle (the
mantle zone). Prognosis varies for r/r MCL, but the median survival for
MCL is 3-5 years depending on the risk group (the Mantle Cell Lymphoma
International Prognostic Index categorizes patients into low,
intermediate and high risk groups), according to the applicant.\264\
The first line therapy for newly diagnosed MCL routinely includes
chemotherapy in combination with
rituximab.^{265 266 267 268 269} According to the applicant,
rituximab is also the only approved therapy for maintenance for
patients in remission. The median progression free survival ranges from
18-51 months with most of MCL patients eventually relapsing. The
applicant contended that only 30-40% of patients end up with durable
long-term remission after a chemoimmunotherapy first line
therapy.^{270 271 272}
---------------------------------------------------------------------------

\257\ Fakhri B, Kahl B. Current and emerging treatment options
for mantle cell lymphoma. Ther Adv Hematol. 2017;8(8):223-34.
\258\ National Comprehensive Cancer Network. Clinical Practice
Guidelines in Oncology; B-cell Lymphomas, Version 1.2019 [November
30, 2018]. 2017 Available from: https://www.nccn.org/professionals/physician_gls/pdf/b-cell.pdf.
\259\ The Non-Hodgkin's Lymphoma Classification Project. A
clinical evaluation of the International Lymphoma Study Group
classification of non-Hodgkin's lymphoma. Blood. 1997;89(11):3909-
3918.
\260\ Zhou Y, et al. Incidence trends of mantle cell lymphoma in
the United States between 1992 and 2004. Cancer. 2008;113(4):791-
798.
\261\ Teras LR, et al. 2016 US lymphoid malignancy statistics by
World Health Organization subtypes CA Cancer J Clin. 2016;6:443-459.
\262\ Kantar Health. CancerMPact[supreg] United States.
September 2018, v1.2.
\263\ Fu S, et al. Trends and variations in mantle cell lymphoma
incidence from 1995 to 2013: A comparative study between Texas and
National SEER areas. Oncotarget. 2017;8(68):112516-29.
\264\ Cheah CY, et al. Mantle cell lymphoma. J Clin Oncol.
2016;34:1256-1269.
\265\ Ibid.
\266\ Kantar Health. CancerMPact[supreg] United States.
September 2018, v1.2.
\267\ Flinn IW, et al. First-line treatment of patients with
indolent non-Hodgkin lymphoma or mantle-cell lymphoma with
bendamustine plus rituximab versus R-CHOP or R-CVP: Results of the
BRIGHT 5-year follow-up study. J Clin Oncol. 2019 Apr 20;37(12):984-
991. doi: 10.1200/JCO.18.00605. Epub 2019 Feb 27.
\268\ LaCasce AS, et al. Comparative outcome of initial therapy
for younger patients with mantle cell lymphoma: An analysis from the
NCCN NHL Database. Blood. 2012;19(9):2093-2099.
\269\ Lenz G, et al. Immunochemotherapy with rituximab and
cyclophosphamide, doxorubicin, vincristine, and prednisone
significantly improves response and time to treatment failure, but
not long-term outcome in patients with previously untreated mantle
cell lymphoma: Results of a prospective randomized trial of the
German Low Grade Lymphoma Study Group (GLSG). J Clin Oncol.
2005:23(9): 1984-1992.
\270\ Flinn IW, et al. First-line treatment of patients with
indolent non-Hodgkin lymphoma or mantle-cell lymphoma with
bendamustine plus rituximab versus R-CHOP or R-CVP: Results of the
BRIGHT 5-year follow-up study. J Clin Oncol. 2019 Apr 20;37(12):984-
991. doi: 10.1200/JCO.18.00605. Epub 2019 Feb 27.
\271\ LaCasce AS, et al. Comparative outcome of initial therapy
for younger patients with mantle cell lymphoma: An analysis from the
NCCN NHL Database. Blood. 2012;19(9):2093-2099.
\272\ Lenz G, et al. Immunochemotherapy with rituximab and
cyclophosphamide, doxorubicin, vincristine, and prednisone
significantly improves response and time to treatment failure, but
not long-term outcome in patients with previously untreated mantle
cell lymphoma: Results of a prospective randomized trial of the
German Low Grade Lymphoma Study Group (GLSG). J Clin Oncol.
2005:23(9): 1984-1992.
---------------------------------------------------------------------------

The applicant indicated that there is no standard of care that
exists for second-line and higher chemotherapy when a patient has
relapsed or refractory MCL.\273\ According to the applicant, second
line therapies typically depend on the front line therapy utilized,
comorbidities, the tumor's sensitivity to chemotherapy, and overall
risk-benefit. Currently available options for second line therapy
include: Cytotoxic chemotherapy, proteasome inhibitors,
immunomodulatory drugs, tyrosine kinase inhibitors, and stem cell
transplant (both autologous [ASCT] and allogenic stem cell transplant
[allo-SCT]). According to the applicant, Bruton's tyrosine kinase (BTK)
inhibitor, ibrutinib, is the most common third-line therapy used for
patients with r/r MCL and has been shown to offer improvements over
other chemotherapy-based regimens for r/r MCL patients. The applicant
also referenced a more selective BTK inhibitor, acalabrutinib, which
was approved in the US for the treatment of patients with r/r
MCL.^{274 275}
---------------------------------------------------------------------------

\273\ Campo E, Rule S. Mantle cell lymphoma: evolving management
strategies. Blood. 2015;125(1):48-55.
\274\ Kantar Health. CancerMPact[supreg] United States.
September 2018, v1.2.
\275\ Vose JM. Mantle cell lymphoma: 2017 update on diagnosis,
risk-stratification, and clinical management. Am J Hematol.
2017;92(8):806-813.
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With respect to the newness criterion, the applicant indicated that
it submitted a biologics license application (BLA) for KTE-X19 on
December 11, 2019 with a request for priority review. The applicant
reported it anticipates receiving FDA approval by July 1, 2020.
According to the applicant, KTE-X19 was granted breakthrough therapy
designation for the treatment of patients with r/r MCL on June 15, 2018
and received an orphan drug designation in 2016 for the treatment of
MCL, acute lymphoblastic leukemia and chronic lymphocytic leukemia.
Under the current coding system, cases reporting the use of KTE-X19
would be coded with ICD-10-PCS codes XW033C3 (Introduction of
engineered autologous chimeric antigen receptor t-cell immunotherapy
into peripheral vein, percutaneous approach, new technology group 3)
and XW043C3 (Introduction of engineered autologous chimeric antigen
receptor t-cell immunotherapy into central vein, percutaneous approach,
new technology group 3), which are currently assigned to MS-DRG 016
(Autologous Bone Marrow Transplant with CC/MCC or T-Cell
Immunotherapy). As discussed in section II.D.2.b. of the preamble of
this proposed rule, we are proposing to assign cases reporting ICD-10-
PCS procedure codes XW033C3 or XW043C3 to a proposed new MS-DRG 018
(Chimeric Antigen Receptor (CAR) T-cell Immunotherapy), which would
also include cases reporting the use of KTE-X19, if approved and
finalized. While we note that the applicant has submitted a request for
a unique ICD-10-PCS code to describe the use of KTE-X19 beginning in FY
2021, the MS-DRG assignment of any applicable finalized codes
describing the use of KTE-X19 will be addressed in the final rule.
As previously discussed, if a technology meets all three of the
substantial similarity criteria, it would be considered substantially
similar to an existing technology and would not be considered ``new''
for purposes of new technology add-on payments.
With regard to the first criterion for substantial similarity,
whether a product uses the same or similar mechanism of action to
achieve a therapeutic outcome, according to the applicant, KTE-X19 will
be the first CAR T-cell immunotherapy indicated for the treatment of r/
r MCL, if approved by FDA. The applicant further asserted that it does
not use a substantially similar mechanism of action or involve the same
treatment indication as any other existing therapy for the treatment of
r/r MCL. The applicant asserts that it uses a different mechanism of
action as other therapies because the unique manufacturing process
results in differences in potency, cellular impurities, and formulation
of the final

[[Page 32636]]

products. Furthermore, the applicant stated that functional autologous
cellular therapy for the treatment of r/r MCL requires a customized
product distinct from other currently available CAR T-cell therapy
products, namely YESCARTA[supreg] and KYMRIAH[supreg]. The applicant
stated it reviewed data from the FY 2018 100 percent MedPAR Hospital
Limited Data Set to obtain a reference of currently available products
used in the treatment of r/r MCL. The applicant stated that based on
this analysis, available products used in the treatment of r/r MCL
included: Chemotherapies, proteasome inhibitors, immunomodulatory
agents, or BTK inhibitors. The applicant described KTE-X19 as an
autologous CAR T-cell immunotherapy, which genetically modifies the
patient's own T-cells to target and eliminate tumor cells for the
treatment of r/r MCL and asserted that because KTE-X19 is an autologous
CAR T-cell immunotherapy, it does not use the same mechanism of action
as other treatments currently used to treat r/r MCL (chemotherapies,
proteasome inhibitors, immunomodulatory agents, or BTK inhibitors).
To further note the differences between KTE-X19's mechanism of
action and other available therapies for r/r MCL, the applicant stated
that KTE-X19 represents a unique product that is customized for B-cell
malignancies bearing high levels of circulating CD19-expressing tumor
cells. Given these genetic modifications and differences, as previously
described, the applicant described KTE-X19 as having a different
mechanism of action from existing r/r MCL therapies.
The applicant described that the KTE-X19 construct encodes for the
following domains of the CAR: An anti-human CD19 single-chain variable
region fragment (scFv); the partial extracellular domain and complete
transmembrane and intracellular signaling domains of human CD28, a
lymphocyte co-stimulatory receptor that plays an important role in
optimizing T-cell survival and function; and the cytoplasmic portion,
including the signaling domain, of human CD3[zeta], a component of the
T-cell receptor complex.\276\ The applicant referenced an April 2018
pre-BLA meeting with FDA, where the applicant contended that FDA
determined that KTE-X19 qualified for a new BLA based on differences in
the manufacturing process between KTE-X19 and YESCARTA[supreg], which
result in differences in potency, cellular impurities, and formation of
the final products. The applicant further referenced that KTE-X19 has a
different mechanism of action as compared to YESCARTA[supreg] given
that the European Medicines Agency (EMA) deemed KTE-X19 and
YESCARTA[supreg] as different products.
---------------------------------------------------------------------------

\276\ Nicholson IC, et al. Construction and characterisation of
a functional CD19 specific single chain Fv fragment for
immunotherapy of B lineage leukemia and lymphoma. Molecular
Immunology. 1997;34(16-17):1157-65.
---------------------------------------------------------------------------

With respect to the second criterion for substantial similarity,
whether a product is assigned to the same or a different MS-DRG, the
applicant noted that CMS previously stated future CAR T-cell therapies
would likely map to the same MS-DRG as other previously FDA-approved
CAR T-cell therapies. However, the applicant asserted that KTE-X19
could not be reported using the same ICD-10-PCS codes as identified for
YESCARTA[supreg] and KYMRIAH[supreg]. As previously noted, under the
current coding system, cases reporting the use of KTE-X19 would be
coded with ICD-10-PCS codes XW033C3 and XW043C3, which are currently
assigned to MS-DRG 016, and which, for FY 2021, we are proposing to
reassign to a new proposed MS-DRG 018 for CART-cell therapies. As also
previously noted, the MS-DRG assignment of any applicable finalized
codes describing the use of KTE-X19 will be addressed in the final
rule. The applicant noted that the patients treated by YESCARTA[supreg]
and KYMRIAH[supreg] are not assigned ICD-10-CM diagnosis code C83.10
(Mantle cell lymphoma, unspecified site), as would patients treated
with KTE-X19. To further emphasize this point, the applicant stated
that CMS indicated YESCARTA[supreg] and KYMRIAH[supreg] are intended to
treat the same or similar disease: adult patients with r/r large B-cell
lymphoma after two or more lines of systemic therapy, including DLBCL
not otherwise specified, primary mediastinal large B-cell lymphoma,
high grade B-cell lymphoma, and DLBCL arising from follicular lymphoma.
The applicant further noted that the patients treated with
YESCARTA[supreg] and KYMRIAH[supreg] are not identified by ICD-10-CM
code C83.10 (Mantle cell lymphoma, unspecified site).
With respect to the third criterion for substantial similarity,
whether the new use of the technology involves the treatment of the
same or similar type of disease and the same or similar patient
population, the applicant described KTE-X19 as representing a therapy
for a different type of disease, r/r MCL, as compared to
YESCARTA[supreg] and KYMRIAH[supreg]. As previously mentioned, the
applicant described that MCL results from a malignant transformation of
a B lymphocyte in the outer edge of the lymph node follicle. The
applicant further stated that diffuse large b-cell lymphoma (DLBCL),
which YESCARTA[supreg] and KYMRIAH[supreg] treat, is defined as a
neoplasm of large B cells arranged in a diffuse pattern. The applicant
described this distinction as evidence that KTE-X19 treats a different
subtype of NHL, r/r MCL, as compared to other FDA approved CAR T-cell
therapies. However, we note that the applicant recognized in its
application that MCL and DLBCL patients share similar clinical
presentation of lymphadenopathy, splenomegaly and constitutional
symptoms. The applicant also noted that the disease courses for MCL and
DLBCL are different given that MCL has a unique molecular pathogenesis.
The applicant also highlighted the high level of tumor cells in the
peripheral blood, which is uncommon in DLBCL, to further illustrate
that the two diseases are different, and asserted that this level of
tumor cells requires a different and customizable treatment approach
for the generation of autologous cellular therapies for MCL.
We have the following concerns regarding whether the technology
meets the substantial similarity criteria and whether it should be
considered new.
With respect to the first criterion for substantial similarity,
based on the statements as previously summarized, the applicant
asserted that KTE-X19 would provide a new treatment option for adult
patients with r/r MCL and therefore is not substantially similar to any
existing technologies. We note that for FY 2019 (83 FR 41299), CMS
approved two CD19 directed CAR T-cell therapies, YESCARTA[supreg] and
KYMRIAH[supreg], for new technology add-on payments. While the
applicant acknowledged that KTE-X19 is a form of CAR T-cell
immunotherapy that modifies the patient's own T-cells, as are
YESCARTA[supreg] and KYMRIAH[supreg], the applicant asserted that the
production process used by KTE-X19, as required by the disease
indication, makes the therapy significantly different from
YESCARTA[supreg] and KYMRIAH[supreg]. However, while the applicant
stated how its technology is different from previously approved CAR T-
cell therapies, KTE-X19 is also a CD19-directed T-cell immunotherapy
for the purpose of treating patients with an aggressive subtype of NHL.
Therefore, we express a potential concern that KTE-X19 has a similar
mechanism of action to YESCARTA[supreg] and KYMRIAH[supreg].
The applicant stated that KTE-X19 is a distinct cellular product
and has a unique manufacturing process

[[Page 32637]]

customized for B-cell malignancies with a high circulating tumor cell
burden and designed to minimize the CD19-expressing tumor cells in the
final product. We are concerned as to whether the differences the
applicant described in the manufacturing process should be considered a
different mechanism of action, as compared to previous CAR T-cell
therapies.
With respect to the second criterion for substantial similarity, we
note that as discussed in section II.D.2.b. of the preamble of this
proposed rule, we are proposing to create new MS-DRG 018 for CAR T-cell
therapies. As previously noted, under the current coding system, cases
reporting the use of KTE-X19 would be coded with ICD-10-PCS codes
XW033C3 and XW043C3, which are currently assigned to MS-DRG 016. Also
as discussed in section II.D.2.b. of the preamble of this proposed
rule, we are proposing to assign cases reporting ICD-10-PCS procedure
codes XW033C3 or XW043C3 to a proposed new MS-DRG 018 (Chimeric Antigen
Receptor (CAR) T-cell Immunotherapy). Should we finalize this proposal,
we would also assign cases involving the use of KTE-X19 to this
proposed new MS-DRG 018. We believe that cases reporting the use of
KTE-X19 would be assigned to the same MS-DRG as existing CAR T-cell
technologies.
With regard to the third criterion for substantial similarity, the
applicant described that MCL results from a malignant transformation of
a B lymphocyte in the outer edge of the lymph node follicle, while
DLBCL, which YESCARTA[supreg] and KYMRIAH[supreg] treat, is defined by
the applicant as a neoplasm of large B cells arranged in a diffuse
pattern. As described by the applicant, MCL and DLBCL patients share
similar clinical presentation of lymphadenopathy, splenomegaly and
constitutional symptoms. We therefore express concern that this therapy
may involve treatment of a similar type of disease when compared to
existing CAR T-cell therapies.
We are inviting public comments on whether KTE-X19 is substantially
similar to other technologies and whether KTE-X19 meets the newness
criterion.
With regard to the cost criterion, the applicant searched the FY
2018 MedPAR claims data file to identify potential cases representing
patients who may be eligible for treatment using KTE-X19. The applicant
identified claims that reported an ICD-10-CM diagnosis code of ICD-10-
CM C83.10 (Mantle cell lymphoma, unspecified site). The applicant
stated that claims reporting ICD-10-CM code C83.10 would not involve
the use of the other two approved CAR T-cell therapies because those
therapies are not used to treat this diagnosis, MCL. As such, the
applicant stated that it used C83.10 to identify potential MCL cases
and ICD-10-PCS codes XW033C3 and XW043C3 to identify patients receiving
CAR T-cell therapy. In its analysis, the applicant identified two sets
of cohorts (Primary Cohort and Sensitivity Analysis Cohort) to assess
whether this therapy met the cost criterion. The ICD-10-PCS procedure
codes listed in the table in this section of this rule were used to
identify claims involving chemotherapy and the applicant noted that
these were used for both cohorts.
The new technology add-on payment Primary Cohort included cases
with an ICD-10-CM principal diagnosis of MCL, at least one procedure
code indicating receipt of chemotherapy, and no ICD-10-PCS procedure
codes indicating CAR T-cell therapy. The applicant believed the Primary
Cohort most closely aligned with the characteristics and health of r/r
MCL patients who would receive KTE-X19 given that this cohort includes
patients with far advanced disease (comparable to the ZUMA-2 study, as
discussed later in this section). The Sensitivity Analysis Cohort
included patients with the ICD-10-CM principal or secondary diagnosis
of MCL, at least one procedure code indicating receipt of chemotherapy,
and no ICD-10-PCS procedure codes indicating CAR T-cell therapy. The
claim search conducted by the applicant resulted in 293 claims in the
Primary Cohort, mapped to 13 MS-DRGs, and 953 claims in the Sensitivity
Analysis Cohort, mapped to 72 MS-DRGs using the FY 2018 MedPAR Hospital
LDS based on the requirements for each cohort outlined by the
applicant.
BILLING CODE 4120-01-P

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[GRAPHIC] [TIFF OMITTED] TP29MY20.128

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[GRAPHIC] [TIFF OMITTED] TP29MY20.129

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[GRAPHIC] [TIFF OMITTED] TP29MY20.130

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[GRAPHIC] [TIFF OMITTED] TP29MY20.131

BILLING CODE 4120-01-C

[[Page 32642]]

The applicant inflated the charges from the FY 2018 MedPAR claims
data by applying the 2-year inflation factor used in the FY 2020 IPPS
final rule to calculate outlier threshold charges (1.11100). The
applicant stated they then standardized the charges. The applicant
stated that the cases representing patients who had received
chemotherapy, as reflected by the Medicare claims data, would generally
not receive both chemotherapy and KTE-X19 as an inpatient because
conditioning chemotherapy would be administered in the outpatient
setting before the patient would be admitted for KTE-X19 infusion and
monitoring. Otherwise, the applicant asserted that patients receiving
KTE-X19 would be expected to incur similar charges to those cases in
the Medicare claims data for patients with a primary diagnosis of MCL
and receiving chemotherapy (Primary Cohort). In its analysis, the
applicant noted that in the FY 2018 MedPAR Hospital LDS, charges for
chemotherapy drugs were grouped with charges for oncology, diagnostic
radiology, therapeutic radiology, nuclear medicine, CT scans, and other
imaging services. The applicant believed that removing all radiology
charges would understate the cost of adverse event (AE) clinical
management for KTE-X19 patients needed. The applicant found that when
using data from the Q4 2017 and Q1 Q3 2018 Standard Analytic files and
comparing total chemotherapy charges to total radiology charges, 2
percent of radiology charges were chemotherapy charges, on average.
Therefore, instead of removing all radiology charges, the applicant
excluded 2 percent of the radiology charge amount to capture the effect
of removing chemotherapy pharmacy charges.
The applicant stated that when comparing the Primary Cohort to the
MS-DRG 016 average case-weighed threshold amount (based on the FY 2020
IPPS/LTCH PPS final rule correction notice data file thresholds for FY
2021), the final inflated average case-weighted standardized charge per
case of $201,459 exceeded the average case-weighted threshold amount of
$170,573 by $30,886 without consideration of KTE-X19 charges. The
applicant stated that because the final inflated average case-weighted
standardized charge per case exceeded the average case-weighted
threshold amount, the therapy meets the cost criterion.
When conducting the same review to assess cost for the Sensitivity
Analysis Cohort, the applicant noted that the Sensitivity Analysis
Cohort did not meet the cost criterion when compared to the MS-DRG 016
average case-weighted threshold amount (based on the FY 2020 IPPS/LTCH
PPS final rule correction notice data file thresholds for FY 2021). As
reported by the applicant, the final inflated average case-weighted
standardized charge per case of $111,531 did not exceed the average
case-weighted threshold amount of $170,573 (difference of $59,042)
without consideration of KTE-X19 charges. However, the applicant noted
that considering the cost of currently marketed CAR T-cell therapies,
this Sensitivity Analysis Cohort would have met the cost criterion if
it considered KTE-X19 charges. The applicant further noted that the
characteristics of this cohort's patient population do not represent
the characteristics of the population that would receive KTE-X19.
Because the final inflated average case-weighted standardized
charge per case for the Primary Cohort exceeds the average case-
weighted threshold amount for MS-DRG 016, the applicant maintained that
the technology meets the cost criterion.
We note that the applicant, along with other CAR T-cell therapy
manufacturers, have requested CMS use existing data to create a new MS-
DRG specifically for CAR T-cell therapies. Currently, as previously
noted, procedures involving CAR T-cell therapies are identified with
ICD-10-PCS procedure codes XW033C3 and XW043C3. In the FY 2019 IPPS/
LTCH PPS final rule, we finalized our proposal to assign cases
reporting these ICD-10-PCS procedure codes to MS-DRG 016 and to revise
the title of this MS-DRG to ``Autologous Bone Marrow Transplant with
CC/MCC or T-cell Immunotherapy'' effective beginning FY 2019. As
discussed in section II.D.2.b. of the preamble of this proposed rule,
for FY 2021, we are proposing to create a new MS-DRG 018, ``Chimeric
Antigen Receptor (CAR) T-cell Immunotherapy.'' If finalized, this new
MS-DRG for CAR T-cell therapy cases would include any approved
procedure codes to describe cases involving the use of KTE-X19. We are
also proposing to modify the structure of MS-DRG 016 by removing
procedure codes XW033C3 and XW043C3 and to revise the title to
``Autologous Bone Marrow Transplant with CC/MCC'' to reflect the
proposed restructuring. We refer readers to section II.E.2.b of the
preamble of this proposed rule for a discussion of our proposals
regarding the development of the relative weights for this proposed new
MS-DRG for CAR T-cell therapy and to section IV.I. of the preamble of
this proposed rule for a discussion of our proposal for a payment
adjustment for clinical trial cases assigned to this proposed new MS-
DRG. In this section of this rule we discuss the impact of our proposal
to create new MS-DRG 018 for CAR T-cell therapies with regard to the
new technology add-on payment.
As we have discussed in prior rulemaking with regard to the
potential creation of a new MS-DRG for CAR T-cell therapies (83 FR
41172), if a new MS-DRG were to be created, then consistent with
section 1886(d)(5)(K)(ix) of the Act, there may no longer be a need for
a new technology add-on payment under section 1886(d)(5)(K)(ii)(III) of
the Act. Section 1886(d)(5)(K)(ix) of the Act requires that, before
establishing any add-on payment for a new medical service or
technology, the Secretary shall seek to identify one or more DRGs
associated with the new technology, based on similar clinical or
anatomical characteristics and the costs of the technology and assign
the new technology into a DRG where the average costs of care most
closely approximate the costs of care using the new technology. As
discussed in previous rulemaking (71 FR 47996), no add-on payment will
be made if the new technology is assigned to a DRG that most closely
approximates its costs.
In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49481 and 49482) in
the discussion of whether the WATCHMAN[supreg] System met the cost
criterion for a new technology add-on payment, we discussed whether the
threshold value associated with a proposed new MS-DRG should be
considered in determining whether the applicant meets the cost
criterion. We also discussed instances in the past where the coding
associated with a new technology application is included in a finalized
policy to change one or more MS-DRGs. For example, in the FY 2013 IPPS/
LTCH PPS final rule, we described the cost analysis for the
Zenith[supreg] Fenestrated Abdominal Aortic Aneurysm Endovascular
Graft, which was identified by ICD-9-CM procedure code 39.78
(Endovascular implantation of branching or fenestrated graft(s) in
aorta). In that same rule, we finalized a change to the assignment of
that procedure code, reassigning it from MS-DRGs 252, 253, and 254 to
MS-DRGs 237 and 238. Because of that change, we determined that, for FY
2013, in order for the Zenith[supreg] Fenestrated Abdominal Aortic
Aneurysm Endovascular Graft to meet the cost criteria, it must
demonstrate that the average case-weighted standardized charge per case
exceeds the thresholds for MS-DRGs 237 and 238 (77 FR 53360). We noted
that, in that example, MS-DRGs 237 and

[[Page 32643]]

238 existed previously; therefore, thresholds that were 75 percent of
one standard deviation beyond the geometric mean standardized charge
for these MS-DRGs were available to the public in Table 10 at the time
the application was submitted. (We note that for fiscal years prior to
FY 2020, Table 10 included the cost thresholds used to evaluate
applications for new technology add-on payments for the next fiscal
year.) In the FY 2016 IPPS/LTCH PPS proposed rule, we stated that in
the case of WATCHMAN[supreg] System, if MS-DRGs 273 and 274 were to be
finalized for FY 2016, we recognized that thresholds that are 75
percent of one standard deviation beyond the geometric mean
standardized charge would not have been available at the time the
application was submitted. We stated that we believed that it could be
appropriate for the applicant to demonstrate that the average case
weighted standardized charge per case exceeded these thresholds for MS-
DRGs 273 and 274. Accordingly, we made available supplemental threshold
values on the CMS website at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/newtech.html that were calculated
using the data used to generate the FY 2015 IPPS/LTCH PPS Table 10 and
reassigned the procedure codes in accordance with the finalized
policies discussed in section II.G.3.b. of the preamble of the FY 2016
IPPS/LTCH PPS final rule. In the FY 2016 IPPS/LTCH PPS proposed rule,
we invited public comments on whether considering these supplemental
threshold values as part of the cost criterion evaluation for this
application was appropriate and also on how to address similar future
situations in a broader policy context should they occur.
After consideration of the comments, in the FY 2016 IPPS/LTCH PPS
final rule (80 FR 49482) we stated that we agreed with the commenters
that we should evaluate the cost threshold in effect at the time the
new technology add-on payment application is submitted to determine if
an applicant exceeds the cost threshold. We stated that we agreed with
commenters that this policy is most predictable for applicants. We also
stated that we were maintaining our current policy to use the
thresholds issued with each final rule for the upcoming fiscal year
when making a determination to continue add-on payments for those new
technologies that were approved for new technology add-on payments from
the prior fiscal year.
At the time of the FY 2016 final rule, in applying this policy, we
did not anticipate the onset of new, extremely high cost, technologies
such as CAR T-cell therapy, nor such significant variance between the
thresholds at the time of application and the thresholds based on the
finalized MS-DRG assignment for the upcoming year. For example, in the
FY 2016 final rule, the difference between the MS-DRG threshold amount
for MS-DRGs 237 ($121,777) and 238 ($87,602) set forth in Table 10
associated with the FY 2015 final rule, and the supplemental MS-DRG
threshold amount based on the proposed new MS-DRGs 273 ($95,542) and
274 ($77,230), was $26,235 and $10,372 respectively. By comparison,
based on the data file released with the FY 2021 final rule (and
corresponding correction notice) for FY 2022 applications, the
threshold amount for MS-DRG 16 is $170,573. However, the threshold
amount for proposed new MS-DRG 018 (in the data file released with this
proposed rule) is $1,237,393, which is more than 7 times greater.
In light of the development of new technologies, such as CAR T-cell
therapies, and the more substantial shifts in the MS-DRG threshold
amounts that may result from the reassignment of new technologies for
the upcoming fiscal year, we believe it is appropriate to revisit the
policy described in the FY 2016 final rule. While we continue to
believe that predictability is important, we also believe payment
accuracy is equally important. Thus, we believe that it is necessary to
balance predictability with a more accurate evaluation of whether a new
technology meets the new technology add-on payment cost criterion by
using threshold values that are consistent with how the cases involving
the use of the new technology will be paid for in the upcoming fiscal
year. Therefore, we are proposing to revise our policy in situations
when the procedure coding associated with a new technology application
is proposed to be assigned to a proposed new MS-DRG. Specifically, we
are proposing that effective for FY 2022, for applications for new
technology add-on payments and previously approved technologies that
may continue to receive new technology add-on payments, the proposed
threshold for a proposed new MS-DRG for the upcoming fiscal year would
be used to evaluate the cost criterion for technologies that would be
assigned to a proposed new MS-DRG.
For example, consider a technology that would be coded using
procedure codes assigned to MS-DRG ABC at the time of its application
for FY 2022, and then the procedure coding associated with the new
technology is proposed to be assigned to a proposed new MS-DRG XYZ in
the FY 2022 proposed rule. Instead of using the threshold for MS-DRG
ABC based on the data file released with the FY 2021 final rule for FY
2022 applications, we are proposing to use the proposed threshold for
the newly proposed MS-DRG XYZ based on the data file released with the
FY 2022 proposed rule, which would otherwise contain the proposed
thresholds for FY 2023 applications. We believe using the proposed rule
thresholds for the proposed new MS-DRG would further promote payment
accuracy by using the latest data available to assess how the
technology would be paid for in the upcoming fiscal year, if the
proposed reassignment to the new MS-DRG was finalized, while also
providing the applicant and the public adequate time to analyze whether
the technology meets the cost criterion using these proposed thresholds
and to provide public comment following the proposed rule.
We believe it is important that the cost criterion be applied in a
manner that accurately reflects the anticipated payment for the
technology. In assessing the adequacy of the otherwise applicable MS-
DRG payment rate for a high cost new technology, where the reassignment
of such a technology to a proposed new MS-DRG may result in a
substantial change in the MS-DRG threshold amounts, we believe that it
is necessary to evaluate that technology using the proposed thresholds
for the newly proposed MS-DRG to which the technology would be
reassigned.
We believe that this policy is also consistent with section
1886(d)(5)(K)(ix) of the Act which, as previously noted, requires that
before establishing any add-on payment for a new medical service or
technology, the Secretary seek to identify one or more DRGs associated
with the new technology, based on similar clinical or anatomical
characteristics and the costs of the technology, and assign the new
technology into a DRG where the average costs of care most closely
approximate the costs of care using the new technology. This provision
further states that no add-on payment will be made with respect to such
new technology. As we have noted in prior rulemaking with regard to the
CAR T-cell therapies (83 FR 41172), if a new MS-DRG were to be created,
then consistent with section 1886(d)(5)(K)(ix) of the Act, there may no
longer be a need for a new technology add-on payment under section
1886(d)(5)(K)(ii)(III) of the Act.
For these reasons, for purposes of FY 2021 new technology add-on
payments,

[[Page 32644]]

we are proposing to evaluate the cost criterion for the CAR T-cell
therapy technologies using the proposed threshold for the newly
proposed MS-DRG to which the procedure codes describing the use of the
CAR T-cell therapies would be assigned in FY 2021 (MS-DRG 018). This
proposed policy would apply to the new FY 2021 CAR T-cell therapy
applications, KTE-X19 and Liso-cel, and those CAR T-cell therapies
previously approved for new technology add-on payments, KYMRIAH[supreg]
and YESCARTA[supreg].
As such, we are proposing to evaluate whether KTE-X19 meets the
cost criterion using the proposed new MS-DRG 018 threshold amount of
$1,237,393. As previously mentioned and reported by the applicant, the
final inflated average case-weighted standardized charge per case for
KTE-X19 was $201,459 for the Primary Cohort. As previously noted, this
figure does not include the cost of the technology. However, we now
have cases involving the use of CAR T-cell therapy within the FY 2019
MedPAR data that we believe may reflect cases that could be eligible
for KTE-X19 or which can be used to approximate the charges for KTE-X19
to estimate the average standardized charge per case for purposes of
this proposed rule. This charge information from the FY 2019 MedPAR
data can be found in the FY 2021 Proposed Before Outliers Removed (BOR)
File (available on the CMS website) for Version 38 of the MS-DRGs.
Based on information from the FY 2021 Proposed BOR File for Version 38
of the MS-DRGs, the standardized charge per case for MS-DRG 018 is
$913,224. The average case-weighted threshold amount based on the
proposed new MS-DRG 018 is $1,237,393. Because this estimated average
case-weighted standardized charge per case does not exceed the average
case-weighted threshold amount for proposed MS-DRG 018, we do not
believe the technology would meet the cost criterion. We note that this
analysis is based on CMS data. The applicant conducted its own analysis
as previously described that did not include the cost of the
technology. We welcome additional information from the applicant
regarding the cost of KTE-X19 to inform our determination for the final
rule regarding whether the applicant meets the cost criterion based on
the applicant's cost analysis.
We invite public comment on our proposal, for purposes of FY 2021
new technology add-on payments for CAR T-cell therapy technologies, to
evaluate the cost criterion using the proposed threshold for the newly
proposed MS-DRG 018 to which the procedure codes describing the use of
the CAR T-cell therapies would be assigned in FY 2021, and on whether
KTE-X19 meets the cost criterion based on this proposal. We also invite
public comment on our proposal to use the proposed threshold for the
upcoming fiscal year for any proposed new MS-DRG to evaluate the cost
criterion for technologies that would be assigned to the proposed new
MS-DRG, beginning with FY 2022 new technology add-on payments for all
other non-CAR T-cell therapy technologies.
With respect to the substantial clinical improvement criterion, the
applicant asserted that KTE-X19 represents a new treatment option for
an adult patient population unresponsive to, or ineligible for,
currently available treatments. The applicant also believes that the
use of KTE-X19 significantly improves clinical outcomes for a patient
with r/r MCL as compared to currently available therapies, including
BTK inhibitors. The applicant stated that KTE-X19 provides access to a
treatment option for patients with r/r MCL who have not been responsive
to first line or second line therapies. The applicant provided further
detail regarding these assertions, referencing the results of a Phase 2
study and historical and meta analyses, which are summarized in this
section of this rule.
The applicant asserted that the use of KTE-X19 significantly
improves clinical outcomes for a patient population as compared to
currently available treatments. The applicant contended that Bruton's
tyrosine kinase (BTK) inhibitor, ibrutinib, is the most common third-
line therapy used for patients with r/r MCL and has been shown to offer
improvements over other chemotherapy-based regimens for r/r MCL
patients. The applicant also referenced a more selective BTK inhibitor,
acalabrutinib, which was approved in the US for the treatment of
patients with r/r MCL.^{277 278} In registrational trials, the
objective response rates and complete response rates were 66% and 17%,
respectively for ibrutinib, and 81% and 40%, respectively, for
acalabrutinib.^{279 280} The applicant contended that primary
and secondary resistance to BTK inhibitors \281\ is common, and
subsequent therapies currently available are minimally
effective.^{282 283 284} The applicant further summarized two
retrospective studies that showed patients with r/r MCL with >=3 prior
lines of therapy before receiving the BTK inhibitor had an objective
response rate of approximately 25% to BTK salvage
therapy.^{285 286} The applicant submitted supplemental
information describing two additional studies looking at the outcomes
for patients receiving BTK inhibitors who had received previous
therapies for their r/r MCL. A study by Regny and colleagues \287\
studied 67 subjects who received BTK inhibitor treatment who then
received a regimen of rituximab, bendamustine, bortezomib, and
dexamethasone (RiVBD). The objective response rate for the 12 patients
that had previously received ibrutinib was 67% and the median duration
of response was 17 months.\288\ The second study, by McCulloch and
colleagues, was a retrospective study of 35 subjects with r/r MCL who
had prior BTK inhibitor treatment and subsequently went on to receive a
regimen of rituximab, bendamustine, and cytarabine (R-BAC). For these
patients, following the R-BAC regimen, the ORR was 82.3% and the
combined CR/unconfirmed CR rate was 55.1%. The median progression free
survival (PFS) was 9.3 months, and the median OS was 12.2 months.\289\
---------------------------------------------------------------------------

\277\ Kantar Health. CancerMPact[supreg] United States.
September 2018, v1.2.
\278\ Vose JM. Mantle cell lymphoma: 2017 update on diagnosis,
risk-stratification, and clinical management. Am J Hematol.
2017;92(8):806-813.
\279\ Ibrutinib USPI. Available from: https://www.imbruvica.com/docs/librariesprovider7/default-document-library/prescribing_information.pdf.
\280\ Acalabrutinib USPI. Available from: https://www.azpicentral.com/calquence/calquence.pdf#page=1.
\281\ Rule S, et al. Median 3.5-year follow-up of ibrutinib
treatment in patients with relapsed/refractory Mantle Cell Lymphoma:
A pooled analysis. Blood Dec. 2017;130(Suppl 1):151.
\282\ Cheah CY, et al. Patients with mantle cell lymphoma
failing ibrutinib are unlikely to respond to salvage chemotherapy
and have poor outcomes. Ann Oncol. 2015;26(6):1175-9.
\283\ Martin P, et al. Postibrutinib outcomes in patients with
mantle cell lymphoma. Blood. 2016;127 (12):1559-63.
\284\ DerSimonian R, Laird N. Meta-analysis in clinical trials.
Control Clin Trials. 1986;7(3):177-88.
\285\ Cheah CY, et al. Patients with mantle cell lymphoma
failing ibrutinib are unlikely to respond to salvage chemotherapy
and have poor outcomes. Ann Oncol. 2015;26(6):1175-9.
\286\ Martin P, et al. Postibrutinib outcomes in patients with
mantle cell lymphoma. Blood. 2016;127 (12):1559-63.
\287\ Regny C, et al. Clinical efficacy of the RIBVD regimen for
refractory/relapsed (r/r) Mantle Cell Lymphoma (MCL) patients: A
retrospective study of the LYSA Group [Poster]. EHA; 2019 13-16
June; Amsterdam, Netherlands.
\288\ Regny C, et al. Clinical efficacy of the RIBVD regimen for
refractory/relapsed (r/r) Mantle Cell Lymphoma (MCL) patients: A
retrospective study of the LYSA Group [Poster]. EHA; 2019 13-16
June; Amsterdam, Netherlands.
\289\ McCulloch R, et al. R-BAC maintains high response rate in
Mantle Cell Lymphoma following relapse on BTK inhibitor therapy
[Abstract 3989]. ASH Annual Meeting; 2019 07-10 December; Orlando,
FL.

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[[Page 32645]]

The ZUMA-2 study of KTE-X19 is the only pivotal study of CAR T-cell
therapy for r/r MCL. ZUMA-2 is a multicenter, open label, Phase 2 study
which evaluated the safety and efficacy of KTE-X19 in patients with r/r
MCL that relapsed or are refractory to prior therapy, including BTK
inhibitors. Participants were required to have received at least 5
prior regimens of MCL treatment, which must have included anthracycline
(or bendamustine containing chemotherapy), an anti-CD20 monoclonial
anitibody and BTK inhibitor. The ZUMA-2 study included 68 subjects
treated with KTE-X19. The safety analysis included a review of all 68
subjects, with the primary analysis of efficacy reviewing the first 60
subjects treated with KTE-X19. ZUMA-2 was conducted in 33 centers in
the United States, France, Germany and the Netherlands. Of the 60
subjects in the primary analysis set, 59 were from U.S. sites. Of the
68 subjects in the safety analysis set, 62 were from U.S. sites. Among
the 68 subjects, the median age was 65 years (range 38-79) and 54
subjects (84%) were male. Additionally, 58 of the subjects (85%) had
stage IV of the disease and the subjects had a median of 3 prior
therapies, with 55 or 81% of subjects having received >=3 prior
therapies. In addition, 43% had relapsed after a prior autologous stem
cell transplant (ASCT); the remaining subjects had either relapsed
after or were refractory to their last therapy for MCL.
The applicant initially submitted information from its interim
analysis of ZUMA-2, which included 28 subjects treated with KTE-X19 who
had the opportunity to be followed for 12 months at the time of the
data cutoff (May 30, 2018). In supplemental information shared with
CMS, which the applicant referred to as its primary analysis, all 60
subjects were followed for 6 months after the Week 4 disease
assessment, and the 28 subjects from the interim analysis were followed
for 24 months.
According to the applicant, because no effective standard therapy
for subjects with r/r MCL who have progressed following a prior BTK
inhibitor therapy exists, ZUMA-2 had no comparison arm. The applicant
described how a historical control was the only ethical and feasible
study design for patients with r/r MCL who had not responded to the
most promising therapies available, including BTK inhibitors.
Therefore, the historical controls consisted of two studies by Martin
et al., (2016) and Cheah et al., (2015), and a meta-analysis of six
studies, consisting of 255 subjects, discovered during a literature
search.
According to the Martin et al. (2016), retrospective cohort study
referenced by the applicant, the investigators-reported best response
rate (RR) to ibrutinib was 55% (43% partial response [PR], 12% complete
response [CR]), with 35% of patients having a best response of
progressive disease. But among patients who received subsequent
therapy, local clinicians reported that 13 patients (19%) achieved PR,
and 5 (7%) achieved CR. The median overall survival (OS) following
cessation of ibrutinib was 2.9 months (95% confidence interval [CI],
1.6-4.9). Of the 104 patients with data available, 73 underwent at
least one additional line of currently available treatment after
stopping ibrutinib with a median OS of 5.8 months (95% confidence
interval [CI], 3.7-10.4).\290\
---------------------------------------------------------------------------

\290\ Op cit, Martin.
---------------------------------------------------------------------------

Also according to the Cheah et al. (2015), retrospective review
study referenced by the applicant, they found that among the 31
patients who experienced disease progression following ibrutinib and
underwent salvage therapy, the overall objective response rate (ORR)
and complete response rate (CRR) was 32% and 19%, respectively. After a
median follow-up of 10.7 (range 2.4-38.9) months from discontinuation
of ibrutinib, the median OS among patients with disease progression was
8.4 months and the estimated one-year OS was 22.1% (95% CI 8.3% to
40.2%).\291\
---------------------------------------------------------------------------

\291\ Op cit, Cheah.
---------------------------------------------------------------------------

To evaluate the effectiveness of KTE-X19, the applicant noted it
used an ORR comparison of 25%, which was derived from the two
aforementioned studies (Martin et al., and Cheah et al.) with patients
with r/r MCL who progressed on the most predominantly prescribed BTK
inhibitor, ibrutinib. The results of these two studies showed a median
OS of 5.8 months after receiving at least 1 additional line of
currently available therapy to treat r/r MCL. Those who did not receive
salvage therapy had a median OS of 0.8 months.\292\
---------------------------------------------------------------------------

\292\ Ibid.
---------------------------------------------------------------------------

The applicant asserted that the interim analysis of ZUMA-2
demonstrated the efficacy of KTE-X19 in subjects (n = 28) with r/r MCL
who were heavily pretreated. The interim analysis showed patients with
an ORR of 86% (24/28 subjects; 95% CI: 67% to 96%), which was an
increase compared to the pre-specified historical control ORR of 25%
and the pooled ORR obtained through the meta-analysis of 28%.
[GRAPHIC] [TIFF OMITTED] TP29MY20.132

[[Page 32646]]

Based on the primary analysis of the 60 subjects included in the
ZUMA-2 study, there was an ORR of 93% after a single dose of KTE-X19
(56 of 60 subjects with a 95% CI of 83.8%, 98.2%). The applicant
reported that the complete response rate was 67% (40 of 60 subjects
with a 95% CI of 53.3%, 78.3%). The applicant noted the ORR of 93% and
CR 67% were observed across age groups (94% ages >=65; 93% ages <65.
And, of the 40 subjects achieving CR, 22 subjects were aged >=65 and 18
were aged <65). The applicant highlighted that the ORR of 93% was
significantly higher than the prespecified historical control rate of
25%. Furthermore, the applicant noted that among the 42 subjects who
initially had a partial response (PR) or stable disease (SD), 24
subjects (57%) went on to achieve a CR after a median of 2.2 months
(range: 1.8 to 8.3 months). Twenty-one subjects converted from PR to
CR, and 3 subjects converted from SD to CR.
The primary analysis from ZUMA-2 showed that with a median follow-
up time of 12.3 months, the median DOR was not reached following the
KTE-X19 therapy and that this result was consistent across age groups.
Kaplan-Meier estimates of the progression free survival (PFS) rates at
6 months and 12 months were 77.0% and 60.9%, respectively, and the
median PFS was not reached with a median potential follow-up of 12.3
months (range: 7.0 to 32.3 months) (this analysis was provided by the
applicant). Additionally, 57% of all patients and 78% of patients with
a CR remained in remission (results consistent across age groups).
Furthermore, as reported by the applicant, among the first 28 subjects
studied as part of the interim analysis, 43% remained in continued
remission without additional therapy at the follow-up period of 27
months (range, 25.3--32.3).
The ZUMA-2 primary analysis 6-month and 1-year survival rate was
86.7% and 83.2%, respectively. The applicant also conducted an
additional analysis of OS among the first 28 subjects (ZUMA-2 interim
analysis) who were treated with KTE-X19 and had a potential follow-up
of >=24 months. Among these subjects, the OS rate estimate at 24 months
was 67.9% and the median OS was not reached. In comparison, the Cheah
and et al. (2015) post-ibrutinib salvage therapy study reported a lower
one-year survival rate of 22%. Additionally, among the subjects in CR
at month 3 who had the opportunity to be followed to month 12, 90%
remained in CR at month 12. The applicant contended that this statistic
showcased that early responses to KTE-X19 are likely indicative of
long-term remission after the single infusion of KTE-X19. Furthermore,
the applicant suggested that a substantial number of patients with r/r
MCL treated with KTE-X19 will achieve a CR, and that this suggests
these patients will likely experience a long-term remission after a
single infusion of KTE-X19. The applicant also noted that these results
were consistent across age groups at the time of the primary data
analysis cut-off (July 24, 2019). By contrast, the applicant noted that
patients with r/r MCL who had prior BTK inhibitor treatment had CR
rates ranging from 7-22%. Additionally, the applicant noted that the
majority of patients on BTK inhibitor treatment go on to have
progressive disease given that the responses achieved with currently
available salvage therapies are short lived and have a DOR ranging from
3 to 5.8 months.^{293 294 295 296}
---------------------------------------------------------------------------

\293\ Kochenderfer JN, et al. Lymphoma Remissions Caused by
Anti-CD19 Chimeric Antigen Receptor T Cells Are Associated With High
Serum Interleukin-15 Levels. J Clin Oncol. 2017a;35(16):1803-13.
\294\ Kochenderfer JN, et al. Long-Duration Complete Remissions
of Diffuse Large B Cell Lymphoma after Anti-CD19 Chimeric Antigen
Receptor T Cell Therapy. Mol Ther. 2017b;25(10):2245-53.
\295\ Gupta S, et al. Recommendations for the design,
optimization, and qualification of cell-based assays used for the
detection of neutralizing antibody responses elicited to biological
therapeutics. Journal of Immunological Methods. 2007;321(1-2):1-18.
\296\ Davila ML, et al. Efficacy and toxicity management of 19-
28z CAR T cell therapy in B cell acute lymphoblastic leukemia. Sci
Transl Med. 2014;6(224):224ra25.
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In regards to the safety and efficacy of KTE-X19, the applicant
argued that the ZUMA-2 study demonstrated a positive benefit-risk of
KTE-X19 over the current therapy options for patients with r/r MCL. The
applicant stated that the toxicity profile that is associated with KTE-
X19 therapy can be managed and that the KTE-X19 risk evaluation and
mitigation strategies (REMS) will ensure that hospitals providing KTE-
X19 therapy are certified so that all who prescribe, dispense, or
administer KTE-X19 are aware of how to manage the risk of cytokine
release syndrome (CRS) and neurologic events. However, the applicant
notes that patients who were >=65 years old showed a trend toward a
higher incidence of Grade 3 or higher CRS compared to those <=65 years
old. (21% versus 7%). Additionally, all subjects in the ZUMA-2 primary
analysis had at least 1 adverse event (AE), 99% of subjects had at
least 1 AE that was Grade 3 or higher, and 68% of subjects had at least
1 serious adverse event (SAE). The most common Grade 3 or higher AEs
were anemia and neutrophil count decreased (50% each) and WBC decreased
(40%). Furthermore, CRS occurred in 62 of 68 (91%) subjects in the
ZUMA-2 safety analysis. Of these, 8 subjects (12%) had worst Grade 3
CRS, and 2 subjects (3%) had worst Grade 4 CRS. No subject had Grade 5
CRS, according to the applicant. Furthermore, according the applicant,
the most common CRS symptoms of any grade were pyrexia, hypotension,
and hypoxia. The most common Grade 3 or higher CRS symptoms were
hypotension (15 subjects, 24%), hypoxia (12 subjects, 19%), and pyrexia
(7 subjects, 11%). No patient in the ZUMA-2 study treated with KTE-X19
died from CRS.
The applicant mentioned that 43 of the 68 patients (63%) in the
ZUMA-2 study also experienced forms of neurologic events. Of these, 15
subjects (22%) had a worst Grade 3 neurologic event, and 6 subjects
(9%) had a worst Grade 4 neurologic event. Twenty-two subjects (32%)
had serious neurologic events, however, the applicant noted no subject
had a Grade 5 neurologic event. Of these, the most common neurologic
events of any grade were tremor, encephalopathy, and confusional state.
The most common Grade 3 or higher neurologic events were encephalopathy
(13 subjects, 19%), confusional state (8 subjects, 12%), and aphasia (3
subjects, 4%). Compared with subjects who were <65 years of age,
subjects who were >=65 years of age showed a trend toward a higher
incidence of Grade 3 or higher neurologic events (36% versus 24%). The
applicant noted that these neurologic events resolved for all but 6
subjects and that among those whose neurologic events had resolved, the
median duration was 12 days. Additionally, no patient died from
neurologic events.
Overall, ZUMA-2 primary results showed that at the time of the
analysis cutoff (July 2019), 16 of 68 subjects (24%) had died; 4 deaths
occurred >30 days through 3 months after infusion of KTE-X19 and 12
deaths occurred >=3 months after infusion of KTE-X19. Fourteen of the
16 subjects died as a result of progressive disease and two of the 16
subjects died due to AEs other than disease progression (Grade 5 AE of
staphylococcal bacteremia and Grade 5 AE of organizing pneumonia).
Although the applicant asserted that KTE-X19 represents a
substantial clinical improvement compared to other currently available
treatments, we are concerned with the generalizability of the findings
from ZUMA-2 to the general Medicare population. We note that 85% of
ZUMA-2 participants had stage IV disease development and that

[[Page 32647]]

this therapy may demonstrate a benefit to a sicker patient population.
However, we are concerned about whether the population of the ZUMA-2
study mirrors the characteristics of the Medicare population and
whether the study included patients that had a similar severity of
disease as would be common within the Medicare population.
The literature search performed by the applicant included a total
of 255 subjects, across 6 studies, and the ZUMA-2 study included 68
subjects studied in the primary analysis. We are concerned with the
relatively small combined sample size from the literature search and
ZUMA-2 study performed by the applicant. We also note that the
applicant stated that it closely communicated with FDA in the
development of the ZUMA-2 study, including in the development of the
sample size, but we remain concerned about whether the ZUMA-2 study
results support a determination of substantial clinical improvement
given the small sample size. Although the applicant's analysis of the
ZUMA-2 study concluded that KTE-X19 offers a treatment option for a
patient population unresponsive to, or ineligible for, currently
available treatments, we are concerned as to whether the sample size
and research presented in this application support extrapolating these
results across the Medicare population.
We are also concerned that there has not been a direct study
completed comparing outcomes of patients with r/r MCL treatment with
KTE-X19 and BTK inhibitors. According to the applicant, ZUMA-2 remains
the only study to evaluate patient outcomes after receiving KTE-X19 for
the treatment of r/r MCL, but this study does not include a direct
comparison to other existing therapies for r/r MCL. Despite there being
no standard of second-line care for r/r MCL patients that failed on
previous therapies, according to the applicant, a BTK inhibitor
reflects the best currently available therapy for treating r/r
MCL.\297\
---------------------------------------------------------------------------

\297\ Campo E, Rule S. Mantle cell lymphoma: Evolving management
strategies. Blood. 2015;125(1):48-55.
---------------------------------------------------------------------------

While the ZUMA-2 primary analysis 6 month and one-year survival
rate was 86.7% and 83.2%, respectively, we are concerned that a longer
term analysis of this population is not available to evaluate the
overall survival and mortality data. We note that the applicant did
conduct an additional analysis of OS among the first 28 subjects (ZUMA-
2 interim analysis) which showed an OS rate estimate at 24 months of
67.9% while the median OS was not reached. Additionally, the applicant
referenced that all subjects in the ZUMA-2 primary analysis had at
least 1 adverse event, and that throughout the course of the ZUMA-2
study, 16 deaths were recorded. However, while the applicant noted only
2 of these 16 deaths were related to adverse events, we remain
concerned that further analysis may be needed to evaluate the safety of
KTE-X19 and the longer term effects of the CRS and neurological events
associated with the KTE-X19 therapy.
We are inviting public comments on whether KTE-X19 meets the
substantial clinical improvement criterion.
We did not receive any written comments in response to the New
Technology Town Hall meeting notice published in the Federal Register
regarding the substantial clinical improvement criterion for the KTE-
X19 or at the New Technology Town Hall meeting.
j. Lisocabtagene Maraleucel (Liso-cel)
Juno Therapeutics, a Bristol-Myers Squibb Company, submitted an
application for new technology add-on payment for FY 2021 for
lisocabtagene maraleucel (Liso-cel). Liso-cel is an investigational,
CD19-directed, autologous chimeric antigen receptor (CAR) T-cell
immunotherapy that is comprised of individually formulated CD8 (killer)
and CD4 (helper) CAR T-cells that the applicant anticipates to be
indicated for the treatment of adult patients with relapsed or
refractory (r/r) large B-cell lymphoma after at least two prior
therapies. According to the National Comprehensive Cancer Network,
Diffuse Large B-cell lymphoma (DLBCL) is the most common type of Non-
Hodgkin's Lymphoma (NHL) in the U.S. and worldwide, accounting for
nearly 30% of newly diagnosed cases of B-cell NHL in U.S.\298\ DLBCL is
characterized by spreading of B-cells through the body that have either
arrived de novo or by the transformation from indolent lymphoma.
---------------------------------------------------------------------------

\298\ Ferlay J, Colombet M, Soerjomataram, et al., Estimating
the global cancer incidence and mortality in 2018: GLOBOCAN sources
and methods, Int J Cancer. 144: 1941-1953 (Ferlay, 2019); NCCN
Clinical Practice Guidelines in Oncology (NCCN Guidelines[supreg])
for B-Cell Lymphomas V. 5.2019. ^(copyright) National
Comprehensive Cancer Network, Inc. 2019 (NCCN, 2019).
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According to the applicant, the standard-of-care, first-line
immune-chemotherapy for DLBCL includes regimens such as
cyclophosphamide, doxorubicin, vincristine, and prednisone plus
rituximab (R-CHOP).\299\ These regimens result in long-lasting
remission in more than 50% of patients.\300\ However, approximately 10%
to 15% of patients will have primary refractory disease (that is,
nonresponse or relapse within three months of first-line therapy), and
an additional 20% to 25% will relapse following an initial response to
therapy.\301\ Patients with relapses of aggressive B-cell lymphomas are
believed to have a poor prognosis because of potential treatment
resistance and rapid tumor growth, with only about 30% to 40%
responding to salvage chemotherapy (for example, R-ICE, DHAP, or Gem-
ox) followed by high-dose therapy and autologous stem cell
transplantation for patients demonstrating chemotherapy-sensitive
disease.\302\ Among patients eligible to undergo autologous stem cell
transplantation (ASCT), only 50% will achieve a remission adequate to
proceed to ASCT, and approximately 50% will relapse after
transplantation.\303\ The applicant also noted that transplant
eligibility is also restricted based on age and tolerance to high dose
chemotherapy and thus excludes a moderate subset of patients with r/r
DLBCL.
---------------------------------------------------------------------------

\299\ Coiffier, Bertrand et al., Long-term outcome of patients
in the LNH-98.5 trial, the first randomized study comparing
rituximab-CHOP to standard CHOP chemotherapy in DLBCL patients: A
study by Group d'Etudes des Lymphomes de l'Adulte, blood 2010 116:
2040-2045. (Coiffier, 2010).
\300\ Ibid.
\301\ Ibid.
\302\ Crump M, Neelapu SS, Farooq U, et al., Outcomes in
refractory diffuse large B-cell lymphoma: results from the
international SCHOLAR-1 study, Blood. 2017; 130(16): 1800-1808
(Crump, 2017); Cunningham D, Hawkes EA, Jack A, et al. Rituximab
plus cyclophosphamide, doxorubicin, vincristine, and prednisolone in
patients with newly diagnosed diffuse large B-cell non-Hodgkin
lymphoma: A phase 3 comparison of dose intensification with 14-day
versus 21-day cycles Lancet. 2013; 381: 1817-1826 (Cunningham,
2013).
\303\ Ibid.
---------------------------------------------------------------------------

Additionally, the applicant explained that the available therapies
for 3L+ large B-cell lymphoma include the following:
CD19-directed genetically modified autologous CAR T-cell
immunotherapy axicabtagene ciloleucel (YESCARTA[supreg]), approved in
October 2017 for the treatment of adult patients with r/r large B-cell
lymphoma after two or more lines of systemic therapy, including DLBCL
not otherwise specified, primary mediastinal large B-cell lymphoma,
high grade B-cell lymphoma, and DLBCL arising from follicular lymphoma
(FL).\304\
---------------------------------------------------------------------------

\304\ YESCARTA[supreg]'s approval was based on a single arm
study (ZUMA-1) demonstrating an IRC-assessed ORR of 72%, CR of 51%,
and an estimated median DOR of 9.2 months in 101 subjects included
in the modified intent-to-treat (mITT population).

---------------------------------------------------------------------------

[[Page 32648]]

CAR T-cell therapy tisagenlecluecel (KYMRIAH[supreg]),
approved in May 2018, for the treatment of adult patients with r/r
large B-cell lymphoma after two or more lines of systemic therapy,
including DLBCL not otherwise specified, high grade B-cell lymphoma,
and DLBCL arising from FL.\305\
---------------------------------------------------------------------------

\305\ KYMRIAH[supreg]'s approval was based on a single-arm study
(JULIET) demonstrating an ORR of 50% and a CR rate of 32% in 68
efficacy-evaluable subjects. A median DOR was not reached with a
median follow-up of 9.4 months.
---------------------------------------------------------------------------

Programmed death receptor-1 (PD-1)-blocking antibody--
(KEYTRUDA[supreg]), approved in 2018, for the treatment of adult and
pediatric patients with refractory primary mediastinal B-cell lymphoma
(PMBCL), or who have relapsed after two or more prior lines of
therapy.\306\
---------------------------------------------------------------------------

\306\ KEYTRUDA is not recommended for treatment of patients with
PMBCL who require urgent cytoreductive therapy. Keytruda USPI
(2019).
---------------------------------------------------------------------------

CD79b-directed antibody-drug conjugate polatuzumab vedotin
(POLIVY[supreg]), in combination with bendamustine and rituximab,
approved in 2019, for the treatment of adult patients with r/r DLBCL,
not otherwise specified, after at least two prior therapies.
According to the applicant, despite the availability of these
therapies, r/r large B-cell lymphoma remains a major cause of morbidity
and mortality due to the aggressive disease course. The applicant noted
that the safety profiles of these therapies exclude many r/r large B-
cell lymphoma patients from being able to undergo treatment with these
therapies.\307\
---------------------------------------------------------------------------

\307\ Smith SD, Reddy P, Sokolova A, et al., Eligibility for CAR
T-cell therapy: An analysis of selection criteria and survival
outcomes in chemorefractory DLBCL, Am. J. Hematol. 2019; E119: 1-4
(Smith, 2019).
---------------------------------------------------------------------------

With respect to the newness criterion, the applicant submitted a
BLA for Liso-cel in October 2019, however, as of the time of the
development of this proposed rule, had not received FDA approval. Liso-
cel was granted Breakthrough Therapy Designation (BTD) on December 15,
2016 and Regenerative Medicine Advanced Therapy (RMAT) designation on
October 20, 2017, for the treatment of patients with r/r aggressive
large B-cell NHL, including DLBCL, not otherwise specified (DLBCL NOS;
de novo or transformed from indolent lymphoma), primary mediastinal B-
cell lymphoma (PMBCL), or follicular lymphoma Grade 3B (FL3B)). We note
that the applicant submitted a request for approval for a unique ICD-
10-PCS procedure code for the administration of Liso-cel beginning in
FY 2021. We note that procedures involving the CAR T-cell therapies
previously approved for new technology add-on payments (KYMRIAH[supreg]
and YESCARTA[supreg] therapies) are reported using the following ICD-
10-PCS procedure codes: XW033C3 (Introduction of engineered autologous
chimeric antigen receptor t-cell immunotherapy into peripheral vein,
percutaneous approach, new technology group 3); and XW043C3
(Introduction of engineered autologous chimeric antigen receptor t-cell
immunotherapy into central vein, percutaneous approach, new technology
group 3). Under the current coding system, cases involving the use of
Liso-cel would be coded using ICD-10-PCS XW033C3 and XW043C3, which are
currently grouped to MS-DRG 016. As discussed in section II.D.2.b. of
the preamble of this proposed rule, effective for discharges occurring
in FY 2021, we are proposing to assign cases reporting ICD-10-PCS
procedure codes XW033C3 or XW043C3 to a proposed new MS-DRG 018
(Chimeric Antigen Receptor (CAR) T-cell Immunotherapy), which would
include cases reporting the use of Liso-Cel, if approved and finalized.
While we note the applicant has submitted a request for approval for a
unique ICD-10-PCS code to describe the use of Liso-cel, beginning in FY
2021, any applicable finalized codes describing the use of Liso-cel
will be addressed in the final rule.
As previously discussed, if a technology meets all three of the
substantial similarity criteria, it would be considered substantially
similar to an existing technology and would not be considered ``new''
for purposes of new technology add-on payments.
With regard to the first criterion, whether a product uses the same
or a similar mechanism of action to achieve a therapeutic outcome, the
applicant described two ways in which it believes the mechanism of
action for Liso-cel differs from previously approved therapies for
DLBCL. First, the applicant described the therapy as being comprised of
individually formulated cryopreserved patient-specific helper (CD4) and
killer (CD8) CAR T-cells in suspension that are administered as a
defined composition of CAR-positive viable T-cells (from individually
formulated CD8 and CD4 components). The applicant stated that the
therapy involves a different mechanism of action from other CAR T-cell
therapies because the CD4 and CD8 T-cells are purified and cultured
separately to maintain compositional control of each cell type.
Furthermore, during culture, each cell type is separately modified to
have the CAR on the cell surface, expanded and quantified, and frozen
in two separate cell suspensions. The applicant then described how
Liso-cel is infused with the same target dose of CD4 and CD8 CAR T-
cells for every patient. The applicant asserted that because Liso-cel
controls the same dosage for both CD4 and CD8, it differs from other
CAR T-cell therapies for DLBCL and could potentially provide for higher
safety and efficacy; the applicant stated that CAR T-cell therapies
that do not control for CD8 CAR T-cell dosage have demonstrated higher
rates of severe and life-threatening toxicities, such as cytokine
release syndrome (CRS) and neurotoxicity (NT).
The second feature the applicant described as distinguishing Liso-
cel's mechanism of action from existing CD19-directed CAR T-cell
therapies was the presence of an EGFRt cell surface tag. The applicant
explained that the EGFRt cell surface tag could hypothetically be
targeted for CAR T-cell clearance by separately administering
cetuximab, a monoclonal antibody. According to the applicant, if the
patient was separately administered cetuximab, the presence of the
EGFRt cell surface tag within Liso-cel would allow cetuximba to bind to
the CAR T-cells and clear the cells from the patient. The applicant
highlighted studies that showed that persistent functional CD19-
directed CAR T-cells in patients caused sustained depletion of a
patient's normal B-cells that expressed CD19, resulting in
hypogammaglobulinemia and an increased risk of life-threatening or
chronic infections.\308\ The applicant further explained that such
prolonged low levels of normal B-cells could place a patient at risk of
life-threatening or chronic infections. According to the applicant, the
ability to deplete CAR T-cells, via the administration of cetuximab,
when a patient achieves a long-term remission could hypothetically
allow recovery of normal B-cells and potentially reduce the risk of
life-threatening or chronic infections. The applicant noted that
experiments in a laboratory setting showed that targeting EGFRt with
the monoclonal antibody cetuximab eliminated CAR T-cells expressing the
EGFRt marker, which resulted in long-term reversal of B-cell aplasia in
mice.\309\ However, the

[[Page 32649]]

applicant noted that this mechanism of CAR T-cell clearance, via
administration of cetuximab and EGFRt cell surface tags/markers, has
not been tested in humans nor in other patients treated with Liso-cel.
---------------------------------------------------------------------------

\308\ Kalos M, Levine BL, Porter DL, et al., T Cells with
Chimeric Antigen Receptors Have Potent Antitumor Effects and Can
Establish Memory in Patients with Advanced Leukemia, Sci Transl Med.
2011; 3(95): 1-21 (Kalos, 2011).
\309\ Paszkiewicz PJ, Frable SP, Srivastava S, et al., Targeted
antibody-mediated depletion of murine CD19 CAR T cells permanently
reverses B cell aplasia, J Clin Invest. 2016; 126(11): 4262-4272
(Paszkiewicz, 2016).
---------------------------------------------------------------------------

With respect to the second criterion, whether a product is assigned
to the same or a different MS-DRG, the applicant acknowledged that
Liso-cel would likely map to the same MS-DRG as other existing CAR T-
cell therapies, which are currently assigned to MS-DRG 016. The
applicant also referenced a request made by it and other CAR T-cell
therapy manufacturers to create a new MS-DRG specifically for CAR T-
cell therapies. The applicant also acknowledged that in previous
rulemaking CMS stated that all CAR T-cell therapies would be assigned
to MS-DRG 016, Autologous Bone Marrow Transplant with CC/MCC while CMS
continues to study the issue. As previously noted and further discussed
in section II.D.2.b. of the preamble of this proposed rule, we are
proposing to assign CAR T-cell therapy cases to a new MS-DRG 018
(Chimeric Antigen Receptor (CAR) T-cell Immunotherapy) effective for
discharges occurring in FY 2021.
With respect to the third criterion, whether the new use of the
technology involves the treatment of the same or similar type of
disease and the same or similar patient population, according to the
applicant, Liso-cel fills an unmet need in the treatment of large B-
cell lymphoma because Liso-cel would be indicated as a third-line
treatment option for patients with r/r DLBCL, who cannot be treated
with existing CAR T-cell therapies. The applicant asserted that Liso-
cel would be able to treat these patients that present with uncommon
subtypes of DLBCL including, PMBCL, FL3B, and DLBCL transformed from
indolent lymphoma from other follicular lymphoma, elderly patients
(>=65 years old), patients with secondary CNS involvement by lymphoma,
and those with moderate renal or cardiac comorbidities. The applicant
asserted that these patient populations were excluded from
registrational trials for YESCARTA[supreg] and KYMRIAH[supreg], and
therefore represent an unmet patient need. Regarding newness, we are
concerned as to whether a differing production and/or dosage represents
a different mechanism of action as compared to previously FDA-approved
CAR T-cell therapies. We are also concerned about whether the existence
of an EGFRt cell surface tag equates to a new mechanism of action given
that in order to activate this cell surface tag, an additional
medication, cetuximab, which targets the CAR T-cells for clearance,
would be needed. We also express concern that, based on our
understanding, the presence of the EGFRt cell surface tag is a
potential way to treat an adverse event of the Liso-cel therapy and is
not critical to the way the drug treats the underlying disease. We note
that the applicant referenced that while this EGFRt cell surface tag is
included within the Liso-cel compound, it remains dormant without
activation by cetuximab. Finally, the applicant noted that Liso-cel has
been shown safe and effective for patient populations excluded from
registrational trials for YESCARTA[supreg] and KYMRIAH[supreg],
including patients with uncommon subtypes of large B-cell lymphoma,
including PMBCL, FL3B, and DLBCL transformed from indolent lymphoma
other than FL, elderly patients (>=65 years old), patients with
secondary CNS involvement by lymphoma and those with moderate renal or
cardiac comorbidities.\310\ We note that the FDA label for
YESCARTA[supreg] and KYMRIAH[supreg] does not appear to specifically
exclude these patient populations or NHL subtypes. As such, it is
unclear whether Liso-cel would in fact treat a patient population
different from other CAR T-cell therapies that treat patients with
DLBCL. Additionally, as previously discussed, we are proposing to
assign cases involving the use of Liso-cel to the same MS-DRG as other
CAR T-cell therapies previously approved for new technology add-on
payments. We refer readers to section II.D.2.b. of the preamble of this
proposed rule for discussion of our proposal to create a new MS-DRG 018
for CAR T-cell therapies which, if finalized, would include cases
reporting the use Liso-cel.
---------------------------------------------------------------------------

\310\ Lisocabtagene maraleucel Biologics License Application
(BLA).
---------------------------------------------------------------------------

We are inviting public comments on whether Liso-cel is
substantially similar to other technologies and whether Liso-cel meets
the newness criterion.
With regard to the cost criterion, the applicant searched the FY
2018 MedPAR claims data file to identify potential cases representing
patients who may be eligible for treatment using Liso-cel. The
applicant identified claims that reported an ICD-10-CM diagnosis code
of: C83.30 (DLBCL, unspecified site); C83.31 (DLBCL, lymph nodes of
head, face and neck); C83.32 (DLBCL, intrathoracic lymph nodes); C83.33
(DLBCL, intra-abdominal lymph nodes); C83.34 (DLBCL, lymph nodes of
axilla and upper limb); C83.35 (DLBCL, lymph nodes of inquinal region
and lower limb); C83.36 (DLBCL, intrapelvic lymph nodes); C83.37
(DLBCL, spleen); C83.38 (DLBCL, lymph nodes of multiple sites); or
C83.39 (DLBCL, extranodal and solid organ sites). However, the
applicant noted that the aforementioned ICD-10-CM codes do not
differentiate r/r patients from the broader DLBCL population. A
clinical literature search completed by the applicant found that the r/
r population makes up one-third of the DLBCL population, but since r/r
patients typically have higher inpatient costs, the applicant selected
one-third of the total identified cases with the highest total charges.
The applicant also identified potential cases where the claim contained
either ICD-10-PCS code XW033C3 (Introduction of engineered autologous
chimeric antigen receptor t-cell immunotherapy into peripheral vein,
percutaneous approach, new technology group 3) or XW043C3 (Introduction
of engineered autologous chimeric antigen receptor t-cell immunotherapy
into central vein, percutaneous approach, new technology group 3) in
addition to the DLBCL diagnosis codes. The applicant found a total of
1,798 cases reporting either one of the previously identified diagnosis
codes or ICD-10-PCS code XW033C3 or XW043C3, mapped to 22 MS-DRGs.
The applicant noted that this analysis was based on charges from
claims in the FY 2018 MedPAR final rule file and were selected based on
the presence of one diagnosis code and one procedure code as previously
discussed. As discussed previously, because clinical data suggests that
about 33% of DLBCL patients are r/r and those patients have higher
inpatient costs than non r/r DLBCL patients, the applicant analyzed the
top third costliest discharges, but also diversified this analysis by
randomly selecting 20% of the remaining cases to account for the
variety of treatment options for patients with DLBCL. The applicant
stated that the use of Liso-cel's therapy would replace chemotherapy or
other drug therapies, including other CAR T-cell therapies. Because of
this, the applicant stated it removed all charges in the drug cost
center since it was not possible to differentiate between different
drugs on inpatient claims. The standardized charges per case were then
calculated using the 2018 IPPS final rule Impact file and the two-year
inflation factor of 11.1% (1.11100) was applied. The applicant noted
that the cost of Liso-cel had not yet been determined at the time of
application. Therefore, without

[[Page 32650]]

considering the charges for Liso-cel, based on the FY 2020 IPPS/LTCH
PPS final rule correction notice data file thresholds for FY 2021, the
final inflated average case-weighted standardized charge per case was
$117,726, which is lower than the MS-DRG 016 average case-weighted
threshold of $170,573. However, we note that the applicant expects the
cost of Liso-cel to be higher than the new technology add-on payment
threshold amount for MS-DRG 016. Therefore, the applicant stated that
Liso-cel met the cost criterion.
As we have discussed in prior rulemaking with regard to the
potential creation of a new MS-DRG for CAR-T cell therapies (83 FR
41172), if a new MS-DRG were to be created, then consistent with
section 1886(d)(5)(K)(ix) of the Act, there may no longer be a need for
a new technology add-on payment under section 1886(d)(5)(K)(ii)(III) of
the Act. Section 1886(d)(5)(K)(ix) of the Act requires that, before
establishing any add-on payment for a new medical service or
technology, the Secretary shall seek to identify one or more DRGs
associated with the new technology, based on similar clinical or
anatomical characteristics and the costs of the technology and assign
the new technology into a DRG where the average costs of care most
closely approximate the costs of care using the new technology. As
discussed in previous rulemaking (71 FR 47996), no add-on payment will
be made if the new technology is assigned to a DRG that most closely
approximates its costs.
As noted previously and discussed in section II.D.2.b of the
preamble of this proposed rule, we are proposing to create proposed new
MS-DRG 018 for cases reporting the use of CAR T-cell therapies
beginning in FY 2021. We also refer readers to section II.G.5.i. of the
preamble of this proposed rule, regarding the new technology add-on
payment application for KTE-X19, for a complete discussion of our
proposal that, effective for FY 2022, for applications for new
technology add-on payments and for previously approved technologies
that may continue to receive new technology add-on payments, the
proposed threshold for a proposed new MS-DRG for the upcoming fiscal
year would be used to evaluate the cost criterion for technologies that
would be assigned to a proposed new MS-DRG. As also discussed in
section II.G.5.i. of this proposed rule, in light of the significant
variance in the threshold amount for the proposed new MS-DRG for cases
reporting CAR T-cell therapies, we are also proposing to apply this
policy when evaluating the CAR T-cell therapy technologies for FY 2021
new technology add-on payments. The application of this proposed policy
for FY 2021 would include the new FY 2021 CAR T-cell therapy
applications and, as discussed in section II.G.4.a. of the preamble of
this proposed rule, those CAR T-cell therapy technologies previously
approved for new technology add-on payments.
As such, we are proposing to evaluate whether Liso-cel meets the
cost criterion using the proposed new MS-DRG 018 threshold amount of
$1,237,393. As previously mentioned, without considering the cost of
the technology, the final inflated average case-weighted standardized
charge per case is $117,726. However, we now have cases involving the
use of CAR T-cell therapy within the FY 2019 MedPAR data that we
believe may reflect cases that could be eligible for Liso-cel or which
can be used to approximate the charges for Liso-cel to estimate the
average standardized charge per case for purposes of this proposed
rule. This charge information from the FY 2019 MedPAR data can be found
in the FY 2021 Proposed Before Outliers Removed (BOR) File (available
on the CMS website) for Version 38 of the MS-DRGs. Based on information
from the FY 2021 Proposed BOR File for Version 38 of the MS-DRGs, the
standardized charge per case for MS-DRG 018 is $913,224. The average
case-weighted threshold amount based on the proposed new MS-DRG 018 is
$1,237,393. Because this estimated average case-weighted standardized
charge per case does not exceed the average case-weighted threshold
amount for proposed MS-DRG 018, we do not believe that the technology
would meet the cost criterion. We note that this analysis is based on
CMS data. The applicant conducted its own analysis as previously
described that did not include the cost of the technology. We welcome
additional information from the applicant regarding the cost of Liso-
cel to inform our determination for the final rule regarding whether
the applicant meets the cost criterion based on the applicant's cost
analysis.
We invite public comment on our proposal to evaluate the cost
criterion for Liso-cel using the proposed threshold amount for proposed
new MS-DRG 018 and whether Liso-cel meets the cost criterion based on
this proposal.
With respect to the substantial clinical improvement criterion, the
applicant asserted that Liso-cel represents a substantial clinical
improvement over existing technologies because it offers a treatment
option for a patient population unresponsive to, or ineligible for,
currently available treatments. The applicant stated that Liso-cel
fills an unmet need in the treatment of patients with large B-cell
lymphoma, including DLBCL, and provides an immunotherapy treatment
option for r/r DLBCL patients who cannot be treated with existing CAR
T-cell therapies. To support this statement, the applicant described
what it considered were important populations that were excluded from
the registrational trials for YESCARTA[supreg] and KYMRIAH[supreg]
(such as renal and cardiac insufficiency, limited marrow reserve,
central nervous system (CNS) involvement by lymphoma, and relapse after
allogeneic hematopoietic stem cell transplant (HSCT)). The applicant
stated that these trials also excluded certain large B-cell lymphoma
subtypes such as DLBCL transformed from indolent lymphomas other than
FL, PMBCL, and follicular lymphoma Grade 3B (FL3B), but that these
excluded patient populations were included in the registrational trial
for Liso-cel.\311\ The applicant referenced that the use of Liso-cel
had been studied for these patients, and was shown to be safe and
resulted in durable responses, including for patients with uncommon
subtypes of large B-cell lymphoma, including PMBCL, FL3B, and DLBCL
transformed from indolent lymphoma other than FL, elderly patients
(>=65 years old), patients with secondary CNS involvement by lymphoma,
and those with moderate renal or cardiac comorbidities.\312\ According
to the applicant, the registrational trials for YESCARTA[supreg] and
KYMRIAH[supreg] also did not include adequate numbers of Medicare
eligible subjects,^{313 314 315} and therefore the applicant
asserted that Liso-cel represents a substantial clinical improvement
over these existing therapies because it has been shown to have a
benefit to a meaningful number of Medicare beneficiaries. To support
this assertion, the applicant stated that 41% of the subjects treated
with Liso-cel were over the age of 65 years and a similar safety and
efficacy profile was seen for this patient cohort as compared

[[Page 32651]]

to a younger cohort.\316\ The applicant provided further detail
regarding these assertions, referencing the results of Phase I and
Phase II studies.
---------------------------------------------------------------------------

\311\ Neelapu, 2017; Schuster SJ, Bishop MR, Tam CS, et al.,
Tisagenlecleucel in Adult Relapsed or Refractory Diffuse Large B-
Cell Lymphoma, N Engl J Med. 2019; 380(1): 45-56 (Schuster, 2019).
\312\ Lisocabtagene maraleucel Biologics License Application
(BLA).
\313\ Neelapu, 2017.
\314\ Schuster, 2019.
\315\ Yescarta USPI (2019); Kymriah USPI (2018).
\316\ Lisocabtagene maraleucel Biologics License Application
(BLA).
---------------------------------------------------------------------------

The applicant shared the results of the Phase I TRANSCEND NHL 001
trial, which was a prospective, single arm, multicenter study of
lisocabtagene maraleucel in patients with relapsed/refractory
aggressive B-cell NHL. The applicant noted that TRANSCEND NHL 001
included subjects with the average age of 63 years with 111 subjects
(41%) over 65 years of age and 27 (10%) subjects older than 75 years of
age. These patients also failed previous therapies. Of the total number
of subjects studied (efficacy: n=256; safety: n=269), 137 subjects
(51%) had DLBCL, 60 (22%) had DLBCL transformed from FL, 18 (7%) had
DLBCL transformed other indolent lymphomas, 36 patients (13%) had high
grade lymphoma, 15 (6%) had PMBCL and 3 (1%) had FL3B.\317\
Additionally, the applicant explained that TRANSCEND NHL 001 was more
inclusive, compared to the registrational trials for KYMRIAH[supreg]
and YESCARTA[supreg], of Medicare aged patients with comorbidities and
NHL disease subtypes seen in the real world presentation of the
disease. To support this, the applicant referenced that within this
study, between 40% to 50% of subjects studied had cardiac ejection
fraction, 3% had secondary CNS lymphoma, 51 patients (19%) had a
creatinine clearance between 30-60 mL/min and 39 patients (14.6%) had
grade >=3 cytopenias. Furthermore, the applicant noted that 51 patients
(19%) had decreased renal function and 13 patients (4.9%) had decreased
cardiac function. The applicant stated that the TRANSCEND NHL 001 study
showcased that the patient population treated during the study better
reflected the real world large B-cell lymphoma patient population, a
population that the applicant asserted included NHL subtypes not
studied or approved for treatment with currently approved or
conditionally approved agents, while providing similar safety and
efficacy. The applicant contended that these high-unmet need large B-
cell lymphoma subsets included patients with DLBCL transformed from
rare indolent lymphomas other than FL, patients with FL3B, patients 65
years of age and older, as well as patients with moderate comorbidities
of renal and cardiac insufficiency.
---------------------------------------------------------------------------

\317\ Ibid.
---------------------------------------------------------------------------

The applicant further explained that Liso-cel provided improved
effectiveness as compared to existing therapies. Patients with
aggressive large B-cell NHL who have failed at least 2 prior therapies
or SCT are treated with combinations of agents or monotherapy based on
institutional preferences, but there is no standard of care for salvage
therapies beyond first treatment therapy.\318\ The applicant noted that
commonly used salvage therapies (non-CAR T-cell therapies) for
relapsed, large B-cell lymphoma demonstrated objective response rates
(ORRs) in the range of 12% to 46% and complete response (CR) rates of
6% to 38%. Among the patients who did achieve a response, the median
duration of response (DOR) ranges from approximately 6 to 17 months and
median overall survival was generally less than 12 months.\319\
Comparatively, TRANSCEND NHL 001, which provided subjects with Liso-
cel, met its primary endpoint of Independent Review Committee (IRC)-
assessed ORR in adult patients with r/r large lymphoma after at least 2
prior therapies, as reported by the applicant. In the 256 efficacy
evaluable patients, the ORR was 73% (95% confidence interval (CI]):
67.0% to 78.3%), and the CR rate was 53% (95% CI: 46.6% to 59.2%). With
a median follow-up of 10.8 months, the median DOR per IRC assessment
was 13.3 months and the median DOR for CR was not reached. By
comparison, the applicant summarized that YESCARTA[supreg], as
demonstrated in the Phase I-II ZUMA-1 study (see the FY 2019 IPPS/LTCH
PPS final rule 83 FR 41295 for a description of this study), had an ORR
of 72.0% (95% confidence interval (CI: 62.0% to 81.0%). Also, according
to the applicant, KYMRIAH[supreg], as demonstrated by the Phase II
JULIET study (see the FY 2019 IPPS/LTCH PPS final rule 83 FR 41293 for
a description of this study), had an ORR of 50.0% (95% confidence
interval (CI: 38.0% to 62.0%). The applicant contended that the results
for Liso-cel (ORR of 73% (95% confidence interval (CI]): 67.0% to
78.3%), and the CR rate of 53% (95% CI: 46.6% to 59.2%)) were observed
across all subgroups tested, including elderly subjects, those with
high burden disease or high baseline inflammatory biomarkers, those
requiring anti-lymphoma therapy for disease control, as well as rare
patient populations with a high unmet medical need (for example, PMBCL,
DLBCL transformed from indolent lymphoma other than FL, and FL3B). The
applicant contended that this data supports that Liso-cel demonstrates
comparable or superior effectiveness compared to existing therapies for
patients with r/r large B-cell NHL.^{320 321}
---------------------------------------------------------------------------

\318\ NCCN, 2019.
\319\ Czuczman MS, Davies A, Linton KM, et al., A Phase \2/3\
Multicenter, Randomized Study Comparing the Efficacy and Safety of
Lenalidomide Versus Investigator's Choice in Relapsed/Refractory
DLBCL, Blood. 2014; 124: 628 (Czuczman, 2014); Jacobsen ED, Sharman
JP, Oki Y, et al., Brentuximab vedotin demonstrates objective
responses in a phase 2 study of relapsed/refractory DLBCL with
variable CD30 expression, Blood. 2015; 125(9): 1394-1402 (Jacobsen,
2015); Nagle SJ, Woo K, Schuster SJ, et al., Outcomes of patients
with relapsed/refractory diffuse large B-cell lymphoma with
progression of lymphoma after autologous stem cell transplantation
in the rituximab era, Am. J. Hematol. 2013; 88: 890-894 (Nagle,
2013); Pettengell R, Coiffier B, Narayanan G, et al., Pixantrone
dimaleate versus other chemotherapeutic agents as a single-agent
salvage treatment in patients with relapsed or refractory aggressive
non-Hodgkin lymphoma: a phase 3, multicenter, open-label, randomised
trial, Lancet Oncol. 2012; 13: 696-706 (Pettengell, 2012); Rigacci
L, Puccini B, Cortelazzo S, et al., Bendamustine with or without
rituximab for the treatment of heavily pretreated non-Hodgkin's
lymphoma patients, Ann Hematol. 2012; 91: 1013-1022 (Rigacci, 2012);
Van Den Neste E, Schmitz N, Mounier N, et al., Outcome of patients
with relapsed diffuse large B-cell lymphoma who fail second-line
salvage regimens in the International CORAL study, Bone Marrow
Transplantation. 2016; 51: 51-57 (Van Den Neste, 2016); Wang M,
Fowler N, Wagner-Bartak N, et al., Oral lenalidomide with rituximab
in relapsed or refractory diffuse large cell, follicular and
transformed lymphoma: a phase II clinical trial, Leukemia. 2013; 27:
1902-1909 (Wang, 2013).
\320\ YESCARTA[supreg] USPI (2019).
\321\ KYMRIAH[supreg] USPI (2018).
---------------------------------------------------------------------------

Furthermore, the applicant stated that Liso-cel had an improved
safety profile in comparison to YESCARTA[supreg] and KYMRIAH[supreg].
The applicant stated that both of these FDA-approved CAR T-cell
therapies had higher rates of toxicity as compared to Liso-cel. In the
TRANSCEND NHL 001 registrational study (n=268), 42% and 2% of subjects
developed all-grade and Grade >3 CRS, respectively, and 30% and 10%
developed all-grade and Grade >3 NT. The applicant compared these
results to the results of the JULIET study as found in
KYMRIAH's[supreg] prescribing information and summarized that
KYMRIAH[supreg] had higher rates of all-grade and Grade >3 CRS (74% and
23%, respectively) and all-grade and Grade >3 NT (58% and 18%,
respectively). The applicant provided the same comparison of the
toxicity results of Liso-cel to the results showcased in the ZUMA-1
study featuring YESCARTA[supreg] as found in YESCARTA[supreg]'s
prescribing information and summarized that YESCARTA[supreg] had higher
rates of all-grade and Grade >3 CRS (94% and 13%, respectively) and
all-grade and Grade >3 NT (87% and 31%,
respectively).^{322 323}
---------------------------------------------------------------------------

\322\ YESCARTA[supreg] USPI (2019).
\323\ KYMRIAH[supreg] USPI (2018).
---------------------------------------------------------------------------

After reviewing the information submitted by the applicant as part
of its

[[Page 32652]]

FY 2021 new technology add-on payment application, we are concerned
that no published studies directly comparing Liso-cel and the two
currently available CAR T-cell therapies for r/r DLBCL,
YESCARTA[supreg] and KYMRIAH[supreg], were provided. Additionally, we
are concerned with the lack of long-term data supporting the
effectiveness and efficacy of Liso-cel and whether the lack of long-
term data may limit the generalizability of the findings from the
TRANSCEND NHL 001 study to the general Medicare population. While there
is no direct comparison study of Liso-cel, YESCARTA[supreg] and
KYMRIAH[supreg], the applicant does provide a comparison of the ORR,
CR, PR and DOR across all three CAR T-cell therapies. While we note
that Liso-cel does appear to provide an improved ORR, CR, PR, and DOR
compared to the other FDA-approved CAR T-cell therapies based on the
data presented by the applicant, we further note that these differences
appear to be small in magnitude, between 1-2% for the ORR, CR, and PR.
Without a direct comparison of outcomes between these therapies, we are
concerned as to whether these differences translate to clinically
meaningful differences or improvements. Liso-cel appears to demonstrate
similar patient outcomes to that of YESCARTA[supreg] and we question
whether the TRANSCEND NHL 001 study is evidence that Liso-cel is a more
effective therapy to treat DLBCL over existing CAR T-cell therapies.
Additionally, as previously discussed, the applicant noted that Liso-
cel has been shown safe and effective for patient populations excluded
from registrational trials for YESCARTA[supreg] and KYMRIAH[supreg].
However, it is unclear whether this suggests that Liso-cel is a
treatment option for patients who cannot be treated with these existing
CAR-T cell therapies, given that the FDA label for YESCARTA[supreg] and
KYMRIAH[supreg] appears to not specifically exclude these patient
populations. Finally, we are concerned that the use of the EGFRt cell
surface tag was not activated in patients receiving Liso-cel to study
the impact of clearing these CAR T-cells after remission and that this
feature has not yet been tested on humans or in conjunction with
patients treated with Liso-cel. We express concern regarding the safety
and efficacy of this feature given its lack of testing.
We are inviting public comments on whether Liso-cel meets the
substantial clinical improvement criterion.
We did not receive any written comments in response to the New
Technology Town Hall meeting notice published in the Federal Register
regarding the substantial clinical improvement criterion for Liso-cel
or at the New Technology Town Hall meeting.
k. Soliris
Alexion, Inc, submitted an application for new technology add-on
payments for Soliris[supreg] (eculizumab) for FY 2021. Soliris[supreg]
is approved for the treatment of neuromyelitis optica spectrum disorder
(NMOSD) in adult patients who are anti-aquaporin-4 (AQP4) antibody
positive.
According to the applicant, NMOSD is a rare and severe condition
that attacks the central nervous system without warning. The applicant
explained that NMOSD attacks, also referred to as relapses, can cause
progressive and irreversible damage to the brain, optic nerve and
spinal cord, which may lead to long-term disability, and in some
instances, the damage may result in death. According to the applicant,
the serious nature of an NMOSD relapse frequently requires inpatient
hospitalization and treatment should be initiated as quickly as
possible.
According to the applicant, in patients with AQP4 antibody-positive
NMOSD, the body's own immune system can turn against itself to produce
auto-antibodies against AQP4, a protein on certain cells in the eyes,
brain and spinal cord that are critical for the survival of nerve
cells. The applicant explained that the binding of these anti-AQP4
auto-antibodies activates the complement cascade, another part of the
immune system.
According to the applicant, complement activation by anti-AQP4
auto-antibodies is one of the primary causes of NMOSD. The applicant
explained that formation of membrane attack complex (MAC) is the end
product of the activated complement system which is directly
responsible for the damage to astrocytes leading to astrocytopathy
(astrocyte death) and ensuing neurologic damage associated with NMOSD
and relapses. According to the applicant, the primary goal of NMOSD
treatment is to prevent these relapses, which over time lead to
irreversible neurologic damage.
According to the applicant, Soliris[supreg] is a first-in-class
complement inhibitor that works by selectively inhibiting the
complement system, a central part of the immune system involved in
inflammatory processes, pathogen elimination, activation of the
adaptive immune response, and maintenance of homeostasis. The applicant
explained that the complement system distinguishes between healthy host
cells, cell debris, apoptotic cells, and external pathogens. The
applicant further explained that the complement system triggers a
modulated immune response, and functions through a combination of
effector proteins, receptors, and regulators. The applicant asserted
that when the complement system detects a threat, an initial protease
is activated. This protease (either alone or in a complex) then cleaves
its target, which in turn becomes active and starts to cleave the next
target in the chain, and so on, leading to a cascade.
Per the applicant, initial activation of the complement system
occurs via three different pathways, which all ultimately lead to the
formation of the membrane attack complex (MAC) and release of the
anaphylatoxins: (1) The classical pathway is activated by antibody-
antigen complexes; (2) The alternative pathway is activated at a
constant low level via ``tick-over'' (spontaneous hydrolysis) of
Complement component 3 (C3), a protein of the immune system; (3) The
lectin pathway is activated by carbohydrates frequently found on the
surface of microbes. According to the applicant, all pathways of
complement activation result in the formation of C3 convertase
(``proximal complement''), and converge at the cleavage of C5 leading
to the generation of C5a and C5b by the C5 convertase enzyme complexes
(``Terminal complement''). The applicant explained that C3 is the most
abundant complement protein in plasma, occurring at a concentration of
1.2 mg/mL and C3 cleavage products bridge the innate and the adaptive
immune systems. The applicant also explained that C3a acts as an
anaphylatoxin and is a mediator of inflammatory processes and C3b
opsonizes the surface of recognized pathogens and facilitates
phagocytosis and binds C3 convertase to form C5 convertase. The
applicant also explained that C5 convertase cleaves C5 into C5a and
C5b; C5a is chemotactic agent and anaphylatoxin, causing leukocyte
activation, endothelial cell activation, and proinflammatory and
prothrombotic effects.
According to the applicant, imbalance between complement activation
and regulation leads to host tissue damage, and congenital deficiencies
in the complement system can lead to an increased susceptibility to
infection. The applicant explained that the complement system is also
associated with the pathogenesis of non-infectious diseases such as
chronic inflammation, autoimmune diseases, thrombotic

[[Page 32653]]

microangiopathy, transplant rejection reactions, ischemic,
neurodegenerative age-associated diseases, and cancer. According to the
applicant, the complement system is also recognized as important in the
antibody-mediated autoimmune disease AQP4 antibody-positive NMOSD. The
applicant stated that Soliris[supreg] is the first and only FDA
approved treatment for adult patients with NMOSD who are AQP4 antibody-
positive that is proven to reduce the risk of relapse.
The incidence of NMOSD in the United States is 0.7/100,000 while
the prevalence is 3.9/100,000 population.\324\ The median onset of
NMOSD is 39 years of age and 83 percent of cases are
female.^{325 326} NMOSD was commonly misdiagnosed as multiple
sclerosis (MS) in the past.\327\ According to the applicant, at least
two-thirds of NMOSD cases are associated with aquaporin-4 antibodies
(AQP4-IgG) and complement-mediated damage to the central nervous
system.
---------------------------------------------------------------------------

\324\ Flanagan EP, et al., ``Epidemiology of aquaporin-4
autoimmunity and neuromyelitis optica spectrum,'' Ann Neurol, 2016,
vol. 79(5), pp. 775-783.
\325\ Bukhari W, et al., ``Incidence and prevalence of NMOSD in
Australia and New Zealand,'' J Neurol Neurosurg Psychiatry, 2017,
vol. 88(8), pp. 632-638.
\326\ Wingerchuk DM, et al., ``The spectrum of neuromyelitis
optica,'' Lancet Neurol, 2007, vol. 6, pp. 805-815.
\327\ Jarius S, et al., ``Contrasting disease patterns in
seropositive and seronegative neuromyelitis optica: A multicentre
study of 175 patients,'' J Neuroinflammation, 2012, vol. 9, pp. 14.
---------------------------------------------------------------------------

According to the applicant, Soliris[supreg] is administered via an
IV infusion by a healthcare professional. The applicant explained that
for adult patients with neuromyelitis optica spectrum disorder,
Soliris[supreg] therapy consists of 900 mg weekly for the first 4
weeks, followed by 1200 mg for the fifth dose 1 week later, then 1200
mg every 2 weeks thereafter. According to the applicant,
Soliris[supreg] should be administered at the recommended dosage
regimen time points, or within 2 days of these time points. The
applicant also explained that for adult and pediatric patients with
NMOSD, supplemental dosing of Soliris[supreg] is required in the
setting of concomitant plasmapheresis or plasma exchange, or fresh
frozen plasma infusion (PE/PI).
The applicant explained that Soliris[supreg] has a boxed warning
for risk of serious meningococcal infections. According to the
applicant, life-threatening and fatal meningococcal infections have
rarely occurred in patients treated with Soliris[supreg] and can be
mitigated with proper vaccination. The applicant explained that by
blocking the terminal complement system, Soliris[supreg] increases the
risk of meningococcal and encapsulated bacterial infection. According
to the applicant, all the patients in a pivotal trial received
meningococcal vaccination, and no cases of meningococcal infection were
reported. The applicant also noted that Soliris[supreg] is available
only through a restricted program under a Risk Evaluation and
Mitigation Strategy (REMS) and under the Soliris[supreg] REMS,
prescribers must enroll in the program.
With respect to the newness criterion, the FDA approved
Soliris[supreg] for the indication of treatment of NMOSD in adult
patients who are AQP4 antibody positive on June 27, 2019.
Soliris[supreg] was first approved by the FDA on March 19, 2007 for the
treatment of patients with paroxysmal nocturnal hemoglobinuria (PNH) to
reduce hemolysis, followed by approvals for the treatment of patients
with atypical hemolytic uremic syndrome (aHUS) to inhibit complement
mediated thrombotic microangiopathy, and for an efficacy supplement to
add the indication of treatment of generalized myasthenia gravis (gMG)
in adult patients who are anti-acetylcholine receptor (AChR) antibody
positive. The applicant has applied for new technology add-on payments
for use of Soliris[supreg] only for the indication of treatment of
NMOSD in adult patients who are AQP4 antibody positive. The applicant
stated that the FDA granted Soliris[supreg] Orphan Drug Designation for
the treatment of neuromyelitis optica on June 24, 2014. Additionally,
the applicant stated that Soliris[supreg] was filed as a supplemental
biologics license application (sBLA; BLA125166/S-431) for the treatment
of NMOSD in adult patients who are AQP4 antibody positive, which the
FDA assigned Priority Review status.
According to the applicant, patients with NMOSD are currently
identified by ICD-10-CM diagnosis code: G36.0 Neuromyelitis optica
(Devic's syndrome). The applicant also noted that there is currently no
ICD-10-PCS procedure code to specifically identify NMOSD cases where
Soliris[supreg] is used. We note that the applicant has submitted a
request for approval for a unique ICD-10-PCS procedure code for the
administration of the Soliris[supreg] beginning in FY 2021.
As stated previously, if a technology meets all three of the
substantial similarity criteria, it would be considered substantially
similar to an existing technology and, therefore, would not be
considered ``new'' for purposes of new technology add-on payments.
With regard to the first criterion, whether a product uses the same
or similar mechanism of action to achieve a therapeutic outcome,
according to the applicant, Soliris[supreg] is the only treatment for
NMOSD that works by specifically inhibiting the complement cascade as
described previously. According to the applicant, Soliris[supreg] is
the only FDA approved treatment for NMOSD, although several off-label
products are used to treat relapse prevention in NMOSD. As mentioned
previously, the applicant explained that the formation of the membrane
attack complex (MAC) is the end product of the activated complement
system which is directly responsible for the damage to astrocytes
leading to astrocytopathy (astrocyte death) and the ensuing neurologic
damage associated with NMOSD and relapses.
With respect to the second criterion, whether a product is assigned
to the same or a different MS-DRG, the applicant stated that cases
involving the administration of Soliris[supreg] will likely be assigned
to the same MS-DRGs as other therapies are that are currently used but
not indicated to treat NMOSD. These therapies that are used off-label
include axiothiprine, rituximab, low-dose steroids (prednisone),
mycophenolate, methotrexate, mitoxantrone, cyclophosphamide,
tacrolimus, tocilizumab, cyclosporin A, and plasma exchange. As stated
previously, the applicant asserted that Soliris[supreg] is the first
approved treatment for NMOSD in adult patients who are AQP4 antibody
positive.
With respect to the third criterion, whether the new use of the
technology involves the treatment of the same or similar type of
disease and the same or similar patient population, the applicant
maintained that, although Soliris[supreg] will be treating the same
disease and patient population as currently available therapies, it
will improve the treatment of NMOSD as there were previously no FDA
labeled treatments. As stated previously, the applicant asserted that
Soliris[supreg] is the first approved treatment for NMOSD in adult
patients who are AQP4 antibody positive.
In summary, the applicant asserted that Soliris[supreg] meets the
newness criterion because it is the only treatment for NMOSD that works
by specifically inhibiting the complement cascade. We are inviting
public comments on whether Soliris[supreg] is substantially similar to
other technologies and whether Soliris[supreg] meets the newness
criterion.
With regard to the cost criterion, the applicant conducted the
following analysis to demonstrate that the technology meets the cost
criterion. The applicant searched claims in the FY 2018 MedPAR final
rule dataset

[[Page 32654]]

reporting an ICD-10-CM diagnosis code of G36.0. This search identified
1,151 cases primarily spanning 14 MS-DRGs. According to the applicant,
cases representing patients who may be eligible for treatment with
Soliris[supreg] for NMOSD would most likely map to MS-DRGs 058, 059 and
060 (Multiple Sclerosis and Cerebellar Ataxia with MCC, with CC and
without CC/MCC, respectively)--the family of MS-DRGs for multiple
sclerosis & cerebellar ataxia. According to the applicant, these three
MS-DRGs were three of the top four MS-DRGs by volume to which cases
reporting a diagnosis code G36.0 were assigned, and together these MS-
DRGs accounted for about 32 percent of the 1,151 originally identified
cases reporting a diagnosis code G36.0. Consequently, the applicant
limited its analysis to the 376 cases that grouped to these three MS-
DRGs (058, 059 and 060).
The applicant performed its cost analysis based on the 376 claims
assigned to MS-DRGs 058, 059 and 060. The applicant first removed
charges for other technologies. According to the applicant,
Soliris[supreg] would replace other drug therapies, such as
azathioprine, methotrexate, and rituximab, among others. Because it is
generally not possible to differentiate between different drugs on
inpatient claims, the applicant removed all charges in the drug cost
center. The applicant also removed all charges from the blood cost
center, because Soliris[supreg] will replace plasma exchange
procedures. Lastly, the applicant removed an additional $12,000 of cost
for the plasma exchange procedural costs, based on an internal analysis
of the average cost of plasma exchange. To convert these costs to
charges, the applicant used the ``other services'' national average
cost-to-charge ratio (0.346). According to the applicant, this was
likely an overestimate of the charges that would be replaced by using
Soliris[supreg].
After removing charges for the prior technology to be replaced, the
applicant standardized the charges. The applicant then used the 2-year
inflation factor of 11.1 percent, as published in the FY 2020 IPPS
final rule (84 FR 42629), to inflate the charges from FY 2018 to FY
2020. To determine the charges for Soliris[supreg], the applicant
assumed hospitals would use the inverse of the national average cost to
charge ratio for pharmacy costs (0.189) from the FY 2020 IPPS/LTCH PPS
final rule to mark-up charges.
Based on the aforementioned analysis, the applicant computed a
final inflated average case-weighted standardized charge per case of
$72,940, as compared to a calculated threshold value of $44,420.
Because the final inflated average case-weighted standardized charge
per case exceeded the average case-weighted threshold amount, the
applicant asserted that the technology meets the cost criterion. We are
inviting public comments on whether Soliris[supreg] meets the cost
criterion.
With respect to the substantial clinical improvement criterion, the
applicant asserted that Soliris[supreg] represents a substantial
clinical improvement over existing technologies because it
significantly improves clinical outcomes relative to services or
technologies previously available, as demonstrated by the applicant's
clinical data and patient outcomes, such as the prevention of relapses
in patients with NMOSD.
The applicant provided a randomized, controlled trial in support of
its claims of reduction of first-adjudicated on-trial relapse with
Soliris[supreg] (PREVENT).\328\ The PREVENT study enrolled 143 adults
who were randomly assigned in a 2:1 ratio to receive intravenous
eculizumab (at a dose of 900 mg weekly for the first four doses
starting on day 1, followed by 1200 mg every 2 weeks starting at week
4) or a matched placebo. The continued use of stable-dose
immunosuppressive therapy was permitted. The primary endpoint studied
was first adjudicated relapse. Secondary outcomes included the
adjudicated annualized relapse rate, quality-of-life measures, and the
score on the Expanded Disability Status Scale (EDSS), which ranges from
0 (no disability) to 10 (death). Adjudicated relapses occurred in 3 of
96 patients (3 percent) in the Soliris[supreg] group and 20 of 47 (43
percent) in the placebo group (hazard ratio, 0.06; 95 percent
confidence interval [CI], 0.02 to 0.20; P<0.001). The adjudicated
annualized relapse rate was 0.02 in the eculizumab group and 0.35 in
the placebo group (rate ratio, 0.04; 95 percent CI, 0.01 to 0.15;
P<0.001). The applicant also explained that 97.9 percent of patients on
Soliris[supreg] remained NMOSD relapse free at 48 weeks, 96.4 percent
at 96 weeks and 96.4 percent at 144 weeks. There was no significant
between-group difference in measures of disability progression. The
mean change in the EDSS score was -0.18 in the eculizumab group and
0.12 in the placebo group (least-squares mean difference, -0.29; 95%
CI, -0.59 to 0.01).
---------------------------------------------------------------------------

\328\ Pittock, S.J., Berthele, A., Fujihara, K., Kim, H.J.,
Levy, M., Palace, J., Nakashima, I., Terzi, M., Totolyan, N.,
Viswanathan, S., Wang, K.C., Pace, A., Futita, K.P., Armstrong, R.,
Wingerchuk, D.M., ``Eculizumab in Aquaporin-4-Positive Neuromyelitis
Optica Spectrum Disorder.'' N Engl J Med., 2019, vol 381(7), pp.,
614-625.
---------------------------------------------------------------------------

The applicant also submitted a poster presentation of post hoc
efficacy analyses in pre-specified subgroups from the PREVENT
study.\329\ Pre-specified subgroup summaries for time to first
adjudicated relapse were based on immunosuppressive therapies (IST) use
(five subgroups for concomitant IST use; two subgroups according to
whether or not rituximab was previously used), geographic region, age,
sex, race and randomization stratum. Time to first adjudicated relapse
was increased with eculizumab compared with placebo in all subgroups
analyzed. Significant treatment effects were observed in all subgroups
for IST use, region, age, sex and race, except for the smallest
subgroups in which the differences were similar to the others but did
not reach nominal significance owing to small sizes (patients using
other ISTs, n = 7; Black/African American patients, n = 17, among whom
none of the nine patients receiving eculizumab experienced a relapse),
and in patients from the Americas owing to the performance of the
placebo arm. In patients who had received rituximab more than 3 months
before the study, the adjudicated relapse risk reduction was 90.7
percent with eculizumab compared with placebo (p = 0.0055). The
proportion of patients who were relapse-free at week 48 was
consistently higher with eculizumab than with placebo in all pre-
specified IST subgroups.
---------------------------------------------------------------------------

\329\ Pittock, S.J., Berthele, A., Fujihara, K., Kim, H.J.,
Levy, M., Palace, J., Nakashima, I., Terzi, M., Totolyan, N.,
Viswanathan, S., Wang, K.C., Pace, A., Futita, K.P., Yountz, M.,
Armstrong, R., Wingerchuk, D.M., ``Subgroup analyses from the phase
3 PREVENT study in patients with aquaporin-4 antibody-positive
neuromyelitis optica spectrum disorder,'' September 11-13, 2019,
Poster presentation at ECTRIMS, Stockholm, Sweden.
---------------------------------------------------------------------------

As stated previously the applicant asserted that Soliris[supreg]
represents a substantial clinical improvement over existing
technologies because it reduces relapses in patients with NMOSD. The
applicant explained that the PREVENT study demonstrated several
endpoints. The applicant explained that Soliris[supreg] reduced first
adjudicated on-trial relapse with eculizumab in comparison to placebo
with a 94 percent relative risk reduction (Hazard Ratio, 0.006; 95% CI,
0.02-0.20). The applicant also explained that 97.9 percent of
Soliris[supreg] patients were relapse free at 48 weeks, compared to
63.2 percent for the placebo group. The applicant further noted that in
a subgroup of patients utilizing monotherapy (patients on eculizumab or
placebo only, without

[[Page 32655]]

concomitant immunosuppressant agents), 100 percent of Soliris[supreg]
patients were relapse free at 48 weeks compared to 60.6 percent for
placebo. The applicant also explained that in the PREVENT subgroup
analysis presented as a poster, the treatment effect was observed
regardless of whether it was used as a monotherapy or with concomitant
ISTs (corticosteroids alone, azathioprine, mycophenolate mofetil);
previous IST use (including rituximab); geographical region; age; sex;
and race.
The applicant also explained that the Soliris[supreg] U.S.
Prescribing Information contains the following information on resource
utilization in the applicant's phase III trials (corticosteroid use,
plasma exchange treatment, and hospitalizations): Compared to placebo-
treated patients, the PREVENT study showed that Soliris[supreg]-treated
patients had reduced annualized rates of (1) hospitalizations (0.04 for
Soliris[supreg] versus 0.31 for placebo), (2) of corticosteroid
administration to treat acute relapses (0.07 for Soliris[supreg] versus
0.42 for placebo), and (3) of plasma exchange treatments (0.02 for
Soliris[supreg] versus 0.19 for placebo). The applicant explained that
annualized rates were calculated by dividing the total number of on-
trial relapses requiring acute treatment during the study period for
all patients by the number of patient-years in the study period.
After reviewing the information submitted by the applicant as part
of its FY 2021 new technology add-on payment application for Soliris,
we are concerned that the applicant provided only one study in support
of its assertions of substantial clinical improvement, which is the
PREVENT trial, with additional supporting documents all based on the
same trial. We note that the study compared Soliris to placebo but that
there was no comparison of Soliris to currently available treatments to
gauge real world efficacy, nor was there information about how these
current treatments work and why they are ineffective. Furthermore, in
the PREVENT trial, the applicant did not provide the dosage amounts for
the patients on continuing medication in addition to placebo or
Soliris. It is not clear to us if the patients receiving Soliris had
higher dosages of continuing medications than those in the placebo
group. We would be interested in more information about the dosage
amounts in the treatment and control groups in the PREVENT trial. We
are inviting public comment on whether Soliris[supreg] technology meets
the substantial clinical improvement criterion.
We did not receive any written comments in response to the New
Technology Town Hall meeting notice published in the Federal Register
regarding the substantial clinical improvement criterion for
Soliris[supreg] or at the New Technology Town Hall meeting.
l. SpineJack[supreg] System
Stryker, Inc., submitted an application for new technology add-on
payments for the SpineJack[supreg] Expansion Kit (hereinafter referred
to as the SpineJack[supreg] system) for FY 2021. The applicant
described the SpineJack[supreg] system as an implantable fracture
reduction system, which is indicated for use in the reduction of
painful osteoporotic vertebral compression fractures (VCFs) and is
intended to be used in combination with Stryker VertaPlex and VertaPlex
High Viscosity (HV) bone cement.
The applicant explained that the SpineJack[supreg] system is
designed to be implanted into a collapsed vertebral body (VB) via a
percutaneous transpedicular approach under fluoroscopic guidance.
According to the applicant, once in place, the intravertebral implants
are expanded to mechanically restore VB height and maintain the
restoration. The applicant explained that the implants remain within
the VB and, together with the delivered bone cement, stabilize the
restoration, provide pain relief and improve patient mobility.
According to the applicant, the SpineJack[supreg] system further
reduces the risk of future adjacent level fractures (ALFs).\330\
---------------------------------------------------------------------------

\330\ Noriega, D., et al., ``A prospective, international,
randomized, noninferiority study comparing an implantable titanium
vertebral augmentation device versus balloon kyphoplasty in the
reduction of vertebral compression fractures (SAKOS study),'' The
Spine Journal, November 2019, vol 19(11), pp. 1782-1795.
---------------------------------------------------------------------------

The applicant explained that the SpineJack[supreg] system is
available in three sizes (4.2, 5.0 and 5.8 mm), and implant size
selection is based upon the internal cortical diameter of the pedicle.
According to the SpineJack[supreg] system Instructions for Use, the use
of two implants is recommended to treat a fractured VB. According to
the applicant, multiple VBs can also be treated in the same operative
procedure as required.
The applicant explained that using a bilateral transpedicular
approach, the SpineJack[supreg] implants are inserted into the
fractured VB. The applicant stated that the implants are then
progressively expanded though actuation of an implant tube that pulls
the two ends of the implant towards each other in situ to mechanically
restore VB height. The applicant explained that the mechanical working
system of the implant allows for a progressive and controlled reduction
of the vertebral fracture.\331\ The applicant stated that when
expanded, each SpineJack[supreg] implant exerts a lifting pressure on
the fracture through a mechanism that may be likened to the action of a
scissor car jack, and that the longitudinal compression on the implant
causes it to open in a craniocaudal direction. The applicant explained
that the implant is locked into the desired expanded position as
determined and controlled by the treating physician.\332\
---------------------------------------------------------------------------

\331\ Vanni D., et al., ``Third-generation percutaneous
vertebral augmentation systems,'' J. Spine Surg., 2016, vol. 2(1),
pp. 13-20.
\332\ Noriega D. et al., ``Clinical Performance and Safety of
108 SpineJack Implantations: 1-Year Results of a Prospective
Multicentre Single-Arm Registry Study,'' BioMed Res. Int., 2015,
vol. 173872.
---------------------------------------------------------------------------

The applicant further explained that once the desired expansion has
been obtained, polymethylmethacrylate (PMMA) bone cement is injected at
low pressure into and around the implant to stabilize the restored
vertebra, which leads the implant to become encapsulated with the
delivered bone cement. According to the applicant, restoration of the
anatomy and stabilization of the fracture results in pain relief as
well as improved mobility for the patient.\333\
---------------------------------------------------------------------------

\333\ Ibid.
---------------------------------------------------------------------------

According to the applicant, osteoporosis is one of the most common
bone diseases worldwide that disproportionately affects aging
individuals. The applicant explained that in 2010, approximately 54
million Americans aged 50 years or older had osteoporosis or low bone
mass,\334\ which resulted in more than 2 million osteoporotic fragility
fractures in that year alone.\335\ The applicant stated it has been
estimated that more than 700,000 VCFs occur each year in the United
States (U.S.),\336\ and of these VCFs, about 70,000 result in hospital
admissions with an average length of stay of 8 days per patient.\337\

[[Page 32656]]

Furthermore, the applicant noted that in the first year after a painful
vertebral fracture, patients have been found to require primary care
services at a rate 14 times greater than the general population.\338\
The applicant explained that medical costs attributed to VCFs in the
U.S. exceeded $1 billion in 2005 and are predicted to surpass $1.6
billion by 2025.\339\
---------------------------------------------------------------------------

\334\ National Osteoporosis Foundation. (2019). What is
osteoporosis and what causes it? Available from: https://www.nof.org/patients/what-is-osteoporosis/.
\335\ King A and Fiorentino D. ``Medicare payment cuts for
osteoporosis testing reduced use despite tests' benefit in reducing
fractures.'' Health Affairs (Millwood), 2011, vol. 30(12), pp. 2362-
2370.
\336\ Riggs B and Melton L. ``The worldwide problem of
osteoporosis: Insights afforded by epidemiology.'' Bone, 1995, vol.
17(Suppl 5), pp. 505-511.
\337\ Siemionow K and Lieberman I. ``Vertebral augmentation in
osteoporotic and osteolytic fractures: Current Opinion in Supportive
and Palliative Care.'' 2009, vol. 3(3), pp. 219-225.
\338\ Wong C and McGirt M. ``Vertebral compression fractures: A
review of current management and multimodal therapy.'' Journal of
Multidisciplinary Healthcare, 2013, vol 6, pp. 205-214.
\339\ Burge R et al. ``Incidence and economic burden of
osteoporosis-related fractures in the United States: 2005-2025.''
Journal of Bone and Mineral Research. 2007, vol 22(3), pp. 465-475.
---------------------------------------------------------------------------

The applicant explained that osteoporotic VCFs occur when the
vertebral body (VB) of the spine collapses and can result in chronic
disabling pain, excessive kyphosis, loss of functional capability,
decreased physical activity and reduced quality of life. The applicant
stated that as the spinal deformity progresses, it reduces the volume
of the thoracic and abdominal cavities, which may lead to crowding of
internal organs. The applicant noted that the crowding of internal
organs may cause impaired pulmonary function, abdominal protuberance,
early satiety and weight loss. The applicant indicated that other
complications may include bloating, distention, constipation, bowel
obstruction, and respiratory disturbances, such as pneumonia,
atelectasis, reduced forced vital capacity and reduced forced
expiratory volume in 1 second.
The applicant stated that if VB collapse is >50 percent of the
initial height, segmental instability will ensue. As a result, the
applicant explained that adjacent levels of the VB must support the
additional load and this increased strain on the adjacent levels may
lead to additional VCFs. Furthermore, the applicant summarized that
VCFs also lead to significant increases in morbidity and mortality risk
among elderly patients, as evidenced by a 2015 study by Edidin et al.,
in which researchers investigated the morbidity and mortality of
patients with a newly diagnosed VCF (n = 1,038,956) between 2005 to
2009 in the U.S. Medicare population. For the osteoporotic VCF
subgroup, the adjusted 4-year mortality was 70 percent higher in the
conservatively managed group than in the balloon kyphoplasty procedures
(BKP)-treated group, and 17 percent lower in the BKP group than in the
vertebroplasty (VP) group. According to the applicant, when evaluating
treatment options for osteoporotic VCFs, one of the main goals of
treatment is to restore the load bearing bone fracture to its normal
height and stabilize the mechanics of the spine by transferring the
adjacent level pressure loads across the entire fractured vertebra and
in this way, the intraspinal disc pressure is restored and the risk of
adjacent level fractures (ALFs) is reduced.
The applicant explained that treatment of osteoporotic VCFs in
older adults most often begins with conservative care, which includes
bed rest, back bracing, physical therapy and/or analgesic medications
for pain control. According to the applicant, for those patients that
do not respond to conservative treatment and continue to have
inadequate pain relief or pain that substantially impacts quality of
life, vertebral augmentation (VA) procedures may be indicated. The
applicant explained that VP and BKP are two minimally invasive
percutaneous VA procedures that are most often used in the treatment of
osteoporotic VCFs and another VA treatment option includes the use of a
spiral coiled implant made from polyetheretherketone (PEEK), which is
part of the Kiva[supreg] system.
According to the applicant, among the treatment options available,
BKP is the most commonly performed procedure and the current gold
standard of care for VA treatment. The applicant stated that it is
estimated that approximately 73 percent of all vertebral augmentation
procedures performed in the United States between 2005 and 2010 were
BKP.\340\ According to the applicant, the utilization of the
Kiva[supreg] system is relatively low in the U.S. and volume
information was not available in current market research data.\341\
---------------------------------------------------------------------------

\340\ Goz V et al. ``Vertebroplasty and kyphoplasty: National
outcomes and trends in utilization from 2005 through 2010.'' The
Spine Journal. 2015, vol. 15(5), pp. 959-965.
\341\ Lin M. ``Minimally invasive vertebral compression fracture
treatments. Medtech 360, Market Insights, Millennium Research Group.
2019.
---------------------------------------------------------------------------

The applicant stated that VA treatment with VP may alleviate pain,
but it cannot restore VB height or correct spinal deformity. The
applicant stated that BKP attempts to restore VB height, but the
temporary correction obtained cannot be sustained over the long-term.
The applicant stated that the Kiva[supreg] implant attempts to
mechanically restore VB height, but it has not demonstrated superiority
to BKP for this clinical outcome.\342\
---------------------------------------------------------------------------

\342\ Ibid.
---------------------------------------------------------------------------

With respect to the newness criterion, the SpineJack[supreg]
Expansion Kit received FDA 510(k) clearance on August 30, 2018, based
on a determination of substantial equivalence to a legally marketed
predicate device. The applicant explained that although the
SpineJack[supreg] Expansion Kit received FDA 510(k) clearance on August
30, 2018, due to the time required to prepare for supply and
distribution channels, it was not available on the U.S. market until
October 11, 2018. As we discussed previously, the SpineJack[supreg]
Expansion Kit is indicated for use in the reduction of painful
osteoporotic VCFs and is intended to be used in combination with
Stryker VertaPlex and VertaPlex High Viscosity (HV) bone cements.
According to the applicant, there are currently no ICD-10-PCS procedure
codes to distinctly identify the SpineJack[supreg] system. We note that
the applicant submitted a request for approval for a unique ICD-10-PCS
procedure code for the implantation of the SpineJack[supreg] system
beginning in FY 2021.
As discussed previously, if a technology meets all three of the
substantial similarity criteria, it would be considered substantially
similar to an existing technology and therefore would not be considered
``new'' for purposes of new technology add-on payments.
With regard to the first criterion, whether a product uses the same
or similar mechanism of action to achieve a therapeutic outcome,
according to the applicant, there are several factors that highlight
the different mechanism of action in treating osteoporotic VCFs with
the SpineJack[supreg] system compared to other BKP implants to reduce
the incidence of ALFs and improve midline VB height restoration.
According to the applicant, these differences include implant
construction, mechanism of action, bilateral implant load support and
>500 Newtons (N) of lift pressure.
The applicant described the SpineJack[supreg] system as including
two cylindrical implants constructed from Titanium-6-Aluminum-4-
Vanadium (Ti6Al4V) with availability in three sizes 4.2 mm (12.5 mm
expanded), 5.0 mm (17 mm expanded) and 5.8 mm (20 mm expanded).
According to the applicant, the SpineJack[supreg] implant exerts
lifting pressure on the fracture through a mechanism that may be
likened to the action of a scissor car jack. The applicant explained
that following the insertion of the implant into the vertebral body
(VB), it is progressively expanded though actuation of an implant tube
that pulls the two ends of the implant towards each other and the
longitudinal compression on the implant causes it to open in a
craniocaudal direction. According to the

[[Page 32657]]

applicant, the force generated by the bilateral SpineJack[supreg]
implants varies according to implant size, ranging from 500-1,000
Newtons for fracture reduction and superior endplate lift. In addition,
the applicant explained that the SpineJack[supreg] implant provides
symmetric, broad load support under the fractured endplate and spinal
column which differentiates the mechanism of action from BKPs.\343\
---------------------------------------------------------------------------

\343\ Jacobson R et al. ``Re-expansion of osteoporotic
compression fractures using bilateral SpineJack implants: Early
clinical experience and biomechanical considerations.'' Cureus.
2019, vol 11(4), e4572.
---------------------------------------------------------------------------

The applicant stated that the SpineJack[supreg] implant is uniquely
constructed from a titanium alloy, which the applicant claims allows
for plastic deformation when it encounters the hard cortical bone of
the endplate yet still provides the lift force required to restore
midline VB height in the fractured vertebra. The applicant stated that
the SpineJack[supreg] system notably contains a self-locking security
mechanism that restricts further expansion of the device when extreme
load forces are concentrated on the implant. As a result, the applicant
asserted that this feature significantly reduces the risk of vertebral
endplate breakage while it further allows functional recovery of the
injured disc.\344\
---------------------------------------------------------------------------

\344\ Vanni D et al. ``Third-generation percutaneous vertebral
augmentation systems.'' Journal of Spine Surgery. 2016, vol 2(1),
pp. 13-20.
---------------------------------------------------------------------------

According to the applicant, the expansion of the SpineJack[supreg]
implants creates a preferential direction of flow for the bone cement;
PMMA bone cement is deployed from the center of the implant into the
VB. The applicant stated that when two implants are symmetrically
positioned in the VB, this allows for a more homogenous spread of PMMA
bone cement. The applicant asserted that the interdigitation of bone
cement creates a broad supporting ring under the endplate, which is
essential to confer stability to the VB.
The applicant explained that the SpineJack[supreg] implants provide
symmetric, broad load support for osteoporotic vertebral collapse,
which is based upon precise placement of bilateral ``struts'' that are
encased in PMMA bone cement, whereas BKP and vertebroplasty (VP) do not
provide structural support via an implanted device. The applicant
explained that the inflatable balloon tamps utilized in BKP are not
made from titanium and are not a permanent implant. According to the
applicant, the balloon tamps are constructed from thermoplastic
polyurethane, which have limited load bearing capacity. The applicant
noted that although the balloon tamps are expanded within the VB to
create a cavity for bone cement, they do not remain in place and are
removed before the procedure is completed. The applicant explained that
partial lift to the VB is obtained during inflation, resulting in
kyphotic deformity correction and partial gains in anterior VB height
restoration, but inflatable balloon tamps are deflated prior to removal
so some of the VB height restoration obtained is lost upon removal of
the bone tamps. According to the applicant, BKP utilizes the placement
of PMMA bone cement to stabilize the fracture and does not include an
implant that remains within the VB to maintain fracture reduction and
midline VB height restoration.
According to the applicant the Kiva[supreg] system is constructed
of a nitinol coil and PEEK-OPTIMA sheath, with sizes including a 4-loop
implant (12 mm expanded) and a 5-loop implant (15 mm expanded) and
unlike the SpineJack[supreg] system, is not made of titanium and does
not include a locking scissor jack design. The applicant stated that
the specific mechanism of action for the Kiva[supreg] system is
different from the SpineJack[supreg] system. The applicant explained
that during the procedure that involves implanting the Kiva[supreg]
system, nitinol coils are inserted into the VB to form a cylindrical
columnar cavity. The applicant stated that the PEEK-OPTIMA is then
placed over the nitinol coil. The applicant explained that the nitinol
coil is removed from the VB and the PEEK material is filled with PMMA
bone cement. The applicant stated that the deployment of 5 coils
equates to a maximum of height of 15 mm. The applicant stated that the
lifting direction of the Kiva implant is caudate and unidirectional.
According to the applicant, in the KAST (Kiva Safety and Effectiveness
Trial) pivotal study, it was reported that osteoporotic VCF patients
treated with the Kiva[supreg] system had an average of 2.6 coils
deployed.\345\ Additionally, in a biomechanical comparison conducted
for the Kiva[supreg] system and BKP using a loading cycle of 200-500
Newtons in osteoporotic human cadaver spine segments filled with bone
cement, there were no statistically significant differences observed
between the two procedures for VB height restoration, stiffness at high
or low loads, or displacement under compression.\346\
---------------------------------------------------------------------------

\345\ Tutton S et al. KAST Study: The Kiva system as a vertebral
augmentation treatment--a safety and effectiveness trial: A
randomized, noninferiority trial comparing the Kiva system with
balloon kyphoplasty in treatment of osteoporotic vertebral
compression fractures. Spine. 2015; 40(12):865-875.
\346\ Wilson D et al. An ex vivo biomechanical comparison of a
novel vertebral compression fracture treatment system to
kyphoplasty. Clinical Biomechanics. 2012; 27(4):346-353.
---------------------------------------------------------------------------

The applicant summarized the differences and similarities of the
SpineJack[supreg], BKP, and PEEK coiled implant as follows: (1) With
respect to construction, SpineJack[supreg] is made of Titanium-6-
Aluminum-4-Vanadium compared to thermoplastic polyurethanes for BKP and
nitinol and PEEK for the PEEK coiled implant; (2) with respect to
mechanism of action, the SpineJack[supreg] uses a locking scissor jack
encapsulated in PMMA bone cement compared to hydrodynamic cavity
creation and PMMA cavity filler for BKP and coil cavity creation and
PEEK implant filled with PMMA bone cement for the PEEK coiled implant;
(3) with respect to plastic deformation, SpineJack[supreg] and BKP
allow for plastic deformation while the PEEK coiled implant does not;
(4) with respect to craniocaudal expansion, SpineJack[supreg] allows
for craniocaudal expansion, whereas BKP and the PEEK coiled implant do
not; (5) with respect to bilateral load support, SpineJack[supreg]
provides bilateral load support whereas BKP and the PEEK coiled implant
do not; and (6) with respect to lift pressure of >500 N,
SpineJack[supreg] provides lift pressure of >500 N whereas BKP and the
PEEK coiled implant do not. The applicant summarized that the
SpineJack[supreg] system is uniquely constructed and utilizes a
different mechanism of action than BKP, which is the gold standard of
treatment for osteoporotic VCFs, and that the construction and
mechanism of action of the SpineJack[supreg] system is further
differentiated when compared with the PEEK coiled implant.
With respect to the second criterion, whether a product is assigned
to the same or a different MS-DRG, the applicant did not specify
whether it believed cases involving the SpineJack[supreg] system would
be assigned to the same MS-DRG as existing technology. However, we note
that the MS-DRGs the applicant included in its cost analysis were the
same MS-DRGs to which cases involving BKP procedures are typically
assigned.
With respect to the third criterion, whether the new use of the
technology involves the treatment of the same or similar type of
disease and the same or similar patient population, the applicant did
not specifically address whether the technology meets this criterion.
However, the applicant generally

[[Page 32658]]

summarized the disease state that the technology treats as osteoporotic
VCFs, and described other treatment options for osteoporotic VCFs as
including VP, BKP and the PEEK coiled implant.
In summary, the applicant asserted that the SpineJack[supreg]
system is not substantially similar to any existing technology because
it utilizes a different mechanism of action, when compared to existing
technologies, to achieve a therapeutic outcome.
We are inviting public comments on whether the SpineJack[supreg]
system is substantially similar to other currently available
technologies and whether the SpineJack[supreg] system meets the newness
criterion.
With regard to the cost criterion, the applicant conducted the
following analysis to demonstrate that the technology meets the cost
criterion. The applicant searched the FY 2018 MedPAR file for inpatient
hospital claims that reported the following ICD-10-PCS procedure codes:
0PS43ZZ (Reposition thoracic vertebra, percutaneous approach) in
combination with 0PU43JZ (Supplement thoracic vertebra with synthetic
substitute, percutaneous approach) and 0QS03ZZ (Reposition lumbar
vertebra, percutaneous approach) in combination with 0QU03JZ
(Supplement lumbar vertebra with synthetic substitute, percutaneous
approach). According to the applicant, the results included cases
involving BKP procedures.
This resulted in 15,352 cases spanning approximately 130 MS-DRGs,
with approximately 77 percent of those cases (n=11,841) mapping to the
following top 6 MS-DRGs:
[GRAPHIC] [TIFF OMITTED] TP29MY20.133

The applicant performed two separate analyses with regard to the
cost criterion, one based on 100 percent of the claims reporting the
specified ICD-10-PCS procedure codes, and the second based on the 77
percent of claims mapping to the top six MS-DRGs.
The applicant used the following methodology for both analyses. The
applicant first removed the charges for the prior technology being
replaced by SpineJack[supreg]. The applicant explained that it
estimated charges associated with the prior technology as 50 percent of
the charges associated with the category Medical Surgical Supply Charge
Amount (which included revenue centers 027x). The applicant stated that
use of the SpineJack[supreg] system would replace some but not all of
the device charges included in these claims, as some currently used
medical and surgical supplies and devices would still be required for
patients during their hospital stay, even after substituting
SpineJack[supreg] for BKP and other surgical interventions. The
applicant stated that it was unable to determine a more specific
percentage for the appropriate amount of prior medical and surgical
supply charges to remove from the relevant patient claims, but asserted
that removing 50 percent of the charges was a conservative approach for
calculation purposes. The applicant then standardized the charges and
inflated the charges from FY 2018 to FY 2020. The applicant reported
using an inflation factor of 11.1 percent, as published in the FY 2020
IPPS final rule (84 FR 42629).
The applicant then calculated and added the charges for the
SpineJack[supreg] technology by taking the estimated per patient cost
of the device, and converting it to a charge by dividing the costs by
the national average CCR (cost-to-charge ratio) of 0.299 for
implantable devices from the FY 2020 IPPS/LTCH PPS final rule (84 FR
42179).
In the analysis based on 100 percent of claims, the applicant
computed a final inflated average case-weighted standardized charge per
case of $108,760, as compared to an average case-weighted threshold
amount of $77,395. In the analysis based on 77 percent of claims from
only the top six MS-DRGs, the applicant computed a final inflated
average case-weighted standardized charge per case of $92,904, as
compared to an average case-weighted threshold amount of $72,273.
Because the final inflated average case-weighted standardized
charge per case exceeded the average case-weighted threshold amount
under both analyses described previously, the applicant asserted that
the technology meets the cost criterion. We are inviting public
comments on whether the SpineJack[supreg] system meets the cost
criterion.
With regard to the substantial clinical improvement criterion, the
applicant asserted that the treatment of osteoporotic vertebral
compression fracture (VCF) patients with the SpineJack[supreg] system
represents a substantial clinical improvement over existing
technologies because clinical research supports that it reduces future
interventions, hospitalizations, and physician visits through a
decrease in adjacent level fractures (ALFs), which the applicant
asserted are clinically significant adverse events associated with
osteoporotic VCF. The applicant also asserted that treatment with the
SpineJack[supreg] system greatly reduces pain scores and pain
medication use when compared to BKP, which the applicant stated is the
current gold standard in vertebral augmentation (VA) treatment. The
applicant submitted eight studies to support that its technology
represents a substantial clinical improvement over existing
technologies.
The applicant explained that the SpineJack[supreg] system has been
available for the treatment of patients with osteoporotic VCFs for over
10 years in Europe. The applicant explained that, as a result, the
SpineJack[supreg] implant has been extensively studied, and claims from
smaller studies are supported by the results from a recent, larger
prospective, randomized study known as the SAKOS (SpineJack[supreg]
versus Kyphoplasty in Osteoporotic Patients) study. The applicant cited
the SAKOS study \347\ in support of multiple clinical

[[Page 32659]]

improvement claims. The applicant explained that the SAKOS study was
the pivotal trial conducted in support of the FDA 510(k) clearance for
the SpineJack[supreg] system and that the intent of the study was to
compare the safety and effectiveness of the SpineJack[supreg] system
with the KyphX Xpander Inflatable Bone Tamp (BKP) for treatment of
patients with painful osteoporotic VCFs in order to establish a non-
inferiority finding for use of the SpineJack[supreg] system versus
balloon kyphoplasty procedure (BKP).
---------------------------------------------------------------------------

\347\ Noriega, D., et al., ``A prospective, international,
randomized, noninferiority study comparing an implantable titanium
vertebral augmentation device versus balloon kyphoplasty in the
reduction of vertebral compression fractures (SAKOS study),'' The
Spine Journal, 2019, vol. 19(11), pp. 1782-1795.
---------------------------------------------------------------------------

The SAKOS study is a prospective, international, randomized, non-
inferiority study comparing a titanium implantable vertebral
augmentation device (TIVAD), the SpineJack[supreg] system, versus BKP
in the reduction of vertebral compression fractures with a 12-month
follow-up. The primary endpoint was a 12-month responder rate based on
a composite of three components: (1) Reduction in VCF fracture-related
pain at 12 months from baseline by >20 mm as measured by a 100-mm
Visual Analog Scale (VAS) measure, (2) maintenance or functional
improvement of the Oswestry Disability Index (ODI) score at 12 months
from baseline, and (3) absence of device-related adverse events or
symptomatic cement extravasation requiring surgical reintervention or
retreatment at the index level. If the primary composite endpoint was
successful, a fourth component (absence of ALF) was added to the three
primary components for further analysis. If the analysis of this
additional composite endpoint was successful, then midline target
height restoration at 6 and 12 months was assessed. According to the
applicant, freedom from ALFs and midline VB height restoration were two
additional superiority measures that were tested. According to the
SAKOS study, secondary clinical outcomes included changes from baseline
in back pain intensity, ODI score, EuroQol 5-domain (EQ-5D) index score
(to evaluate quality of life), EQ-VAS score, ambulatory status,
analgesic consumption, and length of hospital stay. Radiographic
endpoints included restoration of vertebral body height (mm), and Cobb
angle at each follow-up visit. Adverse events (AEs) were recorded
throughout the study period. The applicant explained that researchers
did not blind the treating physicians or patients, so each group was
aware of the treatment allocation prior to the procedure; however, the
three independent radiologists that performed the radiographic reviews
were blinded to the personal data of the patients, study timepoints and
results of the study.
The SAKOS study recruited patients from 13 hospitals across 5
European countries and randomized 152 patients with osteoporotic
vertebral compression fractures (OVCFs) (1:1) to either
SpineJack[supreg] or BKP procedures. Specifically, patients were
considered eligible for inclusion if they met a number of criteria,
including (1) at least 50 years of age, (2) had radiographic evidence
of one or two painful VCF between T7 and L4, aged less than 3 month,
due to osteoporosis, (3) fracture(s) that showed loss of height in the
anterior, middle, or posterior third of the VB >=15% but <=40%, and (4)
patient failed conservative medical therapy, defined as either having a
VAS back pain score of >=50 mm at 6 weeks after initiation of fracture
care or a VAS pain score of >=70% mm at 2 weeks after initiation of
fracture care. Eleven of the originally recruited patients were
subsequently excluded from surgery (9 randomized to SpineJack[supreg]
and 2 to BKP). A total of 141 patients underwent surgery, and 126
patients completed the 12-month follow-up period (61 TIVAD and 65 BKP).
The applicant contended that despite the SAKOS study being completed
outside the U.S., results are applicable to the Medicare patient
population, noting that 82 percent (116 of 141) of the patients in the
SAKOS trial that received treatment (SpineJack[supreg] system or BKP)
were age 65 or older. The applicant explained further that the FDA
evaluated the applicability of the SAKOS clinical data to the U.S.
population and FDA concluded that although the SAKOS study was
performed in Europe, the final study demographics were very similar to
what has been reported in the literature for U.S.-based studies of BKP.
The applicant also explained that FDA determined that the data was
acceptable for the SpineJack[supreg] system 510(k) clearance including
two clinical superiority claims versus BKP.
The SAKOS study reported that analysis on the intent to treat
population using the observed case method resulted in a 12-month
responder rate of 89.8 percent and 87.3 percent, for SpineJack[supreg]
and BKP respectively (p=0.0016). The additional composite endpoint
analyzed in observed cases resulted in a higher responder rate for
SpineJack[supreg] compared to BKP at both 6 months (88.1% vs. 60.9%;
p<0.0001) and 12 months (79.7% vs. 59.3%; p<0.0001). Midline VB height
restoration, tested for superiority using a t test with one-sided 2.5
percent alpha in the ITT population, was greater with SpineJack[supreg]
than BKP at 6 months (1.142.61 mm vs 0.312.22
mm; p=0.0246) and at 12 months (1.312.58 mm vs. 0.102.23 mm; p=0.0035), with similar results in the per protocol (PP)
population.
Also, according to the SAKOS study, decrease in pain intensity
versus baseline was more pronounced in the SpineJack[supreg] group
compared to the BKP group at 1 month (p=0.029) and 6 months (p=0.021).
At 12 months, the difference in pain intensity was no longer
statistically significant between the groups, and pain intensity at 5
days post-surgery was not statistically different between the groups.
The SAKOS study publication also reported that at each timepoint, the
percentage of patients with reduction in pain intensity >20 mm was
>=90% in the SpineJack[supreg] group and >=80% in the BKP group, with a
statistically significant difference in favor of SpineJack[supreg] at 1
month post-procedure (93.8% vs 81.4%; p=0.03). The study also
reported--(1) no statistically significant difference in disability
(ODI score) between groups during the follow-up period, although there
was a numerically greater improvement in the SpineJack[supreg] group at
most time points; (2) at each time point, the percentage of patients
with maintenance or improvement in functional capacity was at or close
to 100 percent; and (3) in both groups, a clear and progressive
improvement in quality of life was observed throughout the 1-year
follow-up period without any statistically significant between-group
differences.
In the SAKOS study, both groups had similar proportions of VCFs
with cement extravasation outside the treated VB (47.3% for TIVAD,
41.0% for BKP; p=0.436). No symptoms of cement leakage were reported.
The SAKOS study also reported that the BKP group had a rate of adjacent
fractures more than double the SpineJack[supreg] group (27.3% vs.
12.9%; p=0.043). The SAKOS study also reported that the BKP group had a
rate of non-adjacent subsequent thoracic fractures nearly 3 times
higher than the SpineJack[supreg] group (21.9% vs. 7.4%) (a p-value was
not reported for this result). The most common AEs reported over the
study period were backpain (11.8 percent with SpineJack[supreg], 9.6
percent with BKP), new lumbar vertebral fractures (11.8 percent with
SpineJack[supreg], 12.3 percent with BKP), and new thoracic vertebral
fractures (7.4 percent with SpineJack[supreg], 21.9 percent with BKP).
The most frequent SAEs were lumbar vertebral fractures (8.8 percent
with SpineJack[supreg]; 6.8 percent with BKP) and thoracic vertebral
fractures (5.9 percent with SpineJack[supreg], 9.6 percent with BKP).
We

[[Page 32660]]

also note that the length of hospital stay (in days) for osteoporotic
VCF patients treated in the SAKOS trial was 3.8 3.6 days
for the SpineJack[supreg] group and 3.3 2.4 days for the
BKP group (p=0.926, Wilcoxon test).
The applicant also submitted seven additional studies, which are
described in more detail in this section, related to the applicant's
specific assertions regarding substantial clinical improvement.
As stated previously, the applicant asserted that the
SpineJack[supreg] system represents a substantial clinical improvement
over existing technologies because it will reduce future interventions,
hospitalizations, and physician visits through a decrease in ALFs. The
applicant explained that ALFs are considered clinically significant
adverse events associated with osteoporotic VCFs, citing studies by
Lindsay et al.\348\ and Ross et al.\349\ The applicant explained that
these studies reported, respectively, that having one or more VCFs
(irrespective of bone density) led to a 5-fold increase in the
patient's risk of developing another vertebral fracture, and the
presence of two or more VCFs at baseline increased the risk of ALF by
12-fold. The applicant asserted that analysis of the additional
composite endpoint in the SAKOS study demonstrated statistical
superiority of the SpineJack[supreg] system over BKP (p<0.0001) for
freedom from ALFs at both 6 months (88.1 percent vs. 60.9 percent) and
12 months (79.7 percent vs. 59.3 percent) post-procedure. The applicant
noted that the results were similar on both the intent to treat and PP
patient populations. In addition, the applicant asserted the
SpineJack[supreg] system represents a substantial clinical improvement
because in the SAKOS study, compared to patients treated with the
SpineJack[supreg] system, BKP-treated patients had more than double the
rate of ALFs (27.3 percent vs. 12.9 percent; p=0.043) and almost triple
the rate of non-adjacent thoracic VCFs (21.9 percent vs. 7.4 percent).
---------------------------------------------------------------------------

\348\ Lindsay R. et al., ``Risk of new vertebral fracture in the
year following a fracture,'' Journal of the American Medical
Association, 2001, vol. 285(3), pp. 320-323.
\349\ Ross P. et al., Pre-existing fractures and bone mass
predict vertebral fracture incidence in women. Annals of Internal
Medicine. 1991, vol. 114(11), pp. 919-923.
---------------------------------------------------------------------------

The applicant also asserted superiority with respect to mid-
vertebral body height restoration with the SpineJack[supreg] system.
The applicant explained that historical treatments of osteoporotic VCFs
have focused on anterior VB height restoration and kyphotic Cobb angle
correction; however, research indicates that the restoration of middle
VB height may be as important as Cobb angle correction in the
prevention of ALFs.\350\ According to the applicant, the depression of
the mid-vertebral endplate leads to decreased mechanics of the spinal
column by transferring the person's weight to the anterior wall of the
level adjacent to the fracture, and as a result the anterior wall is
the most common location for ALFs. The applicant further asserted that
by restoring the entire fracture, including mid-VB height, the
vertebral disc above the superior vertebral endplate is re-pressurized
and transfers the load evenly, preventing ALFs.\351\ The applicant
stated that the SpineJack[supreg] system showed superiority over BKP
with regard to midline VB height restoration at both 6 and 12 months,
pointing to the SAKOS study results in the intent to treat population
at 6 months (1.142.61 mm vs 0.312.22 mm;
p=0.0246) and 12 months (1.312.58 mm vs. 0.102.23 mm; p=0.0035) post-procedure. The applicant noted that
similar results were also observed in the PP population (134 patients
in the intent-to-treat population without any major protocol
deviations).
---------------------------------------------------------------------------

\350\ Lin J et al. Better height restoration, greater kyphosis
correction, and fewer refractures of cemented vertebrae by using an
intravertebral reduction device: A 1-year follow-up study. World
Neurosurgery. 2016; 90:391-396.
\351\ Tzermiadianos M., et al., ``Altered disc pressure profile
after an osteoporotic vertebral fracture is a risk factor for
adjacent vertebral body fracture,'' European Spine Journal, 2008,
vol. 17(11), pp. 1522-1530.
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The applicant also provided two prospective studies, a
retrospective study, and two cadaveric studies in support of its
assertions regarding superior VB height restoration. The applicant
stated that in a prospective comparative study by Noriega D., et
al.,\352\ VB height restoration outcomes utilizing the
SpineJack[supreg] system were durable out to 3 years. This study was a
safety and clinical performance pilot that randomized 30 patients with
painful osteoporotic vertebral compression fractures to
SpineJack[supreg] (n=15) or BKP (n=15).\353\ Twenty-eight patients
completed the 3-year study (14 in each group). The clinical endpoints
of analgesic consumption, back pain intensity, ODI, and quality of life
were recorded preoperatively and through 36-months post-surgery.\354\
Spine X-rays were also taken 48 hours prior to the procedure and at 5
days, 6, 12, and 36 months post-surgery.\355\ The applicant explained
that over the 3-year follow-up period, VB height restoration and
kyphosis correction was better compared to BKP, specifically that VB
height restoration and kyphotic correction was still evident at 36
months with a greater mean correction of anterior VB height (10 13% vs 2 8% for BKP, p=0.007) and midline VB height
(10 11% vs 3 7% for BKP, p=0.034), while
there was a larger correction of the VB angle (-4.97[deg]
5.06[deg] vs 0.42[deg] 3.43[deg]; p=0.003) for the
SpineJack[supreg] group. The applicant stated that this study shows
superiority with regards to VB height restoration.
---------------------------------------------------------------------------

\352\ Noriega D., et al., ``Long-term safety and clinical
performance of kyphoplasty and SpineJack procedures in the treatment
of osteoporotic vertebral compression fractures: a pilot,
monocentric, investigator-initiated study,'' Osteoporosis
International, 2019, vol. 30, pp. 637-645.
\353\ Ibid.
\354\ Ibid.
\355\ Ibid.
---------------------------------------------------------------------------

The applicant asserted that Arabmotlagh M., et al., also supported
superiority with regard to VB height restoration. Arabmotlagh M., et
al. reported an observational case series (with no comparison group) of
SpineJack[supreg]. They enrolled 42 patients with osteoporotic
vertebral compression fracture of the thoracolumbar, who were
considered for kyphoplasty, 31 of whom completed the clinical and
radiological evaluations up to 12 months after the procedure.\356\
According to materials provided by the applicant, the purpose of the
study was to evaluate the efficacy of kyphoplasty with the
SpineJack[supreg] system to correct the kyphotic deformity and to
analyze parameters affecting the restoration and maintenance of spinal
alignment. The applicant explained that the mean VB height calculated
prior to fracture was 2.8 cm (standard deviation (SD) of 0.47), which
decreased to 1.5 cm (SD of 0.59) after the fracture. According to the
applicant, following the procedure performed with the SpineJack[supreg]
device, the VB height significantly increased to 1.9 cm (SD of 0.64;
p<0.01), but was reduced to 1.8 cm (SD of 0.61; p<0.01) at 12 months
post-procedure. We note that according to Arabmotlagh M., et al., these
results were specifically for mean anterior VB height. The study does
not appear to report results for midline VB height.\357\ The applicant
also stated that the mean kyphotic angle (KA) calculated prior to
fracture was -1[deg] (SD of 5.8), which

[[Page 32661]]

increased to 13.4[deg] (SD of 8.1) after the fracture. The applicant
also stated that following the procedure performed with the
SpineJack[supreg] device, KA significantly decreased to 10.8[deg] (SD
of 9.1; p<0.01); however, KA correction was lost at 12 months post-
procedure with an increase to 13.3[deg] (SD of 9.5; p<0.01).
---------------------------------------------------------------------------

\356\ Arabmotlagh M., et al., ``Radiological Evaluation of
Kyphoplasty With an Intravertebral Expander After Osteoporotic
Vertebral Fracture,'' Journal of Orthopaedic Research, 2018. Doi:
10.1002.jor.24180.
\357\ Arabmotlagh M., et al., ``Radiological Evaluation of
Kyphoplasty With an Intravertebral Expander After Osteoporotic
Vertebral Fracture,'' Journal of Orthopaedic Research, 2018. Doi:
10.1002.jor.24180.
---------------------------------------------------------------------------

The applicant provided a Lin et al., retrospective study of 75
patients that compared radiologic and clinical outcomes of kyphoplasty
with the SpineJack[supreg] system to vertebroplasty (VP) in treating
osteoporotic vertebral compression fractures to support its assertions
regarding superiority with regard to midline VB height
restoration.\358\ The applicant stated that the radiologic outcomes
from this study were: (1) The mean KA and mean KA restoration was more
efficient after SpineJack[supreg] than VP at all time points (up to 1
year), except for mean KA observed postoperatively at 1 week; and (2)
the mean middle VB heights and mean VB height restoration was more
favorable after SpineJack[supreg] than VP.\359\ We note that this study
did not compare the SpineJack[supreg] system to BKP, which the
applicant stated is the gold-standard in vertebral augmentation.
---------------------------------------------------------------------------

\358\ Lin J., et al., ``Better Height Restoration, Greater
Kyphosis Correction, and Fewer Refractures of Cemented Vertebrae by
Using an Intravertebral Reduction Device: a 1-Year Follow-up
Study,'' World Neurosurg. 2016, vol. 60, pp. 391-396.
\359\ Ibid.
---------------------------------------------------------------------------

In the two cadaveric studies, Kruger A., et al. (2013) and Kruger
A., et al. (2015), wedge compression fractures were created in human
cadaveric vertebrae by a material testing machine and the axial load
was increased until the height of the anterior edge of the VB was
reduced by 40 percent.\360\ The VBs were fixed in a clamp and loaded
with 100 N in a custom made device. In Kruger A., et al. (2013),
vertebral heights were measured at the anterior wall as well as in the
center of the vertebral bodies in the medial sagittal plane in 36 human
cadaveric vertebrae pre- and post-fracture as well as after treatment
and loading in (27 vertebrae were treated with SpineJack[supreg] with
different cement volumes (maximum, intermediate, and no cement), and 9
vertebrae were treated with BKP). In Kruger A., et al. (2015),
anterior, central, and posterior height as well as the Beck index were
measured in 24 vertebral bodies pre-fracture and post-fracture as well
as after treatment (twelve treated with SpineJack[supreg] and twelve
treated with BKP). The applicant asserted that Kruger A., et al. (2013)
showed superiority on VB height restoration and height maintenance, and
summarized that: (1) Height restoration was significantly better for
the SpineJack[supreg] group compared to BKP; (2) height maintenance was
dependent on the cement volume used; and (3) the group with the
SpineJack[supreg] without cement nevertheless showed better results in
height maintenance, yet the statistical significance could not be
demonstrated.\361\ The applicant asserted that Kruger A., et al. (2015)
showed superiority on VB height restoration, because the height
restoration was significantly better in the SpineJack[supreg] group
compared with the BKP group. The applicant explained that the clinical
implications include a better restoration of the sagittal balance of
the spine and a reduction of the kyphotic deformity, which may relate
to clinical outcome and the biological healing process.\362\
---------------------------------------------------------------------------

\360\ Kruger A., et al., ``Height restoration and maintenance
after treating unstable osteoporotic vertebral compression fractures
by cement augmentation is dependent on the cement volume used,''
Clinical Biomechanics, 2013, vol. 28, pp. 725-730; and Kruger A., et
al., ``Height restoration of osteoporotic vertebral compression
fractures using different intervertebral reduction devices: a
cadaveric study,'' The Spine Journal, 2015, vol. 15, pp. 1092-1098.
\361\ Ibid.
\362\ Ibid.
---------------------------------------------------------------------------

The applicant also asserted that use of the SpineJack[supreg]
system represents a substantial clinical improvement with respect to
pain relief. According to the applicant, pain is the first and most
prominent symptom associated with osteoporotic VCFs, which drives many
elderly patients to seek hospital treatment and negatively impacts on
their quality of life. The applicant provided the SAKOS randomized
controlled study, a prospective consecutive observational study, and a
retrospective case series to support its assertions regarding pain
relief with the SpineJack[supreg] system. The applicant cited the SAKOS
trial for statistically significant greater pain relief achieved at 1
month and 6 months after surgery with the SpineJack[supreg] system. The
applicant summarized that in the SAKOS trial (1) progressive
improvement in pain relief was observed over the follow-up period in
the SpineJack[supreg] system group only; (2) the decrease in pain
intensity versus baseline was more pronounced in the SpineJack[supreg]
system group compared to the BKP group at 1 month (p=0.029) and 6
months (p=0.021); and (3) at each time point, the percentage of
patients with reduced pain intensity >20 mm was >=90 percent in the
SpineJack[supreg] system group and >=80 percent in the BKP group, with
a statistically significant difference in favor of the
SpineJack[supreg] system at 1 month post-procedure (93.8% vs 81.5%;
p=0.030). The applicant also noted that although continued pain score
improvements were seen out to1 year for patients treated with the
SpineJack[supreg] system, the difference between the treatment groups
did not meet statistical significance (p=0.061). The applicant also
explained that in the SAKOS study, at 5 days after surgery, there were
significantly fewer patients taking central agent medications in the
SpineJack[supreg] implant-treated group as compared to those in the
BKP-treated group (SJ 7.4% vs. BKP 21.9%, p=0.015). According to the
applicant, central analgesic agents included medications such as non-
steroidal anti-inflammatory drugs (NSAIDS), salicylates, or opioid
analgesics.
The applicant also cited a prospective consecutive observational
study by Noriega D., et al. for statistically significant pain relief
immediately after surgery and at both 6 and 12 months. Noriega D., et
al. was a European multicenter, single-arm registry study that aimed to
confirm the safety and clinical performance of the SpineJack[supreg]
system for the treatment of vertebral compression fractures of
traumatic origin (no comparison procedure).\363\ The study enrolled 103
patients (median age: 61.6 years) with 108 VCFs due to trauma (n=81),
or traumatic VCF with associated osteoporosis (n=22) who had a
SpineJack[supreg] procedure. Twenty-three patients withdrew from the
study before the 12-month visit. The study reported a significant
improvement in back pain at 48 hours after SpineJack[supreg] procedure,
with the mean VAS pain score decreasing from 6.6 2.6 cm at
baseline to 1.41.3 cm (mean change: -5.22.7 cm;
p<0.001) (median relative decrease in pain intensity of 81.5 percent)
for the total study population. Noriega D., et al. also reported that
the improvement was maintained over the 12-month follow-up period and
similar results were observed with both pure traumatic VCF and
traumatic VCF in patients with osteoporosis. The traumatic VCF with
osteoporosis sub-group had a mean change of -5.5 (SD=1.9) (median
relative change of 81.0%) (p<0.001) at 48 hours post-surgery (n=22),
and -5.7 (SD=2.3) mean change (90.3% median relative change) (p<0.001)
at 12 months (n=16). The applicant stated that this study supported a
claim of statistically significant pain relief immediately after
surgery and at both 6 and 12 months. The applicant summarized that (1)
pain

[[Page 32662]]

relief and improvements in pain scores were statistically significant
immediately after treatment (48-72 hours) and at 6 and 12 months
following surgery (p<0.001); and (2) the mean improvement between
baseline and at 48-72 hours after the procedure (n=31) was -4.6 (2.6)
(p<0.001), while the mean improvement between baseline and at the 12-
month follow-up (n=22) was -6.0 (3.4) (p<0.001). We note that Noriega
D., et al. did not report results for 6 months (although it does
include results for 3 months versus baseline) and does not include the
results of mean improvement stated by the applicant.\364\ It is also
unclear if the applicant intended to rely on the overall results of the
study or the subgroup of traumatic VCF with osteoporosis.
---------------------------------------------------------------------------

\363\ Noriega D., et al., ``Clinical performance and safety of
108 SpineJack implantations: 1-year results of a prospective
multicentre single arm registry study.'' BioMed Research
International. 2015, 173872.
\364\ Ibid.
---------------------------------------------------------------------------

The applicant also cited a retrospective case series, Renaud C., et
al., for statistically significant pain relief after surgery with the
SpineJack[supreg] system. Renaud C., et al., included 77 patients with
a mean age of 60.9 years and 83 VCFs (51 due to trauma and 32 to
osteoporosis) treated with 164 SpineJack[supreg] devices (no comparison
procedure).\365\ The applicant summarized that--(1) pain relief was
statistically significant (p<0.001), with a pain score decrease from
7.9 pre-operatively to 1.8 at 1 month after the procedure; (2) the pain
score improvement was 77 percent at hospital discharge and gradually
increased to 86 percent after 1 year following surgery; and (3) the
study outcomes demonstrated that the SpineJack[supreg] system provided
both immediate and long-lasting pain relief.
---------------------------------------------------------------------------

\365\ Renaud C., ``Treatment of vertebral compression fractures
with the cranio-caudal expandable implant SpineJack: Technical note
and outcomes in 77 consecutive patients.'' Orthopaedics &
Traumatology: Surgery & Research, 2015, vol. 101, pp. 857-859.
---------------------------------------------------------------------------

We note that the results of the SAKOS trial do not appear to have
been corroborated in any other randomized controlled study.
Additionally, although the applicant stated that BKP is the gold
standard in VA, there appears to be a lack of data comparing the
SpineJack[supreg] system to other existing technology, such as the PEEK
coiled implant (Kiva[supreg] system), particularly since the PEEK
coiled system was considered the predicate device for the SpineJack
510(k). Furthermore, there appears to be a lack of data comparing the
SpineJack[supreg] system to conservative medical therapy. We note there
is an active study posted on clinicaltrials.gov comparing
SpineJack[supreg] system to conservative orthopedic management
consisting of brace and pain medication in acute stable traumatic
vertebral fractures in subjects aged 18 to 60 years old. The
clinicaltrials.gov entry indicates that findings should be forthcoming
in 2020. Additionally, we note that the recent systematic reviews of
the management of vertebral compression fracture (Buchbinder et al. for
Cochrane (2018), Ebeling et al. (2019) for the American Society for
Bone and Mineral Research (ASBMR)), do not support vertebral
augmentation procedures due to lack of evidence compared to
conservative medical management.\366\ The ASBMR recommended more
rigorous study of treatment options including ``larger sample sizes,
inclusion of a placebo control and more data on serious AEs (adverse
events).''
---------------------------------------------------------------------------

\366\ Buchbinder R., Johnston R.V., Rischin K.J., Homik J.,
Jones C.A., Golmohammadi K., Kallmes D.F., ``Percutaneous
vertebroplasty for osteoporotic vertebral compression fracture,''
Cochrane Database Syst Rev. 2018 Apr 4 and Nov 6. PMID: 29618171;
Ebeling P.R., Akesson K., Bauer D.C., Buchbinder R., Eastell R.,
Fink H.A., Giangregorio L., Guanabens N., Kado D., Kallmes D.,
Katzman W., Rodriguez A., Wermers R., Wilson H.A., Bouxsein M.L.,
``The Efficacy and Safety of Vertebral Augmentation: A Second ASBMR
Task Force Report.'' J Bone Miner Res., 2019, vol. 34(1), pp. 3-21.
---------------------------------------------------------------------------

We are inviting public comment on whether the SpineJack[supreg]
system meets the substantial clinical improvement criterion.
We did not receive any written comments in response to the New
Technology Town Hall meeting notice published in the Federal Register
regarding the substantial clinical improvement criterion for the
SpineJack[supreg] system or at the New Technology Town Hall meeting.
m. TECENTRIQ[supreg] (Atezolizumab)
Genentech, Inc. submitted an application for new technology add-on
payments for TECENTRIQ[supreg] for FY 2021. According to the applicant,
TECENTRIQ[supreg] is a programmed death-ligand 1 (PD-L1) blocking
antibody with four different oncology indications, including one in
combination with carboplatin and etoposide, for the first-line
treatment of adult patients with extensive-stage small cell lung cancer
(ES-SCLC).\367\ The applicant states that programmed death-ligand 1
(PD-L1) is a protein expressed on the surface of cancer and immune
cells, which allows them to inactivate the T-cells of the patient's
immune system that would otherwise kill them. The applicant states
TECENTRIQ[supreg] blocks the PD-L1 protein, rendering the cancer cells
susceptible to attack.^{368 369} TECENTRIQ[supreg] has multiple
indications. The applicant has applied for the new technology add-on
payment for TECENTRIQ[supreg] for its indication for ES-SCLC only.
---------------------------------------------------------------------------

\367\ TECENTRIQ (atezolizumab) [prescribing information]. San
Francisco, CA: Genentech, Inc., 2019.
\368\ Chen, D.S., Irving, B.A., Hodi, F.S., ``Molecular
Pathways: Next-Generation Immunotherapy--Inhibiting Programmed
Death-Ligand 1 and Programmed Death-1,'' Clinical Cancer Research,
2012, 18(24), pp. 6580-6587, doi:10.1158/1078-0432.ccr-12-1362.
\369\ IMFINZI[supreg] (durvalumab) [Prescribing Information].
Wilmington, DE; AstraZeneca Pharmaceuticals LP, 2019.
---------------------------------------------------------------------------

The applicant states TECENTRIQ[supreg] was initially approved by
FDA on May 18, 2016, for treatment of patients with locally advanced or
metastatic urothelial carcinoma,\370\ and subsequently for patients
with metastatic non-small cell lung cancer (NSCLC) who have disease
progression during or following platinum-containing chemotherapy on
October 18, 2016; \371\ for the first-line treatment of patients with
metastatic non-squamous NSCLC with no EGFR or ALK genomic tumor
aberrations on December 6, 2018; \372\ and for metastatic triple
negative breast cancer on March 8, 2019.\373\
---------------------------------------------------------------------------

\370\ U.S. Department of Health and Human Services. BLA
Accelerated Approval. https://www.accessdata.fda.gov/drugsatfda_docs/appletter/2016/761034Orig1s000ltr.pdf. Accessed
August 9, 2019.
\371\ U.S. Department of Health and Human Services. BLA
Approval. https://www.accessdata.fda.gov/drugsatfda_docs/appletter/2016/761041Orig1s000ltr.pdf. Accessed August 9, 2019.
\372\ U.S. Department of Health and Human Services. Supplement
Approval. https://www.accessdata.fda.gov/drugsatfda_docs/appletter/2018/761034Orig1s009ltr_REPLACEMENT.pdf. Accessed August 9, 2019.
\373\ U.S. Department of Health and Human Services. Accelerated
Approval. https://www.accessdata.fda.gov/drugsatfda_docs/appletter/2019/761034Orig1s018ltr.pdf. Accessed August 9, 2019.
---------------------------------------------------------------------------

TECENTRIQ[supreg] received FDA approval on March 18, 2019 in
combination with carboplatin and etoposide for the first-line treatment
of adult patients with ES-SCLC. The applicant states that
TECENTRIQ[supreg] is the first cancer immunotherapy to be approved in
the first-line treatment of ES-SCLC.\374\ The applicant stated that the
National Comprehensive Cancer Network (NCCN) recommends
TECENTRIQ[supreg] + carboplatin + etoposide as the only category 1
preferred initial treatment for patients with ES-SCLC.\375\
---------------------------------------------------------------------------

\374\ U.S. Department of Health and Human Services. Supplemental
Approval. https://www.accessdata.fda.gov/drugsatfda_docs/appletter/2019/761034Orig1s019ltr.pdf. Accessed August 9, 2019.
\375\ National Comprehensive Cancer Network. NCCN Clinical
Practice Guidelines in Oncology. Small Cell Lung Cancer Version
2.2019. https://www.nccn.org/professionals/physician_gls/pdf/sclc.pdf. Accessed August 16, 2019.

---------------------------------------------------------------------------

[[Page 32663]]

The applicant states that TECENTRIQ[supreg] is formulated into a
single-dose vial for intravenous injection.\376\ It further states that
it is usually given in the physician office or hospital outpatient
setting--as is the case for most treatments for solid tumors. The
applicant explained that sometimes ES-SCLC patients are diagnosed in
the inpatient setting and are treated there due to their immediate need
for treatment. For subsequent doses for ES-SCLC patients, the applicant
states TECENTRIQ[supreg] is generally given in the physician office or
hospital outpatient setting, as it is when used in any of its other
indications.
---------------------------------------------------------------------------

\376\ TECENTRIQ (atezolizumab) [prescribing information]. San
Francisco, CA: Genentech, Inc., 2019.
---------------------------------------------------------------------------

Per the applicant, lung cancer is the second most commonly
diagnosed cancer and the leading cause of cancer-related death among
men and women in the United States.\377\ SCLC is a high-grade
neuroendocrine tumor comprising small cells with minimal cytoplasm,
having poorly defined cell borders, and either being absent a nucleoli
or having an unremarkable nucleoli.^{378 379} The most
aggressive of all lung cancers, it accounts for about 10-15 percent of
lung cancer cases.\380\ Key characteristics of SCLC include its rapid
doubling time and the early development of widespread
metastases.^{381 382} About 72 percent of SCLC cases are
diagnosed at the extensive stage, which is associated with a 5-year
survival rate of only 2.9 percent.^{383 384}
---------------------------------------------------------------------------

\377\ American Cancer Society. Lung Cancer Prevention and Early
Detection. American Cancer Society. https://www.cancer.org/cancer/lung-cancer/prevention-and-early-detection.html. Accessed October 3,
2019.
\378\ Meerbeeck, J.P.V., Fennell, D.A., Ruysscher, D.K.D,
``Small-cell Lung Cancer,'' The Lancet, 2011, 378(9804), pp.1741-
1755, doi:10.1016/s0140-6736(11):60165-7.
\379\ Kalemkerian, G., ``Small Cell Lung Cancer,'' Seminars in
Respiratory and Critical Care Medicine, 2016, 37(05) pp.783-796,
doi:10.1055/s-0036-1592116.
\380\ WebMD, LLC. Types of Lung Cancer. https://www.webmd.com/lung-cancer/lung-cancer-types#1. Accessed August 15, 2019.
\381\ Harris, K., Khachaturova, I., Azab, B., et al., ``Small
Cell Lung Cancer Doubling Time and its Effect on Clinical
Presentation: A Concise Review,'' Sage Journals, 2012, 6, pp.199-
203, doi:10.4137/CMO.S9633.
\382\ Pietanza, M.C., Averett, L., Minna, J., Rudin, C.M.,
``Small Cell Lung Cancer: Will Recent Progress Lead to Improved
Outcomes?,'' Clinical Cancer Research, 2015, (21), pp. 2244-2255,
doi: 10.1158/1078-0432.CCR-14-2958.
\383\ American Lung Association. Trends in Lung Cancer Morbidity
and Mortality. https://www.lung.org/assets/documents/research/lc-trend-report.pdf. Accessed August 15, 2019.
\384\ Noone, A.M., Howlader, N., Krapcho, M., et al., SEER
Cancer Statistics Review, 1975-2015, based on November 2017 SEER
data submission, posted to the SEER website, April 2018. Bethesda,
MD: National Cancer Institute. 2018; https://seer.cancer.gov/csr/1975_2015/results_merged/sect_15_lung_bronchus.pdf. Accessed
September 23, 2019.
---------------------------------------------------------------------------

The applicant states that the current standard-of-care treatment
for ES-SCLC is a combination of etoposide, which is FDA-approved in
SCLC only in combination with cisplatin, and carboplatin, which is used
in preference to cisplatin for toxicity reasons, despite being off-
label.\385\ Irinotecan, a topoisomerase inhibitor indicated in colon
and rectum cancers only, is sometimes used in place of
etoposide.^{386 387} Etoposide causes the induction of
deoxyribonucleic acid (DNA) strand breaks by an interaction with DNA-
topoisomerase II or the formation of free radicals, leading to cell
cycle arrest (primarily at the G2 stage of the cell cycle), and cell
death.\388\ Carboplatin, although associated with a greater risk of
myelosuppression, is often substituted for cisplatin in order to
decrease the risks of emesis, neuropathy, and nephropathy.\389\ Both
carboplatin and cisplatin impart cytotoxicity by binding to DNA, which
inhibits the process of DNA replication.\390\
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\385\ UpToDate, Inc. ES-Small Cell Lung Cancer: Initial
Management. https://www.uptodate.com/contents/extensive-stage-small-cell-lung-cancer-initial-management. Accessed July 26, 2019.
\386\ CAMPOSTAR (irinotecan) [prescribing information]. New
York, NY: Pfizer, Inc., 2019.
\387\ National Comprehensive Cancer Network. NCCN Clinical
Practice Guidelines in Oncology. Small Cell Lung Cancer Version
1.2019. https://www.nccn.org/professionals/physician_gls/pdf/sclc.pdf. Accessed July 26, 2019.
\388\ ETOPOSIDE (etoposide phosphate) [prescribing information].
Deerfield, IL: Baxter Healthcare, Corp., 2017.
\389\ National Comprehensive Cancer Network. NCCN Clinical
Practice Guidelines in Oncology. Small Cell Lung Cancer Version
2.2019. https://www.nccn.org/professionals/physician_gls/pdf/sclc.pdf. Accessed October 3, 2019.
\390\ Sousa, G.F.D., Wlodarczyk, S.R., Monteiro, G.,
``Carboplatin: Molecular Mechanisms of Action Associated with
Chemoresistance,'' Brazilian Journal of Pharmaceutical Sciences,
2014, 4(50), pp. 693-701, doi:10.1590/S1984-82502014000400004.
---------------------------------------------------------------------------

According to the applicant, despite standard-of-care chemotherapy
regimens using etoposide and carboplatin, the majority of patients with
ES-SCLC will experience recurrence within 1 year. Median progression-
free survival (PFS) and overall survival (OS) rates are 2 months and 10
months, respectively, after initial chemotherapy.^{391 392 393}
---------------------------------------------------------------------------

\391\ Kalemkerian, G., ``Small Cell Lung Cancer,'' Seminars in
Respiratory and Critical Care Medicine, 2016, 37(05):783-796.
doi:10.1055/s-0036-1592116.
\392\ Gadgeel, S.M., Pennell, N.A., Fidler, M.J., et al.,
``Phase II Study of Maintenance Pembrolizumab in Patients with ES-
Small Cell Lung Cancer (SCLC),'' Journal of Thoracic Oncology, 2018,
13(9), pp. 1393-1399. doi:10.1016/j.jtho.2018.05.002.
\393\ Rossi, A., ``Relapsed Small-Cell Lung Cancer: Platinum Re-
Challenge Or Not,'' Journal of Thoracic Disease, 2016, 8(9), pp.
2360-2364, doi:10.21037/jtd.2016.09.28.
---------------------------------------------------------------------------

According to the applicant, progress in the treatment of ES-SCLC
has been limited. Over the past 40 years, the 2-year OS has increased
from 3.4 percent to 5.6 percent, and the median OS has remained at
about 10 months since the 1980s.^{394 395 396} One paper noted
that more than 40 phase III trials evaluating other regimens in SCLC
have failed since 1970.\397\ The applicant stated that this situation
is perhaps best illustrated by reference to the National Institutes of
Health's database of clinical trials. The appendix of this document
presents the results of clinical trials of putative pharmacology
therapies for SCLC with statuses of ``terminated'' (phase 2 and phase
3) and ``completed'' (phase 3 only).^{398 399}
---------------------------------------------------------------------------

\394\ Kalemkerian, G., ``Small Cell Lung Cancer,'' Seminars in
Respiratory and Critical Care Medicine, 2016, 37(05), pp. 783-796,
doi:10.1055/s-0036-1592116.
\395\ Evans, W.K., Shepherd, F.A., Feld, R., Osoba, D., Dang,
P., Deboer, G., ``VP-16 and Cisplatin as First-Line Therapy for
Small-Cell Lung Cancer,'' Journal of Clinical Oncology, 1985, 3(11),
pp. 1471-1477, doi:10.1200/jco.1985.3.11.1471.
\396\ Boni, C., Cocconi, G., Bisagni, G., Ceci, G., Peracchia,
G., Cisplatin and Etoposide (VP-16) as a Single Regimen for Small
Cell Lung Cancer. A phase II trial,'' Cancer, 1989, 63(4), pp. 638-
642, doi:10.1002/1097-0142(19890215)63:4>638:aid-
cncr2820630406>3.0.co;2-8.
\397\ Byers, L.A., Rudin, C.M., ``Small Cell Lung Cancer: Where
Do We Go from Here?,'' Cancer, 2014, 121(5), pp. 664-672,
doi:10.1002/cncr.29098.
\398\ U.S. Department of Health and Human Services. Terminated
Studies [bond] Small Cell Lung Cancer Extensive Stage. https://clinicaltrials.gov/ct2/results?cond=Small+Cell+Lung+Cancer+Extensive+Stage&Search=Apply&recrs=h&age_v=&gndr=&type=&rslt=. Accessed August 15, 2019.
\399\ U.S. Department of Health and Human Services. Completed
Studies [bond] Small Cell Lung Cancer Extensive Stage. https://clinicaltrials.gov/ct2/results?cond=Small+Cell+Lung+Cancer+Extensive+Stage&recrs=e&age_v=&gndr=&type=&rslt=&phase=2. Accessed August 15, 2019.
---------------------------------------------------------------------------

The applicant asserts that there is no ICD-10-PCS code which
uniquely identifies the administration of TECENTRIQ[supreg] in ES-SCLC
inpatient cases. The applicant submitted a request for a unique ICD-10-
PCS code for TECENTRIQ[supreg] to be effective October 1, 2020.
As stated previously, if a technology meets all three of the
substantial similarity criteria, it would be considered substantially
similar to an existing technology and, therefore, would not be
considered ``new'' for purposes of new technology add-on payments. The
applicant asserts that TECENTRIQ[supreg] does not meet any of the three
criteria and therefore, TECENTRIQ[supreg] is new.

[[Page 32664]]

With regard to the first criterion, whether a product uses the same
or a similar mechanism of action to achieve a therapeutic outcome, the
applicant asserts that the mechanism of action of TECENTRIQ[supreg] in
ES-SCLC is not the same as or similar to an existing technology. The
applicant describes TECENTRIQ[supreg] as a programmed death-ligand 1
(PD-L1) blocking antibody, and as the first and only blocking antibody
to target the PD-L1/PD-1 pathway that is FDA-approved for the treatment
of ES-SCLC. The applicant explains that PD-L1 is a protein expressed on
the surface of cancer cells, which allows them to inactivate the T-
cells of the patient's immune system which would normally attack the
cancer cells. The applicant asserts that TECENTRIQ[supreg] blocks the
PD-L1 protein, rendering the cancer cells susceptible to attack.\400\
The applicant indicates that the current standard-of-care drugs
etoposide, carboplatin, and cisplatin impart their cytotoxic effects by
interfering with the processes of DNA replication.^{401 402}
Therefore, the applicant states the mechanism of action of
TECENTRIQ[supreg] is unique and distinct from other available forms of
treatment for ES-SCLC.
---------------------------------------------------------------------------

\400\ Chen, D.S., Irving, B.A., Hodi, F.S., ``Molecular
Pathways: Next-Generation Immunotherapy--Inhibiting Programmed
Death-Ligand 1 and Programmed Death-1,'' Clinical Cancer Research,
2012, 18(24), pp. 6580-6587. doi:10.1158/1078-0432.ccr-12-1362.
\401\ ETOPOPHOS (etoposide phosphate) [prescribing information].
Deerfield, IL: Baxter Healthcare, Co., 2017.
\402\ Sousa, G.F.D., Wlodarczyk S.R., Monteiro G.,
``Carboplatin: Molecular Mechanisms of Action Associated with
Chemoresistance,'' Brazilian Journal of Pharmaceutical Sciences,
2014, 4(50), pp. 693-701, doi:10.1590/S1984-82502014000400004.
---------------------------------------------------------------------------

With regard to the second criterion, whether a product is assigned
to the same or a different MS-DRG, the applicant referenced the FY 2016
IPPS/LTCH PPS Final Rule (80 FR 49445) to support that this criterion
is not met in cases where the subject technology is treating a disease
for which the current standard-of-care involves non-FDA-approved
therapies that are also associated with different MS-DRGs. As
previously noted, the applicant stated that the current standard-of-
care treatment for ES-SCLC is a combination of etoposide, which is FDA-
approved in SCLC only in combination with cisplatin, and carboplatin,
which is used in preference to cisplatin for toxicity reasons, despite
being off-label.\403\ They also point out that irinotecan, a
topoisomerase inhibitor indicated in colon and rectum cancers, is
sometimes used in place of etoposide.^{404 405}
---------------------------------------------------------------------------

\403\ UpToDate, Inc. ES-small cell lung cancer: Initial
management. https://www.uptodate.com/contents/extensive-stage-small-cell-lung-cancer-initial-management. Accessed October 3, 2019.
\404\ CAMPOSTAR (irinotecan) [prescribing information]. New
York, NY: Pfizer, Inc., 2019.
\405\ National Comprehensive Cancer Network. NCCN Clinical
Practice Guidelines in Oncology. Small Cell Lung Cancer Version
2.2019. https://www.nccn.org/professionals/physician_gls/pdf/sclc.pdf. Accessed October 3, 2019.
---------------------------------------------------------------------------

The applicant also stated that the MS-DRG payment system cannot
differentiate between patients with NSCLC and ES-SCLC and noted that
MS-DRGs 180 (Respiratory Neoplasms with MCC) and 181 (Respiratory
Neoplasms with CC) are applicable to both diseases. The applicant also
noted that category C34 (Malignant neoplasm of bronchus and lung) of
the ICD-10-CM diagnosis coding classification system can be used to
identify NSCLC and SCLC cases but does not differentiate between them.
As a result, the applicant believes both TECENTRIQ[supreg] and an
existing technology (such as one used to treat NSCLC) may be assigned
to either of these MS-DRGs, even though, as previously noted, the NSCLC
and SCLC patient populations are different.
With regard to the third substantial similarity criterion, the
applicant states the use of TECENTRIQ[supreg] in ES-SCLC does not
involve the treatment of the same or a similar type of disease and the
same or similar patient population when compared to an existing
technology.
The applicant notes this criterion was developed by CMS
specifically to accommodate situations where an NTAP is sought for a
new indication of a drug previously indicated for a different patient
population. The applicant noted that CMS stated the following in the FY
2010 IPPS final rule (74 FR 43813): ``If, prior to the FDA approval for
the new indication, the technology has not been used to treat Medicare
patients for purposes consistent with the new indication, the relevant
MS-DRGs may not reflect the cost of the technology. Consequently,
Medicare beneficiaries may not have adequate access to the technology
when used for purposes consistent with the new indication. Allowing the
new technology add-on payment for the technology when used for the new
indication would address this concern. For these reasons, we believe
that treating an existing technology as ``new'' when approved by the
FDA for a new indication may be warranted under certain
circumstances.''
The applicant believes that this is the case for TECENTRIQ[supreg]
and that there is no evidence of TECENTRIQ[supreg] utilization in
inpatient ES-SCLC cases, in either the 2017 or 2018 Medicare Standard
Analytical Files (SAF). The applicant asserts that therefore, the
relevant MS-DRGs do not reflect the cost of TECENTRIQ[supreg].
Therefore, the applicant believes Medicare beneficiaries may not have
adequate access to TECENTRIQ[supreg] when it is used to treat ES-SCLC
patients as described previously.
Additionally, the applicant explained that although SCLC and NSCLC
share a MS-DRG, they are different diseases with different patient
populations, and pointed to differences between SCLC and NSCLC in terms
of their staging, percentage of patients with distant stage disease at
the time of diagnosis, classification, levels of PD-L1 expression,
pharmacologic treatments, and 5-year relative survival rates. The
applicant further explained that these diseases are not mutually
exclusive; a minority of patients, 5-28 percent depending on the
specimen types used, are said to have combined SCLC (C-SCLC), which is
defined by the World Health Organization as SCLC combined with
additional components that consist of any of the histological types of
NSCLC.\406\ Therefore, the applicant asserts the use of
TECENTRIQ[supreg] in cases of ES-SCLC does not involve treatment of the
same or a similar type of disease, in the same or a similar patient
population, when compared to an existing technology, and therefore
TECENTRIQ[supreg] meets the newness criterion.
---------------------------------------------------------------------------

\406\ Qin, J., Lu, H., ``Combined Small-Cell Lung Carcinoma,''
OncoTargets and Therapy, 2018, Volume 11, pp. 3505-3511,
doi:10.2147/ott.s159057.
---------------------------------------------------------------------------

We note that we received an application for new technology add-on
payments for FY 2021 for IMFINZI[supreg] when used in combination with
etoposide and either carboplatin or cisplatin for the first-line
treatment of patients with extensive-stage small cell lung cancer (ES-
SCLC). At the time of the development of this proposed rule,
IMFINZI[supreg] has not yet received FDA approval for this indication.
Both IMFINZI[supreg] and TECENTRIQ[supreg] seem to be intended for
similar patient populations and would involve the treatment of the same
conditions; patients with locally advanced or metastatic urothelial
carcinoma and patients with SCLC. As noted above, we are interested in
information on how these two technologies may differ from each other
regarding the substantial similarity criteria and newness criterion, to
inform our analysis of whether IMFINZI[supreg] and TECENTRIQ[supreg]
are substantially similar to each other and therefore should be

[[Page 32665]]

considered as a single application for purposes of new technology add-
on payments.
We are inviting public comments on whether TECENTRIQ[supreg] is
substantially similar to an existing technology and whether it meets
the newness criterion.
With regard to the cost criterion, the applicant conducted the
following analysis to demonstrate that the technology meets the cost
criterion. To identify cases that may be eligible for
TECENTRIQ[supreg], the applicant searched the FY 2018 MedPAR LDS file
for claims reporting an ICD-10-CM code from category C34 and considered
only cases where the diagnosis codes were in the primary or admitting
position to differentiate ES-SCLC from limited-stage SCLC. Cases
classified with one or more of 48 surgical lung procedure codes were
not considered to differentiate ES-SCLC from NSCLC. This resulted in
33,404 cases, which the applicant indicated constitute what it defines
as an ES-SCLC case through the reconciliation of clinical presentation,
applicable ICD-10-CM and ICD-10-PCS codes, and MedPAR data fields,
which mapped to 264 MS-DRGs.
Using these 33,404 cases, the applicant then calculated the
unstandardized average charges per case for each MS-DRG. The applicant
determined that it did not need to remove any charges because
TECENTRIQ[supreg] is administered as a combination therapy with
carboplatin and etoposide to treat ES-SCLC.
The applicant then standardized the charges and inflated the
charges by 1.11100 or 11.10 percent, the same inflation factor used by
CMS to update the outlier threshold in the FY 2020 IPPS/LTCH PPS final
rule (84 FR 42629). The applicant then added the estimated cost of an
ES-SCLC TECENTRIQ[supreg] administration to the MedPAR cases. The
applicant then added the charges for TECENTRIQ[supreg] by converting
the costs to a charge by dividing the cost by what the applicant
described as a conservative cost-to-charge ratio of 0.5.
Based on the FY 2020 IPPS/LTCH PPS final rule correction notice
data file thresholds, the average case-weighted threshold amount was
$65,738. In the applicant's analysis, the final inflated average case-
weighted standardized charge per case was $88,561. Because the final
inflated average case-weighted standardized charge per case exceeds the
average case-weighted threshold amount, the applicant maintained that
the technology meets the cost criterion.
The applicant also provided a sensitivity analysis using this same
methodology but considered only the MS-DRGs representing 1 percent of
case volume, producing a list of 10 MS-DRGs that cumulatively represent
88.31 percent of case volume, or 29,500 cases. Based on the FY 2020
IPPS/LTCH PPS final rule correction notice data file thresholds, the
average case-weighted threshold amount was $56,987. In the applicant's
analysis, the final inflated average case-weighted standardized charge
per case was $88,404. Because the final inflated average case-weighted
standardized charge per case exceeds the average case-weighted
threshold amount, the applicant maintained that the technology meets
the cost criterion.
As noted previously, we received an application for new technology
add-on payments for FY 2021 for IMFINZI[supreg]. Both IMFINZI[supreg]
and TECENTRIQ[supreg] seem to be intended for similar patients. The
ICD-10-CM diagnosis codes and MS-DRGs in the cost analysis for
IMFINZI[supreg] differ from those used in the cost analysis for
TECENTRIQ[supreg]. Specifically, as noted previously, the applicant for
TECENTRIQ[supreg] searched for claims with ICD-10-CM diagnosis codes
from category C34 while the applicant for IMFINZI[supreg] searched for
ICD-10-CM diagnosis codes from category C34 in combination with Z51.11
or Z51.12. As noted previously, we are concerned as to why the
diagnosis codes would differ between the cost analysis for
IMFINZI[supreg] and for TECENTRIQ[supreg] as one analysis may lend more
accuracy to the calculation depending on which is more reflective of
the applicable patient population). We are inviting public comment on
whether TECENTRIQ[supreg] meets the cost criterion.
With regard to substantial clinical improvement, the applicant
asserts that TECENTRIQ[supreg] plus standard-of-care represents a
substantial clinical improvement over existing technologies because it
offers a treatment option for a patient population unresponsive to, or
ineligible for currently available treatments. The applicant also
believes that TECENTRIQ[supreg] represents a substantial clinical
improvement because the technology demonstrates statistically
significant improvement in overall survival, statistically significant
improvement in progression-free survival, as well as improved HRQoL
(Health-related quality of life, which is an individual's or a group's
perceived physical and mental health over time) \407\ and reduced
symptomology.
---------------------------------------------------------------------------

\407\ https://www.cdc.gov/hrqol/index.htm. Accessed December 27,
2019.
---------------------------------------------------------------------------

According to the applicant, the use of TECENTRIQ[supreg] in cases
of ES-SCLC was evaluated in IMpower133, a phase III (efficacy) and
phase I (safety), double-blind, placebo-controlled, randomized,
multicenter study designed to compare the efficacy and safety of
TECENTRIQ[supreg] vs. placebo in combination with carboplatin and
etoposide in patients with ES-SCLC who did not receive prior systemic
therapy.\408\ Over 40 percent of the population of the IMpower 133
clinical trial were of Medicare age.\409\
---------------------------------------------------------------------------

\408\ Horn, .L, Mansfield, A.S., Szcz[eogon]sna, A., et al.,
``First-Line Atezolizumab plus Chemotherapy in Extensive Stage
Small-Cell Lung Cancer,'' New England Journal of Medicine, 2018,
379(23), pp. 2220-2229, doi:10.1056/nejmoa1809064.
\409\ Ibid.
---------------------------------------------------------------------------

Key inclusion criteria were as follows: histologically or
cytologically confirmed ES-SCLC as defined by the VA Lung Study Group
staging system; measurable ES-SCLC according to RECIST version 1.1;
ECOG PS of 0-1; no prior systemic treatment for ES-SCLC; and treated
asymptomatic CNS metastases. Key exclusion criteria were as follows:
history of autoimmune disease and prior treatment with CD137 agonists
or immune checkpoint inhibitors.
A total of 403 patients were enrolled. Patients were stratified by
gender, ECOG PS (0 or 1), and the presence of brain metastases.
Baseline characteristics were comparable across both treatment arms.
The following table summarizing baseline patient characteristics
indicates that more than 40 percent of the patients in both treatment
arms were of Medicare age.

[[Page 32666]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.134

At the time of data cutoff (April 24, 2018), the median follow-up
was 13.9 months. The applicant states that patients treated with
TECENTRIQ[supreg] + carboplatin + etoposide experienced a significantly
longer OS and PFS compared with patients treated with placebo +
carboplatin + etoposide in the ITT population. The 1-year OS with
TECENTRIQ[supreg] + carboplatin + etoposide, compared with the placebo
+ carboplatin + etoposide rate, was approximately 13 percent higher;
the 1-year PFS was approximately 7 percent higher, as shown in the
following table that summarizes Landmark Overall Survival and
Progression-free Survival Rates (Data Cutoff: April 24, 2018).
[GRAPHIC] [TIFF OMITTED] TP29MY20.135

The incidence of treatment-related AEs was similar in both
treatment arms. The following table provides information about the
safety profiles (Data Cutoff: April 24, 2018) (safety population)--
IMpower133. The most common treatment-related Grade \3/4\ AEs for
TECENTRIQ[supreg] + carboplatin + etoposide and for placebo +
carboplatin + etoposide was neutropenia (22.7 percent vs. 24.5 percent,
respectively), anemia (14.1 percent vs. 12.2 percent), and decreased
neutrophil count (14.1 percent vs. 16.8 percent). Treatment-related
deaths occurred in three patients in the TECENTRIQ[supreg] group (due
to neutropenia, pneumonia, and unspecified cause) and three patients in
the placebo group (due to pneumonia, septic shock, and cardiopulmonary
failure).

[[Page 32667]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.136

More patients in the TECENTRIQ[supreg] group than in the placebo
group experienced immune-related AEs, with rash and hypothyroidism
being the most common. The following table summarizes immune-related
AEs occurring in >=5 patients in any treatment arm (data cutoff: April
24, 2018) (safety population).
[GRAPHIC] [TIFF OMITTED] TP29MY20.137

The median treatment duration of TECENTRIQ[supreg] was 4.7 months
(range: 0-1), and the median number of TECENTRIQ[supreg] doses
administered was 7 (range: 1-30). The median dose intensity, total
cumulative dose, and median number of chemotherapy doses (four doses of
carboplatin, 12 doses of etoposide) were similar in the two treatment
groups.
The addition of TECENTRIQ[supreg] to carboplatin + etoposide
demonstrated a statistically significant improvement in OS and PFS
compared with placebo + carboplatin + etoposide for the first-line
treatment of ES-SCLC. Overall, the safety profiles of TECENTRIQ[supreg]
+ carboplatin + etoposide and placebo + carboplatin + etoposide were
comparable to the safety profiles of each individual agent; no new
safety signals were identified with the combinations.
The applicant asserts that TECENTRIQ[supreg] plus standard-of-care
therapy represents a substantial clinical improvement over existing
technologies because it offers a treatment option for a patient
population unresponsive to or ineligible for currently available
treatments. The applicant also asserted that TECENTRIQ[supreg]
represents a significant clinical improvement over existing
technologies because the technology produces a statistically
significant improvement in overall survival, a statistically
significant improvement in progression-free survival, as well as
improved HRQoL and reduced symptomology.
We are concerned that the survival benefit of the addition of
TECENTRIQ[supreg] was a median duration of only 2 months over standard
therapy and the improvement on the median progression free survival was
less than one month. We are also concerned that the short survival and
progression free survival may not be clinically significant.
Additionally, we are concerned that the participants did not have a
clinically significant improvement in their quality of life given the
number of AEs in the TECENTRIQ[supreg] treatment arm combined with the
number of treatments given in that arm.
We are inviting public comment on whether TECENTRIQ[supreg] meets
the substantial clinical improvement criterion.
We did not receive any written comments in response to the New
Technology Town Hall meeting notice published in the Federal Register
regarding the substantial clinical improvement criterion for
TECENTRIQ[supreg] or at the New Technology Town Hall meeting.
o. WavelinQ^TM (4F) EndoAVF System
Becton Dickinson & Company submitted an application for new
technology add-on payments for the WavelinQ^TM (4F) EndoAVF
System for FY 2021. According to the applicant, the predicate device,
the WavelinQ^TM (6F) EndoAVF System received FDA marketing
authorization on June 22, 2018 for the indication of the creation

[[Page 32668]]

of an arteriovenous (AV) fistula using concomitant ulnar artery and
ulnar vein or concomitant radial artery and radial vein in patients
with minimum artery and vein diameters of 2.0 mm at the fistula
creation site who have chronic kidney disease and need hemodialysis. On
February 6, 2019 the FDA cleared the WavelinQ^TM (4F) EndoAVF
System via its 510(k) (premarket notification) pathway for an expanded
access indication with a smaller 4Fr catheter. The WavelinQ 4F EndoAVF
System is indicated for the creation of an AV fistula using concomitant
ulnar artery and ulnar vein or concomitant radial artery and radial
vein in patients with minimum artery and vein diameters of 2.0 mm at
the fistula creation site who have chronic kidney disease and need
hemodialysis. It is our understanding that the WavelinQ^TM
(4F) EndoAVF System replaces the the WavelinQ^TM (6F) EndoAVF
System. The applicant noted that it is applying for new technology add
on payments for the WavelinQ^TM (4F) EndoAVF System and not
the WavelinQ^TM (6F) EndoAVF System. The applicant also noted
that the WavelinQ^TM (4F) EndoAVF System has been cleared to
treat both the radial arteries and veins and the ulnar arteries and
veins. Per the applicant, the only difference between the two
technologies and their respective approvals is the size of the
catheters (6F vs. 4F) and the expanded indication to treat the radial
arteries and veins for the WavelinQ^TM (4F) EndoAVF System.
Hemodialysis, a form of treatment for kidney failure patients, is a
procedure that removes wastes, salts, and fluid from a patient's blood
when the kidneys can no longer perform these functions. To receive
dialysis, patients require a vascular access, such as an arteriovenous
(AV) fistula, to connect to the dialysis machine.
The applicant asserts that Endovascular AV fistula creation with
the WavelinQ^TM (4F) EndoAVF System is achieved using
flexible magnetic-guided arterial and venous catheters that utilize
radiofrequency energy and includes vascular embolization of the
brachial vein, fistulogram, angiography (to fluoroscopically guide
placement of the arterial magnetic catheter), and venography (to
fluoroscopically guide placement and alignment of the venous magnetic
radiofrequency [RF] catheter, ultrasound, and final fistulogram to
document AV fistula creation).
The applicant asserts that the following ICD-10-CM diagnosis codes
are applicable to the WavelinQ^TM (4F) EndoAVF System: N18.4
(Chronic kidney disease, stage 4), N18.5 (Chronic kidney disease, stage
5) and N18.6 (End stage renal disease). The applicant also asserts that
the following ICD-10-PCS procedure codes can identify the
WavelinQ^TM (4F) EndoAVF System: 03193ZF (Bypass right ulnar
artery to lower arm vein, percutaneous approach), 031A3ZF (Bypass left
ulnar artery to lower arm vein, percutaneous approach), 031B3ZF (Bypass
right radial artery to lower arm vein, percutaneous approach), and
031C3ZF (Bypass left radial artery to lower arm vein, percutaneous
approach).
As stated previously, if a technology meets all three of the
substantial similarity criteria, it would be considered substantially
similar to an existing technology and, therefore, would not be
considered ``new'' for purposes of new technology add-on payments.
With regard to the first criterion, whether a product uses the same
or a similar mechanism of action to achieve a therapeutic outcome, the
applicant asserted that the WavelinQ^TM (4F) EndoAVF System
uses a different mechanism of action than any commercially available
technology on the market for hemodialysis fistula creation. The
applicant states the WavelinQ^TM (4F) EndoAVF System is not
an open surgical approach, and that this is the first differentiating
factor from previous methods used to create an arteriovenous fistula.
The applicant also explains that WavelinQ^TM (4F) EndoAVF
System utilizes flexible magnetic-guided arterial and venous catheters
that utilize radiofrequency energy to create a communicating channel
between the arterial and venous system via an endovascular approach.
Additionally, the applicant explains that as part of the procedure, the
WavelinQ^TM (4F) EndoAVF System also requires vascular
embolization of the brachial vein, fistulogram, angiography (to
fluoroscopically guide placement of the arterial magnetic catheter),
and venography (to fluoroscopically guide placement and alignment of
the venous magnetic RF catheter, ultrasound, and final fistulogram to
document AV fistula creation). The applicant asserts that in summary,
the endovascular creation of an AV fistula using radiofrequency energy
delivered through magnetic-guided catheters is a unique mechanism of
action.
The applicant indicates the Ellypsis[supreg] Vascular Access System
(Avenu Medical) has recently been granted marketing authorization by
the FDA (January 25, 2019). The applicant asserts that while
Ellipsys[supreg] also supports an endovascular method of creating an AV
fistula, there are several important points of differentiation between
the two devices and their corresponding procedures. According to the
applicant, there are different mechanisms of action, procedural
processes, and anatomical locations of fistula creation as follows:
Fistula creation; WavelinQ^TM utilizes
Radiofrequency ablation; Ellipsys[supreg] utilizes thermal resistance
(heat).
Embolization: WavelinQ^TM requires coil
embolization of the brachial vein at the time of endoAVF creation,
Ellipsys[supreg] does not.
Guidance: WavelinQ^TM utilizes magnetic
catheters to guide and align the location of the endoAVF creation site
and Ellipsys[supreg] does not have a mechanism for aligning the fistula
creation site.
Fistula of blood vessels: WavelinQ^TM offers two
options for fistula creation compared to Ellipsys[supreg]:
++ First, the WavelinQ^TM can create a fistula from the
ulnar artery to the ulnar vein; according to the applicant, this is an
unused vascular bed for traditional surgical fistula options which does
not interfere with necessary blood flow for hemodialysis purposes, thus
preserving all future surgical AV fistula options such as
radiocephalic, brachiocephalic, and braciobasilic fistulas.
++ Second, the WavelinQ can create a fistula between the
concomitant radial artery and radial vein. This method eliminates the
ability to perform a future radiocephalic fistula.
++ In comparison, the Ellipsys[supreg] device is only able to
create a fistula from the proximal radial artery to the perforating
vein, thus eliminating any future use of a radiocephalic fistula.
Access methods: WavelinQ^TM utilizes the
arterial system and venous system and Ellipsys[supreg] utilizes only
the venous system.
Imaging: there are different methods of visualization in
that WavelinQ^TM uses ultrasound and fluoroscopy, whereas
Ellipsys[supreg] only uses ultrasound.
Subsequent procedures: Ellipsys[supreg] requires a
secondary balloon angioplasty procedure at a later date, while
WavelinQ^TM does not.
Procedure Times and Complexity: eEndoAVF creation with
WavelinQ^TM is an 85-minute procedure, whereas endoAVF
creation with Ellipsys[supreg] is a 23-minute procedure, which the
applicant states represents a marked difference in procedure
complexities.
With regard to the second criterion, whether a product is assigned
to the same or a different MS-DRG, the applicant asserted that its MS-
DRG analysis showed that cases using the WavelinQ^TM (4F)
EndoAVF System will most often be mapped to MS-DRG 264

[[Page 32669]]

(Other Circulatory System O.R. Procedures), per the assignment of
recently created ICD-10-PCS codes for endovascular fistula creation.
The applicant anticipates that cases using the Ellipsys[supreg]
Vascular Access System will also be frequently mapped to this MS-DRG as
MS-DRG 264 is the most common MS-DRG for patients with surgical AV
fistula creations. As such, the applicant does not see a difference in
MS-DRG assignment between WavelinQ^TM (4F) EndoAVF procedures
and traditional surgical AV fistula creation procedures.
With regard to the third criterion, whether the new use of the
technology involves the treatment of the same or similar type of
disease and the same or similar patient population when compared to an
existing technology, the applicant states the WavelinQ^TM
(4F) EndoAVF System is indicated for the creation of an arteriovenous
fistula using concomitant ulnar artery and ulnar vein or concomitant
radial artery and radial vein in patients with minimum artery and vein
diameters of 2.0 mm at the fistula creation site who have chronic
kidney disease and need hemodialysis. The applicant further explains
that the diagnoses associated with this treatment and the patient
population are similar to those treated by existing procedures and
technologies that are commercially available, such as surgical AV
fistula creation and the Ellipsys[supreg] Vascular Access System.
As mentioned above, the WavelinQ^TM (6F) EndoAVF System
received FDA approval on June 22, 2018 for use in the ulnar arteries
and veins. The WavelinQ^TM (4F) EndoAVF System is an expanded
access of the WavelinQ^TM (6F) EndoAVF System and received
FDA approval on February 6, 2019 for use in the radial arteries and
veins as well as the ulnar arteries and veins. It seems that for
purposes of use in the ulnar arteries and veins, the
WavelinQ^TM (4F) EndoAVF System would be considered
substantially similar to the WavelinQ^TM (6F) EndoAVF System
as there are only minor differences (the size of the catheters) between
the two devices as explained previously. As a result, we believe the
newness period for the use in the ulnar arteries and veins would begin
with the FDA approval of the WavelinQ^TM (6F) EndoAVF System,
which occurred on June 22, 2018, rather than the FDA approval of the
WavelinQ^TM (4F) EndoAVF System, which occurred on February
6, 2019. Finally, because the WavelinQ^TM (4F) EndoAVF System
received FDA approval on February 6, 2019 for use in the radial
arteries and veins, it seems the newness period for the use of the
device in the radial arteries and veins would begin on February 6,
2019.
As summarized previously, the manufacturer explained why it
believes the WavelinQ^TM (4F) EndoAVF System is not
substantially similar to the Ellipsys[supreg], specifically with regard
to mechanism of action. We welcome additional comments on whether the
WavelinQ^TM (4F) EndoAVF System and the Ellipsys[supreg] are
substantially similar to each other.
We are inviting public comments on whether the
WavelinQ^TM (4F) EndoAVF System is substantially similar to
existing technologies and whether it meets the newness criterion.
With regard to the cost criterion, the applicant conducted the
following analysis to demonstrate that the technology meets the cost
criterion. The applicant searched the FY 2018 MedPAR for claims
reporting an ICD-10-CM diagnosis code of N18.4, N18.5 or N18.6 to
identify cases that may be eligible for the WavelinQ^TM (4F)
EndoAVF System. The applicant limited its analysis to the following
five most common MS-DRGs that the cases mapped to, which accounted for
66 percent of all cases: MS-DRG 252 (Other Vascular Procedures with
MCC), 264 (Other Circulatory System O.R. Procedures), 673 (Other Kidney
and Urinary Tract Procedures with MCC), 674 (Other Kidney and Urinary
Tract Procedures with CC) and 981 (Extensive O.R. Procedure Unrelated
to Principal Diagnosis with MCC). This resulted in 2,472 cases across
these five MS-DRGs.
The applicant first removed supply charges with a revenue code of
027X and also removed charges for the operating room. The applicant
then standardized the charges. The applicant noted that in order to
provide a conservative estimate it did not inflate the charges. The
applicant then added charges for the new technology as well as
procedure related charges which included operating room charges.
Based on the FY 2020 IPPS/LTCH PPS final rule correction notice
data file thresholds, the average case-weighted threshold amount was
$83,372. In the applicant's analysis, the final inflated average case-
weighted standardized charge per case was $121,749. Because the final
inflated average case-weighted standardized charge per case exceeds the
average case-weighted threshold amount, the applicant maintained that
the technology meets the cost criterion.
We are inviting public comments on whether the
WavelinQ^TM (4F) EndoAVF System meets the cost criterion.
With regard to substantial clinical improvement, the applicant
asserts that the WavelinQ^TM (4F) EndoAVF System represents a
substantial clinical improvement over existing technologies because it
offers a treatment option for a patient population unresponsive to or
ineligible for currently available treatments. The applicant also
believes that WavelinQ^TM (4F) EndoAVF System represents a
substantial clinical improvement over existing technologies because the
WavelinQ^TM (4F) EndoAVF System significantly improves
clinical outcomes for patients requiring hemodialysis in comparison to
arteriovenous surgical fistula creation and the Ellipsys[supreg]
Vascular Access System; offers higher patient satisfaction; provides a
beneficial resolution to disease process treatment; and provides
additional vascular access options for dialysis.
Surgical arteriovenous fistulae are the recommended type of
vascular access for hemodialysis.\410\ Despite initiatives to increase
AVF use, fistulas are still underutilized with only 17 percent of
patients initiating dialysis with an AVF and 67 percent of patients
still using a central venous catheter (CVC) at 3 months after dialysis
initiation.\411\ Failure rates (fail to mature and become usable) for
surgical AVF range from 20-60 percent.^{412 413 414 415 416}
AVFs also take a long time to mature--approximately 132 days.\417\
Furthermore, >83 percent of AVF patients need at least one intervention
in the first year,\418\ typically receiving 1.5 to 3.3 additional
interventions per year to mature and maintain
patency.^{419 420 421 422 423}
---------------------------------------------------------------------------

\410\ National Kidney Foundation Disease Outcomes Quality
Initiative (NKF-KDOQI). ``KDOQI Clinical practice guideline for
vascular access, American Journal of Kidney Diseases, 2006, 48
(suppl 1), S176-S276.
\411\ USRDS Annual Report, 2017.
\412\ Asif, et al., ``Early arteriovenous fistula failure: a
logical proposal for when and how to intervene,'' Clinical Journal
of American Society of Nephrology, 2006, 1: pp. 332-339.
\413\ Dember, et al., ``Effect of clopidogrel on early failure
of arteriovenous fistulas for hemodialysis: a randomized controlled
trial,'' JAMA, 2008, 299, pp. 2164-2171.
\414\ Al-Jaishi, et al., ``Patency rates of the arteriovenous
fistula for hemodialysis: a systematic review and meta- analysis,''
American Journal of Kidney Diseases, 2014, 63, pp. 464-478.
\415\ USRDS Annual Report, 2017.
\416\ Thamer, et al., ``Medicare costs associated with
arteriovenous fistulas,'' American Journal of Kidney Diseases,
72(1), pp. 10- 8. Published online March 28, 2018.
\417\ USRDS Annual Report, 2017.
\418\ Thamer, et al., ``Medicare costs associated with
arteriovenous fistulas,'' American Journal of Kidney Diseases,
72(1), pp. 10- 18. Published online March 28, 2018.
\419\ Lee, et al., ``Tradeoffs in vascular access selection in
elderly patients initiating hemodialysis with a catheter,'' American
Journal of Kidney Diseases, 2018.
\420\ Yang, et al., ``Comparison of post-creation procedures and
costs between surgical and an endovascular approach to arteriovenous
fistula creation,'' The Journal of Vascular Access, 2017, 18, pp. 8-
14.
\421\ Arnold, et al., ``Evaluation of hemodialysis arteriovenous
fistula interventions and associated costs: Comparison between
surgical and endovascular AV fistula,'' Journal of Vascular and
Interventional Radiology 2018, pp. 1-9.
\422\ Buickians, et al., ``The natural history of autologous
fistulas as first-time dialysis access in the KDOQI era,'' Journal
of Vascular Surgery,'' 2008, 47, pp. 415-421, discussion 20-1.
\423\ Falk, et al., ``Maintenance and salvage of arteriovenous
fistulas,'' Journal of Vascular Interventional Radiology, 2006, 17,
pp. 807-813.

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[[Page 32670]]

According to the applicant, in contrast, results of AVF created
using the WavelinQ^TM EndoAVF System have shown that endoAV
fistulas have better results than surgical AVF. The applicant states
that these results include higher patency with fewer post-creation
interventions and higher fistula maturation as compared to the surgical
AVF results reported in the literature. For example, a recent meta-
analysis included four clinical studies with pooled efficacy and safety
data from 157 patients using the WavelinQ^TM EndoAVF
System.\424\ According to the applicant, the results include high
procedure success of 96.8 percent and higher cannulation success than
surgical AVF--82.4 percent of patients were successfully used for
dialysis by 6 months. Also, the applicant asserts that the results
include higher patency than surgical AVF, demonstrated by 74.8 percent
primary patency (unobstruction without additional intervention) at 12
months, 79.0 percent secondary patency (unobstruction) at 12 months,
and 98.12 percent functional patency (durability post-cannulation) at
12 months. The FLEX study (using the WavelinQ^TM (6F) EndoAVF
System) reported a procedure success rate of 97 percent and that 96
percent of endoAVFs were used for dialysis and remained patent after 6
months.\425\
---------------------------------------------------------------------------

\424\ BD WavelinQ Instructions for Use, BAW1469200 Rev. 0 02/19.
\425\ Rajan, et al., ``Percutaneous creation of an arteriovenous
fistula for hemodialysis access,'' Journal of Vascular Intervenous
Radiology, 2015, 26, pp. 484-490.
---------------------------------------------------------------------------

The applicant indicates that a second study, the Novel Endovascular
Access Trial (NEAT), which was a statistically powered, prospective,
multi-center study of 60 evaluable patients and 20 roll-ins using the
WavelinQ^TM (6F) EndoAVF System, confirmed previous results
with high procedure and cannulation success of 98 percent and 67
percent (within 12 months), respectively. Additionally, the study
demonstrated a low thrombosis rate of 10.5 percent, low intervention
rate of 0.46 per pt-year, and high 12-month primary and secondary
patency of 69 percent and 84 percent, respectively.\426\
---------------------------------------------------------------------------

\426\ Lok, et al., ``Endovascular proximal forearm arteriovenous
fistula for hemodialysis access: Results of the prospective,
multicenter novel endovascular access trial (NEAT),'' American
Journal of Kidney Diseases, 2017, 70, pp. 486-497.
---------------------------------------------------------------------------

The applicant states that additional analyses comparing endoAVF
(using the WavelinQ^TM (6F) EndoAVF System) to surgical AVF
showed that patients with an endoAVF had fewer secondary interventions
in the first year as compared to patients with a surgical AVF,
resulting in overall cost savings to payers. According to the
applicant, 67 percent of endoAVF patients were free from intervention
after 1 year compared to only 18 percent of surgical AVF
patients.^{427 428}
---------------------------------------------------------------------------

\427\ Yang, et al., ``Comparison of post-creation procedures and
costs between surgical and an endovascular approach to arteriovenous
fistula creation,'' The Journal of Vascular Access, 2017, 18, pp. 8-
14.
\428\ Arnold, et al., ``Evaluation of hemodialysis arteriovenous
fistula interventions and associated costs: Comparison between
surgical and endovascular AV fistula,'' Journal of Vascular
Intervenous Radiology, 2018, pp. 1-9.
---------------------------------------------------------------------------

The applicant also indicates a third study, the EASE study, which
included 32 patients and evaluated the safety and efficacy of the
WavelinQ^TM (4F) EndoAVF System. The applicant states that
results from EASE were consistent with previous studies, demonstrating
100 percent procedure success with a low adverse event rate, 1/32 (3.1
percent). At 6 months, 86 percent of patients were successfully
cannulated for dialysis using the WavelinQ^TM (4F) EndoAVF
System.\429\
---------------------------------------------------------------------------

\429\ Berland, et al., Endovascular Creation of an Arteriovenous
Fistula with a Next Generation 4Fr Device Design for Hemodialysis
Access: Clinical Experience from the EASE Study.
---------------------------------------------------------------------------

Additionally, the applicant noted that a fourth study, the endoAVF
EU Study (using the WavelinQ^TM (4F) EndoAVF System), is
still enrolling. Outcomes for the first 32 patients were tabulated and
included in the meta-analysis and showed consistent results to previous
studies.\430\
---------------------------------------------------------------------------

\430\ Rajan, et al., ``Percutaneous creation of an arteriovenous
fistula for hemodialysis access,'' Journal of Vascular Intervenous
Radiology, 2015, 26, pp. 484-490.
---------------------------------------------------------------------------

The applicant asserts the FLEX, NEAT, EASE, and endoAVF EU Studies
support that the WavelinQ^TM (4F) EndoAVF System results in
much lower maintenance and morbidity than the traditional surgical AVF
in end-stage renal failure patients, with intervention rates for
endoAVF ranging from 0.21-0.6 per pt-year and fistula maturation rates
up to 86 percent at 6 months.^{431 432 433}
---------------------------------------------------------------------------

\431\ Lee, et al., ``Tradeoffs in vascular access selection in
elderly patients initiating hemodialysis with a catheter,'' American
Journal of Kidney Diseases, 2018.
\432\ Harms, et al., ``Outcomes of arteriovenous fistulas and
grafts with or without intervention prior to successful use,''
Journal of Vascular Surgery,'' 2016, 64(1), pp. 155-162.
\433\ Berland et al., Endovascular Creation of an Arteriovenous
Fistula with a Next Generation 4Fr Device Design for Hemodialysis
Access: Clinical Experience from the EASE Study.
---------------------------------------------------------------------------

The applicant also asserts the reduction in interventions with the
WavelinQ^TM (4F) EndoAVF System is a result of the unique
procedure that minimizes vessel trauma. According to the applicant, the
system creates a fistula by using radiofrequency to vaporize tissue
between the artery and concomitant vein with minimal vessel trauma or
manipulation of the vessels, potentially lessening the stimulus for
negative remodeling that leads to frequent interventions.
The applicant states WavelinQ^TM (4F) EndoAVF System
offers higher patient satisfaction and beneficial resolution to disease
process treatment compared to surgical AVF. According to the applicant
the team Lok, C et al. was interested in patient acceptance of an
endoAVF (based on the WavelinQ^TM (6F) EndoAVF System)
because up to 30 percent of patients refuse a surgically created AV
fistula according to the reported literature.^{434 435}
Therefore, the team collected data on patient satisfaction using a
validated patient questionnaire to learn more about the patient
experience with this new technology. The applicant asserts that results
indicate patients are very satisfied with their endoAVF and would not
change to another type of access.
---------------------------------------------------------------------------

\434\ Lok, C. et al., ``Patient perceptions of a new non-
surgical approach to arteriovenous fistula creation and use for
hemodialysis,'' Nephrology Dialysis Transplantation, 2017, 32
(Supplement 3) iii329-iii343.
\435\ Casey, et al., ``Patients' perspectives on hemodialysis
vascular access: A systematic review of qualitative studies,''
American Journal of Kidney Diseases, 2014, vol. 64, pp. 937-953.
---------------------------------------------------------------------------

The applicant explained some of the clinical and patient benefits
of the WavelinQ^TM (4F) EndoAVF System. The applicant
asserts, for example, that endoAVF allows the patient to avoid open
surgery, scarring, and arm disfigurement, which is important to many
patients. The applicant further asserts that the endoAVF procedure
improves the process of administering hemodialysis as the endoAVF
matures faster compared to a surgical AVF, allowing the patient to more
quickly transition away from a central venous catheter, which the
applicant states has

[[Page 32671]]

a high rate of complication including infection. In addition, the
applicant states that WavelinQ^TM (4F) EndoAVF requires less
follow-on maintenance such that patients are not in and out of the
hospital for additional interventions to maintain the primary patency
of the fistula.^{436 437} The applicant states that this has
the potential to increase patient acceptance of an AVF as surgical
fatigue is cited as the primary reason patients elect a permanent CVC
over a surgical AVF.\438\ The applicant also suggests the
WavelinQ^TM (4F) EndoAVF System provides additional vascular
access options for dialysis in comparison to surgical AVF and the
Ellipsys[supreg] Vascular Access System.^{439 440}
---------------------------------------------------------------------------

\436\ Yang, et al., ``Comparison of post-creation procedures and
costs between surgical and an endovascular approach to arteriovenous
fistula creation,'' The Journal of Vascular Access, 2017, 18, pp. 8-
14.
\437\ Arnold, et al., ``Evaluation of hemodialysis arteriovenous
fistula interventions and associated costs: Comparison between
surgical and endovascular AV fistula,'' Journal of Vascular
Intervenous Radiology, 2018, pp. 1-9.
\438\ Chaudhry, et al., ``Seeing eye to eye: The key to reducing
catheter use,'' The Journal of Vascular Access, 2011, 12, pp. 120-
126.
\439\ BD WavelinQ Instructions for Use, BAW1469200 Rev. 0 02/19.
\440\ Avenue Medical Ellypsis Instructions for Use, LB015-002
Rev B, Released 11/2018.
---------------------------------------------------------------------------

The applicant asserts the WavelinQ^TM (4F) EndoAVF System
creates additional options for establishing arteriovenous access, that
is another anatomic site for creating a fistula that neither
traditional surgical AVFs nor the Ellipsys[supreg] Vascular Access
System can offer. According to the applicant, patients are given an
extra location in the mid-arm for a fistula because the
WavelinQ^TM (4F) EndoAVF System uses vessels deep in the arm
that are not used in surgical fistula creation and are only accessible
endovascularly via the unique mechanism of WavelinQ^TM
consisting of action using magnetically guided arterial and venous
catheters. The applicant suggests this additional access creation site
extends the potential time a patient can undergo dialysis with an
autogenous fistula before exhausting vessels and requiring an AV graft
or CVC.
The applicant asserts the WavelinQ^TM (4F) EndoAVF System
is indicated for the creation of an arteriovenous fistula using
concomitant ulnar artery and ulnar vein or concomitant radial artery
and radial vein in patients with minimum artery and vein diameters of
2.0 mm at the fistula creation site who have chronic kidney disease and
need hemodialysis. According to the applicant, the ulnar artery to
ulnar vein fistula is unique to the WavelinQ^TM (4F) EndoAVF
System in comparison to both traditional surgical fistula creation and
the Ellipsys[supreg] Vascular Access System. The applicant states that
it enables the preservation of all future surgical AVF options such as
a radiocephalic, brachiocephalic and brachiobasilic fistula as it
utilizes an entirely different vascular bed for both arterial and
venous blood flow.
With regard to the information previously summarized, we are
concerned that there is no study directly comparing
WavelinQ^TM (4F) Endo AVF System to surgical AVF or
Ellipsys[supreg] Vascular Access System; rather, the studies provided
compare historical data for surgical AVF to data on the results of AVF
created using both the WavelinQ^TM Endo AVF (6F) and (4F)
systems. We are also concerned as to whether the data demonstrates if
the WavelinQ^TM (4F) EndoAVF System significantly improves
clinical outcomes for patients requiring hemodialysis in comparison to
surgical AVF and the Ellipsys[supreg] Vascular Access System due to the
limited number of participants in the clinical trials, and whether the
results are generalizable to the entire Medicare population due to the
limited number of participants.
We are inviting public comments on whether the
WavelinQ^TM (4F) EndoAVF System meets the substantial
clinical improvement criterion.
We received a written public comment from the applicant in response
to the New Technology Add-on Payment Town Hall meeting regarding the
application of WavelinQ^TM (4F) EndoAVF System for new
technology add-on payments.
Comment: The applicant addressed a question posed at the town hall
meeting regarding how the WavelinQ^TM (4F) EndoAVF System is
different from the Ellipsys[supreg] Vascular Access System. The
applicant stated that the WavelinQ^TM utilizes a different
method for fistula creation, radiofrequency ablation, whereas the
Ellipsys[supreg] utilizes thermal resistance (heat). The applicant
further stated that the WavelinQ^TM requires coil
embolization of the brachial vein at the time of endoAVF creation while
the Ellipsys[supreg] does not. The applicant stated that the
WavelinQ^TM utilizes magnetic catheters to guide and align
the location of the endoAVF creation site, and that the
Ellipsys[supreg] does not have a mechanism for aligning the fistula
creation site. The applicant stated that the WavelinQ^TM
offers two options for fistula creation. The applicant stated that the
WavelinQ^TM (4F) EndoAVF can create a fistula from the ulnar
artery to the ulnar vein. According to the applicant this is an unused
vascular bed for traditional surgical fistula options which does not
interfere with necessary blood flow for hemodialysis purposes, thus
preserving all future surgical AV fistula options such as
radiocephalic, brachiocephalic and braciobasilic fistulas. Second, it
can create a fistula between the concomitant radial artery and radial
vein. Per the applicant, this method of fistula creation eliminates the
ability to perform a future radiocephalic fistula as an option in the
future.
The applicant further stated that in comparison, Ellipsys[supreg]
is only able to create a fistula from the proximal radial artery to the
perforating vein, thus eliminating any future use of a radiocephalic
fistula. The applicant asserts that the access methods are different--
WavelinQ^TM utilizes the arterial system and venous system
and that the Ellipsys[supreg] utilizes only the venous system. The
applicant asserts that the methods of visualization are also different.
The WavelinQ^TM uses ultrasound and fluoroscopy, whereas the
Ellipsys[supreg] only uses ultrasound. With regard to subsequent
procedures, Ellipsys[supreg] requires a secondary balloon angioplasty
procedure at a later date, while WavelinQ^TM does not. The
applicant asserts that procedure times and complexity are also
different--endoAVF creation with WavelinQ^TM is an ~85-minute
procedure, whereas endoAVF creation with Ellipsys[supreg] is a ~23-
minute procedure, which the applicant states represents a marked
difference in procedure complexities.
The applicant also addressed a question regarding available
randomized, controlled studies comparing the WavelinQ^TM (4F)
EndoAVF System to surgical AVFs. The applicant stated that as mentioned
during the Town Hall, while there are no current head to head RCTs
comparing the two fistula types, there are two published retrospective
studies that utilize a Propensity Score Matching Analysis to compare
WavelinQ^TM data from the NEAT study with two separate data
sources for AVF patients.
The applicant stated that the first study was conducted by Yang, et
al. and was published in the Journal of Vascular Access in 2017. This
study compared AVF post-creation procedures and their associated costs
for patients with surgical AV fistulas to patients with fistulas
created using WavelinQ^TM. A random 5 percent sample from
Medicare's Standard Analytic Files was extracted and used in comparison
to patients from the NEAT study. Patients were matched 1:1 using
propensity score matching of baseline demographic and clinical
characteristics. Patient follow up data from inpatient, outpatient, and
physician claims were

[[Page 32672]]

used to identify post-creation procedures and to estimate average
procedure costs. Of 3764 Medicare surgical AVF patients, 60
successfully matched 1:1 with patients from the NEAT study. Key results
were as follows:
Post-creation procedural event rate was 3.43 per patient
year and 0.59 per patient year (p<0.05) for surgical and
WavelinQ^TM fistulas, respectively.
Average first year post-AVF creation costs per patient-
year for patients who received a WavelinQ^TM fistula were
$11,240 USD lower than costs for a surgical fistula.
The second study was conducted by Arnold, et al. and was published
in the Journal of Vascular Interventional Radiology in 2018. This study
compared the rate of AVF interventions in both incident and prevalent
end-stage kidney disease patients, their associated costs and
intervention-free survival between patients with surgically created
AVFs vs. patients with an endoAVF created using WavelinQ^TM.
Data from the USRDS was abstracted and matched 1:1 with patients from
the NEAT study using propensity score matching. Post fistula creation
event rates, intervention-free survival, and costs were compared
between patients with surgically created fistulas and patients with a
WavelinQ^TM fistula. The applicant stated that key results
were as follows:
In incident patients, post-creation event rates were 7.22
per patient year and 0.74 per patient year (p<0.0001) for surgical and
WavelinQ^TM fistulas, respectively.
In prevalent patients, post-creation event rates were 4.10
per patient year and 0.46 per patient year (p<0.0001) for surgical and
WavelinQ^TM fistulas, respectively.
Expenditures for post-creation interventions were $16,494
and $13,389 less in incident and prevalent patients with a
WavelinQ^TM fistula, respectively.
The applicant also provided written comments addressing the
availability of data from the EU post market study. The applicant
stated that while there are no plans at this time to publish the EU
post market study in a medical journal, the data have been made
available to the public via WavelinQ's Instructions for Use (IFU). The
applicant also provided a PDF copy of the most recent IFU which
contained a summary of the study safety and effectiveness measures.
Response: We appreciate the applicant's comments. We will take
these comments into consideration when deciding whether to approve new
technology add-on payments for WavelinQ^TM.
o. Zulresso^TM
Sage Therapeutics submitted an application for new technology add-
on payments for ZULRESSO^TM for FY 2021.
ZULRESSO^TM (brexanalone) is a neuroactive steroid gamma-
aminobutyric acid (GABA)A receptor positive modulator
indicated for the treatment of postpartum depression (PPD) in adults
administered via a continuous intravenous infusion.
According to the applicant, PPD is a major depressive episode that
occurs following delivery, though onset of symptoms may occur during
pregnancy. Per the applicant, mothers with PPD may present with a
variety of symptoms, which must be present most of the time for 2 weeks
or more in order for PPD to be diagnosed. These depressive symptoms may
persist throughout and beyond the first postnatal year if PPD is left
untreated. As described by the applicant, these symptoms may include
trouble bonding with, and doubt in ability to care for, their baby;
thoughts of self-harm or harm to baby; feelings of worry, anxiety,
sadness, moodiness, irritability, and/or restlessness; crying more
often or without apparent reason; experiencing anger or rage; sleep
disturbances; changes in appetite; difficulty concentrating; and
withdrawal from friends and family. According to the applicant, PPD may
affect the mother's ability to function with potential considerable
risks such as self-harm, and PPD may also be associated with suicidal
ideation.
The applicant stated that PPD is one of the most common
complications during and after pregnancy, affecting more than 400,000
women in the United States. The applicant noted that women diagnosed
with PPD who are disabled may be otherwise eligible for Medicare, and
some may be eligible for Medicaid as well. While the studies summarized
did not specifically target Medicare patients, the applicant believes
that these results can be generalized to Medicare patients diagnosed
with PPD.
The applicant stated that the precise cause of PPD is unknown,
though there are multiple hypotheses about the mechanism of disease of
PPD. The applicant reported that levels of allopregnanolone, the
predominant metabolite of progesterone, increase during pregnancy and
decrease substantially after childbirth. Per the applicant, preclinical
evidence indicated that rapid changes in levels of allopregnanolone
confer dramatic behavioral changes and may trigger PPD in some
women.\441\
---------------------------------------------------------------------------

\441\ Kanes, SJ, Colquhoun, H, Doherty, J, Raines, S, Hoffmann,
E, Rubinow, DR, Meltzer-Brody, S. ``Open-label, proof-of-concept
study of brexanolone in the treatment of severe postpartum
depression,'' Human Psychopharmacology: Clinical & Experimental,
2017, Vol. 32(2).
---------------------------------------------------------------------------

As reported in a study submitted by the applicant, the GABAergic
deficit hypothesis of depression states that a deficit of GABAergic
transmission in defined neural circuits is causal for depression.
According to the study, conversely, an enhancement of GABA
transmission, including that triggered by selective serotonin reuptake
inhibitors or ketamine, has antidepressant effects. The study reported
that ZULRESSO^TM, an intravenous formulation of the
endogenous neurosteroid allopregnanolone, showed clinically significant
antidepressant activity in postpartum depression. According to the
study, by allosterically enhancing GABAA receptor function,
the antidepressant activity of allopregnanolone is attributed to an
increase in GABAergic inhibition. In addition, allopregnanolone may
stabilize normal mood by decreasing the activity of stress-responsive
dentate granule cells and thereby sustain resilience behavior. The
researchers concluded that therefore, allopregnanolone may augment and
extend its antidepressant activity by fostering resilience.\442\
---------------------------------------------------------------------------

\442\ L[uuml]scher, B, M[ouml]hler, H, ``Brexanolone, a
neurosteroid antidepressant, vindicates the GABAergic deficit
hypothesis of depression and may foster resilience,'' F1000Research,
2019, vol. 751.
---------------------------------------------------------------------------

The applicant stated that prior to FDA approval of
ZULRESSO^TM, there were no medicines specifically indicated
for PPD. The applicant indicated that the regimens historically
employed for the treatment of patients who have been diagnosed with PPD
have generally consisted of medications typically used for major
depression or other mood disorders. As described by the applicant,
these pharmacological therapies include--
Selective serotonin reuptake inhibitors (SSRIs), such as
sertraline, fluoxetine, and paroxetine, which selectively block the
reuptake of serotonin;
Serotonin and norepinephrine reuptake inhibitors (SNRIs)
such as venlafaxine, duloxetine, and milnacipran, which selectively
block the reuptake of serotonin and norepinephrine;
Monoamine oxidase inhibitors (MAOIs) such as phenelzine,
which cause an accumulation of amine neurotransmitters and are not
commonly used, owing to the adverse reactions with concomitant
medications and various food groups; and

[[Page 32673]]

Tricyclic antidepressants (TCAs), like nortriptyline,
which are antimuscarinic drugs that block the reuptake of both
serotonin and norepinephrine and have variable sedative properties.
The applicant indicated that non-pharmacological treatments, such
as psychotherapies, including cognitive behavioral therapy,
psychosocial community-based intervention, and dynamic therapy have
also been used to treat PPD.
Based on market research conducted by the applicant, the applicant
asserted that current treatment options for patients who have been
diagnosed with PPD present potential challenges for patients such as:
Long wait times for an appointment and difficulties scheduling follow-
up appointments with providers; insurance coverage challenges; delays
or interruptions in treatment; changes in medications or doses (which
may or may not be effective): And the lengths of the treatment plan
being longer than expected.
With respect to the newness criterion, the FDA granted
ZULRESSO^TM Priority Review and Breakthrough Therapy
designations, and on March 19, 2019, approved ZULRESSO^TM for
the treatment of PPD in adult women. On June 17, 2019, the Drug
Enforcement Administration (DEA) placed ZULRESSO^TM into
Schedule IV of the Controlled Substances Act (84 FR 27938 through
27943), after which it became commercially available. Currently, there
are no ICD-10-PCS procedure codes to uniquely identify procedures
involving ZULRESSO^TM. We note that the applicant has
submitted a request for approval for two unique ICD-10-PCS codes for
the administration of ZULRESSO^TM beginning in FY 2021.
As discussed previously, if a technology meets all three of the
substantial similarity criteria, it would be considered substantially
similar to an existing technology and would not be considered ``new''
for purposes of new technology add-on payments.
With regard to the first criterion, whether a product uses the same
or a similar mechanism of action to achieve a therapeutic outcome,
according to the applicant, ZULRESSO^TM does not use the same
or a similar mechanism of action when compared to existing treatments.
The applicant indicated that prior to the approval of
ZULRESSO^TM, certain antidepressants were prescribed for the
treatment of PPD; however, these antidepressants are not specifically
indicated for PPD. In addition, the applicant asserted that
ZULRESSO^TM does not use the same or a similar mechanism of
action as current antidepressants, including SSRIs, SNRIs, MAOIs, and
TCAs. The applicant stated that ZULRESSO^TM works differently
because it does not directly affect monoaminergic systems, with the
mechanism of action believed to be related to ZULRESSO's^TM
positive allosteric modulation of GABAA receptors.
Therefore, the applicant asserted that ZULRESSO^TM utilizes a
different mechanism of action than currently available treatment
options.
With respect to the second criterion, whether a product is assigned
to the same or a different MS-DRG, the applicant stated that the
antidepressants and non-pharmacological treatments historically used to
treat PPD are traditionally used in the outpatient setting; however,
patients with more severe symptoms of PPD who are hospitalized would
likely have the same diagnosis (F53.0--Postpartum depression) and be
assigned to the same MS-DRG as ZULRESSO^TM patients, MS-DRG
881 (Depressive Neuroses).
With respect to the third criterion, whether the new use of the
technology involves the treatment of the same or similar type of
disease and the same or similar patient population, according to the
applicant, the use of ZULRESSO^TM for treating PPD would
involve treatment of a similar patient population as compared to other
therapies historically used to treat PPD. However, the applicant noted
that there are no other treatments or technologies that are
specifically indicated for the treatment of PPD.
As summarized previously, the applicant maintains that
ZULRESSO^TM meets the newness criterion and is not
substantially similar to existing technologies because it has a unique
mechanism of action for treating PPD and is the only therapy
specifically indicated for the treatment of PPD. We are inviting public
comments on whether ZULRESSO^TM is substantially similar to
any existing technologies and whether ZULRESSO^TM meets the
newness criterion.
With regard to the cost criterion, the applicant used the FY 2018
MedPAR Hospital Limited Data Set (LDS) to determine the MS-DRGs to
which cases representing potential patient hospitalizations that may be
eligible for treatment involving ZULRESSO^TM may be assigned.
The applicant identified these potential cases as those with a
principal or secondary diagnosis code of F53 (Puerperal psychosis),
excluding MA cases and claims submitted only for GME payment. The
applicant noted that ICD-10-CM code F53.0 (Postpartum depression)
became effective October 1, 2018, and was not found on any FY 2018
inpatient claims. The applicant identified 76 cases reporting ICD-10-CM
diagnosis code F53 spanning 26 different MS-DRGs, with approximately 58
percent of these potential cases mapping to the following 3 MS-DRGs,
out of which approximately 49 percent of those potential cases mapped
to the top 2 MS-DRGs:
[GRAPHIC] [TIFF OMITTED] TP29MY20.138

The applicant did not remove charges for the prior technology or
the technology being replaced because the historical treatment
regimens, such as oral anti-depressants, do not need to be stopped
during treatment with ZULRESSO^TM. The applicant also noted
that ZULRESSO^TM is the first and only FDA-approved treatment
specifically indicated for PPD so there are no prior technology charges
to remove. The applicant then standardized the FY 2018 charges using
the FY 2018 impact file and inflated the charges to FY 2020 using the
2-year inflation factor of 11.1 percent (1.11100) published in the FY
2020 IPPS/LTCH PPS final rule (see 84 FR 42629). The applicant then
added charges for ZULRESSO^TM, based on the average per
discharge cost of ZULRESSO^TM inflated by the inverse of the
national average CCR for pharmacy costs of 0.189. The applicant
calculated a final average case-weighted standardized charge per case
of $225,056. Based on the FY 2020 IPPS/LTCH PPS final rule correction
notice

[[Page 32674]]

data file thresholds, the applicant calculated an average case-weighted
threshold amount of $33,012. The applicant stated that
ZULRESSO^TM exceeded the average-case-weighted threshold
amount and, therefore, meets the cost criterion.
As noted previously, the 76 cases reporting ICD-10-CM diagnosis
code F53 span 26 different MS-DRGs, with very few observations in most
of these MS-DRGs. We note that a sub-analysis of the top 2 MS-DRGs--
which represent 49 percent of the cases--would still exceed the
threshold. We also note that a sub-analysis assigning 100 percent of
the cases to the highest paying of these 26 MS-DRGs would also still
exceed the threshold.
We are concerned with the limited number of cases in the sample the
applicant analyzed. However, we acknowledge the difficulty in obtaining
cost data for a condition that has low prevalence in the Medicare
population. We are inviting public comments on whether
ZULRESSO^TM meets the cost criterion.
With regard to substantial clinical improvement, the applicant
asserted that, because there is no other treatment option specifically
approved by the FDA to treat PPD, ZULRESSO^TM represents a
substantial clinical improvement over existing technologies. In support
of this statement, the applicant submitted the FDA approval letter and
news release indicating that the approval of ZULRESSO^TM
marks the first time a drug has been specifically approved to treat
PPD.\443\ The applicant also asserted that ZULRESSO^TM
represents a substantial clinical improvement because the technology
significantly reduces depressive symptoms and improves patients'
functioning. The applicant submitted three studies to support its
assertion that ZULRESSO^TM represents a substantial clinical
improvement over existing technologies by improving depressive symptoms
and patients' functioning.
---------------------------------------------------------------------------

\443\ Food and Drug Administration, ``FDA approves first
treatment for post-partum depression,'' https://www.fda.gov/news-events/press-announcements/fda-approves-first-treatment-post-partum-depression.
---------------------------------------------------------------------------

The first study submitted (202A) was a Phase II, multicenter,
randomized, double-blind, parallel-group, placebo-controlled clinical
trial with 30-day follow-up in women diagnosed with severe PPD.
Patients with severe PPD (n=21) were randomized to receive a single,
continuous infusion of ZULRESSO^TM or placebo for 60 hours.
The primary endpoint was the change from baseline in the 17-item
Hamilton Depression Rating Scale (HAM-D) total score at the end of the
60-hour treatment period, compared to placebo. At the end of the 60-
hour infusion, the least-squared (LS) mean reduction in HAM-D total
score from baseline was 21.0 points in the ZULRESSO^TM group
compared with 8.8 points in the placebo group. The researchers
concluded that in women with severe PPD, infusion of
ZULRESSO^TM resulted in a significant and clinically
meaningful reduction in HAM-D total score, compared with placebo.\444\
---------------------------------------------------------------------------

\444\ Kanes, S., Colquhoun, H., Gunduz-Bruce, H., Raines, S.,
Arnold, R., Schacterle, A., Doherty, J., Epperson, C.N.,
Deligiannidis, K.M., Riesenberg, R., Hoffmann, E., Rubinow, D.,
Jonas, J., Paul, S., Meltzer-Brody, S., ``Brexanolone (SAGE-547
injection) in post-partum depression: a randomised controlled
trial.'' The Lancet. 2017,vol. 390(10093), pp. 480-489.
---------------------------------------------------------------------------

The second and third studies submitted (202B and 202C) were Phase
III, multicenter, randomized, double-blind, parallel-group, placebo-
controlled clinical trials with 30 day follow-up conducted at 30
clinical research centers and specialized psychiatric units in the
United States. The studies included women between the ages of 18-45
years, 6 months postpartum or less at screening, with PPD and a
qualifying score on the HAM-D. In both studies, patients were randomly
assigned to receive a single, continuous 60-hour infusion of
ZULRESSO^TM or matching placebo. The primary endpoint in both
studies was the change from baseline in the 17-item HAM-D total score
at 60 hours, compared with placebo. Study 202B consisted of patients
who were diagnosed with severe PPD (HAM-D score >=26) who were randomly
assigned to receive a single intravenous injection of either
ZULRESSO^TM 90 [mu]g/kg per h (BRX90), ZULRESSO^TM
60 [mu]g/kg per hour (BRX60), or matching placebo for 60 hours. Study
202C consisted of patients who were diagnosed with moderate PPD (HAM-D
score of 20 to 25) who were randomly assigned to BRX90 or matching
placebo for 60 hours. Three hundred and seventy-five women were
simultaneously screened across both studies, of whom 138 were randomly
assigned to receive either BRX90 (n=45), BRX60 (n=47), or placebo
(n=46) in Study 202B, and 108 were randomly assigned to receive BRX90
(n=54) or placebo (n=54) in Study 202C. In study 202B, at hour 60, the
LS mean reduction in HAM-D total score from baseline was 19.5 points in
the BRX60 group and 17.7 points in the BRX90 group, compared with 14.0
points in the placebo group. In Study 202C, at hour 60, the LS mean
reduction in HAM-D total score from baseline was 14.6 points in the
BRX90 group compared with 12.1 points for the placebo group. The
researchers concluded that administration of ZULRESSO^TM
injection for PPD resulted in significant and clinically meaningful
reductions in HAM-D total score at hour 60 compared with placebo, with
rapid onset of action and durable treatment response during the study
period of 30 days.\445\
---------------------------------------------------------------------------

\445\ Meltzer-Brody, S., Colquhoun, H., Riesenberg, R.,
Epperson, C.N., Deligiannidis, K.M., Rubinow, D.R., Li, H., Sankoh,
A.J., Clemson, C., Schacterle A., Jonas, J., Kanes, S.,
``Brexanolone injection in post-partum depression: two multicentre,
double-blind, randomised, placebo-controlled, phase 3 trials,'' The
Lancet, 2018, vol. 392(10152), pp. 1058-1070.
---------------------------------------------------------------------------

The applicant provided data from the clinical studies cited
previously to support that ZULRESSO^TM improves patients'
depressive symptoms as measured by a reduction in the HAM-D score at
hour 60, and sustained at day 30. The applicant cited data from the
Phase II study (202A) that, at the end of the 60 hour infusion, the LS
mean reduction in HAM-D total score was significantly larger for the
ZULRESSO^TM (90 [mu]g/kg/h) group compared with the placebo
group (21.0 vs 8.8 points, respectively). Prespecified secondary
analyses showed a mean difference of -11.3 points between groups as
early as 24 hours after infusion, with significant improvements also
seen for the ZULRESSO^TM group at 36, 48, 60, and 72 hours,
as well as days 7 and 30. A greater percentage of patients in the
ZULRESSO^TM group achieved a treatment response (defined as
>=50% reduction from baseline in HAM-D total score) compared to the
placebo group, with a significant difference observed at hour 72 (80%
vs. 27%) and day 7 (80% vs. 20%). At hour 60, 70 percent of patients in
the ZULRESSO^TM group and 36 percent of patients in the
placebo group had a treatment response. A greater percentage of
patients treated with ZULRESSO^TM achieved remission (HAM-D
total score <=7) at hour 60 compared with the placebo group (70.0% vs.
9.1%). The difference was significant at hours 24, 48, 60, and 72, and
days 7 and 30.\446\
---------------------------------------------------------------------------

\446\ Kanes, S., Colquhoun, H., Gunduz-Bruce, H., Raines, S.,
Arnold, R., Schacterle, A., Doherty, J., Epperson, C.N.,
Deligiannidis, K.M., Riesenberg, R., Hoffmann, E., Rubinow, D.,
Jonas, J., Paul, S., Meltzer-Brody, S., ``Brexanolone (SAGE-547
injection) in post-partum depression: a randomised controlled
trial.'' The Lancet, 2017, vol. 390(10093), pp. 480-489.
---------------------------------------------------------------------------

The applicant cited data from the Phase III multicenter study of
patients with severe PPD (202B) that at hour 60, and sustained at day
30, the LS mean reduction in HAM-D total score was significantly
greater for the ZULRESSO^TM groups, compared to the

[[Page 32675]]

placebo groups. At hour 60, the LS mean reduction in HAM-D total score
was 17.7 points in the BRX90 group and 19.5 points in the BRX60 group,
compared to 14.0 points in the placebo group. At all-time points from
hour 24 to day 30, the percentage of patients achieving HAM-D response
(>=50% reduction from baseline in HAM-D total score) was higher in both
ZULRESSO^TM groups compared with placebo, with statistical
significance achieved for both ZULRESSO^TM groups across
multiple timepoints compared with placebo. The percentage of patients
achieving HAM-D remission (total score <=7) was numerically higher in
both ZULRESSO^TM groups between 24 and 72 hours and at day 30
compared with the placebo group.\447\
---------------------------------------------------------------------------

\447\ Meltzer-Brody, S., Colquhoun, H., Riesenberg, R.,
Epperson, C.N., Deligiannidis, K.M., Rubinow, D.R., Li, H., Sankoh,
A.J., Clemson, C., Schacterle A., Jonas, J., Kanes, S.,
``Brexanolone injection in post-partum depression: two multicentre,
double-blind, randomised, placebo-controlled, phase 3 trials,'' The
Lancet, 2018, vol. 392(10152), pp. 1058-1070.
---------------------------------------------------------------------------

The applicant cited data from the Phase III multicenter study of
patients with moderate PPD (202C) that at the end of the 60 hour
infusion, the LS mean reduction in HAM-D total score was significantly
greater in the ZULRESSO^TM BRX90 group compared with the
placebo group (14.6 vs 12.1, respectively). At all time points from
hour 8 through day 14, the percentage of patients achieving HAM-D
remission (total score <=7) was numerically higher for the
ZULRESSO^TM BRX90 group compared with the placebo group, with
statistical significance achieved at multiple time points, including at
the end of the 60 hour infusion.\448\
---------------------------------------------------------------------------

\448\ Ibid.
---------------------------------------------------------------------------

The applicant cited pooled data from the ZULRESSO^TM
BRX90 groups in the Phase II (202A) and Phase III (202B and 202C)
studies showing a significant LS mean reduction in HAM-D total score
compared with the placebo group at hour 60 (17.0 vs 12.8 points).
Similar to the individual studies, the integrated BRX90 analysis showed
a rapid decrease in HAM-D scores (that is, depressive symptoms) in the
BRX90 group compared with the placebo groups, which was sustained until
day 30. At the end of the 60 hour infusion, the LS mean reduction in
HAM-D total score from baseline was significantly larger in the BRX90
group than the placebo group (LS mean difference -4.1), which was also
observed at 24 hours (LS mean difference -3.0) and was sustained at day
30 (LS mean difference -2.6).\449\
---------------------------------------------------------------------------

\449\ Ibid.
---------------------------------------------------------------------------

The applicant provided data from the clinical studies cited
previously to support that ZULRESSO^TM improves patients'
functioning scores, as measured by the Clinical Global Impressions
Scale-Improvement (CGI-I). The applicant cited data from the Phase II
study (202A) that the observed improvement in symptoms of postpartum
depression following ZULRESSO^TM administration was evidenced
by the significant treatment difference observed for CGI-I response. At
day 30, 3 (27.3%) patients in the placebo group vs. 8 (80.0%) patients
treated with ZULRESSO^TM were considered CGI-I responders
with a score of ``1--very much improved'' or ``2--much improved.''
\450\
---------------------------------------------------------------------------

\450\ Kanes, S., Colquhoun, H., Gunduz-Bruce, H., Raines, S.,
Arnold, R., Schacterle, A., Doherty, J., Epperson, C.N.,
Deligiannidis, K.M., Riesenberg, R., Hoffmann, E., Rubinow, D.,
Jonas, J., Paul, S., Meltzer-Brody, S., ``Brexanolone (SAGE-547
injection) in post-partum depression: A randomised controlled
trial.'' The Lancet, 2017, vol. 390(10093), pp. 480-489.
---------------------------------------------------------------------------

The applicant cited data from the Phase III study of patients with
severe PPD (202B) that patients' functioning scores, as measured by
CGI-I, improved at hour 60, and sustained at day 30. The proportion of
patients who achieved a CGI-I response (score of ``1--very much
improved,'' or ``2--much improved'') at 60 hours was significantly
higher in both ZULRESSO^TM groups. The proportion of BRX90
patients who achieved a CGI-I response was also significantly higher
than the placebo group at hour 72 and day 30 and significantly higher
in the BRX60 group compared to placebo at timepoints from hours 36 to
72 and days 7 and 30.\451\
---------------------------------------------------------------------------

\451\ Meltzer-Brody, S., Colquhoun, H., Riesenberg, R.,
Epperson, C.N., Deligiannidis, K.M., Rubinow, D.R., Li, H., Sankoh,
A.J., Clemson, C., Schacterle A., Jonas, J., Kanes, S.,
``Brexanolone injection in post-partum depression: Two multicentre,
double-blind, randomised, placebo-controlled, phase 3 trials,'' The
Lancet, 2018, vol. 392(10152), pp. 1058-1070.
---------------------------------------------------------------------------

The applicant cited data from the Phase III study of patients with
moderate PPD (202C) that the proportion of patients who achieved a CGI-
I response was significantly higher for the BRX90 group compared with
the placebo group at hour 60. These significant increases in CGI-I
response occurred as early as 36 hours and were sustained at day
7.\452\
---------------------------------------------------------------------------

\452\ Ibid.
---------------------------------------------------------------------------

The applicant provided data from the clinical studies cited
previously to support that ZULRESSO^TM improves patients'
depressive symptoms, as measured by the Montgomery-Asberg Depression
Rating Scale (MADRS). The applicant cited data from the Phase II study
(202A) that ZULRESSO^TM improved patients' depressive
symptoms, as measured by the MADRS, at hour 60 and sustained at day 30.
Through the study period, patients in the ZULRESSO^TM (90
[mu]g/kg/h) group showed significant differences in MADRS score
compared with the placebo group (hour 24, P=0.004; hour 60, P=0.01; day
30, P=0.01).\453\
---------------------------------------------------------------------------

\453\ Kanes, S., Colquhoun, H., Gunduz-Bruce, H., Raines, S.,
Arnold, R., Schacterle, A., Doherty, J., Epperson, C.N.,
Deligiannidis, K.M., Riesenberg, R., Hoffmann, E., Rubinow, D.,
Jonas, J., Paul, S., Meltzer-Brody, S., ``Brexanolone (SAGE-547
injection) in post-partum depression: A randomised controlled
trial.'' The Lancet, 2017, vol. 390(10093), pp. 480-489.
---------------------------------------------------------------------------

The applicant cited data from the Phase III study of patients with
severe PPD (202B) that ZULRESSO^TM improved patients'
depressive symptoms, as measured by the MADRS, at hour 60. Numerically
greater improvement from baseline in MADRS total score was observed for
both ZULRESSO^TM (60 [mu]g/kg/h and 90 [mu]g/kg/h) treatment
groups compared with the placebo group at hour 60 and day 30. This
difference was statistically significant at hour 60 for ZULRESSO 60
[mu]g/kg/h (LS mean difference vs placebo, -6.9).\454\
---------------------------------------------------------------------------

\454\ Meltzer-Brody, S., Colquhoun, H., Riesenberg, R.,
Epperson, C.N., Deligiannidis, K.M., Rubinow, D.R., Li, H., Sankoh,
A.J., Clemson, C., Schacterle A., Jonas, J., Kanes, S.,
``Brexanolone injection in post-partum depression: Two multicentre,
double-blind, randomised, placebo-controlled, phase 3 trials,'' The
Lancet, 2018, vol. 392(10152), pp. 1058-1070.
---------------------------------------------------------------------------

The applicant cited data from the Phase III study of patients with
moderate PPD (202C) that ZULRESSO^TM improved patients'
depressive symptoms, as measured by the MADRS, at hour 60. There was a
statistically significant improvement from baseline in the MADRS total
score for the ZULRESSO^TM (90 [mu]g/kg/h) group compared to
placebo at hour 60 (LS mean difference vs. placebo, -4.9). \455\
---------------------------------------------------------------------------

\455\ Ibid.
---------------------------------------------------------------------------

The applicant cited data from the Phase II study (202A) cited
previously that ZULRESSO^TM improves patients' depressive
symptoms as measured by the Bech-6 Subscale, a secondary endpoint. In
the Phase II study (202A), significant improvement in the core
depressive symptoms of the HAM-D Bech-6 Subscale score were observed at
day 30 in the ZULRESSO^TM (90 [mu]g/kg/h) group compared with
the placebo group.\456\
---------------------------------------------------------------------------

\456\ Kanes, S., Colquhoun, H., Gunduz-Bruce, H., Raines, S.,
Arnold, R., Schacterle, A., Doherty, J., Epperson, C.N.,
Deligiannidis, K.M., Riesenberg, R., Hoffmann, E., Rubinow, D.,
Jonas, J., Paul, S., Meltzer-Brody, S., ``Brexanolone (SAGE-547
injection) in post-partum depression: A randomised controlled
trial.'' The Lancet, 2017, vol. 390(10093), pp. 480-489.

---------------------------------------------------------------------------

[[Page 32676]]

After reviewing the information submitted by the applicant as part
of its FY 2021 new technology add-on payment application for
ZULRESSO^TM, we are concerned that the patients in the
clinical trials were followed up for only 30 days, and the durability
of the effects of ZULRESSO^TM, including whether patients in
remission relapse after 30 days, is not clear. We also note that the
small sample sizes of the trials and the demographic characteristics of
the patients recruited for these studies may not have included or
sufficiently represented populations that may be at high-risk to
develop PPD, such as women who are financially or socially vulnerable
and individuals with pre-existing mental illness, and it is not clear
whether the study participants had time-limited PPD that might have
resolved with the passage of time. It is also unclear whether the
outcomes chosen for these studies (for example, test scores) translate
into clinically significant observable improvements in maternal
functioning and child interactions, for example, has maternal-child
bonding been shown to improve as a result of the infusion. We also note
that these studies compare the effects of ZULRESSO^TM to
placebo, and not current regimens being used to treat PPD, and do not
seem to include patients who were unresponsive to existing therapies.
In addition, we are concerned whether results of studies of otherwise
healthy women with PPD would be generalizable to the Medicare
population, in which women with PPD would likely be eligible for
Medicare based on disabilities that could potentially present
comorbidities for which ZULRESSO^TM would not be appropriate
or effective. We also note that because of possible side effects of
excessive sedation or sudden loss of consciousness,
ZULRESSO^TM is only available through a restricted Risk
Evaluation and Mitigation (REMS) program, and we are concerned whether
these or other adverse events associated with ZULRESSO^TM
would be unsafe for women with PPD in the Medicare population. We are
inviting public comments on whether ZULRESSO^TM meets the
substantial clinical improvement criterion, including with respect to
the concerns we have raised.
We did not receive any written comments in response to the New
Technology Town Hall meeting notice published in the Federal Register
regarding the substantial clinical improvement criterion for
ZULRESSO^TM or at the New Technology Town Hall meeting.
6. Proposed FY 2021 Applications for New Technology Add-On Payments
(Alternative Pathways)
As discussed previously, for applications received for new
technology add-on payments for FY 2021 and subsequent fiscal years, if
a medical device is part of FDA's Breakthrough Devices Program or a
product is designated by FDA as a QIDP, and received FDA marketing
authorization, it will be considered new and not substantially similar
to an existing technology for purposes of the new technology add-on
payment under the IPPS, and will not need to meet the requirement that
it represent an advance that substantially improves, relative to
technologies previously available, the diagnosis or treatment of
Medicare beneficiaries. These technologies must still meet the cost
criterion.
We received 10 applications for new technology add-on payments for
FY 2021 under this alternative new technology add-on payment pathway.
One applicant withdrew its application prior to the issuance of this
proposed rule. Of the remaining nine applications, three of the
technologies received a Breakthrough Device designation from FDA and
six have been designated as a Qualified Infectious Disease Product
(QIDP) by FDA. In accordance with the regulations under Sec.
412.87(e), applicants for new technology add-on payments must have FDA
approval or clearance by July 1 of the year prior to the beginning of
the fiscal year for which the application is being considered.
Typically, in the annual proposed rule, we provide a summary of
each application and describe any concerns we may have regarding
whether the technology meets a specific new technology add-on payment
criterion. As we discussed in the FY 2020 IPPS/LTCH PPS final rule, we
believe it is appropriate to facilitate access to these transformative
new technologies and antimicrobials as part of the Administration's
commitment to addressing barriers to healthcare innovation and ensuring
Medicare beneficiaries have access to critical and life-saving new
cures and technologies that improve beneficiary health outcomes. To
that end, to provide additional transparency and predictability with
respect to these technologies, in this proposed rule we are making a
proposal to approve or disapprove each of these nine applications based
on whether the technology meets the cost criterion. Therefore, in this
section of this rule, we provide background information on each
alternative pathway application and propose whether or not each
technology would be eligible for the new technology add-on payment for
FY 2021 based on a discussion of whether the technology meets the cost
criterion. We refer readers to section II.H.8. of the preamble of the
FY 2020 IPPS/LTCH PPS final rule (84 FR 42292 through 42297) for a
complete discussion of the alternative new technology add-on payment
pathways for these technologies.
a. Alternative Pathway for Breakthrough Devices
(1) BAROSTIM NEO[supreg] System
CVRx submitted an application for the BAROSTIM NEO[supreg] System.
According to the applicant, the BAROSTIM NEO[supreg] System is
indicated for the improvement of symptoms of heart failure--quality of
life, six-minute hall walk and functional status--for patients who
remain symptomatic despite treatment with guideline-directed medical
therapy, are NYHA Class III or Class II (who had a recent history of
Class III), have a left ventricular ejection fraction <=35%, a NT-
proBNP <1600 pg/ml and excluding patients indicated for Cardiac
Resynchronization Therapy (CRT) according to AHA/ACC/ESC guidelines.
The BAROSTIM NEO[supreg] System received FDA approval on August 16,
2019 and is a Breakthrough Device designated by FDA. Additionally,
according to the applicant, the device was available on the market
immediately upon FDA approval. Currently, the following ICD-10-PCS
procedure codes can be used to uniquely identify the BAROSTIM
NEO[supreg] System: 0JH60MZ (Insertion of stimulator generator into
chest subcutaneous tissue and fascia, open approach) in combination
with 03HK0MZ (Insertion of stimulator lead into right internal carotid
artery, open approach) or 03HL0MZ (Insertion of stimulator lead into
left internal carotid artery, open approach).
With regard to the cost criterion, the applicant used the FY 2018
MedPAR Limited Data Set (LDS) to assess the MS-DRGs to which potential
cases representing hospitalized patients who may be eligible for
treatment involving the BAROSTIM NEO[supreg] System would mapped. The
applicant searched for cases with the following combination of existing
ICD-10-PCS codes: 0JH60MZ in combination with 03HK0MZ or 03HL0MZ. The
applicant determined its search using these procedure codes mapped to
MS-DRGs 252, 253, and 254 (Other Vascular Procedures with MCC,

[[Page 32677]]

with CC, and without CC/MCC, respectively), resulting in 71,431 total
claims across these three MS-DRGs.
The applicant then removed charges for the prior technology since
the BAROSTIM NEO[supreg] System will replace all of the current device
charges included in the claims. The applicant explained that it removed
all charges associated with the service category Medical/Surgical
Supply Charge Amount, which include revenue centers 027x.
The applicant then standardized the charges and inflated the
charges by applying the FY 2020 IPPS/LTCH PPS final rule outlier charge
inflation factor of 1.11100 (84 FR 42629). The applicant then added the
charges for the new technology by converting the cost of the device to
charges by dividing the costs by the national average cost-to-charge
ratio of 0.299 for implantable devices from the FY2020 IPPS Final Rule
(84 FR 42179).
Based on the above, the applicant calculated a final average case-
weighted standardized charge per case of $194,393 and an average case-
weighted threshold of $85,559. Because the final inflated average case-
weighted standardized charge per case exceeded the average case-
weighted threshold amount, the applicant asserted that the technology
meets the cost criterion.
According to the applicant, since the BAROSTIM NEO[supreg] System
is used in heart failure patients, the applicant submitted an
additional analysis to demonstrate that the technology meets the cost
criterion. The applicant revised its first analysis by assessing MS-DRG
291 (Heart Failure and Shock with MCC), 292 (Heart Failure and Shock
with CC), and 293 (Heart Failure and Shock without CC/MCC), 242
(Permanent Cardiac Pacemaker Implant with MCC), 243 (Permanent Cardiac
Pacemaker Implant with CC), 244 (Permanent Cardiac Pacemaker Implant
without CC/MCC), 222 (Cardiac Defibrillator Implant with Cardiac
Catheterization with AMI/HF/Shock with MCC), 223 (Cardiac Defibrillator
Implant with Cardiac Catheterization with AMI/HF/Shock without MCC),
224 (Cardiac Defibrillator Implant with Cardiac Catheterization without
AMI/HF/Shock with MCC), 225 (Cardiac Defibrillator Implant with Cardiac
Catheterization without AMI/HF/Shock without MCC), 226 (Cardiac
Defibrillator Implant without Cardiac Catheterization with MCC) and 227
(Cardiac Defibrillator Implant without Cardiac Catheterization without
MCC) using the same aforementioned ICD-10-PCS codes. The applicant used
the same methodology above and calculated a final inflated average
case-weighted standardized charge per case of $161,332 and an average
case-weighted threshold amount of $55,697. Because the final inflated
average case-weighted standardized charge per case exceeded the average
case-weighted threshold amount, the applicant asserted that the
technology meets the cost criterion.
We agree with the applicant that the BAROSTIM NEO[supreg] System
meets the cost criterion and therefore are proposing to approve the
BAROSTIM NEO[supreg] System for new technology add-on payments for FY
2021. As previously noted, there is a combination of ICD-10-PCS
procedure codes that can uniquely identify cases involving the BAROSTIM
NEO[supreg] System.
Based on preliminary information from the applicant at the time of
this proposed rule, the cost of the BAROSTIM NEO[supreg] System is
$35,000. We note that the cost information for this technology may be
updated in the final rule based on revised or additional information
CMS receives prior to the final rule. Under Sec. 412.88(a)(2), we
limit new technology add-on payments to the lesser of 65 percent of the
average cost of the technology, or 65 percent of the costs in excess of
the MS-DRG payment for the case. As a result, we are proposing that the
maximum new technology add-on payment for a case involving the use of
the BAROSTIM NEO[supreg] System would be $22,750 for FY 2021.
We are inviting public comments on whether the BAROSTIM NEO[supreg]
System meets the cost criterion and our proposal to approve new
technology add-on payments for the BAROSTIM NEO[supreg] System for FY
2021.
(2) NanoKnife[supreg] System
Angiodynamics submitted an application for new technology add-on
payments for the NanoKnife[supreg] System for FY 2021. The applicant is
seeking new technology-add on payments for the use of the
NanoKnife[supreg] System with six outputs for the treatment of Stage
III pancreatic cancer. We note that FDA has not yet granted market
approval of the NanoKnife[supreg] System for use in the treatment of
pancreatic cancer. We also note that the NanoKnife[supreg] System has
been previously approved by FDA for the use for surgical ablation of
soft tissue. Per the applicant, the Nanoknife[supreg] System is a
medical device consisting of a dedicated generator and specialized
electrode probes currently used for inpatient hospital ablation
procedures for surgical treatment of soft tissue ablation procedures.
The NanoKnife[supreg] System is considered a FDA class II device when
indicated for soft tissue ablation.
The applicant states that the NanoKnife[supreg] System delivers a
series of high voltage direct current electrical pulses between at
least two electrode probes placed within a target area of tissue. The
electrical pulses produce an electric field which induces
electroporation on cells within the target area. The number of
electrodes used is dependent on the size and shape of the tumor, and
the individual patient's clinical needs.
Electroporation is a technique in which an electrical field is
applied to cells in order to increase the permeability of the cell
membranes through the formation of nanoscale defects in the lipid
bilayer. The result is creation of nanopores in the cell membrane and
disruption of intra-cellular homeostasis, ultimately causing cell
death. The applicant stated that after delivering a sufficient number
of high voltage pulses, the cells surrounded by the electrodes will be
irreversibly damaged. This mechanism, which causes permanent cell
damage, is referred to as Irreversible Electroporation (IRE). Per the
applicant, benefits of IRE over other ablation methods include: (1)
Localized ablation of targeted tissue; (2) lack of damaging heat-sink
effect often seen with traditional thermal ablation techniques; and (3)
preservation of critical anatomic structures in the vicinity of the
ablation. Furthermore, according to the applicant, in studies to date,
the NanoKnife[supreg] System has been shown to be safe and effective in
patients presenting with unresectable tumors, who, given current
treatment standards, have few viable treatment options.
The NanoKnife[supreg] System with six outputs for the treatment of
Stage III pancreatic cancer received FDA Breakthrough Device
designation on January 18, 2018 and approval of an FDA investigational
device exemption (IDE G180278) on March 28, 2019. We note, and as
discussed above, that although the NanoKnife[supreg] System received
FDA Breakthrough Device designation for treatment of pancreatic cancer,
FDA has not yet market approved or cleared the NanoKnife[supreg] System
for use in the treatment of pancreatic cancer. The NanoKnife[supreg]
System is currently being used for the treatment of Stage III
pancreatic cancer in the DIRECT clinical trial in which the first
patient was enrolled on May 13, 2019. Completion of the clinical trial
is

[[Page 32678]]

not expected until approximately December 2023.\457\
---------------------------------------------------------------------------

\457\ https://clinicaltrials.gov/ct2/show/study/NCT03899636?term=NanoKnife&draw=2&rank=6.
---------------------------------------------------------------------------

The applicant noted that earlier iterations of the
NanoKnife[supreg] System indicated for the surgical ablation of soft
tissue were available on the market after FDA clearances in 2008 and
2015. According to the applicant, NanoKnife 3.0[supreg], the most
recent iteration of the NanoKnife[supreg] System device consisting of
improvements and advancements as compared to prior versions of the
device, was cleared by FDA on June 19, 2019 for the surgical ablation
of soft tissue and per the applicant became commercially available on
the U.S. market in June 2019. Consistent with prior versions of the
device, NanoKnife 3.0[supreg] is labeled for soft tissue ablation. We
note that since the earlier versions of the NanoKnife[supreg] System
have been available commercially on the U.S. market following FDA
clearances in 2008 and 2015, these versions are not considered new. As
mentioned above, under the first criterion, 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. Therefore, the indication associated
with the device during that timeframe, soft tissue ablation, would not
be relevant for purposes of the new technology add-on payment
application for FY 2021. Only the use of the NanoKnife[supreg] System
with six outputs for the treatment of Stage III pancreatic cancer, for
which the applicant submitted its application for new technology-add on
payments for FY 2021, and the FDA Breakthrough Device designation it
received for that use, are relevant for purposes of the new technology
add-on payment application for FY 2021.
According to the applicant, ICD-10-PCS procedure codes 0F5G0ZF
(Destruction of pancreas using irreversible electroporation, open
approach), 0F5G3ZF (Destruction of pancreas using irreversible
electroporation, percutaneous approach), and 0F5G4ZF (Destruction of
pancreas using irreversible electroporation, percutaneous endoscopic
approach) may be used to distinctly identify cases involving the
NanoKnife[supreg] System because the NanoKnife[supreg] System is
currently the only device used for irreversible electroporation in the
United States.
The applicant conducted the following analysis to demonstrate that
the technology meets the cost criterion. The applicant used the FY 2018
MedPAR Limited Data Set (LDS) to identify the MS-DRGs to which
potential cases representing hospitalized patients who may be eligible
for treatment involving the NanoKnife[supreg] System would be mapped.
The applicant searched for cases reporting the following predecessor
ICD-10-PCS codes: 0F5G0ZZ (Destruction of pancreas, open approach),
0F5G3ZZ (Destruction of pancreas, percutaneous approach) and 0F5G4ZZ
(Destruction of pancreas, percutaneous endoscopic approach). According
to the applicant, this resulted in 40 cases mapped to MS-DRGs 405, 406,
and 407 (Pancreas, Liver and Shunt Procedures with MCC, with CC, and
without CC/MCC, respectively). The applicant noted that cases eligible
for use of the NanoKnife[supreg] System would likely map to MS-DRGs
628, 629, or 630 (Other Endocrine, Nutritional and Metabolic O.R.
procedures with MCC, with CC, and without CC/MCC, respectively) as well
but none of the 40 cases above mapped to these MS-DRGs. However, the
applicant stated that had there been cases assigned to MS-DRGs 628,
629, or 630, these would have been selected as well. The applicant also
noted that cases where the open approach Whipple procedure (ICD-10-PCS
code 0FBG0ZZ (Excision of pancreas, open approach)) was coded were
removed, as according to the applicant it is unlikely this procedure
would be performed in conjunction with IRE because the Whipple
procedure is an extensive surgical procedure that may not be necessary
with IRE. The applicant only disclosed the percentage of cases assigned
to MS-DRG 406 because, according to the applicant, the number of cases
assigned to MS-DRGs 405 and 407 was less than 12 for each MS-DRG,
making the exact percentage for these two MS-DRGs unavailable.
The applicant examined associated charges per MS-DRG. According to
the applicant, since the 40 cases mapped to MS-DRGs 405, 406 and 407
could include charges for various technologies for destruction of
pancreatic tumors, and in order to exclude charges for prior
technology, the applicant removed all charges billed to the medical
supplies cost center for MS-DRGs 405, 406 and 407, as this cost center
could include charges associated with use of various predecessor
technologies for destruction of pancreatic tumors. The applicant noted
it did not remove charges related to the predecessor technology as it
believes that remaining charges associated with the cases would stay
the same. According to the applicant, related charges consist of
operating room, routine, intensive care, drug, radiology and Computed
Tomography charges. The applicant then standardized the charges for
each case and inflated each case's charges by applying the FY 2020
IPPS/LTCH PPS final rule outlier charge inflation factor of 1.11100 (84
FR 42629). The applicant then added the charges for the
Nanoknife[supreg] System by dividing the costs of the device and
required ancillary supplies per patient by the national average cost-
to-charge ratio of 0.299 for implantable devices from the FY 2020 IPPS
Final Rule (84 FR 42179). The applicant calculated a final inflated
average case-weighted standardized charge per case of $175,836 and an
average case-weighted threshold amount of $102,842. Because the final
inflated average case-weighted standardized charge per case exceeded
the average case-weighted threshold amount, the applicant maintained
that the technology met the cost criterion.
We agree with the applicant that it meets the cost criterion. As
noted previously, subject to our proposed conditional approval process
for technologies for which an application is submitted under the
alternative pathway for certain antimicrobial products, applicants for
new technology add-on payments must have FDA approval or clearance by
July 1 of the year prior to the beginning of the fiscal year for which
the application is being considered. As also summarized previously, the
applicant is seeking new technology-add on payments for the use of the
NanoKnife[supreg] System with six outputs for the treatment of Stage
III pancreatic cancer, and it is only that use, and the FDA
Breakthrough Device designation it received for that use, that are
relevant for purposes of the new technology add-on payment application
for FY 2021. Therefore, subject to the NanoKnife[supreg] System
receiving FDA clearance or approval for use in the treatment of Stage
III pancreatic cancer by July 1, 2020, we are proposing to approve the
NanoKnife[supreg] System for new technology add-on payments for FY
2021.
Based on preliminary information from the applicant at the time of
this proposed rule, the cost of the NanoKnife[supreg] System is
$11,086. We note that the cost information for this technology may be
updated in the final rule based on revised or additional information
CMS receives prior to the final rule. Under Sec. 412.88(a)(2), we
limit

[[Page 32679]]

new technology add-on payments to the lesser of 65 percent of the
average cost of the technology, or 65 percent of the costs in excess of
the MS-DRG payment for the case. As a result, we are proposing that the
maximum new technology add-on payment for a case involving the use of
the NanoKnife[supreg] System would be $7,205.90 for FY 2021.
We are inviting public comments on whether the NanoKnife[supreg]
System meets the cost criterion and our proposal to approve new
technology add-on payments for the NanoKnife[supreg] System for FY
2021, subject to the NanoKnife[supreg] System receiving FDA clearance
or approval for use in the treatment of Stage III pancreatic cancer by
July 1, 2020.
(3) Optimizer System
Impulse Dynamics submitted an application for The Optimizer[supreg]
System (QFV). The Optimizer[supreg] System is intended for the
treatment of chronic heart failure in patients with advanced symptoms
that have normal QRS duration and are not indicated for cardiac
resynchronization therapy.
Per the applicant, the Optimizer System consists of three
components. First, the Optimizer Rechargeable Implantable Pulse
Generator (IPG) is designed for subcutaneous implant and delivers
cardiac contractility modulation to the heart via two standard pacing
leads attached to the right ventricular septum. Second, the Optimizer
Mini Charger recharges the Optimizer IPG. Finally, the Omni II
Programmer with Omni SMART Software gives a qualified healthcare
professional the ability to program the Optimizer IPG over a large
range of clinical settings.
The applicant explained that the Optimizer IPG is implanted in the
right pre-pectoral region, similar to cardiac rhythm management
devices. According to the applicant, the procedure is performed in a
cardiac catheterization laboratory under fluoroscopic guidance with the
patient under light sedation. The applicant stated that since three
intracardiac leads are used, subclavian venous access is preferred over
access via the axillary or cephalic vein. The applicant stated that the
Optimizer IPG is connected to the heart via two standard implantable
pacing leads that are each placed into the right ventricular septum.
With respect to the newness criterion, the applicant indicated that
the FDA granted Breakthrough Device designation for the Optimizer
System on March 21, 2019. The applicant received FDA premarket approval
for the two-lead Optimizer System, which included placement of the two
leads in the right ventricular septum, on October 23, 2019. The device
was available in the market immediately following FDA approval.
The applicant asserted that the current ICD-10-PCS codes 0JH60AZ
(Insertion of contractility modulation device into chest subcutaneous
tissue and fascia, open approach), 0JH63AZ (Insertion of contractility
modulation device into chest subcutaneous tissue and fascia,
percutaneous approach), 0JH80AZ (Insertion of contractility modulation
device into abdomen subcutaneous tissue and fascia, open approach) and
0JH83AZ (Insertion of contractility modulation device into abdomen
subcutaneous tissue and fascia, percutaneous approach) identify the
Optimizer System.
With regard to the cost criterion, the applicant conducted an
analysis using the FY 2018 MedPAR Limited Data Set (LDS) to demonstrate
that the Optimizer System meets the cost criterion.
The applicant first searched the FY 2018 MedPAR data for cases
reporting the procedure codes listed in this section to identify
potential cases representing hospitalized patients who may be eligible
for treatment using the Optimizer[supreg] System. The applicant limited
its search to MS-DRG 245 (AICD Generator Procedures), which it asserts
is the typical MS-DRG assignment for implanting a contractility
modulation device. The applicant identified 2,049 cases that met the
criterion of having at least one of the following relevant ICD-10-PCS
procedure codes:
[GRAPHIC] [TIFF OMITTED] TP29MY20.139

The applicant determined an average unstandardized charge per case
of $180,319. The applicant then removed all charges for prior
technology by removing charges associated with the service categories
Prosthetic/Orthotic (revenue center 0274), Pacemakers (revenue center
0275) and other implantables (revenue center 0278), as the applicant
believed the Optimizer[supreg] System will typically not be implanted
concomitantly with other devices during the hospital admission. The
applicant then standardized the charges and applied the FY 2020 IPPS/
LTCH PPS final rule outlier charge inflation factor of 1.11100 (84 FR
42629) to update the charges from FY 2018 to FY 2020.
The applicant added the charges for the new technology by dividing
its cost per patient by the national average cost-to-charge ratio of
0.299 for implantable devices from the FY2020 IPPS Final Rule (84 FR
42179).
The applicant calculated a final inflated average case-weighted
standardized charge per case of $190,167, which it stated exceeded the
average case-weighted threshold amount of $148,002 by $42,165.
The applicant also conducted a subsequent analysis that only
included

[[Page 32680]]

patients with a diagnosis of heart failure. The applicant once again
limited its search to MS-DRG 245 and refined its sample by including
only cases with one of the ICD-10-PCS procedure codes listed previously
and an ICD-10-CM diagnosis code from Category I50 (Heart Failure) on
the claim. This resulted in 1,698 cases with an average unstandardized
charge per case of $183,243. After following the same order of
operations as the first analysis, the final inflated average case
weighted standardized charge per case was $192,237, which exceeded the
average case weighted threshold amount of $148,002. Because the final
inflated average case-weighted standardized charge per case exceeded
the average case-weighted threshold amount under both analyses
described previously, the applicant maintains that the technology meets
the cost criterion.
We agree with the applicant that the technology meets the cost
criterion and therefore are proposing to approve the Optimizer[supreg]
System for new technology add-on payments for FY 2021. As noted above,
the applicant asserted that ICD-10-PCS codes 0JH60AZ, 0JH63AZ, 0JH80AZ
and 0JH83AZ identify the Optimizer[supreg] System.
Based on preliminary information from the applicant at the time of
this proposed rule, the cost of the Optimizer[supreg] System is
$23,000. We note that the cost information for this technology may be
updated in the final rule based on revised or additional information
CMS receives prior to the final rule. Under Sec. 412.88(a)(2), we
limit new technology add-on payments to the lesser of 65 percent of the
average cost of the technology, or 65 percent of the costs in excess of
the MS-DRG payment for the case. As a result, we are proposing that the
maximum new technology add-on payment for a case involving the use of
the Optimizer[supreg] System would be $14,950 for FY 2021.
We are inviting public comments on whether the Optimizer[supreg]
System meets the cost criterion and our proposal to approve new
technology add-on payments for the Optimizer[supreg] System for FY
2021.
b. Alternative Pathways for Qualified Infectious Disease Products
(QIDPs)
(1) Cefiderocol (Fetroja)
Shionogi & Co. Ltd (Company) submitted an application for
Cefiderocol (Fetroja), a [beta]-lactam antibiotic indicated for the
treatment of complicated urinary tract infections (cUTI), including
pyelonephritis, caused by the following susceptible GN pathogens:
Escherichia coli (including with concurrent bacteremia), Klebsiella
pneumoniae, Proteus mirabilis, Pseudomonas aeruginosa, Citrobacter
freundii, Enterobacter cloacae, Morganella morganii, and Serratia
marcescens. Per the applicant, Cefiderocol should be used to treat
infections where limited or no alternative treatment options are
available and where cefiderocol is likely to be an appropriate
treatment option, which may include use in patients with infections
caused by documented or highly suspected CR and/or multidrug-resistant
GN pathogens.
The applicant describes Cefiderocol as an injectable siderophore
cephalosporin. The applicant asserts that the principal antibacterial/
bactericidal activity of Cefiderocol occurs with inhibiting Gram-
negative (GN) bacterial cell wall synthesis by binding to penicillin-
binding proteins. The applicant contends that Cefiderocol is unique in
that it can enter the bacterial periplasmic space (in addition to the
typical entry point via porin channels) as a result of its siderophore-
like property, has enhanced stability to [beta]-lactamases, and has
activity limited to GN aerobic bacteria only.
Per the applicant, cUTIs are the second leading cause of
hospitalization in the elderly and have substantial morbidity and worse
outcomes if the causative pathogens are carbapenem-resistant (CR).
According to the applicant, bloodstream infection (BSI) is often
associated with cUTI, known as urosepsis, with an associated mortality
rate of 9 to 31 percent. The applicant asserts that patients who
develop cUTI due to a CR pathogen are at greater risk for prolonged
hospital stays and progression to a BSI or urosepsis. The applicant
stated that CR is a growing problem in the US and around the world,
with increasing infections due to strains that are resistant to most or
all currently available antibiotics. The applicant further states that,
compared to susceptible pathogens, CR pathogens cause prolonged
hospital and intensive care unit (ICU) stays, worse discharge status,
and greater mortality.
Cefiderocol is designated as a Qualified Infectious Disease Product
(QIDP) and received FDA approval on November 19, 2019. However,
according to the applicant, Cefiderocol was not commercially available
until February 24, 2020 due to the finalization of the materials
associated with the commercial launch of a drug, which could not be
completed until the final label with the FDA was determined. The
applicant noted that there are currently no ICD-10-PCS procedure codes
that could be used to uniquely identify the administration of
Cefiderocol. The applicant has submitted a request for approval for a
new ICD-10-PCS code for consideration at the March 2020 ICD-10 C&M
Meeting.
With regard to the cost criterion, the applicant conducted two
analyses based on 100% and 75% of identified claims. For both
scenarios, the applicant used the FY 2018 MedPAR Limited Data Set (LDS)
to assess the MS-DRGs to which potential cases representing
hospitalized patients who may be eligible for Cefiderocol treatment
would be mapped. The applicant identified eligible cases by searching
the FY 2018 MedPAR for cases reporting one of the following ICD-10-CM
codes:
BILLING CODE 4120-01-P

[[Page 32681]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.140

BILLING CODE 4120-01-C
Under the first scenario of 100 percent of cases, the applicant
identified 1,461,784 cases mapping to 656 MS-DRGs. Under the second
scenario of 75 percent of cases, the applicant identified 1,097,594
cases mapping to 53 MS-DRGs. The applicant standardized the charges
after calculating the average case-weighted unstandardized charge per
case for both scenarios and removing 50 percent of charges associated
with the drug revenue centers 025x, 026x, and 063x under both
scenarios. (Per the applicant, Cefiderocol is expected to replace some
of the drugs that would otherwise be utilized to treat these patients.
The applicant stated that it believes 50 percent of these total charges
to be a conservative estimate as other drugs will still be required for
these patients during their hospital stay.) The applicant then applied
an inflation factor of 11.1 percent, which was the two-year outlier
charge inflation factor used in the FY 2020 IPPS/LTCH PPS final rule,
to update the charges from FY 2018 to FY 2020. The applicant then added
charges for Cefiderocol by dividing the total average hospital cost of
Cefiderocol by the national average cost-to-charge ratio (0.189) for
drugs published in the FY 2020 IPPS/LTCH PPS final rule.
The applicant calculated a final inflated average case-weighted
standardized charge per case of $116,131 for the first scenario and
$106,037 for the second scenario and an average case-weighted threshold
amount of $55,885 for the first scenario and $50,887 for the second
scenario.

[[Page 32682]]

Because the final inflated average case-weighted standardized charge
per case for each scenario exceeds the average case-weighted threshold
amount for each scenario, the applicant asserted that the technology
meets the cost criterion.
We agree with the applicant that Cefiderocol meets the cost
criterion and therefore are proposing to approve Cefiderocol for new
technology add-on payments for FY 2021. As previously noted, the
applicant has submitted a request for approval for a new ICD-10-PCS
procedure code to uniquely identify cases of Cefiderocol. We anticipate
additional coding information will be available for the final rule.
In its application, the applicant stated that the cost of
Cefiderocol is $10,559.81. We note that the cost information for this
technology may be updated in the final rule based on revised or
additional information CMS receives prior to the final rule. Under
412.88(a)(2), we limit new technology add-on payments for QIDPs to the
lesser of 75 percent of the costs of the new medical service or
technology, or 75 percent of the amount by which the costs of the case
exceed the MS-DRG payment. As a result, we are proposing that the
maximum new technology add-on payment for a case involving the
administration of Cefiderocol would be $7,919.86 for FY 2021 (that is
75 percent of the average cost of the technology).
We are inviting public comments on whether Cefiderocol meets the
cost criterion and our proposal to approve new technology add-on
payments for Cefiderocol for FY 2021.
(2) Contepo
CONTEPO^TM (fosfomycin for injection), is intended for
treatment of complicated urinary tract infections (cUTI) and is
designated by FDA as a QIDP. In October 2018, Nabriva Therapeutics
submitted a New Drug Application (NDA) to the US-FDA seeking marketing
approval of IV fosfomycin for injection (ZTI-01) for the treatment of
patients 18 years and older with cUTI including acute pyelonephritis
(AP) caused by designated susceptible bacteria. The applicant noted
that once approved, CONTEPO will represent the first FDA-approved
IVepoxide antibiotic in the United States.
On April 30, 2019, Nabriva received a Complete Response Letter
(CRL) from FDA for the NDA seeking marketing approval of CONTEPO
(fosfomycin) for injection. The applicant stated that the CRL from FDA
requests that Nabriva address issues related to facility inspections
and manufacturing deficiencies at one of Nabriva's contract
manufacturers prior to FDA approving the NDA. Nabriva has resubmitted
its NDA to FDA with FDA setting a Prescription Drug User Fee Act
(PDUFA) goal date of June 19, 2020 for the completion of its review of
the NDA.
The applicant applied for and received a unique ICD-10-PCS
procedure code to identify cases involving the administration of
CONTEPO^TM in 2019. Effective October 1, 2019,
CONTEPO^TM administration can be identified by ICD-10-PCS
procedure codes XW033K5, (Introduction of Fosfomycin anti-infective
into peripheral vein, percutaneous approach, new technology group 5)
and XW043K5 (Introduction of Fosfomycin anti-infective into central
vein, percutaneous approach, new technology group 5), which the
applicant states are unique to CONTEPO administration.
With regard to the cost criterion, the applicant used the FY 2018
MedPAR Limited Data Set (LDS) to assess the MS-DRGs to which potential
cases representing hospitalized patients who may be eligible for
treatment involving CONTEPO^TM would most likely be mapped.
According to the applicant, CONTEPO^TM is anticipated to be
indicated for the treatment of hospitalized patients who have been
diagnosed with complicated urinary tract infections (cUTIs). The
applicant identified 199 ICD-10-CM diagnosis code combinations that
identify hospitalized patients who have been diagnosed with a cUTI.
Searching the FY 2018 MedPAR data file for these ICD-10-CM diagnosis
codes resulted in a total of 684,664 potential cases that span 570
unique MS-DRGs, 522 of which contained more than 10 cases. The
applicant excluded MS-DRGs with minimal volume (that is, 10 cases or
less) from the cohort of the analysis (a total of 252 cases and 48 MS-
DRGs), and this resulted in a total of 684,412 cases across 522 MS-
DRGs.
The applicant examined associated charges per MS-DRG and removed
charges for potential antibiotics that may be replaced by the use of
CONTEPO^TM. Specifically, the applicant identified 5
antibiotics currently used for the treatment of patients who have been
diagnosed with a cUTI and calculated the cost of each of these drugs
for administration over 14 day inpatient hospitalization. Because
patients who have been diagnosed with a cUTI would typically only be
treated with one of these antibiotics at a time, the applicant
estimated an average of the 14-day cost for the 5 antibiotics. The
applicant then converted the cost to charges by dividing the costs by
the national average CCR of 0.189 for drugs from the FY 2020 IPPS/LTCH
PPS final rule (84 FR 42179).
The applicant then standardized the charges for each case and
inflated each case's charges by applying the FY 2020 IPPS/LTCH PPS
final rule outlier charge inflation factor of 1.11100 (84 FR 42629).
The applicant then added the charges for the new technology by
calculating the per-day cost per patient. The applicant noted that the
duration of therapy of up to 14 days (patients that had a cUTI with
concurrent bacteremia) is consistent with the prospective prescribing
information, and that it used this 14-day duration of therapy to
calculate total inpatient cost. The applicant then converted these
costs to charges by dividing the costs per patient by the national
average cost-to charge ratio of 0.189 for drugs from the FY 2020 IPPS/
LTCH PPS final rule (84 FR 42179). The applicant calculated a final
inflated average case-weighted standardized charge per case of $75,533
and a case weighted threshold of $55,447. Because the final inflated
average case-weighted standardized charge per case for
CONTEPO^TM exceeded the average case-weighted threshold
amount, the applicant maintained it meets the cost criterion.
As summarized, the applicant used a 14-day duration of therapy to
calculate total inpatient cost for purposes of its cost analysis.
However, the applicant noted that the average number of days a patient
would be administered CONTEPO^TM will most likely fall
between 10-14 days of therapy given the current guideline
recommendations. Of these treatment days, the applicant noted that
nearly all would occur during the inpatient hospital stay. Consistent
with our historical practice, we believe the new technology add-on
payment for CONTEPO^TM, if approved, would be based on the
average cost of the technology and not the maximum. For example, in the
FY 2013 IPPS/LTCH PPS final rule (77 FR 53358), we approved new
technology add-on payments for DIFICID^TM based on the
average dosage of 6.2 days rather than the maximum 10 day dosage.
Without further information from the applicant regarding the average
number of days CONTEPO^TM is administered, we believe using
the middle ground of 12.5 days, based on the 10-14 day period indicated
by the applicant, is appropriate for this analysis to determine the
average number of days CONTEPO^TM is administered in the
hospital. To assess whether the technology would meet the cost
criterion using an average cost for the

[[Page 32683]]

technology based on this 12.5-day period for CONTEPO^TM
administration, we converted the costs to charges by dividing the costs
per patient by the national average cost-to charge ratio of 0.189 for
drugs from the FY 2020 IPPS/LTCH PPS final rule (84 FR 42179). Based on
data from the applicant, this resulted in a final inflated average
case-weighted standardized charge per case of $73,548 which exceeds the
case weighted threshold of $55,447.
Because of the large number of cases included in this cost
analysis, the applicant supplemented the analysis as described
previously with additional sensitivity analyses. In these analyses, the
previous cost analysis was repeated using only the top 75 percent of
cases, the top 20 MS-DRGs, and the top 10 MS-DRGs. In these three
additional sensitivity analyses, the final inflated average case-
weighted standardized charge per case for CONTEPO^TM of
$64,019, $62,486 and $61,158 exceeded the average case-weighted
threshold amount of $51,085, $50,704 and $49,889, respectively. We note
that the applicant did not use the thresholds from the correction
notice to case weight the charges, however the variance is minimal with
the final inflated average case-weighted standardized charge per case
well in excess of the case weighted threshold amounts. Because the
final inflated average case-weighted standardized charge per case for
CONTEPO^TM exceeded the average case-weighted threshold
amount, the applicant asserts that CONTEPO^TM meets the cost
criterion.
We believe that CONTEPO^TM meets the cost criterion and
therefore are proposing to approve CONTEPO^TM for new
technology add-on payments for FY 2021. As previously noted, the
applicant has received a unique ICD-10-PCS procedure code to identify
cases involving the administration of CONTEPO^TM.
As discussed previously, without further information from the
applicant regarding the average number of days CONTEPO^TM is
administered, we believe using a 12.5 day duration of therapy is a
reasonable approach for estimating the average cost of the technology.
Based on preliminary information from the applicant at the time of this
proposed rule, the cost of CONTEPO^TM administered over 12.5
days is $3,125. We note that the cost information for this technology
may be updated in the final rule based on revised or additional
information CMS receives prior to the final rule. Under 412.88(a)(2),
we limit new technology add-on payments for QIDPs to 75 percent of the
costs of the new medical service or technology, or 75 percent of the
amount by which the costs of the case exceed the MS-DRG payment. As a
result, we are proposing that the maximum new technology add-on payment
for a case involving the administration of CONTEPO^TM would
be $2,343.75 for FY 2021 (that is 75 percent of the average cost of the
technology).
We are inviting public comments on whether CONTEPO^TM
meets the cost criterion and our proposal to approve new technology
add-on payments for CONTEPO^TM for FY 2021.
(3) NUZYRA[supreg] for Injection
Paratek Pharmaceuticals submitted an application for new technology
add-on payments for NUZYRA[supreg] (omadacycline) for Injection for FY
2021. According to the applicant, NUZYRA[supreg] for Injection is a
tetracycline class antibacterial indicated for the treatment of adult
patients with the following infections caused by susceptible
microorganisms:
Community-acquired bacterial pneumonia (CABP) caused by
the following susceptible microorganisms: Streptococcus pneumoniae,
Staphylococcus aureus (methicillin-susceptible isolates), Haemophilus
influenzae, Haemophilus parainfluenzae, Klebsiella pneumoniae,
Legionella pneumophila, Mycoplasma pneumoniae, and Chlamydophila
pneumoniae.
Acute bacterial skin and skin structure infections
(ABSSSI) caused by the following susceptible microorganisms:
Staphylococcus aureus (methicillin susceptible and resistant isolates),
Staphylococcus lugdunensis, Streptococcus pyogenes, Streptococcus
anginosus grp. (includes S. anginosus, S. intermedius, and S.
constellatus), Enterococcus faecalis, Enterobacter cloacae, and
Klebsiella pneumoniae.
The applicant explained that NUZYRA[supreg] for Injection is
supplied as a lyophilized powder in a single-dose colorless glass vial,
with each vial containing 100 mg of NUZYRA[supreg] (equivalent to 131
mg omadacycline tosylate). 100-mg single dose vials are packaged in
cartons of 10. The NDC number is 71715-001-02. Additionally, the
applicant noted that while an oral formulation of NUZYRA[supreg] is
available, NUZYRA[supreg] can also be administered through intravenous
infusion. Providers may determine which method of administration is
clinically appropriate for each patient. Adult patients with community-
acquired bacterial pneumonia (CABP) must receive their initial loading
dose of NUZYRA[supreg] via intravenous infusion. The applicant
specified that NUZYRA[supreg] for Injection should not be administered
with any solution containing multivalent cations, for example, calcium
and magnesium, through the same intravenous line. Co-infusion with
other medications has not been studied. The applicant conveyed that for
treatment of adults with CABP, the recommended dosage regimen of
NUZYRA[supreg] for Injection is as follows (Use NUZYRA for injection
administered by intravenous infusion for the loading dose in CABP
patients):
[GRAPHIC] [TIFF OMITTED] TP29MY20.141

For treatment of adults with ABSSSI, the recommended dosage regimen
of NUZYRA[supreg] for injection is as follows (Use NUZYRA[supreg] for
injection administered by intravenous infusion or NUZYRA[supreg]
tablets orally administered for the loading dose in ABSSSI patients):

[[Page 32684]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.142

Finally, the applicant indicated that no dose adjustment is
warranted in patients with renal or hepatic impairment.
According to the applicant, NUZYRA[supreg] for Injection was
submitted for FDA approval under a New Drug Application (identified as
NDA 209817). After Fast Track and Priority Review consideration,
NUZYRA[supreg] for Injection received FDA approval on October 2, 2018.
According to information provided by the applicant, NUZYRA[supreg] for
Injection was designated as a QIDP and granted priority review.
According to the applicant, NUZYRA[supreg] for Injection became
commercially available in February 2019. The applicant explained that
the delay in commercial availability was due to an effort to prepare
the distribution and supply channel (pharmacies and wholesalers) and to
prepare for a full promotional launch. The applicant noted that there
are currently no ICD-10-PCS procedure codes that uniquely identify the
use of NUZYRA[supreg] for Injection. However, the applicant stated in
the absence of a unique code for NUZYRA[supreg] that providers could
use ICD-10-PCS procedure codes 3E03329 (Introduction of other anti-
infective into peripheral vein, percutaneous approach) or 3E04329
(Introduction of other anti-infective into central vein, percutaneous
approach). The applicant has submitted a request for approval for a new
ICD-10-PCS procedure code to uniquely identify NUZYRA[supreg] for
Injection for administration in FY 2021.
With regard to the cost criterion, the applicant used the FY 2018
MedPAR Limited Data Set (LDS) to identify potential cases that may be
eligible for treatment involving NUZYRA[supreg] for Injection. To
ensure appropriate discharges were used from the dataset, the following
edits were made:
Claims paid by a Managed Care Organization were removed.
Duplicated records with the same beneficiary ID, provider,
admission data, and discharge date were removed.
Interim claims were combined into discharge records.
Discharges with covered charges of zero dollars and
discharges with zero covered days were removed.
Discharges from IPPS hospitals, as determined by the FY
2020 IPPS Impact File and discharges with discharge dates from October
1, 2017 to September 30, 2018 were included.
Statistical outliers with standard charges that were
outside of the range of +/- 3 standard deviations from the geometric
mean standardized charge by MS-DRG were removed.
After these edits were made, the applicant selected discharges that
had a primary or secondary diagnosis for ABSSSI or CABP, using a wide
list of ICD-10-PCS codes, which resulted in a total of 1,745,649
discharges. Using these 1,745,649 discharges, 37 MS-DRGs were selected
based on one of the following criteria:
MS-DRGs with the highest volume of discharges with a
primary or secondary diagnosis for ABSSSI or CABP (which represent 70
percent of all discharges with ABSSSI or CABP).
MS-DRGs with at least two-thirds of discharges with a
primary or secondary diagnosis of ABSSSI or CABP.
Using this method, the applicant identified 1,226,429 total cases
which mapped to the following 37 unique MS-DRGs:

[[Page 32685]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.257

Next, using the cases mapping to these selected MS-DRGs, the
applicant removed pharmacy charges for other drugs and standardized the
charges. Then, the applicant inflated the standardized charges from FY
2018 to FY 2020 using a 2-year charge inflation factor of 11.1 percent,
based on the FY 2020 IPPS/LTCH PPS final rule (84 FR 42629).
The applicant estimated the cost of NUZYRA[supreg] for Injection
based on an average inpatient stay of 5 days in the clinical
trial.\458\ Some patients may be required to stay longer than 5 days,
resulting in increased charges. Using a loading dose for day 1 and
maintenance doses in days 2 through 5 results in use of 6 vials. Each
vial costs $345, resulting in a total cost for the new technology of
$2,070. The applicant estimated charges for the drug by dividing the
cost by the national average cost-to-charge (CCR) for drugs of 0.189,
as set forth in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42179).
This resulted in estimated charges of $10,952. The applicant then added
$10,952 of charges for the drug which resulted in a final inflated
average case-weighted standardized charge per case of $58,922. The
applicant determined an average case-weighted threshold amount of
$53,899. Because the final inflated average case-weighted standardized
charge per case exceeded the average case-weighted threshold amount,
the applicant maintained that the technology met the cost criterion.
---------------------------------------------------------------------------

\458\ Doe, et al., ``Reducing mortality in disease X population:
analysis,'' JAMA 2019, vol. 2(5), pp. 12-23.

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[[Page 32686]]

We agree with the applicant that it meets the cost criterion and
therefore are proposing to approve NUZYRA[supreg] for Injection for new
technology add-on payments for FY 2021. As previously noted, the
applicant has submitted a request for approval for a new ICD-10-PCS
procedure code to uniquely identify cases of NUZYRA[supreg] for
Injection. We anticipate additional coding information will be
available for the final rule.
Based on preliminary information from the applicant at the time of
this proposed rule, the cost of NUZYRA[supreg] for Injection is $2,070.
We note that the cost information for this technology may be updated in
the final rule based on revised or additional information CMS receives
prior to the final rule. Under Sec. 412.88(a)(2), we limit new
technology add-on payments for QIDPs to 75 percent of the costs of the
new medical service or technology, or 75 percent of the amount by which
the costs of the case exceed the MS-DRG payment. As a result, we are
proposing that the maximum new technology add-on payment for a case
involving the use of NUZYRA[supreg] for Injection would be $1,552.50
for FY 2021 (that is 75 percent of the average cost of the technology).
We are inviting public comments on whether NUZYRA[supreg] for
Injection meets the cost criterion and our proposal to approve new
technology add-on payments for NUZYRA[supreg] for Injection for FY
2021.
(4) RECARBRIO^TM
Merck submitted an application for new technology add-on payments
for RECARBRIO^TM for FY 2021. RECARBRIO^TM is a
fixed-dose combination of imipenem, a penem antibacterial; cilastatin,
a renal dehydropeptidase inhibitor; and relebactam, a novel [beta]-
lactamase inhibitor (BLI). According to the applicant,
RECARBRIO^TM is intended for the treatment of complicated
urinary tract infections (cUTI) and complicated intra-abdominal
infections (cIAI) for patients 18 years of age and older.
RECARBRIO^TM is administered via intravenous infusion.
The applicant explained that the recommended dose of
RECARBRIO^TM is 1.25 grams administered by intravenous
infusion over 30 minutes every 6 hours in patients 18 years of age and
older with creatinine clearance (CLcr) 90 mL/min or greater. According
to the applicant, the recommended treatment course suggests that a
patient will receive 1 vial per dose and 4 doses per day. Per
RECARBRIO^TM's prescribing information, the recommended
duration of treatment with RECARBRIO^TM is 4 days to 14 days.
According to information provided by the applicant,
RECARBRIO^TM received FDA approval on July 16, 2019 and is
designated by FDA as a Qualified Infectious Disease Product (QIDP).
According to the applicant, RECARBRIO^TM became commercially
available on the U.S. market on January 6, 2020. The applicant stated
that the delay in commercial availability was due to manufacturing
considerations. According to the applicant, RECARBRIO^TM can
be identified with ICD-10-PCS codes XW033U5 (Introduction of imipenem-
cilastatin-relebactam anti-infective into peripheral vein, percutaneous
approach, new technology group 5) or XW043U5 (Introduction of imipenem-
cilastatin-relebactam anti-infective into central vein, percutaneous
approach, new technology group 5).
To demonstrate that the technology meets the cost criterion, the
applicant searched the FY 2018 MedPAR Limited Data Set (LDS) for cases
reporting ICD-10-CM diagnosis codes for either cUTI or cIAI with ICD-
10-PCS codes XW033U5 (Introduction of imipenem-cilastatin-relebactam
anti-infective into peripheral vein, percutaneous approach, new
technology group 5 or XW043U5 (Introduction of imipenem-cilastatin-
relebactam anti-infective into central vein, percutaneous approach, new
technology group 5) to identify the MS-DRGs to which potential cases
representing hospitalized patients who may be eligible for treatment
involving RECABRIO^TM would be mapped. The applicant
identified a total 25,379 cases which were mapped to 453 unique MS-
DRGs. There were 299 MS-DRGs with minimal frequencies (fewer than 11
cases), with a total of 1,140 cases associated with such low-volume MS-
DRGs. After excluding the cases that were mapped to these low-volume
MS-DRGs, the applicant identified 24,239 cases that were mapped to 153
unique MS-DRGs. The applicant examined associated charges per MS-DRG
and removed all pharmacy charges that will be replaced through the use
of RECARBRIO^TM. The applicant standardized the charges and
inflated the charges by applying the FY 2020 IPPS/LTCH PPS final rule
outlier charge inflation factor of 1.11100 (84 FR 42629). The applicant
estimated an average cost of RECARBRIO^TM for the treatment
of cUTI or cIAI in the inpatient setting based on the recommended dose
of 1.25 grams (imipenem 500 mg, cilastatin 500 mg, relebactam 250 mg)
administered by intravenous infusion over 30 minutes every 6 hours in
patients 18 years of age and older with creatinine clearance (CLcr) 90
mL/min or greater. As stated above, according to the applicant, the
recommended treatment course suggests that a patient will receive 1
vial per dose, 4 doses per day within a recommended treatment duration
of 4 to 14 days. To determine the cost per patient, the applicant
stated it used the FY 2018 MedPAR analysis of total cases representing
hospitalized patients who may be eligible for treatment involving
RECARBRIO^TM to identify a percentage of total cases per
indication: cUTI equaled 88.6 percent of cases and cIAI equaled 11.4
percent. According to the applicant, it next identified the average
length of stay per indication: cUTI 6.4 days and cIAI 9.7 days.
According to the applicant, it also assumed that 70 percent of patients
would receive RECARBRIO^TM beginning on the fourth day after
admission while the remaining 30 percent of these patients would
receive RECARBRIO^TM beginning on the second day of their
hospitalization. According to the applicant, it multiplied the daily
dose cost by the two scenarios for each cUTI and cIAI indication to
determine the cost per stay for each indication by days of drug use.
According to the applicant, next it multiplied the cost per stay for
each indication by the share of cases by days in use (70/30 percent
split) to determine the weighted cost for days in use estimation.
According to the applicant, it summed the 70/30 percent case breakdown
(weighted cost) for patients initiating on day 2 and 4 to determine the
average cost per indication for cUTI and cIAI. Finally, according to
the applicant, it multiplied the average cost per indication by the
percent of total cases for cUTI and cIAI, then summed them to get the
overall average cost. The applicant converted this cost to a charge by
dividing the costs by the national average cost-to-charge ratio of
0.189 for drugs from the FY 2020 IPPS/LTCH PPS final rule (84 FR 42179)
and added the resulting charges to determine the final inflated average
case-weighted standardized charge per case. The applicant calculated a
final inflated average case-weighted standardized charge per case of
$75,122 and an average case-weighted threshold amount of $52,216.
The applicant also calculated an average case-weighted standardized
charge per case for cUTI and cIAI separately using the same methodology
previously described and determined final inflated average case-
weighted standardized charges per case of $70,765 for cUTI and $109,403
for cIAI

[[Page 32687]]

and average case-weighted thresholds of $50,210 for cUTI and $67,531
for cIAI. Because the final inflated average case-weighted standardized
charge per case exceeded the average case-weighted threshold amount in
each scenario, the applicant maintained that the technology met the
cost criterion.
We agree with the applicant that it meets the cost criterion and
therefore are proposing to approve RECARBRIO^TM for new
technology add-on payments for FY 2021. As previously noted, the
applicant stated that RECARBRIO^TM can be identified by ICD-
10-PCS codes XW033U5 (Introduction of imipenem-cilastatin-relebactam
anti-infective into peripheral vein, percutaneous approach, new
technology group 5) or XW043U5 (Introduction of imipenem-cilastatin-
relebactam anti-infective into central vein, percutaneous approach, new
technology group 5).
Based on preliminary information from the applicant at the time of
this proposed rule, the cost of RECARBRIO^TM is $4,710.37
(which is based on the cost per patient determined using the
methodology as previously described in the analysis of the cost
criterion). We note that the cost information for this technology may
be updated in the final rule based on revised or additional information
CMS receives prior to the final rule. Under 412.88(a)(2), we limit new
technology add-on payments for QIDPs to 75 percent of the costs of the
new medical service or technology, or 75 percent of the amount by which
the costs of the case exceed the MS-DRG payment. As a result, we are
proposing that the maximum new technology add-on payment for a case
involving RECARBRIO^TM would be $3,532.78 for FY 2021 (that
is 75 percent of the average cost of the technology).
We are inviting public comments on whether RECARBRIO^TM
meets the cost criterion and our proposal to approve new technology
add-on payments for the RECARBRIO^TM for FY 2021.
(5) XENLETA
Nabriva Therapeutics submitted an application for XENLETA, a
pleuromutilin antibacterial agent representing the first intravenous
(IV) and oral treatment option from a novel class of antibiotics for
community-acquired bacterial pneumonia (CABP). XENLETA is indicated for
the treatment of adults with CABP caused by the following susceptible
microorganisms: Streptococcus pneumoniae, Staphylococcus aureus
(methicillin-susceptible isolates), Haemophilus influenzae, Legionella
pneumophila, Mycoplasma pneumoniae, and Chlamydophila pneumoniae. Per
the applicant, XENLETA also has in vitro activity against methicillin
resistant Staphylococcus aureus.
Per the applicant, pleuromutilins inhibit bacterial protein
synthesis by binding to the A- and P-sites of the peptidyl transferase
center (PTC) in the large ribosomal subunit of the bacterial ribosome.
The applicant asserts that this unique binding site in the highly
conserved core of the ribosomal PTC is specific to pleuromutilins, and
it confers a lack of cross-resistance with other classes, as well as a
low propensity for developing bacterial resistance.
The applicant noted that there are two methods of administering
XENLETA. As a tablet containing 600 mg of XENLETA, it is administered
orally every 12 hours for a duration of 5 days. As an injection,
XENLETA contains 150 mg of the drug and is administered every 12 hours
by IV infusion over 60 minutes for a duration of 5 to 7 days, with the
option to switch to XENLETA tablets administered every 12 hours to
complete the treatment course.
With respect to the newness criterion, the applicant indicated that
XENLETA was approved by the FDA under the Qualified Infectious Disease
Product (QIDP) designation, and granted fast-track designation. XENLETA
received FDA approval on August 19, 2019 for a new drug application
indicated for the oral and IV formulations of XENLETA for the treatment
of CABP in adults. The applicant indicated that XENLETA was
commercially available on the U.S. market on September 10, 2019 and the
slight delay from approval to availability was due to the shipment of
drug to the distribution channels.
There are currently no ICD-10-PCS procedure codes that uniquely
identify the use of the XENLETA. We note the applicant submitted a
request for approval for a unique ICD-10-PCS procedure code to uniquely
identify use of the technology beginning in FY 2021.
With respect to the cost criterion, the applicant presented three
scenarios varying in the assumptions regarding the form of XENLETA used
to treat the patient and the duration of treatment. For the first
analysis, the applicant assumed that a patient population with CABP
received 7 days of IV treatment with XENLETA. For the second analysis,
the applicant assumed the patient population received 3.2 days of IV
treatment with XENLETA before switching to oral XENLETA for 3.8 days.
For the third analysis, the applicant assumed the patient population
received oral XENLETA for 5 days. The applicant explained that patients
receiving XENLETA in the inpatient hospital setting would receive it
through IV treatment. However, some patients may be switched to oral
form during care, which was observed for some patients in clinical
trial. While the applicant does not expect many patients to be treated
with only oral XENLETA in the inpatient setting, they conducted a
sensitivity analysis based on 5 days of treatment with oral XENLETA, as
oral treatment is possible in hospital.
Across all three analyses, the applicant first searched the FY 2018
MedPAR Final Rule Limited Data Set for potential cases representing
patients diagnosed with CABP and eligible for treatment with XENLETA.
The applicant limited the cohort to cases that had an indication on the
claim that the pneumonia was present on admission. The applicant
searched for claims that had one of the following ICD-10-CM diagnosis
codes as a principal or secondary diagnosis:

[[Page 32688]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.143

The applicant identified 1,225,713 cases from the FY 2018 MedPAR
LDS file spanning 357 MS-DRGs. The applicant then excluded cases that
mapped to MS-DRGs with a volume of 10 cases or fewer, resulting in a
total of 1,225,561 cases spanning 319 unique MS-DRGs. The applicant
considered these cases to be the primary cohort of the cost analysis.
The applicant noted that the most common MS-DRGs in the cohort are 871,
193, 194, 291, and 190, which account for 61 percent of cases. The
applicant presented the following table of the top 20 MS-DRGs in the
primary cohort with more than 10 cases:

[[Page 32689]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.144

For all three scenarios, the applicant calculated an average case-
weighted unstandardized charge per case of $73,911. The applicant then
removed charges for the prior technology being replaced, which included
the average charge associated with the cost of antibiotics that are the
current standard of care. The applicant varied assumptions by scenario
to reflect appropriate substitute treatments for the different forms of
XENLETA, as noted previously. For each scenario, the applicant
calculated the cost of therapy for each standard of care drug using
dosing information, the duration of treatment, and wholesale
acquisition costs and converted them to charges using the national
pharmacy cost-to-charge ratio published in the FY 2020 IPPS final rule
(84 FR 42179). After adjusting for prior technology, the applicant
standardized the charges and applied an inflation factor of 11.1
percent, which is the 2-year inflation factor used by CMS to calculate
outlier threshold charges in the FY 2020 IPPS/LTCH PPS final rule (84
FR 42629), to update the charges from FY 2018 to FY 2020. The applicant
added charges for the new technology, which it again calculated using
the national pharmacy cost-to-charge ratio.
For all three scenarios, the applicant conducted a sensitivity
analysis testing alternative assumptions regarding the charges
associated with prior technology that could be replaced by XENLETA. The
applicant acknowledged that it is possible for some patients with CABP
to receive more than one antibiotic. The applicant examined the cost
criterion for each scenario after doubling the charges associated with
prior technology to account for multiple antibiotics. Furthermore, the
applicant tested alterative assumptions regarding the MS-DRGs that
cases representing patients eligible for treatment with XENLETA mapped.
Specifically, the applicant examined the cost criterion for the top 10
MS-DRGs, the top 20 MS-DRGs, and the top MS-DRGs that accounted for 75
percent of cases.
Across all three scenarios and the sensitivity analyses testing
alternative assumptions, the applicant determined that the final
inflated average standardized charge per case exceeded the case-
weighted threshold, with the difference ranging from $4,547 to $17,907.
The following table summarizes the results of the applicant's cost
analyses. The applicant maintained that XENLETA meets the cost
criterion.

[[Page 32690]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.145

We agree with the applicant that XENLETA meets the cost criterion
and therefore are proposing to approve XENLETA for new technology add-
on payments for FY 2021. As previously noted, the applicant has
submitted a request for approval for a new ICD-10-PCS procedure code to
uniquely identify cases involving the use of XENLETA. We anticipate
additional coding information will be available for the final rule.
Based on preliminary information from the applicant at the time of
this proposed rule, the cost of XENLETA is $1,701. We note that the
cost information for this technology may be updated in the final rule
based on revised or additional information CMS receives prior to the
final rule. Under Sec. 412.88(a)(2), we limit new technology add-on
payments for QIDPs to 75 percent of the costs of the new medical
service or technology, or 75 percent of the amount by which the costs
of the case exceed the MS-DRG payment. As a result, we are proposing
that the maximum new technology add-on payment for a case involving the
use of XENLETA would be $1,275.75 for FY 2021 (that is 75 percent of
the average cost of the technology).
We are inviting public comments on whether XENLETA meets the cost
criterion and our proposal to approve new technology add-on payments
for XENLETA for FY 2021.
(6) ZERBAXA[supreg]
Merck submitted an application for new technology add-on payments
for ZERBAXA[supreg] for FY 2021. ZERBAXA[supreg] (ceftolozane and
tazobactam) is a combination of ceftolozane, a cephalosporin
antibacterial, and tazobactam, a [beta]-lactamase inhibitor (BLI),
indicated in patients 18 years or older for the treatment of the
following infections caused by designated susceptible microorganisms:
Complicated Intra-abdominal Infections (cIAI), used in
combination with metronidazole;
Complicated Urinary Tract Infections (cUTI), Including
Pyelonephriti;
Hospital-acquired Bacterial Pneumonia and Ventilator-
associated Bacterial Pneumonia (HABP/VABP).
According to the applicant, the FDA initially approved
ZERBAXA[supreg] on December 19, 2014 for the treatment of complicated
intra-abdominal infections (cIAI) and for complicated urinary tract
infections (cUTI) under a New Drug Application (NDA). ZERBAXA[supreg]
was then approved on June 3, 2019 for the indication of hospital-
acquired bacterial pneumonia and ventilator-associated bacterial
pneumonia (HABP/VABP), also under a NDA. The applicant noted that
ZERBAXA[supreg] was designated as a Quality Infectious Disease Product
(QIDP) as well as provided Fast Track and Priority Review consideration
by the FDA. The applicant also indicated that ZERBAXA[supreg] was
commercially available on the U.S. market upon FDA approval. We believe
only the indication approved in 2019 for treatment of hospital-acquired
bacterial pneumonia and ventilator-associated bacterial pneumonia
(HABP/VABP) is eligible for new technology add on payments for FY 2021
because the first indication was approved in 2014 and is therefore
beyond the 3-year newness period.
The applicant noted that there are currently no ICD-10-PCS
procedure codes that could be used to uniquely identify the use of
ZERBAXA[supreg]. However, we note that the applicant has submitted a
request for approval for a new ICD-10-PCS procedure code to uniquely
identify ZERBAXA[supreg] administration effective for FY 2021.
According to the applicant, to reduce the development of drug-
resistant bacteria and maintain the effectiveness of ZERBAXA[supreg]
and other antibacterial drugs, ZERBAXA[supreg] should be used only to
treat or prevent infections that are proven or strongly suspected to be
caused by susceptible bacteria. According to the applicant, when
culture and susceptibility information are available, they should be
considered in selecting or modifying antibacterial therapy. In the
absence of such data, local epidemiology and susceptibility patterns
may contribute to the empiric selection of therapy.
The applicant explained that the recommended dosage of
ZERBAXA[supreg] for injection when used for HABP/VABP is 3 g
(ceftolozane 2 g and tazobactam 1 g) administered every 8 hours by
intravenous infusion over 1 hour in patients 18 years or older and with
a creatinine clearance (CrCl) greater than 50 mL/min. The duration of
therapy should be guided by the severity and site of infection and the
patient's clinical and bacteriological progress. Dose adjustment is
required for patients with CrCl 50 mL/min or less. All doses of
ZERBAXA[supreg] are administered over 1 hour. For patients with
changing renal function, CrCl is monitored at least daily and dosage of
ZERBAXA[supreg] adjusted accordingly.
With regard to the cost criterion, the applicant used the FY 2018
MedPAR Limited Data Set (LDS) to identify the MS-DRGs to which
potential cases representing hospitalized patients who may be eligible
for treatment involving

[[Page 32691]]

ZERBAXA[supreg] would be mapped. According to the applicant,
ZERBAXA[supreg] is indicated for the treatment of hospitalized patients
who have been diagnosed with cUTI, cIAI, VABP, or HABP conditions. The
applicant conducted multiple analyses based on ICD-10-CM diagnosis
codes for various scenarios involving patients diagnosed with cUTI,
cIAI, VABP, or HABP. The applicant stated that cases representing
patients who may be eligible to receive treatment through the
administration of ZERBAXA[supreg] are identified with ICD-10-PCS codes
3E03329 (Introduction of other anti-infective into peripheral vein,
percutaneous approach) or 3E04329 (Introduction of other anti-infective
into central vein, percutaneous approach). For the purposes of
analyzing the cost criterion for this technology for new technology
add-on payment for FY 2021, we are only discussing the applicant's cost
analysis related to the HABP and VABP indications because, as we noted
previously, the first indications (cUTI, cIAI) were approved in 2014
and are therefore beyond the 3-year newness period. For the HABP and
VABP scenarios, the applicant submitted the following three cost
analysis scenarios: Cases with a HABP diagnosis only, cases with a VABP
diagnosis only and cases with either a HABP or VABP diagnosis. For all
three scenarios, the applicant calculated the average charges per case
for each MS-DRG without standardizing the charges. Next, the applicant
removed 100 percent of the drug charges from the relevant cases to
conservatively estimate the charges for drugs that potentially may be
replaced by or avoided through use of ZERBAXA[supreg]. After removing
these drug charges from unstandardized average charge amounts, the
applicant calculated the average standardized charge per case for each
MS--DRG. Then, the applicant inflated the standardized average charges
by 11.1 percent, which is the 2-year inflation factor used by CMS to
calculate outlier threshold charges in the FY 2020 IPPS/LTCH PPS final
rule (84 FR 42629), to update the charges from FY 2018 to FY 2020. The
applicant added charges for the new technology, which it again
calculated using the national pharmacy cost-to-charge ratio. Finally,
the applicant calculated the final inflated average case-weighted
standardized charge per case as well as the case-weighted threshold
amount. The following table summarizes the results of the applicant's
cost analyses. The applicant maintained that ZERBAXA[supreg] meets the
cost criterion.
[GRAPHIC] [TIFF OMITTED] TP29MY20.146

We agree with the applicant that ZERBAXA[supreg] meets the cost
criterion and therefore are proposing to approve ZERBAXA[supreg] for
new technology add-on payments for FY 2021. As previously noted, the
applicant has submitted a request for approval for a new ICD-10-PCS
procedure code to uniquely identify cases involving the use of
ZERBAXA[supreg]. We anticipate additional coding information will be
available for the final rule.
Based on preliminary information from the applicant at the time of
this proposed rule, the cost of ZERBAXA[supreg] is $2,449.31. We note
that the cost information for this technology may be updated in the
final rule based on revised or additional information CMS receives
prior to the final rule. Under Sec. 412.88(a)(2), we limit new
technology add-on payments for QIDPs to 75 percent of the costs of the
new medical service or technology, or 75 percent of the amount by which
the costs of the case exceed the MS-DRG payment. As a result, we are
proposing that the maximum new technology add-on payment for a case
involving the use of ZERBAXA[supreg] would be $1,836.98 for FY 2021
(that is 75 percent of the average cost of the technology).
We are inviting public comments on whether ZERBAXA[supreg] meets
the cost criterion and our proposal to approve new technology add-on
payments for ZERBAXA[supreg] for FY 2021.
7. Technical Revision to the New Technology Add-On Payment Regulations
at 42 CFR 412.88
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42297 through 42300,
and 42612), we finalized an increase in the new technology add-on
payment percentage. Specifically, for a new technology other than a
medical product designated by FDA as a QIDP, beginning with discharges
on or after October 1, 2019, if the costs of a discharge involving a
new technology (determined by applying 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) 65 percent of the costs of the new
medical service or technology; or (2) 65 percent of the amount by which
the costs of the case exceed the standard DRG payment. We also
finalized a separate increase in the new technology add-on payment
percentage to 75 percent for a new technology that is a medical product
designated by FDA as a QIDP. Under this finalized policy, unless the
discharge qualifies for an outlier payment, the additional Medicare
payment will be limited to the full MS-DRG payment plus 65 percent (or
75 percent for a medical product designated by FDA as a QIDP) of the
estimated costs of the new technology or medical service. We also
finalized revisions to paragraphs (a)(2) and (b) under Sec. 412.88 to
reflect these changes to the calculation of the new technology add-on
payment amount beginning in FY 2020, including the finalized percentage
for a medical product designated by FDA as a QIDP. Specifically, the
new technology add-on payment percentage of 65 percent for a new
technology other than a medical product designated by FDA as a QIDP is
set forth in Sec. 412.88(a)(2)(ii)(A). The

[[Page 32692]]

new technology add-on payment percentage of 75 percent for a medical
product designated by FDA as a QIDP is set forth at Sec.
412.88(a)(2)(ii)(B). However, in our revision to paragraph (a)(2)(ii),
in setting forth the new technology add-on payment amounts for
discharges occurring on or after October 1, 2019, we made an
inadvertent error when referencing the separate new technology add-on
payment percentage for QIDPs under Sec. 412.88(a)(2)(ii)(B).
Specifically, in referencing the add-on percentage for QIDPs, Sec.
412.88(a)(2)(ii)(A) refers to ``paragraph (a)(2)(ii)(2) of this
section'' when the correct citation should be ``paragraph (a)(2)(ii)(B)
of this section''. We are proposing to revise Sec. 412.88(a)(2)(ii)(A)
to correct this technical error.
8. Technical Clarification to the Alternative Pathway for Certain
Transformative New Devices
As described previously, in the FY 2020 IPPS/LTCH PPS final rule,
we finalized an alternative pathway for new technology add-on payments
for certain transformative new devices. Under the existing regulations
at Sec. 412.87(c), to be eligible for approval under this alternative
pathway, the device must be part of the FDA's Breakthrough Devices
Program and have received FDA marketing authorization.
We have received questions from the public regarding CMS's intent
with respect to the ``marketing authorization'' required for purposes
of approval under the alternative pathway for certain transformative
new devices at Sec. 412.87(c). Some of the public appear to assert
that so long as a technology has received marketing authorization for
any indication, even if that indication differs from the indication for
which the technology was designated by FDA as part of the Breakthrough
Devices Program, the technology would meet the marketing authorization
requirement at Sec. 412.87(c). For example, consider a device that
received FDA marketing authorization in 2019 for use in the heart. The
same device is then designated by the FDA as part of the Breakthrough
Devices Program for use in the liver in 2020, but has not yet received
marketing authorization for indicated use in the liver. Some of the
public have asserted that in such a scenario, the original marketing
authorization for use in the heart could be used with FDA's
Breakthrough Device indication for use in the liver to qualify under
the alternative pathway for certain transformative new devices and
receive new technology add-on payments for use in the liver in FY 2021.
Because of this potential confusion, we are clarifying that, consistent
with our existing policies for determining newness where a product has
more than one indication, an applicant cannot combine a marketing
authorization for an indication that differs from the technology's
indication under the Breakthrough Device Program, and for which the
applicant is seeking to qualify for the new technology add-on payment,
for purposes of approval under the alternative pathway for certain
transformative devices.
Section 1886(d)(5)(K)(ii)(II) of the Act provides for the
collection of data with respect to the costs of a new medical service
or technology described in subclause (I) for a period of not less than
2 years and not more than 3 years beginning on the date on which an
inpatient hospital code is issued with respect to the service or
technology. As explained in the FY 2005 IPPS final rule (69 FR 49002),
the intent of section 1886(d)(5)(K) of the Act and regulations under
Sec. 412.87(b)(2) is to pay for new medical services and technologies
for the first 2 to 3 years that a product comes on the market, during
the period when the costs of the new technology are not yet fully
reflected in the DRG weights. Generally, we use the FDA approval (i.e.,
marketing authorization) 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. The costs of the new medical service or technology,
once paid for by Medicare for this 2-year to 3-year period, are
accounted for in the MedPAR data that are used to recalibrate the DRG
weights on an annual basis. Therefore, we limit the add-on payment
window for those technologies that have passed this 2- to 3-year
timeframe. In the September 7, 2001 final rule that established the new
technology add-on payment regulations (66 FR 46915), we also indicated
that an existing technology can receive new technology add on payments
for a new use or indication. While we recognize that a technology can
have multiple indications, each indication has its own newness period
and must meet the new technology add on payment criteria. The
applicable criteria will depend on whether the technology is eligible
for an alternative new technology add-on payment pathway. However, each
indication for the technology is evaluated separately from any other
indication, including with respect to the start of the newness period,
to determine whether the technology is eligible for new technology add-
on payments when used for that indication.
Based on this policy, using the previous example, the newness
period for the heart indication began in 2019 when the technology
received marketing authorization from FDA for that indication, while
the newness period for the liver indication would begin when the device
receives marketing authorization specifically indicated for the liver.
These are two distinct newness periods. Consistent with this policy,
the newness period that began with the original marketing authorization
for indicated use in the heart cannot be combined with FDA's
Breakthrough Device indication for use in the liver for purposes of the
marketing authorization required for approval under the alternative
pathway to receive new technology add-on payments in FY 2021.
To address this potential confusion, we are clarifying our policy
that a new medical device under this alternative pathway must receive
marketing authorization for the indication covered by the Breakthrough
Devices Program designation and making a conforming change to the
regulations at Sec. 412.87(c)(1). Specifically, with regard to the
eligibility criteria for approval under the alternative pathway for
certain transformative new devices, we are proposing to amend the
regulations in Sec. 412.87(c)(1) to state that ``A new medical device
is part of the FDA's Breakthrough Devices Program and has received
marketing authorization for the indication covered by the Breakthrough
Device designation.'' We note that we are also proposing to make
similar amendments to the regulations at Sec. 412.87(d) for the
alternative pathway for certain antimicrobial products, as discussed in
section II.G.9.b. of this preamble of this proposed rule.
9. Proposed Revisions to New Technology Add-On Payments for Certain
Antimicrobial Products
a. Background
In the FY 2020 IPPS/LTCH PPS final rule, after consideration of
public comments, we finalized changes to the new technology add-on
payment policy related to certain antimicrobial products. These changes
were finalized in recognition of the significant concerns related to
antimicrobial resistance and its serious impact on Medicare
beneficiaries and public health overall, and consistent with the
Administration's commitment to

[[Page 32693]]

address issues related to antimicrobial resistance, in order to help
secure access to antibiotics, and improve health outcomes for Medicare
beneficiaries in a manner that is as expeditious as possible. Firstly,
as described earlier in this section, we finalized an alternative new
technology add-on payment pathway for a product that is designated by
FDA as a Qualified Infectious Disease Product (QIDP). Under this
alternative pathway, at existing Sec. 412.87(d), for applications
received for new technology add-on payments for FY 2021 and subsequent
fiscal years, if a technology receives FDA's QIDP designation and
received FDA marketing authorization, it will be considered new and not
substantially similar to an existing technology for purposes of new
technology add-on payments and will not need to meet the requirement
that it represent an advance that substantially improves, relative to
technologies previously available, the diagnosis or treatment of
Medicare beneficiaries. Under this pathway, a medical product that has
received FDA marketing authorization and is designated by the FDA as a
QIDP will need to meet the cost criterion under Sec. 412.87(b)(3), as
reflected in Sec. 412.87(d)(3) (84 FR 42292 through 42297).
In addition, beginning with FY 2020, we adopted a general increase
in the maximum new technology add-on payment amount from 50 percent to
65 percent; however, we adopted a higher increase to 75 percent for a
product that is designated by FDA as a QIDP. Therefore, under existing
Sec. 412.88(a)(2)(ii)(B), for a new technology that is a medical
product designated by FDA as a QIDP, the new technology add-on payment
is equal to the lesser of: (1) 75 percent of the costs of the new
medical service or technology; or (2) 75 percent of the amount by which
the costs of the case exceed the standard DRG payment (84 FR 42297
through 42300).
We stated that we believe Medicare beneficiaries may be
disproportionately impacted by antimicrobial resistance, due in large
part to the elderly's unique vulnerability to drug-resistant infections
(for example, due to age-related and/or disease-related
immunosuppression and greater pathogen exposure via catheter use). As
such, antimicrobial resistance results in a substantial number of
additional hospital days for Medicare beneficiaries, resulting in
significant unnecessary health care expenditures. In November 2019, the
CDC released its updated ``Antibiotic Resistance Threats in the United
States'' (AR Threats Report) \459\ indicating that antibiotic-resistant
bacteria and fungi cause more than 2.8 million infections and 35,000
deaths in the United States each year. This report also shows that
there were nearly twice as many annual deaths from antibiotic
resistance as CDC originally reported in 2013, and underscores the
continued threat of antibiotic resistance in the U.S. This recent
information highlights the significant concerns and impacts related to
antimicrobial resistance and emphasizes the continued importance of
this issue both with respect to Medicare beneficiaries and public
health overall. In this section, we discuss our proposals for FY 2021
regarding new technology add-on payments and certain antimicrobials,
including QIDPs.
---------------------------------------------------------------------------

\459\ https://www.cdc.gov/drugresistance/biggest-threats.html.
---------------------------------------------------------------------------

b. Proposed Changes and Technical Clarification to the Alternative
Pathway for Certain Antimicrobial Products
As described previously, in the FY 2020 IPPS/LTCH PPS final rule,
we finalized an alternative pathway for new technology add-on payments
for certain antimicrobial products. Under the existing regulations at
Sec. 412.87(d), to be eligible for approval under this alternative
pathway, the antimicrobial product must be designated by the FDA as a
QIDP and have received FDA marketing authorization. Under this
alternative pathway, such a QIDP will be considered new and not
substantially similar to an existing technology for purposes of new
technology add-on payments and will not need to meet the requirement
that it represent an advance that substantially improves, relative to
technologies previously available, the diagnosis or treatment of
Medicare beneficiaries.
The FDA also has the Limited Population Pathway for Antibacterial
and Antifungal Drugs (LPAD pathway), which encourages the development
of safe and effective drug products that address unmet needs of
patients with serious bacterial and fungal
infections.^{460 461} Specifically, an antibacterial or
antifungal drug approved under the LPAD pathway is used to treat a
serious or life-threatening infection in a limited population of
patients with unmet needs. We believe that in order to address the
continued issues related to antimicrobial resistance discussed
previously, as well as further help to support access to antibiotics
and improve health outcomes for Medicare beneficiaries, it is
appropriate to expand our policy for an alternative new technology add-
on payment pathway for a product that is designated by the FDA as a
QIDP to include products approved as a LPAD as well. Therefore, we are
proposing to expand our current alternative new technology add-on
payment pathway for QIDPs to include products approved under the LPAD
pathway as well to further address the continued issues related to
antimicrobial resistance discussed previously. Under this proposed
policy, for applications received for new technology add-on payments
for FY 2022 and subsequent fiscal years, if an antimicrobial drug is
approved by FDA under the LPAD pathway it will be considered new and
not substantially similar to an existing technology for purposes of the
new technology add-on payment under the IPPS, and not need to meet the
requirement that it represent an advance that substantially improves,
relative to technologies previously available, the diagnosis or
treatment of Medicare beneficiaries. Under this proposal, an
antimicrobial product that is approved by FDA under the LPAD pathway
will need to meet the cost criterion under Sec. 412.87(b)(3).
---------------------------------------------------------------------------

\460\ Section 506(h) of the FD&C Act, 21 U.S.C. 356(h).
\461\ https://www.fda.gov/media/113729/download.
---------------------------------------------------------------------------

We are proposing to revise Sec. 412.87(d)(1) to reflect this
proposal, by adding drugs approved under FDA's LPAD pathway to the
current alternative new technology add-on payment pathway for QIDPs at
proposed new Sec. 412.87(d)(1)(ii), beginning with discharges
occurring on or after October 1, 2021. We are also proposing to revise
the title of existing Sec. 412.87(d) to refer more broadly to
``certain antimicrobial products'' rather than specifying in this title
the particular FDA programs for antimicrobial products (that is, QIDPs
and LPADs) that are the subject of this alternative new technology add-
on payment pathway.
We note, FDA may approve a drug under the LPAD pathway if it meets
certain statutory standards for approval, as applicable, including that
FDA receives a written request from the sponsor to approve the drug as
a limited population drug. Sponsors seeking approval of a drug under
the LPAD pathway are not precluded from seeking designation or approval
under any other applicable provision for which the drug otherwise
qualifies (for example, fast track designation, breakthrough therapy
designation, regenerative medicine advanced therapy designation,
accelerated approval, priority review designation). A sponsor who seeks
approval of a drug under the LPAD pathway may also seek designation, as
applicable, for other programs,

[[Page 32694]]

including QIDP or orphan drug designation. Although FDA may provide
advice on potential eligibility, FDA intends to make the determination
of whether a drug meets the criteria for the LPAD pathway at the time
of the drug's approval. (For additional information, see https://www.fda.gov/media/113729/download.)
As such, an applicant that has not received FDA approval and which
has requested approval under the LPAD pathway may not know with
certainty at the time it applies for new technology add on payments
under the proposed expanded alternative pathway for certain
antimicrobial products whether it will qualify for approval under that
pathway. As noted previously in section II.G.1.c. of the preamble of
this proposed rule, CMS will review the application based on the
information provided by the applicant under the alternative pathway
specified by the applicant. If the applicant drug ultimately does not
receive approval under the LPAD pathway (but receives FDA approval
otherwise) and is not designated as a QIDP, the technology would not be
eligible for the alternative pathway for certain antimicrobial products
and the applicant would need to re-apply for new technology add on
payments under the traditional pathway at Sec. 412.87(b) for the
following fiscal year in order to seek approval for new technology add
on payments.
We are also proposing to increase the maximum new technology add-on
payment percentage for a product approved under FDA's LPAD pathway,
from 65 percent to 75 percent, consistent with the new technology add
on payment percentage that currently applies for a product that is
designated by FDA as a QIDP. As previously noted, an antibacterial or
antifungal drug approved under the LPAD pathway is used to treat a
serious or life-threatening infection in a limited population of
patients with unmet needs, and therefore we believe increasing the add-
on payment amount for these products would further the goal of helping
secure access to antibiotics and improving health outcomes for Medicare
beneficiaries to address the continued significant concerns related to
antimicrobial resistance as discussed previously. Therefore, we are
proposing to revise Sec. 412.88(a)(2)(ii)(B) and (b)(2) by adding
products approved under FDA's LPAD pathway, beginning with discharges
occurring on or after October 1, 2020.
In addition to adding drugs approved under the FDA's LPAD pathway
to the alternative new technology add-on payment pathway for certain
antimicrobial products, we are clarifying our policy regarding
marketing authorization for QIDPs. As discussed previously, we have
received questions from the public regarding the ``marketing
authorization'' required for purposes of approval under the alternative
pathway for certain transformative new devices, and are therefore
clarifying our policy regarding the marketing authorization requirement
under this pathway and proposing conforming amendments to the
regulations at Sec. 412.87(c)(1). We refer the reader to the previous
discussion in section II.G.8. of this preamble of this proposed rule
for complete details regarding this clarification.
The current regulations at Sec. 412.87(d)(1) regarding the
alternative pathway for new technology add-on payments for certain
antimicrobial products also require marketing authorization for a QIDP
to be eligible for approval under this pathway. Therefore, similar to
the clarification regarding the transformative new devices alternative
pathway, we are clarifying that a new medical product seeking approval
for the new technology add-on payment under the alternative pathway for
QIDPs must receive marketing authorization for the indication covered
by the QIDP designation. We are proposing to amend the regulations at
Sec. 412.87(d)(1) describing the alternative pathway for QIDPs (which,
as amended, would appear at Sec. 412.87(d)(1)(i)) to state that ``A
new medical product is designated by the FDA as a Qualified Infectious
Disease Product and has received marketing authorization for the
indication covered by the Qualified Infectious Disease Product
designation.''
c. Proposed Change to Announcement of Determinations and Deadline for
Consideration of New Medical Service or Technology Applications for
Certain Antimicrobial Products
As noted previously, in the FY 2009 IPPS final rule (73 FR 48562),
we amended Sec. 412.87(c) (now Sec. 412.87(e) of the existing
regulations) to specify that all applicants for new technology add-on
payments must have FDA approval or clearance by July 1 of the year
prior to the beginning of the fiscal year for which the application is
being considered. We stated that this deadline would provide us with
enough time to fully consider all of the new medical service or
technology add-on payment criteria for each application and maintain
predictability in the IPPS for the coming fiscal year. We also stated
and further explained that we believe that July 1 of each year provides
an appropriate balance between the necessity for adequate time to fully
evaluate the applications, the requirement to publish the IPPS final
rule by August 1 of each year, and the commenters' concerns that
potential new technology applicants have some flexibility with respect
to when their technology receives FDA approval or clearance.
We continue to believe that our policy of requiring FDA approval or
clearance by July 1 of the year prior to the beginning of the fiscal
year for which the application is being considered appropriately
balances the length of time required to fully consider all of the new
medical service or technology add-on payment criteria for each
application while also providing flexibility to potential new
technology add-on payment applicants. At the same time, we also believe
the significant ongoing concerns regarding antimicrobial resistance,
and the need to help secure access to antibiotics for Medicare
beneficiaries in a manner that is as expeditious as possible, may
warrant additional flexibility with respect to applications for new
technology add-on payments for certain antimicrobial products. Further,
we note that under the new alternative pathway for certain
antimicrobial products, upon FDA marketing authorization, such products
are considered new and not substantially similar to an existing
technology and do not need to demonstrate substantial clinical
improvement, resulting in a difference in the amount of information and
time required for CMS to complete its evaluation as compared to
technologies for which it must fully consider of all of the new medical
service or technology add-on payment criteria. For these reasons, and
for the reasons stated previously regarding the significant ongoing
concerns related to the public health crisis represented by
antimicrobial resistance, consistent with the Administration's
commitment to address issues related to antimicrobial resistance, and
to continue to help secure access to antibiotics and improve health
outcomes for Medicare beneficiaries in a manner that is as expeditious
as possible, we are proposing a process by which a technology that
meets the new technology add-on payment criteria under the alternative
pathway for products designated as QIDPs or, as proposed previously,
approved under FDA's LPAD pathway, would receive conditional approval
for such payment even if the product has not been granted FDA marketing
authorization by July 1

[[Page 32695]]

(the existing deadline by which any technology must be granted FDA
marketing authorization in order to be eligible for a new technology
add-on payment). (We note that for the remainder of this discussion, we
refer to the alternative pathway at Sec. 412.87(d), which we are
proposing would also include products approved under the LPAD pathway
beginning with applications submitted for new technology add-on
payments for FY 2022, as the ``alternative pathway for certain
antimicrobial products'').
Under our proposal, a technology eligible for the new technology
add-on payment alternative pathway for certain antimicrobial products
would begin receiving the new technology add-on payment effective for
discharges the quarter after FDA marketing authorization is granted. We
are proposing that the cutoff or deadline for this conditional approval
would be FDA marketing authorization by July 1 of the fiscal year for
which the applicant is applying for new technology add-on payments. We
would consider July 1 to be the cutoff for conditional approval because
under this proposal, if the FDA marketing authorization is received on
or after July 1, the new technology add-on payment would not be
effective for discharges until the beginning of the next quarter on
October 1, which would be the start of the next fiscal year. For
example, an eligible antimicrobial product is conditionally approved
for the new technology add-on payment in the FY 2021 IPPS final rule.
However, FDA marketing authorization is not granted until February 1,
2021. The new technology add-on payment for such an antimicrobial
product would be made for discharges that use the technology on or
after April 1, 2021 (the beginning of the quarter after the FDA
marketing authorization was granted). Using the same example, if the
eligible antimicrobial product received FDA marketing authorization on
or after July 1, 2021, no new technology add-on payments would be made
for FY 2021, because the beginning of the next quarter would be October
1, which is the beginning of FY 2022, the next fiscal year. As we
discuss further, to be eligible for new technology add-on payments for
FY 2022, the applicant would have needed to re-apply for such payments
for FY 2022 by the applicable deadline.
In the FY 2009 IPPS final rule (73 FR 48562), we also stated that
applications that receive FDA approval of the medical service or
technology after July 1 would be able to reapply for the new medical
service or technology add-on payment the following year (at which time
they would be given full consideration in both the IPPS proposed and
final rules). Consistent with this policy, an applicant for an eligible
antimicrobial product that does not receive FDA marketing authorization
during the conditional approval period described previously would need
to evaluate whether it believes it is necessary to re-apply for new
technology add-on payments for the following fiscal year. For example,
an applicant for an eligible antimicrobial product for FY 2021 that
receives conditional approval for FY 2021 (with a conditional approval
period of on or after July 1, 2020 and before July 1, 2021) would still
need to submit an application for FY 2022 in order to be eligible for
new technology add-on payments in FY 2022. The applicant would need to
evaluate whether it believes it is necessary to re-apply for new
technology add-on payments for the next fiscal year based on when the
applicant anticipates receiving FDA marketing authorization. However,
we would encourage eligible antimicrobial product applicants to reapply
for new technology add-on payments for the next fiscal year in case
they do not receive FDA marketing authorization prior to July 1 of the
fiscal year for which they initially applied. We also note, as
discussed previously, although FDA may provide advice on potential
eligibility, FDA intends to make the determination of whether a drug
meets the criteria for the LPAD pathway at the time of the drug's
approval. As such, an applicant may not know with certainty at the time
it applies for new technology add on payments under the alternative
pathway for certain antimicrobial products whether it qualifies for
that pathway. If the applicant drug ultimately does not receive
approval under the LPAD pathway (but receives FDA approval otherwise)
and is not designated as a QIDP, the applicant would not be eligible
for approval under the alternative pathway for certain antimicrobial
products, and therefore, even if the product received conditional
approval under this proposal, no new technology add-on payments would
be made for that fiscal year. As described previously, the applicant
would need to re-apply for new technology add on payments under the
traditional pathway at Sec. 412.87(b) for the following fiscal year if
the applicant wishes to continue to seek approval for new technology
add-on payments.
We are proposing to revise Sec. 412.87(e) to reflect this proposal
by adding a new paragraph (3) which would provide for conditional
approval for a technology for which an application is submitted under
the alternative pathway for certain antimicrobial products at Sec.
412.87(d) that does not receive FDA marketing authorization by the July
1 deadline specified in Sec. 412.87(e)(2), provided that the
technology receives FDA marketing authorization by July 1 of the
particular fiscal year for which the applicant applied for new
technology add-on payments. We are also proposing related revisions to
the paragraph (e) introductory text and to paragraph (e)(2) to reflect
this proposed new policy.
In addition, we are proposing to make technical clarifications to
the regulations in paragraph (e)(2) of Sec. 412.87 by replacing the
words ``FDA approval or clearance'' with ``FDA marketing
authorization'' which conforms to the existing regulations in
paragraphs (c)(1) and (d)(1) of Sec. 412.87. We believe this more
precisely describes the current policy and does not change or modify
the policy set forth in existing Sec. 412.87(e)(2). For example, under
our current policy, in evaluating whether a technology is eligible for
new technology add-on payment for a given fiscal year, we consider
whether the technology has received marketing authorization by July 1,
which could be any of the following: Premarket Approval (PMA); 510(k)
clearance; the granting of a De Novo classification request; or
approval of a New Drug Application (NDA). Therefore, we believe the
term ``marketing authorization'' would more precisely describe the
various types of potential FDA approvals, clearances and
classifications that we currently consider under our new technology
add-on payment policy.

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

A. Background

1. Legislative Authority
Section 1886(d)(3)(E) of the Act requires that, as part of the
methodology for determining prospective payments to hospitals, the
Secretary adjust the standardized amounts for area differences in
hospital wage levels by a factor (established by the Secretary)
reflecting the relative hospital wage level in the geographic area of
the hospital compared to the national average hospital wage level. We
currently define hospital labor market areas based on the delineations
of statistical areas established by the Office of Management and Budget
(OMB). A discussion of the proposed FY 2021 hospital wage index based
on the statistical areas appears under section

[[Page 32696]]

III.A.2. of the preamble of this proposed rule.
Section 1886(d)(3)(E) of the Act requires the Secretary to update
the wage index annually and to base the update on a survey of wages and
wage-related costs of short-term, acute care hospitals. (CMS collects
these data on the Medicare cost report, CMS Form 2552-10, Worksheet S-
3, Parts II, III, and IV. The OMB control number for approved
collection of this information is 0938-0050, which expires on March 31,
2022.) This provision also requires that any updates or adjustments to
the wage index be made in a manner that ensures that aggregate payments
to hospitals are not affected by the change in the wage index. The
proposed adjustment for FY 2021 is discussed in section II.B. of the
Addendum to this proposed rule.
As discussed in section III.I. of the preamble of this proposed
rule, we also take into account the geographic reclassification of
hospitals in accordance with sections 1886(d)(8)(B) and 1886(d)(10) of
the Act when calculating IPPS payment amounts. Under section
1886(d)(8)(D) of the Act, the Secretary is required to adjust the
standardized amounts so as to ensure that aggregate payments under the
IPPS after implementation of the provisions of sections 1886(d)(8)(B),
1886(d)(8)(C), and 1886(d)(10) of the Act are equal to the aggregate
prospective payments that would have been made absent these provisions.
The proposed budget neutrality adjustment for FY 2021 is discussed in
section II.A.4.b. of the Addendum to this proposed rule.
Section 1886(d)(3)(E) of the Act also provides for the collection
of data every 3 years on the occupational mix of employees for short-
term, acute care hospitals participating in the Medicare program, in
order to construct an occupational mix adjustment to the wage index. A
discussion of the occupational mix adjustment that we are proposing to
apply to the FY 2021 wage index appears under sections III.E.3. and F.
of the preamble of this proposed rule.
2. Proposed Core-Based Statistical Areas (CBSAs) for the FY 2021
Hospital Wage Index
a. General
The wage index is calculated and assigned to hospitals on the basis
of the labor market area in which the hospital is located. Under
section 1886(d)(3)(E) of the Act, beginning with FY 2005, we delineate
hospital labor market areas based on OMB-established Core-Based
Statistical Areas (CBSAs). The current statistical areas (which were
implemented beginning with FY 2015) are based on revised OMB
delineations issued on February 28, 2013, in OMB Bulletin No. 13-01.
OMB Bulletin No. 13-01 established revised delineations for
Metropolitan Statistical Areas, Micropolitan Statistical Areas, and
Combined Statistical Areas in the United States and Puerto Rico based
on the 2010 Census, and provided guidance on the use of the
delineations of these statistical areas using standards published in
the June 28, 2010 Federal Register (75 FR 37246 through 37252). We
refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 49951
through 49963 and 49973 through 49982)) for a full discussion of our
implementation of the OMB statistical area delineations beginning with
the FY 2015 wage index.
Generally, OMB issues major revisions to statistical areas every 10
years, based on the results of the decennial census. However, OMB
occasionally issues minor updates and revisions to statistical areas in
the years between the decennial censuses through OMB Bulletins. On July
15, 2015, OMB issued OMB Bulletin No. 15-01, which provided updates to
and superseded OMB Bulletin No. 13-01 that was issued on February 28,
2013. The attachment to OMB Bulletin No. 15-01 provided detailed
information on the update to statistical areas since February 28, 2013.
The updates provided in OMB Bulletin No. 15-01 were based on the
application of the 2010 Standards for Delineating Metropolitan and
Micropolitan Statistical Areas to Census Bureau population estimates
for July 1, 2012 and July 1, 2013. In the FY 2017 IPPS/LTCH PPS final
rule (81 FR 56913), we adopted the updates set forth in OMB Bulletin
No. 15-01 effective October 1, 2016, beginning with the FY 2017 wage
index. For a complete discussion of the adoption of the updates set
forth in OMB Bulletin No. 15-01, we refer readers to the FY 2017 IPPS/
LTCH PPS final rule. In the FY 2018 IPPS/LTCH PPS final rule (82 FR
38130), we continued to use the OMB delineations that were adopted
beginning with FY 2015 to calculate the area wage indexes, with updates
as reflected in OMB Bulletin No. 15-01 specified in the FY 2017 IPPS/
LTCH PPS final rule.
On August 15, 2017, OMB issued OMB Bulletin No. 17-01, which
provided updates to and superseded OMB Bulletin No. 15-01 that was
issued on July 15, 2015. The attachments to OMB Bulletin No. 17-01
provided detailed information on the update to statistical areas since
July 15, 2015, and were based on the application of the 2010 Standards
for Delineating Metropolitan and Micropolitan Statistical Areas to
Census Bureau population estimates for July 1, 2014 and July 1, 2015.
In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41362 through 41363), we
adopted the updates set forth in OMB Bulletin No. 17-01 effective
October 1, 2018, beginning with the FY 2019 wage index. For a complete
discussion of the adoption of the updates set forth in OMB Bulletin No.
17-01, we refer readers to the FY 2019 IPPS/LTCH PPS final rule. In the
FY 2020 IPPS/LTCH PPS final rule (84 FR 42300 through 42301), we
continued to use the OMB delineations that were adopted beginning with
FY 2015 (based on the revised delineations issued in OMB Bulletin No.
13-01) to calculate the area wage indexes, with updates as reflected in
OMB Bulletin Nos. 15-01 and 17-01.
On April 10, 2018 OMB issued OMB Bulletin No. 18-03 which
superseded the August 15, 2017 OMB Bulletin No. 17-01. On September 14,
2018, OMB issued OMB Bulletin No. 18-04 which superseded the April 10,
2018 OMB Bulletin No. 18-03. Typically, interim OMB bulletins (those
issued between decennial censuses) have only contained minor
modifications to labor market delineations. However the April 10, 2018
OMB Bulletin No. 18-03 and the September 14, 2018 OMB Bulletin No. 18-
04 included more modifications to the labor market areas than are
typical for OMB bulletins issued between decennial censuses, including
some material modifications that have a number of downstream effects,
such as reclassification changes (as discussed later in this preamble).
CMS was unable to complete an extensive review and verification of the
changes made by these bulletins until after the development of the FY
2020 IPPS/LTCH PPS proposed rule. These bulletins 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 OMB Bulletin No. 18-04 may be obtained at https://www.whitehouse.gov/wp-content/uploads/2018/09/Bulletin-18-04.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

[[Page 32697]]

on June 28, 2010 (75 FR 37246), and Census Bureau data.'' (We note, on
March 6, 2020 OMB issued OMB Bulletin 20-01 (available on the web at
https://www.whitehouse.gov/wp-content/uploads/2020/03/Bulletin-20-01.pdf), and as discussed in this section of the rule was not issued in
time for development of this proposed rule.)
As noted previously, while OMB Bulletin No. 18-04 is not based on
new census data, it includes some material changes to the OMB
statistical area delineations. Specifically, under the revised OMB
delineations, there would be some new CBSAs, urban counties that would
become rural, rural counties that would become urban, and some existing
CBSAs would be split apart. In addition, the revised OMB delineations
would affect 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) under section 1886(d)(8)(B) of the Act. We discuss
the revised OMB delineations and the effects of these revisions in this
section of this rule. As previously noted, the March 6, 2020 OMB
Bulletin 20-01 was not issued in time for development of this proposed
rule. While we do not believe that the updates included in OMB Bulletin
20-01 would impact our proposed changes discussed in this section of
this rule, if appropriate, we would propose any updates from this
bulletin in the FY 2022 IPPS/LTCH PPS proposed rule.
b. Proposed Implementation of Revised Labor Market Area Delineations
We believe that using the revised delineations based on OMB
Bulletin No. 18-04 will increase the integrity of the IPPS wage index
system by creating a more accurate representation of geographic
variations in wage levels. Therefore, we are proposing to implement the
revised OMB delineations as described in the September 14, 2018 OMB
Bulletin No. 18-04, effective October 1, 2020 beginning with the FY
2021 IPPS wage index. We are proposing to use these revised
delineations to calculate area wage indexes in a manner that is
generally consistent with the CBSA-based methodologies. Because of the
previously described material changes, we also are proposing a wage
index transition applicable to hospitals that experience a significant
decrease in their FY 2021 wage index compared to their final FY 2020
wage index. This transition is discussed in more detail in this section
of this rule.
i. Micropolitan Statistical Areas
As discussed in the FY 2005 IPPS final rule (69 FR 49029 through
49032), OMB defines a ``Micropolitan Statistical Area'' as a CBSA
``associated with at least one urban cluster that has a population of
at least 10,000, but less than 50,000'' (75 FR 37252). We refer to
these areas as Micropolitan Areas. Since FY 2005, we have treated
Micropolitian Areas as rural and include hospitals located in
Micropolitan Areas in each State's rural wage index. We refer the
reader to the FY 2005 IPPS final rule (69 FR 49029 through 19032) and
the FY 2015 IPPS/LTCH PPS final rule (79 FR 49952) for a complete
discussion regarding this policy and our rationale for treating
Micropolitan Areas as rural. For the reasons discussed in the FY 2005
IPPS final rule and in the FY 2015 IPPS final rule, we believe that the
best course of action would be to continue this policy and include
hospitals located in Micropolitan Areas in each State's rural wage
index. Therefore, in conjunction with our proposal to implement the new
OMB statistical area delineations beginning in FY 2021, we are
proposing to continue to treat Micropolitan Areas as ``rural'' and to
include Micropolitan Areas in the calculation of each state's rural
wage index.
ii. Urban Counties That Would Become Rural Under the Revised OMB
Delineations
As previously discussed, we are proposing to implement the revised
OMB statistical area delineations (based upon OMB Bulletin No. 18-04)
beginning in FY 2021. Our analysis shows that a total of 34 counties
(and county equivalents) and 10 hospitals that were once considered
part of an urban CBSA would be considered to be located in a rural
area, beginning in FY 2021, under these revised OMB delineations. The
following chart lists the 34 urban counties that would be rural if we
finalize our proposal to implement the revised OMB delineations.
BILLING CODE 4120-01-P

[[Page 32698]]

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[[Page 32699]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.148

We are proposing that the wage data for all hospitals located in
the counties, as previously listed, would now be considered rural when
calculating their respective State's rural wage index. We recognize
that rural areas typically have lower area wage index values than urban
areas, and hospitals located in these counties may experience a
negative impact in their IPPS payment due to the proposed adoption of
the revised OMB delineations. We refer readers to section III.A.2.c. of
the preamble of this proposed rule for a discussion of our proposed
wage index transition policy to apply a 5 percent cap in FY 2021 for
hospitals that may experience any decrease in their final wage index
from the prior fiscal year. We are also proposing revisions to the list
of counties deemed urban under Section 1886(d)(8)(B) of the Act that
will affect the hospitals located in these proposed rural counties. We
refer readers to section III.I.3.b for further discussion.
In addition, we note the provisions of Sec. 412.102 of the
regulations would continue to apply with respect to determining DSH
payments. Specifically, in the first year after a hospital loses urban
status, the hospital will receive an adjustment to its DSH payment that
equals two-thirds of the difference between the urban DSH payments
applicable to the hospital before its redesignation from urban to rural
and the rural DSH payments applicable to the hospital subsequent to its
redesignation from urban to rural. In the second year after a hospital
loses urban status, the hospital will receive an adjustment to its DSH
payment that equals one third of the difference between the urban DSH
payments applicable to the hospital before its redesignation from urban
to rural and the rural DSH payments applicable to the hospital
subsequent to its redesignation from urban to rural
iii. Rural Counties That Would Become Urban Under the Revised OMB
Delineations
As previously discussed, we are proposing to implement the revised
OMB statistical area delineations (based upon OMB Bulletin No. 18-04)
beginning in FY 2021. Analysis of these OMB statistical area
delineations shows that a total of 47 counties (and county equivalents)
and 17 hospitals that were located in rural areas would be located in
urban areas under the revised OMB delineations. The following chart
lists the 47 rural counties that would be urban if we finalize our
proposal to implement the revised OMB delineations.

[[Page 32700]]

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[[Page 32701]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.150

We are proposing that when calculating the area wage index, the
wage data for hospitals located in these counties would be included in
their new respective urban CBSAs. Typically, hospitals located in an
urban area would receive a wage index value higher than or equal to
hospitals located in their State's rural area. We refer readers to
section III.A.2.c. of the preamble of this proposed rule for a
discussion of our proposed wage index transition policy to apply a 5
percent cap in FY 2021 for hospitals that may experience any decrease
in their final wage index from the prior fiscal year.
We also note that due to the proposed adoption of the revised OMB
delineations, some CAHs that were previously located in rural areas may
be located in urban areas. The regulations at Sec. Sec. 412.103(a)(6)
and 485.610(b)(5) provide affected CAHs with a two-year transition
period that begins from the

[[Page 32702]]

date the redesignation becomes effective. The affected CAHs must
reclassify as rural during this transition period in order to retain
their CAH status after the two-year transition period ends. We refer
readers to the FY 2015 IPPS/LTCH final rule (79 FR 50162 and 50163) for
further discussion of the two-year transition period for CAHs.
iv. Urban Counties That Would Move to a Different Urban CBSA Under the
Revised OMB Delineations
In addition to rural counties becoming urban and urban counties
becoming rural, some urban counties would shift from one urban CBSA to
another urban CBSA under our proposal to adopt the new OMB
delineations. In other cases, adopting the revised OMB delineations
would involve a change only in CBSA name and/or number, while the CBSA
continues to encompass the same constituent counties. For example, CBSA
19380 (Dayton, OH) would experience both a change to its number and its
name, and become CBSA 19430 (Dayton-Kettering, OH), while all of its
three constituent counties would remain the same. In other cases, only
the name of the CBSA would be modified, and none of the currently
assigned counties would be reassigned to a different urban CBSA. The
following is a list of such CBSAs where we are proposing to change the
name and/or CBSA number only.

[[Page 32703]]

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[[Page 32704]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.152

We are not discussing further in this section these proposed
changes because they are inconsequential changes with respect to the
IPPS wage index. However, in other cases, if we adopt the revised OMB
delineations, counties would shift between existing and new CBSAs,
changing the constituent makeup of the CBSAs. For example, Kendall
County, IL would be moved from the current CBSA 16974 (Chicago-
Naperville-Arlington Height, IL) into proposed CBSA 20994 (Elgin, IL).
The remaining counties in the current CBSA 16974 would be assigned to
the proposed CBSA 16984 (Chicago-Naperville-Evanston, IL). The
constituent counties of CBSA 16974 would therefore be split into two
different urban CBSAs. There would also be a significant rearrangement
in the constituent counties among the New York City Area Metropolitan
Divisions. Most notably, Monmouth, Middlesex, and Ocean Counties in NJ
would move from the current CBSA 35614 (New York-Jersey City-White
Plains, NY-NJ) to the proposed CBSA 35154 (New Brunswick-Lakewood, NJ).
Also, Somerset County, NJ would move from current CBSA 35084 (Newark,
NJ-PA) to CBSA 35154. The following chart lists the urban counties that
would move from one urban CBSA to a newly proposed or modified CBSA if
we adopted the revised OMB delineations.

[[Page 32705]]

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[GRAPHIC] [TIFF OMITTED] TP29MY20.154

BILLING CODE 4120-01-C
If hospitals located in these counties move from one CBSA to
another under the revised OMB delineations, there may be impacts, both
negative and positive, upon their specific wage index values. We refer
readers to section III.A.2.c. of the preamble of this proposed rule for
a discussion of our proposed wage index transition policy to apply a 5
percent cap in FY 2021 for hospitals that may experience any decrease
in their final wage index from the prior fiscal year. We also refer
readers to section III.I.2.c. of the preamble of this proposed rule for
discussion of our proposals to reassign MGCRB wage index
reclassifications for

[[Page 32706]]

hospitals currently assigned to these modified CBSAs.
c. Proposed Transition for Hospitals Negatively Impacted
Overall, we believe implementing the revised OMB statistical area
delineations would result in wage index values being more
representative of the actual costs of labor in a given area. However,
we recognize that some hospitals would experience decreases in wage
index values as a result of our proposed implementation of the revised
labor market area delineations. We also realize that some hospitals
would have higher wage index values due to our proposed implementation
of the new labor market area delineations.
In the past, we have proposed and finalized budget neutral
transition policies to help mitigate negative impacts on hospitals of
certain wage index proposals. For example, in the FY 2015 IPPS/LTCH PPS
final rule (79 FR 49960 through 49963) when we implemented new OMB
delineations based on the 2010 decennial census data, we finalized
budget neutral transitions for certain situations. Specifically, in the
FY 2015 IPPS/LTCH PPS final rule, for a period of 3 fiscal years, we
allowed urban hospitals that became rural under the new delineations
(and that had no form of wage index reclassification or redesignation)
to maintain the wage index value of the CBSA in which they were
physically located for FY 2014; and for hospitals that experienced a
decrease in wage index values due to the change in labor market area
definitions, we implemented a 1-year blended wage index where hospitals
received 50 percent of their wage index based on the new OMB
delineations that went into effect in FY 2015, and 50 percent of their
wage index based on their FY 2014 labor market area. This blended wage
index required us to calculate wage indexes for all hospitals using
both old and new labor market definitions even though it only applied
to hospitals that experienced a decrease in wage index values due to a
change in labor market area definitions. More recently, in the FY 2020
IPPS/LTCH PPS final rule (84 FR 42336 through 42338), we finalized a
wage index transition to help mitigate any significant decreases in the
wage index values of hospitals compared to their final wage index value
from the prior fiscal year due to the combined effect of the proposed
changes to the FY 2020 wage index. Specifically, for FY 2020, we
implemented a 5-percent cap on any decrease in a hospital's wage index
from the hospital's final wage index in FY 2019.
As previously mentioned, while the revised OMB delineations in this
latest OMB bulletin (OMB Bulletin 18-04) are not based on new census
data, there were some material changes in the OMB delineations. Also,
as previously mentioned, the revisions in the latest OMB bulletin are
updates to the CBSA delineations already adopted in FY 2015 based on
the 2010 census data. For these reasons, for FY 2021 we do not believe
it is necessary to implement the multifaceted transitions we
established in FY 2015 for the adoption of the new OMB delineations
based on the new decennial census data. However, in accordance with our
past practice of implementing transition policies to help mitigate
negative impacts on hospitals of certain wage index proposals, we do
believe that if we adopt the proposed revised OMB delineations, it
would be appropriate to implement a transition policy since, as
previously mentioned, some of these revisions are material, and may
negatively impact payments to hospitals. For example, changes in the
county makeup of a CBSA, by adding or removing a constituent county,
may change the pool of hospitals contributing average hourly wage data,
potentially resulting in lower wage index values for certain areas.
When CMS implemented various changes to the hospital wage index in
prior rulemaking, commenters frequently supported transition policies
that ensured wage index values maintain a degree of year-to-year
consistency (see comments to our FY 2015 IPPS/LTCH PPS final rule
transition policies at 79 FR 49959 through 49961). Thus, we believe
applying a 5-percent cap on any decrease in a hospital's wage index
from the hospital's final wage index from the prior fiscal year, as we
did for FY 2020, would be an appropriate transition for FY 2021 for the
revised OMB delineations as it provides predictability in payment
levels from FY 2020 to the upcoming FY 2021. The proposed FY 2021 5-
percent cap on wage index decreases would be applied to all hospitals
that have any decrease in their wage indexes, mitigating significant
negative decrease in wage index values. Given the significant portion
of Medicare IPPS payments that are adjusted by the wage index and how
relatively few hospitals generally see wage index declines in excess of
5 percent, hospitals may have difficulty adapting to changes in the
wage index of this magnitude all at once. For these reasons, for FY
2021, we would place a 5 percent cap on any decrease in a hospital's
wage index from the hospital's final wage index for FY 2020, such that
a hospital's final wage index for FY 2021 would not be less than 95
percent of its final wage index for FY 2020. This transition would
allow the effects of our proposed adoption of the revised CBSA
delineations to be phased in over 2 years with no estimated reduction
in the wage index of more than 5 percent in FY 2021 (that is, no cap
would be applied the second year). We continue to believe 5 percent is
a reasonable level for the cap because it would effectively mitigate
any significant decreases in the wage index for FY 2021. We also
believe this transition would afford hospitals adequate time to fully
assess any additional reclassification options available to them (we
refer the reader to section III.I.2.c. of the preamble of this proposed
rule for a complete discussion regarding the revised OMB delineations
and their effects regarding hospital reclassification). Therefore, for
FY 2021, we are proposing to again provide for a transition of a 5-
percent cap on any decrease in a hospital's wage index from the
hospital's final wage index from the prior fiscal year (FY 2020).
Consistent with the application of the 5 percent cap in FY 2020, the
proposed FY 2021 5-percent cap on wage index decreases would be applied
to all hospitals that have any decrease in their wage indexes,
regardless of the circumstance causing the decline, so that a
hospital's final wage index for FY 2021 will not be less than 95
percent of its final wage index for FY 2020. We believe applying the
cap on wage index decreases for all hospitals, regardless of the
circumstance causing the decrease, allows CMS to mitigate any
significant negative impacts of adopting the new OMB delineations in a
manner that is readily identifiable in the wage index tables and
promotes greater wage index predictability.
d. Proposed Transition Budget Neutrality
For FY 2021 we are proposing to apply a budget neutrality
adjustment to the standardized amount so that our proposed transition
described in section III.A.2.c. is implemented in a budget neutral
manner under our authority in section 1886(d)(5)(I) of the Act. We note
that implementing the proposed transition wage index in a budget
neutral manner is consistent with past practice (for example, 79 FR
50372 and 84 FR 42338) where CMS has used its exceptions and
adjustments authority under section 1886(d)(5)(I)(i) of the Act to
budget neutralize transition wage index policies when such policies
allow

[[Page 32707]]

for the application of a transitional wage index only when it benefits
the hospital. We stated that we believed, and continue to believe, that
it would be appropriate to ensure that such policies do not increase
estimated aggregate Medicare payments beyond the payments that would be
made had we never proposed these transition policies (79 FR 50372 and
84 FR 42337 through 42338). Therefore, for FY 2021, we are proposing to
use our exceptions and adjustments authority under section
1886(d)(5)(I)(i) of the Act to apply a budget neutrality adjustment to
the standardized amount so that our proposed transition (described in
section III.A.2.c.) is implemented in a budget neutral manner.
Specifically, we are proposing to apply a budget neutrality
adjustment to ensure that estimated aggregate payments under our
proposed transition (described in section III.A.2.c. of the preamble of
this proposed rule) for hospitals that have any decrease in their wage
indexes for FY 2021 would equal what estimated aggregate payments would
have been without the proposed transition. To determine the associated
budget neutrality factor, we compared estimated aggregate IPPS payments
with and without the proposed transition.
Based on this proposed rule data, the budget neutrality adjustment
factor to achieve budget neutrality for the proposed transition would
be 0.998580, which would be applied to the FY 2021 standardized amount.
We note that this number would be updated, as appropriate, based on the
final rule data. We refer readers to the Addendum of this final rule
for further information regarding the budget neutrality calculations.
We note that, consistent with past practice (69 FR 49034 and 79 FR
49963), we are not adopting the revised OMB delineations themselves in
a budget neutral manner. We do not believe that the revision to the
labor market areas in and of itself constitutes an ``adjustment or
update'' to the adjustment for area wage differences, as provided under
section 1886(d)(3)(E) of the Act.
3. Codes for Constituent Counties in CBSAs
CBSAs are made up of one or more constituent counties. Each CBSA
and constituent county has its own unique identifying codes. There are
two different lists of codes associated with counties: Social Security
Administration (SSA) codes and Federal Information Processing Standard
(FIPS) codes. Historically, CMS has listed and used SSA and FIPS county
codes to identify and crosswalk counties to CBSA codes for purposes of
the hospital wage index. As we discussed in the FY 2018 IPPS/LTCH PPS
final rule (82 FR 38129 through 38130), we have learned that SSA county
codes are no longer being maintained and updated. However, the FIPS
codes continue to be maintained by the U.S. Census Bureau. We believe
that using the latest FIPS codes will allow us to maintain a more
accurate and up-to-date payment system that reflects the reality of
population shifts and labor market conditions.
The Census Bureau's most current statistical area information is
derived from ongoing census data received since 2010; the most recent
data are from 2015. The Census Bureau maintains a complete list of
changes to counties or county equivalent entities on the website at:
https://www.census.gov/geo/reference/county-changes.html. We believe
that it is important to use the latest counties or county equivalent
entities in order to properly crosswalk hospitals from a county to a
CBSA for purposes of the hospital wage index used under the IPPS.
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38129 through
38130), we adopted a policy to discontinue the use of the SSA county
codes and began using only the FIPS county codes for purposes of
crosswalking counties to CBSAs. In addition, in the same rule, we
implemented the latest FIPS code updates which were effective October
1, 2017, beginning with the FY 2018 wage indexes. These updates have
been used to calculate the wage indexes in a manner generally
consistent with the CBSA-based methodologies finalized in the FY 2005
IPPS final rule and the FY 2015 IPPS/LTCH PPS final rule.
For FY 2021, we are continuing to use only the FIPS county codes
for purposes of crosswalking counties to CBSAs. For FY 2021, Tables 2
and 3 associated with this proposed rule and the County to CBSA
Crosswalk File and Urban CBSAs and Constituent Counties for Acute Care
Hospitals File posted on the CMS website reflect these county changes.

B. Worksheet S-3 Wage Data for the Proposed FY 2021 Wage Index

The proposed FY 2021 wage index values are based on the data
collected from the Medicare cost reports submitted by hospitals for
cost reporting periods beginning in FY 2017 (the FY 2020 wage indexes
were based on data from cost reporting periods beginning during FY
2016).
1. Included Categories of Costs
The proposed FY 2021 wage index includes all of the following
categories of data associated with costs paid under the IPPS (as well
as outpatient costs):
Salaries and hours from short-term, acute care hospitals
(including paid lunch hours and hours associated with military leave
and jury duty);
Home office costs and hours;
Certain contract labor costs and hours, which include
direct patient care, certain top management, pharmacy, laboratory, and
nonteaching physician Part A services, and certain contract indirect
patient care services (as discussed in the FY 2008 final rule with
comment period (72 FR 47315 through 47317)); and
Wage-related costs, including pension costs (based on
policies adopted in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51586
through 51590)) and other deferred compensation costs.
2. Excluded Categories of Costs
Consistent with the wage index methodology for FY 2020, the
proposed wage index for FY 2021 also excludes the direct and overhead
salaries and hours for services not subject to IPPS payment, such as
skilled nursing facility (SNF) services, home health services, costs
related to GME (teaching physicians and residents) and certified
registered nurse anesthetists (CRNAs), and other subprovider components
that are not paid under the IPPS. The proposed FY 2021 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). For FY 2020 and
subsequent years, other wage-related costs are also excluded from the
calculation of the wage index. As discussed in the FY 2019 IPPS/LTCH
final rule (83 FR 41365 through 41369), other wage-related costs
reported on Worksheet S-3, Part II, Line 18 and Worksheet S-3, Part IV,
Line 25 and subscripts, as well as all other wage-related costs, such
as contract labor costs, are excluded from the calculation of the wage
index.
3. Use of Wage Index Data by Suppliers and Providers Other Than Acute
Care Hospitals Under the IPPS
Data collected for the IPPS wage index also are currently used to
calculate wage indexes applicable to suppliers and other providers,
such as SNFs, home health agencies (HHAs), ambulatory surgical centers
(ASCs), and

[[Page 32708]]

hospices. In addition, they are used for prospective payments to IRFs,
IPFs, and LTCHs, and for hospital outpatient services. We note that, in
the IPPS rules, we do not address comments pertaining to the wage
indexes of any supplier or provider except IPPS providers and LTCHs.
Such comments should be made in response to separate proposed rules for
those suppliers and providers.
4. Proper Documentation of Physician Time Spent in Part A
Administrative Versus Part B Billable Activities
In the last few years, we have received wage index data appeals
related to MACs' disallowances of wages and hours that hospitals
believe are associated with Part A administrative physician time, but
the MACs believe are not properly documented as such, or are in fact,
associated with Part B billable activities, which are not included in
the wage index. For physicians employed by a hospital, their salaries
and hours associated with Part A administrative time, which ARE
included in the wage index, are reported on CMS-2552-10 Worksheet S-3,
Part II, line 4, and the salaries and hours of hospital employed
physicians associated with billable Part B patient care activities,
which are NOT included in the wage index, are reported on Worksheet S-
3, Part II, line 5. Specifically, the instructions for lines 4 and 5
state the following:
Line 4--Enter the physician Part A administrative
salaries, (excluding teaching physician salaries), that are included in
line 1. Also do not include intern and resident (I & R) salary on this
line. Report I & R salary on line 7. Subscript this line and report
salaries for Part A teaching physicians on line 4.01.
Line 5--Enter the total physician, physician assistant,
nurse practitioner and clinical nurse specialist on-call salaries and
salaries billed under Part B that are included in line 1. Under
Medicare, these services are related to direct patient care and billed
separately under Part B. Also include physician salaries for patient
care services reported for rural health clinics (RHC) and FQHCs
included on Worksheet A, column 1, lines 88 and/or 89 as applicable. Do
not include on this line amounts that are included on lines 9 and 10
for the SNF or excluded area salaries. Refer to CMS Pub. 15-1, sections
2313.2.E. and 2182.3.E., for instructions related to keeping time
studies to track time spent in Part A versus Part B activities.
However, although section 2313.2.E.2. states that, ``A minimally
acceptable time study must encompass at least one full week per month
of the cost reporting period,'' the contractor makes the final
determination on the adequacy of the records maintained. A 2-week semi-
annual (every 6 months) time study can be adequate unless the
contractor believes that a significant change in the pattern of
physician time is likely to occur from one quarter to the next, in
which case, the contractor may require more frequent time studies.
Adequate documentation must be maintained to support total hours in a
manner that is verifiable, and to serve as a condition of payment under
Part A.
In addition, for physicians that are not employed by the hospital
but are under contract, the wages and hours associated with contract
Physician Part A administrative activities are reported on Worksheet S-
3, Part II, line 13. No salaries and hours related to Part B activities
are allowed. Line 13 states the following:
Line 13--Enter from your records the amount paid under contract (in
accordance with the general instructions for contract labor) for Part A
physician services--administrative, excluding teaching physician
services. DO NOT include contract I & R services (to be included on
line 7). DO NOT include the costs for Part A physician services from
the home office allocation and/or from related organizations (to be
reported on line 15). Do not include wages or hours associated with
Part B services. As stated in the General Instructions for Contract
Labor, ``the minimum requirement for supporting documentation is the
contract itself. If the wage costs, hours, and non-labor costs are not
clearly specified in the contract, other supporting documentation is
required, such as a representative sample of invoices that specify the
wage costs, hours, and non-labor costs.'' Refer to CMS Pub. 15-1,
sections 2313.2E and 2182.3.E, for instructions related to keeping time
studies to track time spent in Part A versus Part B activities.
Adequate documentation must be maintained to support total hours in a
manner that is verifiable.
In order to accurately report the wages and hours associated with
Part A and Part B activities on lines 4 and 5 and 13 respectively, the
providers are required to maintain records as to the allocation of
physicians' time between various services to keep track of the amount
of time the physicians spend on Part A versus Part B activities. 42 CFR
415.60(b) and CMS Pub. 15-1, chapter 21, section 2182.3.B.
Specifically, 42 CFR 415.60(b) states, except as provided in paragraph
(d) of the section, each provider that incurs physician compensation
costs must allocate those costs, in proportion to the percentage of
total time that is spent in furnishing each category of services,
among--
Physician services to the provider (as described in Sec.
415.55);
Physician services to patients (as described in Sec.
415.102); and
Activities of the physician, such as funded research, that
are not paid under either Part A or Part B of Medicare.
To facilitate the MAC's review of whether physician wages and hours
have been reported correctly, hospitals must submit the physician
allocation agreements to the MAC. (See CMS Pub. 15-1, Section
2182.3.E.3. which states that allocation agreements are to be submitted
annually as part of the cost report filing process.) In the absence of
a written allocation agreement (such as Exhibit 1 in CMS Pub. 15-II,
Chapter 40, Section 4004.2 and related instructions for this exhibit on
Line 34 of Section 4004.2--that is, instructions for Form CMS-2552-10,
Worksheet S-2, Part II, line 34), the MAC assumes that 100 percent of
the physician compensation cost is allocated to Part B services (see 42
CFR 415.60(f)(2)). The hospital must maintain the information used to
complete the physician allocation agreements as directed in CMS Pub.
15-1 section 2182.3.E. in order to track time spent in Part A versus
Part B activities. This section specifies that the hospital may choose
to employ the methodology described in subsection 2313.2.E for a time
study but may not be required by the MAC to utilize that specific
methodology. Therefore, although section 2313.2.E. states that ``a
minimally acceptable time study must encompass at least one full week
per month of the cost reporting period,'' the MAC makes the final
determination on the adequacy of the records maintained for the
allocation of physicians' compensation. A 2-week semi-annual (every 6
months) time study can be adequate unless the MAC believes that a
significant change in the pattern of physician time is likely to occur
from one quarter to the next, in which case, the MAC may require more
frequent time studies (see CMS-2552-10, Worksheet S-3, Part II line 5
instructions). Adequate documentation must be maintained to support
total hours in a manner that is verifiable, and to serve as a condition
of payment under Part A, that is, total hours worked by the physicians
must be based on actual data accumulated during the cost reporting
period and may not be imputed (consistent with 42 CFR 413.24 and
415.60(f)(1) and (g)). Non-allowable services that are neither Part A
nor Part B services (for example, research,

[[Page 32709]]

teaching of residents in non-approved programs, teaching and
supervision of medical students, writing for medical journals,
reasonable availability services in departments/cost centers other than
Emergency Room, etc.) are reported as non-reimbursable activities in
the designated non-reimbursable cost centers of the Medicare cost
report, CMS-2552-10 (for example, Worksheet A, lines 190-194, see 42
CFR 415.60(b)(3)). Reasonable availability services for emergency rooms
can be considered Part A in certain circumstances (see PRM-I, section
2109.3.A. through C. for instances when emergency department physician
availability services costs are allowable, and for the associated
required documentation).

C. Verification of Worksheet S-3 Wage Data

The wage data for the FY 2021 wage index were obtained from
Worksheet S-3, Parts II and III of the Medicare cost report (Form CMS-
2552-10, OMB Control Number 0938-0050 with expiration date March 31,
2022) for cost reporting periods beginning on or after October 1, 2016,
and before October 1, 2017. For wage index purposes, we refer to cost
reports during this period as the ``FY 2017 cost report,'' the ``FY
2017 wage data,'' or the ``FY 2017 data.'' Instructions for completing
the wage index sections of Worksheet S-3 are included in the Provider
Reimbursement Manual (PRM), Part 2 (Pub. 15-2), Chapter 40, Sections
4005.2 through 4005.4. The data file used to construct the FY 2021 wage
index includes FY 2017 data submitted to us as of February 7, 2019. As
in past years, we performed an extensive review of the wage data,
mostly through the use of edits designed to identify aberrant data.
We asked our MACs to revise or verify data elements that result in
specific edit failures. For the proposed FY 2021 wage index, we
identified and excluded 84 providers with aberrant data that should not
be included in the wage index. However, if data elements for some of
these providers are corrected, we intend to include data from those
providers in the final FY 2021 wage index. We also adjusted certain
aberrant data and included these data in the proposed wage index. For
example, in situations where a hospital did not have documentable
salaries, wages, and hours for housekeeping and dietary services, we
imputed estimates, in accordance with policies established in the FY
2015 IPPS/LTCH PPS final rule (79 FR 49965 through 49967). We
instructed MACs to complete their data verification of questionable
data elements and to transmit any changes to the wage data no later
than March 19, 2020.
In constructing the proposed FY 2021 wage index, we included the
wage data for facilities that were IPPS hospitals in FY 2017, 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 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); that is, any
hospital that is designated as a CAH by 7 days prior to the publication
of the preliminary wage index public use file (PUF) is excluded from
the calculation of the wage index. For the proposed rule, we removed 8
hospitals that converted to CAH status on or after January 24, 2019,
the cut-off date for CAH exclusion from the FY 2020 wage index, and
through and including January 24, 2020, the cut-off date for CAH
exclusion from the FY 2021 wage index. In summary, we calculated the
proposed wage index using the Worksheet S-3, Parts II and III wage data
of 3,196 hospitals.
For the proposed FY 2021 wage index, we allotted the wages and
hours data for a multicampus hospital among the different labor market
areas where its campuses are located using campus full-time equivalent
(FTE) percentages as originally finalized in the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51591). Table 2, which contains the proposed FY 2021
wage index associated with this proposed rule (available via the
internet on the CMS website), includes separate wage data for the
campuses of 16 multicampus hospitals. The following chart lists the
multicampus hospitals by CSA certification number (CCN) and the FTE
percentages on which the wages and hours of each campus were allotted
to their respective labor market areas:
[GRAPHIC] [TIFF OMITTED] TP29MY20.155

We note that, in past years, in Table 2, we have placed a ``B'' to
designate the subordinate campus in the fourth position of the hospital
CCN. However, for the FY 2019 IPPS/LTCH PPS proposed and final rules
and subsequent rules, we have moved the ``B'' to the third position of
the CCN. Because all IPPS hospitals have a ``0'' in the third position
of the CCN, we believe that placement of the ``B'' in this third
position, instead of the ``0'' for the subordinate campus, is the most
efficient method of identification and interferes the least with the
other, variable, digits in the CCN.

[[Page 32710]]

D. Method for Computing the Proposed FY 2021 Unadjusted Wage Index

The method used to compute the proposed FY 2021 wage index without
an occupational mix adjustment follows the same methodology that we
used to compute the wage indexes without an occupational mix adjustment
in the FY 2020 IPPS/LTCH PPS final rule (see 84 FR 42304 through 42307,
August 16, 2019), and we are not proposing any changes to this
methodology. We have restated our methodology in this section of this
rule.
Step 1.--We gathered data from each of the non-Federal, short-term,
acute care hospitals for which data were reported on the Worksheet S-3,
Parts II and III of the Medicare cost report for the hospital's cost
reporting period relevant to the proposed wage index (in this case, for
FY 2021, these were data from cost reports for cost reporting periods
beginning on or after October 1, 2016, and before October 1, 2017). In
addition, we included data from some hospitals that had cost reporting
periods beginning before October 2016 and reported a cost reporting
period covering all of FY 2017. These data were included because no
other data from these hospitals would be available for the cost
reporting period as previously described, and because particular labor
market areas might be affected due to the omission of these hospitals.
However, we generally describe these wage data as FY 2017 data. We note
that, if a hospital had more than one cost reporting period beginning
during FY 2017 (for example, a hospital had two short cost reporting
periods beginning on or after October 1, 2016, and before October 1,
2017), we include wage data from only one of the cost reporting
periods, the longer, in the wage index calculation. If there was more
than one cost reporting period and the periods were equal in length, we
included the wage data from the later period in the wage index
calculation.
Step 2.--Salaries.--The method used to compute a hospital's average
hourly wage excludes certain costs that are not paid under the IPPS.
(We note that, beginning with FY 2008 (72 FR 47315), we included what
were then Lines 22.01, 26.01, and 27.01 of Worksheet S-3, Part II of
CMS Form 2552-96 for overhead services in the wage index. Currently,
these lines are lines 28, 33, and 35 on CMS Form 2552-10. However, we
note that the wages and hours on these lines are not incorporated into
Line 101, Column 1 of Worksheet A, which, through the electronic cost
reporting software, flows directly to Line 1 of Worksheet S-3, Part II.
Therefore, the first step in the wage index calculation is to compute a
``revised'' Line 1, by adding to the Line 1 on Worksheet S-3, Part II
(for wages and hours respectively) the amounts on Lines 28, 33, and
35.) In calculating a hospital's Net Salaries (we note that we
previously used the term ``average'' salaries in the FY 2012 IPPS/LTCH
PPS final rule (76 FR 51592), but we now use the term ``net'' salaries)
plus wage-related costs, we first compute the following: Subtract from
Line 1 (total salaries) the GME and CRNA costs reported on CMS Form
2552-10, Lines 2, 4.01, 7, and 7.01, the Part B salaries reported on
Lines 3, 5 and 6, home office salaries reported on Line 8, and exclude
salaries reported on Lines 9 and 10 (that is, direct salaries
attributable to SNF services, home health services, and other
subprovider components not subject to the IPPS). We also subtract from
Line 1 the salaries for which no hours were reported. Therefore, the
formula for Net Salaries (from Worksheet S-3, Part II) is the
following:

((Line 1 + Line 28 + Line 33 + Line 35)-(Line 2 + Line 3 + Line 4.01 +
Line 5 + Line 6 + Line 7 + Line 7.01 + Line 8 + Line 9 + Line 10)).

To determine Total Salaries plus Wage-Related Costs, we add to the
Net Salaries the costs of contract labor for direct patient care,
certain top management, pharmacy, laboratory, and nonteaching physician
Part A services (Lines 11, 12 and 13), home office salaries and wage-
related costs reported by the hospital on Lines 14.01, 14.02, and 15,
and nonexcluded area wage-related costs (Lines 17, 22, 25.50, 25.51,
and 25.52). We note that contract labor and home office salaries for
which no corresponding hours are reported are not included. In
addition, wage-related costs for nonteaching physician Part A employees
(Line 22) are excluded if no corresponding salaries are reported for
those employees on Line 4. The formula for Total Salaries plus Wage-
Related Costs (from Worksheet S-3, Part II) is the following: ((Line 1
+ Line 28 + Line 33 + Line 35)-(Line 2 + Line 3 + Line 4.01 + Line 5 +
Line 6 + Line 7 + Line 7.01 + Line 8 + Line 9 + Line 10)) + (Line 11 +
Line 12 + Line 13 + Line 14.01 + 14.02 + Line 15) + (Line 17 + Line 22
+ 25.50 + 25.51 + 25.52).
Step 3.--Hours.--With the exception of wage-related costs, for
which there are no associated hours, we compute total hours using the
same methods as described for salaries in Step 2. The formula for Total
Hours (from Worksheet S-3, Part II) is the following:

((Line 1 + Line 28 + Line 33 + Line 35)-(Line 2 + Line 3 + Line 4.01 +
Line 5 + Line 6 + Line 7 + Line 7.01 + Line 8 + Line 9 + Line 10)) +
(Line 11 + Line 12 + Line 13 + Line 14.01 + 14.02 + Line 15).

Step 4.--For each hospital reporting both total overhead salaries
and total overhead hours greater than zero, we then allocate overhead
costs to areas of the hospital excluded from the wage index
calculation. First, we determine the ``excluded rate'', which is the
ratio of excluded area hours to Revised Total Hours (from Worksheet S-
3, Part II) with the following formula: (Line 9 + Line 10)/(Line 1 +
Line 28 + Line 33 + Line 35)-(Lines 2, 3, 4.01, 5, 6, 7, 7.01, and 8
and Lines 26 through 43). We then compute the amounts of overhead
salaries and hours to be allocated to excluded areas by multiplying the
above ratio by the total overhead salaries and hours reported on Lines
26 through 43 of Worksheet S-3, Part II. Next, we compute the amounts
of overhead wage-related costs to be allocated to excluded areas using
three steps:
We determine the ``overhead rate'' (from Worksheet S-3,
Part II), which is the ratio of overhead hours (Lines 26 through 43
minus the sum of Lines 28, 33, and 35) to revised hours excluding the
sum of lines 28, 33, and 35 (Line 1 minus the sum of Lines 2, 3, 4.01,
5, 6, 7, 7.01, 8, 9, 10, 28, 33, and 35). We note that, for the FY 2008
and subsequent wage index calculations, we have been excluding the
overhead contract labor (Lines 28, 33, and 35) from the determination
of the ratio of overhead hours to revised hours because hospitals
typically do not provide fringe benefits (wage-related costs) to
contract personnel. Therefore, it is not necessary for the wage index
calculation to exclude overhead wage-related costs for contract
personnel. Further, if a hospital does contribute to wage-related costs
for contracted personnel, the instructions for Lines 28, 33, and 35
require that associated wage-related costs be combined with wages on
the respective contract labor lines. The formula for the Overhead Rate
(from Worksheet S-3, Part II) is the following: (Lines 26 through 43-
Lines 28, 33 and 35)/((((Line 1 + Lines 28, 33, 35)-(Lines 2, 3, 4.01,
5, 6, 7, 7.01, 8, and 26 through 43))-(Lines 9 and 10)) + (Lines 26
through 43-Lines 28, 33, and 35)).
We compute overhead wage-related costs by multiplying the
overhead hours ratio by wage-related costs reported on Part II, Lines
17, 22, 25.50, 25.51, and 25.52.
We multiply the computed overhead wage-related costs by
the previously described excluded area hours ratio.

[[Page 32711]]

Finally, we subtract the computed overhead salaries, wage-related
costs, and hours associated with excluded areas from the total salaries
(plus wage-related costs) and hours derived in Steps 2 and 3.
Step 5.--For each hospital, we adjust the total salaries plus wage-
related costs to a common period to determine total adjusted salaries
plus wage-related costs. To make the wage adjustment, we estimate the
percentage change in the employment cost index (ECI) for compensation
for each 30-day increment from October 14, 2016 through April 15, 2018,
for private industry hospital workers from the BLS' Compensation and
Working Conditions. We use the ECI because it reflects the price
increase associated with total compensation (salaries plus fringes)
rather than just the increase in salaries. In addition, the ECI
includes managers as well as other hospital workers. This methodology
to compute the monthly update factors uses actual quarterly ECI data
and assures that the update factors match the actual quarterly and
annual percent changes. We also note that, since April 2006 with the
publication of March 2006 data, the BLS' ECI uses a different
classification system, the North American Industrial Classification
System (NAICS), instead of the Standard Industrial Codes (SICs), which
no longer exist. We have consistently used the ECI as the data source
for our wages and salaries and other price proxies in the IPPS market
basket, and we are not proposing to make any changes to the usage of
the ECI for FY 2021. The factors used to adjust the hospital's data are
based on the midpoint of the cost reporting period, as indicated in
this rule.
Step 6.--Each hospital is assigned to its appropriate urban or
rural labor market area before any reclassifications under section
1886(d)(8)(B), 1886(d)(8)(E), or 1886(d)(10) of the Act. Within each
urban or rural labor market area, we add the total adjusted salaries
plus wage-related costs obtained in Step 5 for all hospitals in that
area to determine the total adjusted salaries plus wage-related costs
for the labor market area.
Step 7.--We divide the total adjusted salaries plus wage-related
costs obtained under Step 6 by the sum of the corresponding total hours
(from Step 4) for all hospitals in each labor market area to determine
an average hourly wage for the area.
Step 8.--We add the total adjusted salaries plus wage-related costs
obtained in Step 5 for all hospitals in the Nation and then divide the
sum by the national sum of total hours from Step 4 to arrive at a
national average hourly wage.
Step 9.--For each urban or rural labor market area, we calculate
the hospital wage index value, unadjusted for occupational mix, by
dividing the area average hourly wage obtained in Step 7 by the
national average hourly wage computed in Step 8.
Step 10.--For each urban labor market area for which we do not have
any hospital wage data (either because there are no IPPS hospitals in
that labor market area, or there are IPPS hospitals in that area but
their data are either too new to be reflected in the current year's
wage index calculation, or their data are aberrant and are deleted from
the wage index), we finalized in the FY 2020 IPPS/LTCH PPS final rule
(84 FR 42305) that, for FY 2020 and subsequent years' wage index
calculations, such CBSA's wage index would be equal to total urban
salaries plus wage-related costs (from Step 5) in the State, divided by
the total urban hours (from Step 4) in the State, divided by the
national average hourly wage from Step 8 (see 84 FR 42305 and 42306)
August 16, 2019). We stated that we believe that, in the absence of
wage data for an urban labor market area, it is reasonable to use a
statewide urban average, which is based on actual, acceptable wage data
of hospitals in that State, rather than impute some other type of value
using a different methodology. For calculation of the proposed FY 2021
wage index, we note there is one urban CBSA for which we do not have
IPPS hospital wage data. In Table 3 (which is available via the
internet on the CMS website) which contains the proposed area wage
indexes, we include a footnote to indicate to which CBSAs this policy
applies. These CBSAs' wage indexes would be equal to total urban
salaries plus wage-related costs (from Step 5) in the respective State,
divided by the total urban hours (from Step 4) in the respective State,
divided by the national average hourly wage (from Step 8) (see 84 FR
42305 and 42306) August 16, 2019). Under this step, we also apply our
policy with regard to how dollar amounts, hours, and other numerical
values in the wage index calculations are rounded, as discussed in this
section of this rule.
We refer readers to section II. of the Appendix of the proposed
rule for the policy regarding rural areas that do not have IPPS
hospitals.
Step 11.--Section 4410 of Public Law 105-33 provides that, for
discharges on or after October 1, 1997, the area wage index applicable
to any hospital that is located in an urban area of a State may not be
less than the area wage index applicable to hospitals located in rural
areas in that State. The areas affected by this provision are
identified in Table 2 listed in section VI. of the Addendum to the
proposed rule and available via the internet on the CMS website.
Following is our policy with regard to rounding of the wage data
(dollar amounts, hours, and other numerical values) in the calculation
of the unadjusted and adjusted wage index, as finalized in the FY 2020
IPPS/LTCH final rule (84 FR 42306; August 16, 2019). For data that we
consider to be ``raw data,'' such as the cost report data on Worksheets
S-3, Parts II and III, and the occupational mix survey data, we use
such data ``as is,'' and do not round any of the individual line items
or fields. However, for any dollar amounts within the wage index
calculations, including any type of summed wage amount, average hourly
wages, and the national average hourly wage (both the unadjusted and
adjusted for occupational mix), we round the dollar amounts to 2
decimals. For any hour amounts within the wage index calculations, we
round such hour amounts to the nearest whole number. For any numbers
not expressed as dollars or hours within the wage index calculations,
which could include ratios, percentages, or inflation factors, we round
such numbers to 5 decimals. However, we continue rounding the actual
unadjusted and adjusted wage indexes to 4 decimals, as we have done
historically.
As discussed in the FY 2012 IPPS/LTCH PPS final rule, in ``Step
5,'' for each hospital, we adjust the total salaries plus wage-related
costs to a common period to determine total adjusted salaries plus
wage-related costs. To make the wage adjustment, we estimate the
percentage change in the employment cost index (ECI) for compensation
for each 30-day increment from October 14, 2016, through April 15,
2018, for private industry hospital workers from the BLS' Compensation
and Working Conditions. We have consistently used the ECI as the data
source for our wages and salaries and other price proxies in the IPPS
market basket, and we are not proposing any changes to the usage of the
ECI for FY 2021. The factors used to adjust the hospital's data were
based on the midpoint of the cost reporting period, as indicated in the
following table.

[[Page 32712]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.156

For example, the midpoint of a cost reporting period beginning
January 1, 2017, and ending December 31, 2017, is June 30, 2017. An
adjustment factor of 1.01306 was applied to the wages of a hospital
with such a cost reporting period.
Previously, we also would provide a Puerto Rico overall average
hourly wage. As discussed in the FY 2017 IPPS/LTCH PPS final rule (81
FR 56915), prior to January 1, 2017, Puerto Rico hospitals were paid
based on 75 percent of the national standardized amount and 25 percent
of the Puerto Rico-specific standardized amount. As a result, we
calculated a Puerto Rico specific wage index that was applied to the
labor-related share of the Puerto Rico-specific standardized amount.
Section 601 of the Consolidated Appropriations Act, 2016 (Pub. L. 114-
113) amended section 1886(d)(9)(E) of the Act to specify that the
payment calculation with respect to operating costs of inpatient
hospital services of a subsection (d) Puerto Rico hospital for
inpatient hospital discharges on or after January 1, 2016, shall use
100 percent of the national standardized amount. As we stated in the FY
2017 IPPS/LTCH PPS final rule (81 FR 56915 through 56916), because
Puerto Rico hospitals are no longer paid with a Puerto Rico specific
standardized amount as of January 1, 2016, under section 1886(d)(9)(E)
of the Act, as amended by section 601 of the Consolidated
Appropriations Act, 2016, there is no longer a need to calculate a
Puerto Rico specific average hourly wage and wage index. Hospitals in
Puerto Rico are now paid 100 percent of the national standardized
amount and, therefore, are subject to the national average hourly wage
(unadjusted for occupational mix) and the national wage index, which is
applied to the national labor-related share of the national
standardized amount. Therefore, for FY 2021, there is no Puerto Rico-
specific overall average hourly wage or wage index. Based on the
previously described methodology, the proposed unadjusted national
average hourly wage is the following:
[GRAPHIC] [TIFF OMITTED] TP29MY20.157

E. Proposed Occupational Mix Adjustment to the FY 2021 Wage Index

As stated earlier, section 1886(d)(3)(E) of the Act provides for
the collection of data every 3 years on the occupational mix of
employees for each short-term, acute care hospital participating in the
Medicare program, in order to construct an occupational mix adjustment
to the wage index, for application beginning October 1, 2004 (the FY
2005 wage index). The purpose of the occupational mix adjustment is to
control for the effect of hospitals' employment choices on the wage
index. For example, hospitals may choose to employ different
combinations of registered nurses, licensed practical nurses, nursing
aides, and medical assistants for the purpose of providing nursing care
to their patients. The varying labor costs associated with these
choices reflect hospital management decisions rather than geographic
differences in the costs of labor.
1. Use of 2016 Medicare Wage Index Occupational Mix Survey for the FY
2019, FY 2020, and FY 2021 Wage Indexes
Section 304(c) of the Consolidated Appropriations Act, 2001 (Pub.
L. 106- 554) amended section 1886(d)(3)(E) of the Act to require CMS to
collect data every 3 years on the occupational mix of employees for
each short-term, acute care hospital participating in the Medicare
program. As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR
19903) and final rule (82 FR 38137), we collected data in 2016 to

[[Page 32713]]

compute the occupational mix adjustment for the FY 2019, FY 2020, and
FY 2021 wage indexes.
The FY 2021 occupational mix adjustment is based on the calendar
year (CY) 2016 survey. Hospitals were required to submit their
completed 2016 surveys (Form CMS-10079, OMB number 0938-0907,
expiration date September 31, 2022) to their MACs by July 3, 2017. The
preliminary, unaudited CY 2016 survey data were posted on the CMS
website on July 12, 2017. As with the Worksheet S-3, Parts II and III
cost report wage data, as part of the FY 2021 desk review process, the
MACs revised or verified data elements in hospitals' occupational mix
surveys that resulted in certain edit failures.
2. Deadline for Submitting the 2019 Medicare Wage Index Occupational
Mix Survey for Use Beginning With the FY 2022 Wage Index
A new measurement of occupational mix is required for FY 2022. The
FY 2022 occupational mix adjustment will be based on a new calendar
year (CY) 2019 survey. The CY 2019 survey (CMS Form CMS-10079, OMB
number 0938-0907, expiration date September 31, 2022) received OMB
approval on October 18, 2019. The final CY 2019 Occupational Mix Survey
Hospital Reporting Form is available on the CMS website at: https://www.cms.gov/medicaremedicare-fee-service-paymentacuteinpatientppswage-index-files/2019-occupational-mix-survey-hospital-reporting-form-cms-10079-wage-index-beginning-fy-2022. Hospitals were required to submit
their completed 2019 surveys to their MACs (not directly to CMS), on
the Excel hospital reporting form, by July 1, 2020 via email attachment
or overnight delivery. CMS is granting an extension until August 3,
2020 for hospitals nationwide that may be unable to meet the July 1,
2020 deadline amidst the Novel Coronavirus Disease (COVID-19) national
emergency. Hospitals should please see the CMS website at the
previously mentioned link for information on this extension. As with
the Worksheet S-3, Parts II and III cost report wage data, as part of
the FY 2022 desk review process, the MACs will revise or verify data
elements in hospitals' occupational mix surveys that result in certain
edit failures.
3. Calculation of the Occupational Mix Adjustment for FY 2021
For FY 2021, we are proposing to calculate the occupational mix
adjustment factor using the same methodology that we have used since
the FY 2012 wage index (76 FR 51582 through 51586) and to apply the
occupational mix adjustment to 100 percent of the FY 2021 wage index.
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42308), we modified our
methodology with regard to how dollar amounts, hours, and other
numerical values in the unadjusted and adjusted wage index calculation
are rounded, in order to ensure consistency in the calculation.
According to the policy finalized in the FY 2020 IPPS/LTCH PPS final
rule (84 FR 42308 and 42309), for data that we consider to be ``raw
data,'' such as the cost report data on Worksheets S-3, Parts II and
III, and the occupational mix survey data, we continue to use these
data ``as is'', and not round any of the individual line items or
fields. However, for any dollar amounts within the wage index
calculations, including any type of summed wage amount, average hourly
wages, and the national average hourly wage (both the unadjusted and
adjusted for occupational mix), we round such dollar amounts to 2
decimals. We round any hour amounts within the wage index calculations
to the nearest whole number. We round any numbers not expressed as
dollars or hours in the wage index calculations, which could include
ratios, percentages, or inflation factors, to 5 decimals. However, we
continue rounding the actual unadjusted and adjusted wage indexes to 4
decimals, as we have done historically.
Similar to the method we use for the calculation of the wage index
without occupational mix, salaries and hours for a multicampus hospital
are allotted among the different labor market areas where its campuses
are located. Table 2 associated with this proposed rule (which is
available via the internet on the CMS website), which contains the
proposed FY 2021 occupational mix adjusted wage index, includes
separate wage data for the campuses of multicampus hospitals. We refer
readers to section III.C. of the preamble of this proposed rule for a
chart listing the multicampus hospitals and the FTE percentages used to
allot their occupational mix data.
Because the statute requires that the Secretary measure the
earnings and paid hours of employment by occupational category not less
than once every 3 years, all hospitals that are subject to payments
under the IPPS, or any hospital that would be subject to the IPPS if
not granted a waiver, must complete the occupational mix survey, unless
the hospital has no associated cost report wage data that are included
in the FY 2021 wage index. For the proposed FY 2021 wage index, we are
using the Worksheet S-3, Parts II and III wage data of 3,196 hospitals,
and we are using the occupational mix surveys of 3,113 hospitals for
which we also have Worksheet S-3 wage data, which represented a
``response'' rate of 97 percent (3,113/3,196). For the proposed FY 2021
wage index, we are applying proxy data for noncompliant hospitals, new
hospitals, or hospitals that submitted erroneous or aberrant data in
the same manner that we applied proxy data for such hospitals in the FY
2012 wage index occupational mix adjustment (76 FR 51586). As a result
of applying this methodology, the proposed FY 2021 occupational mix
adjusted national average hourly wage is the following:
[GRAPHIC] [TIFF OMITTED] TP29MY20.158

F. Analysis and Implementation of the Proposed Occupational Mix
Adjustment and the Proposed FY 2021 Occupational Mix Adjusted Wage
Index

As discussed in section III.E. of the preamble of this proposed
rule, for FY 2021, we are proposing to apply the occupational mix
adjustment to 100 percent of the FY 2021 wage index. We calculated the
occupational mix adjustment using data from the 2016 occupational mix
survey data, using the methodology described in the FY 2012 IPPS/LTCH
PPS final rule (76 FR 51582 through 51586).
The proposed FY 2021 national average hourly wages for each
occupational mix nursing subcategory as calculated in Step 2 of the
occupational mix calculation are as follows.

[[Page 32714]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.159

The proposed national average hourly wage for the entire nurse
category is computed in Step 5 of the occupational mix calculation.
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 2016 occupational mix survey data, we determined (in
Step 7 of the occupational mix calculation) that the national
percentage of hospital employees in the nurse category is 42 percent,
and the national percentage of hospital employees in the all other
occupations category is 58 percent. At the CBSA level, the percentage
of hospital employees in the nurse category ranged from a low of 27
percent in one CBSA to a high of 82 percent in another CBSA.
We compared the proposed FY 2021 occupational mix adjusted wage
indexes for each CBSA to the proposed unadjusted wage indexes for each
CBSA. Applying the proposed occupational mix adjustment to the wage
data resulted in the following:
[GRAPHIC] [TIFF OMITTED] TP29MY20.160

These results indicate that a larger percentage of urban areas
(57.8 percent) would benefit from the occupational mix adjustment than
would rural areas (44.7 percent).

G. Proposed Application of the Rural Floor, Proposed Application of the
State Frontier Floor, and Continuation of the Low Wage Index Hospital
Policy

1. Proposed Rural Floor
Section 4410(a) of Public Law 105-33 provides that, for discharges
on or after October 1, 1997, the area wage index applicable to any
hospital that is located in an urban area of a State may not be less
than the area wage index applicable to hospitals located in rural areas
in that State. This provision is referred to as the ``rural floor''.
Section 3141 of Public

[[Page 32715]]

Law 111-148 also requires that a national budget neutrality adjustment
be applied in implementing the rural floor. Based on the FY 2021 wage
index associated with this proposed rule (which is available via the
internet on the CMS website) and based on the calculation of the rural
floor without the wage data of hospitals that have reclassified as
rural under Sec. 412.103, we estimate that 255 hospitals would receive
an increase in their FY 2021 wage index due to the application of the
rural floor.
2. Proposed State Frontier Floor for FY 2021
Section 10324 of Public Law 111-148 requires that hospitals in
frontier States cannot be assigned a wage index of less than 1.0000.
(We refer readers to the regulations at 42 CFR 412.64(m) and to a
discussion of the implementation of this provision in the FY 2011 IPPS/
LTCH PPS final rule (75 FR 50160 through 50161).) In this FY 2021 IPPS/
LTCH PPS proposed rule, we are not proposing any changes to the
frontier floor policy for FY 2021. In this proposed rule, 45 hospitals
would receive the frontier floor value of 1.0000 for their FY 2021 wage
index. These hospitals are located in Montana, North Dakota, South
Dakota, and Wyoming. We note that while Nevada meets the criteria of a
frontier State, all hospitals within the State currently receive a wage
index value greater than 1.0000.
The areas affected by the proposed rural and frontier floor
policies for the proposed FY 2021 wage index are identified in Table 2
associated with this proposed rule, which is available via the internet
on the CMS website.
3. Continuation of the Low Wage Index Hospital Policy
To help mitigate wage index disparities, including those resulting
from the inclusion of hospitals with rural reclassifications under 42
CFR 412.103 in the rural floor, in the FY 2020 IPPS/LTCH PPS final rule
(84 FR 42325 through 42339), we finalized policies to reduce the
disparity between high and low wage index hospitals by increasing the
wage index values for certain hospitals with low wage index values and
doing so in a budget neutral manner through an adjustment applied to
the standardized amounts for all hospitals, as well as by changing the
calculation of the rural floor. We also provided for a transition in FY
2020 for hospitals experiencing significant decreases in their wage
index values as compared to their final FY 2019 wage index, and made
these changes in a budget neutral manner.
We increase the wage index for hospitals with a wage index value
below the 25th percentile wage index value for a fiscal year by half
the difference between the otherwise applicable final wage index value
for a year for that hospital and the 25th percentile wage index value
for that year across all hospitals. We stated in the FY 2020 IPPS/LTCH
PPS final rule (84 FR 42326 through 42328) that this policy will be
effective for at least 4 years, beginning in FY 2020, in order to allow
employee compensation increases implemented by these hospitals
sufficient time to be reflected in the wage index calculation.
Therefore, this policy will continue in FY 2021. Based on the data for
this proposed rule, for FY 2021, the 25th percentile wage index value
across all hospitals would be 0.8420. In order to offset the estimated
increase in IPPS payments to hospitals with wage index values below the
25th percentile wage index value, we are proposing to apply the budget
neutrality adjustment in the same manner as we applied it in FY 2020,
as a uniform budget neutrality factor applied to the standardized
amount.
In addition, in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42332
through 42336), we removed urban to rural reclassifications from the
calculation of the rural floor to prevent inappropriate payment
increases under the rural floor due to rural reclassifications, such
that, beginning in FY 2020, the rural floor is calculated without
including the wage data of hospitals that have reclassified as rural
under section 1886(d)(8)(E) of the Act (as implemented in the
regulations at Sec. 412.103). Also, for the purposes of applying the
provisions of section 1886(d)(8)(C)(iii) of the Act, effective
beginning in FY 2020, we remove the data of hospitals reclassified from
urban to rural under section 1886(d)(8)(E) of the Act (as implemented
in the regulations at Sec. 412.103) from the calculation of ``the wage
index for rural areas in the State in which the county is located'' as
referred to in section 1886(d)(8)(C)(iii). As previously mentioned in
section III.G.1. of this proposed rule, the rural floor for this FY
2021 proposed rule is calculated without the wage data of hospitals
that have reclassified as rural under Sec. 412.103.
Lastly, for FY 2020, we placed a 5-percent cap on any decrease in a
hospital's wage index from the hospital's final wage index in FY 2019
(84 FR 42336 through 42338). We applied a budget neutrality adjustment
to the standardized amount so that this transition policy was
implemented in a budget neutral manner. We clarified in the FY 2020
IPPS/LTCH PPS final rule (84 FR 42337 through 42338) that this 5-
percent cap on wage index decreases applied to all hospitals that have
any decrease in their wage indexes, regardless of the circumstance
causing the decline, so that a hospital's final wage index for FY 2020
will not be less than 95 percent of its final wage index for FY 2019.
In light of the recent OMB updates described in section III.B.2. of
this proposed rule, for FY 2021 we are proposing to again cap any
decreases in the wage index at 5 percent so that a hospital's final
wage index for FY 2021 will not be less than 95 percent of its final
wage index for FY 2020, and to apply a budget neutrality adjustment for
this proposed transition policy in the same manner as in FY 2020. As
previously mentioned, on September 14, 2018, OMB issued OMB Bulletin
No. 18-04 which established revised delineations. Consistent with our
past practice of implementing transition policies to help mitigate
negative impacts on hospitals of certain wage index proposals, due to
the revised OMB delineations, for FY 2021 we are proposing to again
provide for a transition of a 5-percent cap on any decrease in a
hospital's wage index from the hospital's final wage index from the
prior fiscal year which would be FY 2020. We refer readers to section
III.B.2.c. of the preamble of this proposed rule for a complete
discussion of the proposed wage index transition policy.

H. Proposed FY 2021 Wage Index Tables

In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49498 and 49807
through 49808), we finalized a proposal to streamline and consolidate
the wage index tables associated with the IPPS proposed and final rules
for FY 2016 and subsequent fiscal years. Prior to FY 2016, the wage
index tables had consisted of 12 tables (Tables 2, 3A, 3B, 4A, 4B, 4C,
4D, 4E, 4F, 4J, 9A, and 9C) that were made available via the internet
on the CMS website. Effective beginning FY 2016, with the exception of
Table 4E, we streamlined and consolidated 11 tables (Tables 2, 3A, 3B,
4A, 4B, 4C, 4D, 4F, 4J, 9A, and 9C) into 2 tables (Tables 2 and 3). As
discussed in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41380),
beginning with FY 2019, we added Table 4 which is titled and includes a
``List of Counties Eligible for the Out-Migration Adjustment under
Section 1886(d)(13) of the Act'' for the relevant fiscal year. We refer
readers to section VI. of the Addendum to this proposed rule for a
discussion of the proposed wage index tables for FY 2021.

[[Page 32716]]

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

1. General Policies and Effects of Reclassification and Redesignation
Under section 1886(d)(10) of the Act, the Medicare Geographic
Classification Review Board (MGCRB) considers applications by hospitals
for geographic reclassification for purposes of payment under the IPPS.
Hospitals must apply to the MGCRB to reclassify not later than 13
months prior to the start of the fiscal year for which reclassification
is sought (usually by September 1). Generally, hospitals must be
proximate to the labor market area to which they are seeking
reclassification and must demonstrate characteristics similar to
hospitals located in that area. The MGCRB issues its decisions by the
end of February for reclassifications that become effective for the
following fiscal year (beginning October 1). The regulations applicable
to reclassifications by the MGCRB are located in 42 CFR 412.230 through
412.280. (We refer readers to a discussion in the FY 2002 IPPS final
rule (66 FR 39874 and 39875) regarding how the MGCRB defines mileage
for purposes of the proximity requirements.) The general policies for
reclassifications and redesignations and the policies for the effects
of hospitals' reclassifications and redesignations on the wage index
are discussed in the FY 2012 IPPS/LTCH PPS final rule for the FY 2012
final wage index (76 FR 51595 and 51596). We note that rural hospitals
reclassifying under the MGCRB to another state's rural area are not
eligible for the rural floor, because the rural floor may apply to
urban, not rural, hospitals.
In addition, in the FY 2012 IPPS/LTCH PPS final rule, we discussed
the effects on the wage index of urban hospitals reclassifying to rural
areas under 42 CFR 412.103. In the FY 2020 IPPS/LTCH PPS final rule (84
FR 42332 through 42336), we finalized a policy to exclude the wage data
of urban hospitals reclassifying to rural areas under 42 CFR 412.103
from the calculation of the rural floor. Hospitals that are
geographically located in States without any rural areas are ineligible
to apply for rural reclassification in accordance with the provisions
of 42 CFR 412.103.
On April 21, 2016, we published an interim final rule with comment
period (IFC) in the Federal Register (81 FR 23428 through 23438) that
included provisions amending our regulations to allow hospitals
nationwide to have simultaneous Sec. 412.103 and MGCRB
reclassifications. For reclassifications effective beginning FY 2018, a
hospital may acquire rural status under Sec. 412.103 and subsequently
apply for a reclassification under the MGCRB using distance and average
hourly wage criteria designated for rural hospitals. In addition, we
provided that a hospital that has an active MGCRB reclassification and
is then approved for redesignation under Sec. 412.103 will not lose
its MGCRB reclassification; such a hospital receives a reclassified
urban wage index during the years of its active MGCRB reclassification
and is still considered rural under section 1886(d) of the Act and for
other purposes.
We discussed that when there is both a Sec. 412.103 redesignation
and an MGCRB reclassification, the MGCRB reclassification controls for
wage index calculation and payment purposes. We exclude hospitals with
Sec. 412.103 redesignations from the calculation of the reclassified
rural wage index if they also have an active MGCRB reclassification to
another area. That is, if an application for urban reclassification
through the MGCRB is approved, and is not withdrawn or terminated by
the hospital within the established timelines, we consider the
hospital's geographic CBSA and the urban CBSA to which the hospital is
reclassified under the MGCRB for the wage index calculation. We refer
readers to the April 21, 2016 IFC (81 FR 23428 through 23438) and the
FY 2017 IPPS/LTCH PPS final rule (81 FR 56922 through 56930) for a full
discussion of the effect of simultaneous reclassifications under both
the Sec. 412.103 and the MGCRB processes on wage index calculations.
For a discussion on the effects of reclassifications under Sec.
412.103 on the rural area wage index and the calculation of the rural
floor, we refer readers to the FY 2020 IPPS/LTCH PPS final rule (84 FR
42332 through 42336).
2. MGCRB Reclassification and Redesignation Issues for FY 2021
a. FY 2021 Reclassification Application Requirements and Approvals
As previously stated, under section 1886(d)(10) of the Act, the
MGCRB considers applications by hospitals for geographic
reclassification for purposes of payment under the IPPS. The specific
procedures and rules that apply to the geographic reclassification
process are outlined in regulations under 42 CFR 412.230 through
412.280. At the time this proposed rule was constructed, the MGCRB had
completed its review of FY 2021 reclassification requests. Based on
such reviews, there are 435 hospitals approved for wage index
reclassifications by the MGCRB starting in FY 2021. Because MGCRB wage
index reclassifications are effective for 3 years, for FY 2021,
hospitals reclassified beginning in FY 2019 or FY 2020 are eligible to
continue to be reclassified to a particular labor market area based on
such prior reclassifications for the remainder of their 3-year period.
There were 244 hospitals approved for wage index reclassifications in
FY 2019 that will continue for FY 2021, and 279 hospitals approved for
wage index reclassifications in FY 2020 that will continue for FY 2021.
Of all the hospitals approved for reclassification for FY 2019, FY
2020, and FY 2021, based upon the review at the time of this proposed
rule, 957 hospitals are in a MGCRB reclassification status for FY 2021
(with 101 of these hospitals reclassified back to their geographic
location).
Under the regulations at 42 CFR 412.273, hospitals that have been
reclassified by the MGCRB are permitted to withdraw their applications
if the request for withdrawal is received by the MGCRB any time before
the MGCRB issues a decision on the application, or after the MGCRB
issues a decision, provided the request for withdrawal is received by
the MGCRB within 45 days of the date that CMS' annual notice of
proposed rulemaking is issued in the Federal Register concerning
changes to the inpatient hospital prospective payment system and
proposed payment rates for the fiscal year for which the application
has been filed. For information about withdrawing, terminating, or
canceling a previous withdrawal or termination of a 3-year
reclassification for wage index purposes, we refer readers to Sec.
412.273, as well as the FY 2002 IPPS final rule (66 FR 39887 through
39888) and the FY 2003 IPPS final rule (67 FR 50065 through 50066).
Additional discussion on withdrawals and terminations, and
clarifications regarding reinstating reclassifications and ``fallback''
reclassifications were included in the FY 2008 IPPS final rule (72 FR
47333) and the FY 2018 IPPS/LTCH PPS final rule (82 FR 38148 through
38150).
b. Hospitals With One or Two Years of Wage Data Seeking MGCRB
Reclassification
We are proposing to modify the regulation at Sec.
412.230(d)(2)(ii)(A) to clarify that a hospital may qualify for an
individual wage index reclassification by the MGCRB under Sec. 412.230
to another labor market area if the hospital only has 1 or 2 years of
wage data. Section 412.230(d)(2)(ii)(A) provides that, for hospital-
specific wage data, a

[[Page 32717]]

hospital must provide a weighted 3-year average of its average hourly
wages using data from the CMS hospital wage survey used to construct
the wage index. We note that in certain circumstances, such as that of
a new hospital, a hospital may not have 3 years of published wage data
within the applicable 3-year average hourly wage period used by the
MGCRB. In such cases, it has been CMS's longstanding policy that a
hospital must accumulate at least 1 year of wage data within the
applicable 3-year average hourly wage period used by the MGCRB, in
order to apply for individual reclassification. We are concerned that
this policy may not be clear in the current regulation text at Sec.
412.230(d)(2)(ii)(A), and we are now proposing to revise Sec.
412.230(d)(2)(ii)(A) to clarify this. For hospitals that have
accumulated fewer than 3 years of wage data within the applicable 3-
year average hourly wage period used by the MGCRB, the appropriate
hospital-specific wage data to be used by an applicant under Sec.
412.230(d) is either the single year of published wage data (if the
hospital has accumulated just 1 year of wage data), or, if applicable,
the weighted average of its 2 years of wage data within the 3-year
period reviewed by the MGCRB. Although Sec. 412.230(d)(2)(iv) reflects
this longstanding policy as it pertains to new providers, we note that
this policy has not been limited to new providers. Section
412.230(d)(2)(iv) specifies that if a new owner does not accept
assignment of the hospital's provider agreement, the hospital is
considered a new provider with a new provider number, and the wage data
associated with the previous hospital's provider number cannot be used
to calculate the new hospital's 3-year average hourly wage. Section
412.230(d)(2)(iv) further states that, in this case, the new hospital
would be eligible to apply for an individual MGCRB reclassification
after accumulating at least 1 year of wage data (we refer readers to
the FY 2003 IPPS/LTCH final rule (67 FR 50066) for further discussion
of this policy). As previously noted, however, we have not limited this
wage data policy to new providers, and thus we are proposing to revise
Sec. 412.230(d)(2)(ii)(A) to clarify this. Specifically, we are
proposing to reformat Sec. 412.230(d)(2)(ii)(A) so that it consists of
two paragraphs (paragraphs (d)(2)(ii)(A)(1) and (2)), and to include
new language in new of Sec. 412.230(d)(2)(ii)(A)(2) stating that once
a hospital has accumulated at least 1 year of wage data in the
applicable 3-year average hourly wage period used by the MGCRB, the
hospital is eligible to apply for reclassification based on those data
Consistent with our current policy, hospitals without wage data or that
have accumulated less than 1 year of wage data would not be eligible
for individual wage index reclassification.
c. Effects of Implementation of Revised OMB Labor Market Area
Delineations on Reclassified Hospitals
(1) Assignment Policy for Hospitals Reclassified to CBSAs Where One or
More Counties Move to a New or Different Urban CBSA
Because hospitals that have been reclassified beginning in FY 2019,
2020, or 2021 were reclassified based on the current labor market
delineations, if we adopt the revised OMB delineations based on the OMB
Bulletin No. 18-04 beginning in FY 2021, the areas to which they have
been reclassified, or the areas where they are located, may change.
Under the revised OMB delineations, some existing CBSAs would be
reconfigured. Hospitals with current reclassifications are encouraged
to verify area wage indexes on Table 2 in the appendix of proposed
rule, and confirm that the areas to which they have been reclassified
for FY 2021 would continue to provide a higher wage index than their
geographic area wage index. Hospitals may withdraw or terminate their
FY 2021 reclassifications by contacting the MGCRB within 45 days from
the date this proposed rule is issued in the Federal Register (Sec.
412.273(c)).
In some cases, adopting the revised OMB delineations would result
in counties splitting apart from CBSAs to form new CBSAs, or counties
shifting from one CBSA designation to another CBSA. Reclassifications
granted under section 1886(d)(10) of the Act are effective for 3 fiscal
years so that a hospital or county group of hospitals would be assigned
a wage index based upon the wage data of hospitals in a nearby labor
market area for a 3-year period. If CBSAs are split apart, or if
counties shift from one CBSA to another under the revised OMB
delineations, we must determine which reclassified area to assign to
the hospital for the remainder of a hospital's 3-year reclassification
period if the area to which the hospital reclassified split or had
counties shift to another new or modified urban CBSA.
Consistent with the policy CMS implemented in the FY 2005 IPPS
final rule (69 FR 49054 through 49056) and in the FY 2015 IPPS final
rule (79 FR 49973 through 49977), for FY 2021, if a CBSA would be
reconfigured due to adoption of the revised OMB delineations and it
would not be possible for the reclassification to continue seamlessly
to the reconfigured CBSA, we believe it would be appropriate for us to
determine the best alternative location to reassign current
reclassifications for the remaining 3 years. Therefore, to maintain the
integrity of a hospital's 3-year reclassification period, we are
proposing that current geographic reclassifications (applications
approved effective for FY 2019, FY 2020, or FY 2021) that would be
affected by CBSAs that are split apart or counties that shift to
another CBSA under the revised OMB delineations, would ultimately be
assigned to a CBSA under the revised OMB delineations that contains at
least one county from the reclassified CBSA under the current FY 2020
definitions, and would be generally consistent with rules that govern
geographic reclassification. That is, consistent with the policy
finalized in FY 2015 (79 FR 49973), we are proposing a policy that
affected reclassified hospitals be assigned to a CBSA that would
contain the most proximate county that--(1) is located outside of the
hospital's proposed FY 2021 geographic labor market area, and (2) is
part of the original FY 2020 CBSA to which the hospital is
reclassified. (Please note, in the next section, we are making a minor
modification to this proposed assignment policy for certain hospitals
currently reclassified to their current geographic CBSA (that is, as
discussed later in this section, we would not require these
reclassifications to be assigned to a CBSA outside the hospital's
proposed FY 2021 geographic labor market area)). We believe that
assigning reclassifications to the CBSA that contains the nearest
county that meets the aforementioned criteria satisfies the statutory
requirement at section 1886(d)(10)(v) of the Act by maintaining
reclassification status for a period of 3 fiscal years, while generally
respecting the longstanding principle of geographic proximity in the
labor market reclassification process. For county group
reclassifications, we would follow our proposed policy, as previously
discussed, except that, for county group reclassifications, we are
proposing to reassign hospitals in a county group reclassification to
the CBSA under the revised OMB delineations that contains the county to
which the majority of hospitals in the group reclassification are
geographically closest. We are also proposing to allow such hospitals,
or county groups of hospitals, to submit a request to the
[email protected] mailbox for reassignment to another CBSA that

[[Page 32718]]

would contain a county that is part of the current FY 2020 CBSA to
which it is reclassified if the hospital or county group of hospitals
can demonstrate compliance with applicable reclassification proximity
rules, as described later in this section.
We recognize that the proposed reclassification reassignment
policy, as previously described, for hospitals that are reclassified to
CBSAs that would split apart or to counties that would shift to another
CBSA under the revised OMB delineations may result in the reassignment
of the hospital for the remainder of its 3-year reclassification period
to a CBSA having a lower wage index than the wage index that would have
been assigned for the reclassified hospital in the absence of the
proposed adoption of the revised OMB delineations. Therefore, as
discussed in section III.B.2.e. of the preamble of this proposed rule,
as a transition, we are proposing to continue to apply for FY 2021 a 5-
percent cap on any decrease in a hospital's wage index from the
hospital's final wage index for the prior fiscal year. In other words,
we would apply a 5 percent cap in FY 2021 on any decrease in a
hospital's wage index compared to its final wage index for FY 2020. We
believe that this proposed transitional wage index would mitigate
significant negative payment impacts for FY 2021, and would afford
hospitals adequate time to fully assess any additional reclassification
options available to them.
We note that if the CBSA to which a hospital is reclassified
experiences only a change in name and/or number, (in other words, a
county (or county equivalent) did not move to a new or different CBSA),
we considered the CBSA, and associated reclassifications, to remain
unchanged. For example, any hospital reclassified to current CBSA 19380
(Dayton, OH), 39140 (Prescott, AZ) or 43524 (Silver Spring-Frederick-
Rockville, MD) would have its reclassification transferred to the
proposed equivalent CBSA 19430 (Dayton-Kettering, OH), 39150 (Prescott
Valley-Prescott, AZ), and 23224 (Frederick-Gaithersburg-Rockville, MD),
respectively.
The following Table 1 provides a list of current FY 2020 CBSAs
(column 1) where one or more counties would be relocated to a new or
different urban CBSA. Hospitals with FY 2020 MGCRB reclassifications
into the CBSAs in column 1 would be subject to the proposed
reclassification assignment policy. The third column of ``eligible''
CBSAs lists all proposed revised CBSAs that contain at least one county
that is part of the current FY 2020 CBSA (in column 1).
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The following Table 2 lists all hospitals subject to our proposed
reclassification assignment policy and where their reclassifications
would be assigned for FY 2021 under this proposed policy. The table
lists reclassifications that would be in effect for FY 2021 under our
proposed policy, and included in Table 2 in the addendum of this
proposed rule. The table also includes reclassifications (noted by an
asterisk on the ``MGCRB Case Number'') that were approved in FY 2019 or
FY 2020 and are superseded by a new FY 2021 reclassification. These
prior year reclassifications, frequently referred to as ``fallback''
reclassifications, may become active if the subsequent FY 2021
reclassification is withdrawn. (Please note, the following table does
not include hospitals currently reclassified to their ``home''
geographic area, which are discussed in the next section.
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If a hospital that is subject to the proposed reclassification
assignment policy discussed earlier in this section wishes to be
reassigned to another eligible CBSA (that is, to a CBSA other than the
CBSA to which their reclassification would be assigned under the
proposed reclassification assignment policy and that contains at least
one county from the CBSA to which they are reclassified for FY 2020)
for which they meet the applicable proximity criteria may request
reassignment within 45 days from the date the proposed rule is placed
on display at the Federal Register. Hospitals must send a request to
[email protected] and provide documentation establishing that they
meet the requisite proximity criteria for reassignment to an alternate
CBSA that contains one or more counties from the CBSA to which they are
currently reclassified for FY 2020. We believe this option of allowing
these hospitals to submit a request to CMS would provide hospitals with
greater flexibility with respect to their reclassification
reassignment, while ensuring that the proximity requirements are met.
We believe that where the proximity requirements are met, the
reclassified wage index would be consistent with the labor market area
to which the hospitals were originally approved for reclassification.
Thus, a hospital that is subject to our proposed reclassification
assignment policy may request to reassign an individual
reclassification to any CBSA that contains a county from the CBSA to
which it is currently reclassified for FY 2020. However, to be
reassigned to an area that is not the most proximate to the hospital,
we believe it is necessary that the hospital demonstrates that it
complies with the applicable proximity criteria. If a hospital cannot
demonstrate proximity to a different eligible CBSA, the hospital would
not be considered for reclassification to that labor market area, and
the reclassification would remain with the CBSA assigned under the
reclassification assignment policy proposed earlier in this section. In
the case of a county group reclassification, all requests for
reassignment must include all active hospitals (that is, excluding any
hospital that has since closed or converted to a different provider
type) included on the original MGCRB reclassification application.
County groups must also demonstrate that they meet the appropriate
proximity requirements, including, for rural county groups, being
adjacent to the MSA to which they seek redesignation (Sec.
412.232(a)(1)(ii)), and for urban county groups, being in the same
Combined Statistical Area or Core-Based Statistical Area as the urban
area to which they seek redesignation (Sec. 412.234(a)(3)(iv).
All hospital requests for reassignment should contain the
hospital's name, address, CCN, and point of contact information. All
requests must be sent to [email protected]. Changes to a hospital's
CBSA assignment on the basis of a hospital's disagreement with our
determination of closest county, or on the basis of being granted a
reassignment due to meeting applicable proximity criteria to an
alternate eligible CBSA will be announced in the FY 2021 IPPS/LTCH PPS
final rule. Finally, we note that MGCRB case 21C0026 was denied by the
MGCRB for reclassification to CBSA 35614. The hospital (CCN 310064) has
appealed this decision to the Office of the Administrator. The result
of this appeal was not available in time to include in this proposed
rule. If this decision is overturned in favor of the hospital, based on
our analysis, this reclassification would be assigned to CBSA 35154
under our proposed reclassification assignment policy.
(2) Proposed Treatment for Hospitals Reclassified to Their Geographic
CBSA
Under the previous assignment policy implemented in FY 2015 IPPS/
LTCH final rule, a hospital reclassified to a CBSA that had one or more
counties moved to a new of different urban CBSA was required to be
assigned a new or revised CBSA that is different than its proposed
geographic CBSA (79 FR 49974 and 49975). We adopted the policy that the
assigned CBSA must be different than the hospital's geographic area to
ensure that a hospital that qualified for reclassification to a
different area continued to be eligible to receive a different wage
index than its home area. We continue to believe this is the
appropriate policy for hospitals that originally reclassified to a
different area. However, as noted in the prior section, for hospitals
currently reclassified to their current geographic CBSA, we are
proposing to implement a reclassification assignment policy consistent
with the policy implemented

[[Page 32721]]

in FY 2015, with a minor modification in that we would not require
these reclassifications to be assigned to a CBSA outside the hospital's
proposed FY 2021 geographic labor market area. Since the FY 2015 IPPS/
LTCH final rule was issued, CMS has allowed, under certain
circumstances, a hospital to seek an MGCRB wage index reclassification
to its own geographic CBSA. We refer readers to a comment response in
the FY 2017 IPPS/LTCH PPS final rule (81 FR 56925) discussing such a
scenario. In these cases, the hospitals are assigned the same wage
index value as other hospitals located in its geographic labor market
area, not the wage index assigned to hospitals reclassified to that
area. We are proposing to assign ``home area'' reclassifications to the
hospital's proposed geographic CBSA. The assigned ``home area''
reclassification CBSA may be different from previous years if the
hospital is located in a county that was relocated to a new or
different urban CBSA. The following table lists hospitals with current
``home area'' reclassifications to one of the seven CBSAs (identified
in Table 1 earlier in this section) where one or more counties would
move to a new or different urban CBSA, and each hospital's proposed
assigned CBSA (column 4).
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We also note that in the FY 2015 IPPS/LTCH PPS final rule (79 FR
49977), CMS terminated reclassifications when, as a result of adopting
the revised OMB delineations, a hospital's geographic county was
reassigned to the CBSA for which it was approved for MGCRB
reclassification. At that time, ``home area'' reclassifications were
not possible. However, since CMS now allows ``home area''
reclassifications, as discussed previously, we would consider this
scenario to be a ``home area'' reclassification and we do not believe
it is necessary to terminate these reclassifications as we did in FY
2015. We note that hospitals with a ``home area'' reclassification (or
any other form of reclassification) are not eligible to receive an
outmigration adjustment determined under section 1886(d)(13) of the
Act. If such an adjustment is available, a hospital may wish to
consider withdrawing or terminating its reclassification by contacting
the MGCRB within 45 days of the date this proposed rule is issued in
the Federal Register (Sec. 412.273(c)).
3. Redesignations Under Section 1886(d)(8)(B) of the Act
a. Lugar Status Determinations
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51599 through
51600), we adopted the policy that, beginning with FY 2012, an eligible
hospital that waives its Lugar status in order to receive the out-
migration adjustment has effectively waived its deemed urban status
and, thus, is rural for all purposes under the IPPS effective for the
fiscal year in which the hospital receives the outmigration adjustment.
In addition, in that rule, we adopted a minor

[[Page 32722]]

procedural change that would allow a Lugar hospital that qualifies for
and accepts the out-migration adjustment (through written notification
to CMS within 45 days from the publication of the proposed rule) to
waive its urban status for the full 3-year period for which its out-
migration adjustment is effective. By doing so, such a Lugar hospital
would no longer be required during the second and third years of
eligibility for the out-migration adjustment to advise us annually that
it prefers to continue being treated as rural and receive the out-
migration adjustment. In the FY 2017 IPPS/LTCH PPS final rule (81 FR
56930), we further clarified that if a hospital wishes to reinstate its
urban status for any fiscal year within this 3-year period, it must
send a request to CMS within 45 days of publication of the proposed
rule for that particular fiscal year. We indicated that such
reinstatement requests may be sent electronically to
[email protected]. In the FY 2018 IPPS/LTCH PPS final rule (82 FR
38147 through 38148), we finalized a policy revision to require a Lugar
hospital that qualifies for and accepts the out-migration adjustment,
or that no longer wishes to accept the out-migration adjustment and
instead elects to return to its deemed urban status, to notify CMS
within 45 days from the date of public display of the proposed rule at
the Office of the Federal Register. These revised notification
timeframes were effective beginning October 1, 2017. In addition, in
the FY 2018 IPPS/LTCH PPS final rule (82 FR 38148), we clarified that
both requests to waive and to reinstate ``Lugar'' status may be sent to
[email protected]. To ensure proper accounting, we request
hospitals to include their CCN, and either ``waive Lugar'' or
``reinstate Lugar'', in the subject line of these requests.
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42314 and 42315), we
clarified that in circumstances where an eligible hospital elects to
receive the outmigration adjustment within 45 days of the public
display date of the proposed rule at the Office of the Federal Register
in lieu of its Lugar wage index reclassification, and the county in
which the hospital is located would no longer qualify for an out-
migration adjustment when the final rule (or a subsequent correction
notice) wage index calculations are completed, the hospital's request
to accept the outmigration adjustment would be denied, and the hospital
would be automatically assigned to its deemed urban status under
section 1886(d)(8)(B) of the Act. We stated that final rule wage index
values would be recalculated to reflect this reclassification, and in
some instances, after taking into account this reclassification, the
out-migration adjustment for the county in question could be restored
in the final rule. However, as the hospital is assigned a Lugar
reclassification under section 1886(d)(8)(B) of the Act, it would be
ineligible to receive the county outmigration adjustment under section
1886(d)(13)(G) of the Act. Because the out-migration adjustment, once
finalized, is locked for a 3-year period under section 1886(d)(13)(F)
of the Act, the hospital would be eligible to accept its out-migration
adjustment in either the second or third year.
b. Effects of Implementation of Revised OMB Labor Market Area
Delineations on Redesignations Under Section 1886(d)(8)(B) of the Act
As discussed in section III.A.2. of the preamble of this proposed
rule, CMS is proposing to update the CBSA labor market delineations to
reflect the changes made in the September 14, 2018 OMB Bulletin 18-04.
In that section, we proposed that 47 currently rural counties be added
to new or existing urban CBSAs. Of those 47 counties, 23 are currently
deemed urban under Section 1886(d)(8)(B) of the Act. Hospitals located
in such a ``Lugar'' county, barring another form of wage index
reclassification, are assigned the reclassified wage index of a
designated urban CBSA. Section 1886(d)(8)(B) of the Act defines a
deemed urban county as a ``rural county adjacent to one or more urban
areas'' that meets certain commuting thresholds. Since we are proposing
to modify the status of these 23 counties from rural to urban, they
would no longer qualify as ``Lugar'' counties. Hospitals located within
these counties would be considered geographically urban under the
revised OMB delineations. The following table lists the counties that
would no longer be deemed urban under section 1886(d)(8)(B) of the Act
if we adopt the revised OMB delineations.

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We note that in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49973
through 49977), when we adopted large scale changes to the CBSA labor
market delineations based on the new decennial census, we also re-
evaluated the commuting data thresholds for all eligible rural counties
in accordance with the methodology set forth in 1886(d)(8)(B). In FY
2015, the OMB bulletin we used to update the CBSA delineations was
based on the results of the 2010 decennial census, and had broad
ranging nationwide impacts. With some exceptions, notably the FY 2020
IPPS/LTCH final rule where we modified the CBSA assignment for some
``Lugar'' counties based on a revised interpretation of the statute (84
FR 42315 through 42318), it has been CMS's long-standing policy to only
revise the list of qualifying counties in conjunction with the adoption
of the large scale OMB delineation changes following the results of a
decennial census. Typically, interim OMB bulletins (those issued
between decennial censuses) have only contained minor modifications to
labor market delineations. However the April 10, 2018 OMB Bulletin No.
18-03 and the September 14, 2018 OMB Bulletin No. 18-04 included more
modifications to the labor market areas than are typical for OMB
bulletins issued between decennial censuses. Although we believe the
transition wage index described in section III.B.2.e. of the preamble
of this proposed rule would mitigate significant negative impacts on
affected hospitals, and provide hospitals with adequate time to
evaluate alternative wage index reclassification options, we are aware
that several hospitals in counties that would be considered rural under
the revised OMB delineations would qualify for ``Lugar'' status, were
CMS to reevaluate the commuting data and new labor market delineations.
We believe providing Lugar status to these hospitals, as appropriate,
would further mitigate any significant negative impacts on affected
hospitals. We are therefore proposing to reevaluate the ``Lugar''
status for all counties in FY 2021 using the same commuting data table
used to evaluate

[[Page 32724]]

the list of ``Lugar'' counties when CMS adopted new OMB delineations in
FY 2015 rulemaking. The data table is the ``2006-2010 5-Year American
Community Survey Commuting Flows and Employment'' (available on OMB's
website: https://www.census.gov/data/tables/2010/demo/metro-micro/commuting-employment-2010.html). Since we are using the same data
tables, any difference in the list of qualifying counties would be
solely due to the effects of the updated OMB delineations. We believe
that making the proposed revisions to the qualifying counties using the
updated OMB delineations but the same 2006-2010 commuting data tables
used in the FY 2015 IPPS/LTCH PPS final rule trikes an appropriate
balance between reserving comprehensive revisions to the list of
qualifying counties to instances where we adopt large scale OMB
delineation changes following a decennial census, and the desire to
mitigate any significant negative impacts on hospitals of the proposed
updated OMB delineations (which do contain a number of material
changes). We are also proposing to use the same methodology discussed
in the FY 2020 IPPS/LTCH final rule (84 FR 42315 through 42318) to
assign the appropriate reclassified CBSA for hospitals in ``Lugar''
counties. That is, when assessing which CBSA to assign, we will sum the
total number of workers that commute from the ``Lugar'' county to both
``central'' and ``outlying'' urban counties (rather than just
``central'' county commuters).
By applying the 2010 ACS commuting data to the updated OMB labor
market delineations, we are proposing the following changes to the
current ``Lugar'' county list. Most notably, based on this commuting
data and the revised OMB delineations, all 34 urban counties that
became rural under the revised OMB delineations would qualify as
``Lugar'' counties and all hospitals located within them would be
designated as ``Lugar.'' This would affect 10 current hospitals located
in those counties. Additionally, due to the change in designation of
some urban counties from ``outlying'' to ``central'' status by OMB, we
are proposing to add two current rural counties in NY as ``Lugar''
counties. Specifically, hospitals located in Columbia county, NY
(FIPSCD 36021) would be deemed ``Lugar'' hospitals and reclassified to
urban CBSA 10580 (Albany-Schenectady-Troy, NY) and hospitals located in
Sullivan county, NY (FIPCD 36105) would be deemed ``Lugar'' hospitals
and reclassified to urban CBSA 39100 (Poughkeepsie-Newburgh-Middletown,
NY). However, we note all hospitals in these New York counties
currently have MGCRB reclassifications in place for FY 2021, which
would supersede these ``Lugar'' reclassifications. Finally, Calhoun
County, TX (FIPSCD 48057) would no longer qualify as a ``Lugar'' county
due to the fact it is no longer adjacent to CBSA 18580 (Corpus Christi,
TX). We are proposing to remove Calhoun County from the list of
``Lugar'' counties. We note that there are no IPPS hospitals located in
Calhoun County.
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J. Proposed Out-Migration Adjustment Based on Commuting Patterns of
Hospital Employees

In accordance with section 1886(d)(13) of the Act, as added by
section 505 of 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.
Section 1886(d)(13)(B) of the Act requires the Secretary to use
data the Secretary determines to be appropriate to establish the
qualifying counties. When the provision of section

[[Page 32729]]

1886(d)(13) of the Act was implemented for the FY 2005 wage index, we
analyzed commuting data compiled by the U.S. Census Bureau that were
derived from a special tabulation of the 2000 Census journey-to-work
data for all industries (CMS extracted data applicable to hospitals).
These data were compiled from responses to the ``long-form'' survey,
which the Census Bureau used at that time and which contained questions
on where residents in each county worked (69 FR 49062). However, the
2010 Census was ``short form'' only; information on where residents in
each county worked was not collected as part of the 2010 Census. The
Census Bureau worked with CMS to provide an alternative dataset based
on the latest available data on where residents in each county worked
in 2010, for use in developing a new outmigration adjustment based on
new commuting patterns developed from the 2010 Census data beginning
with FY 2016.
To determine the out-migration adjustments and applicable counties
for FY 2016, we analyzed commuting data compiled by the Census Bureau
that were derived from a custom tabulation of the American Community
Survey (ACS), an official Census Bureau survey, utilizing 2008 through
2012 (5-year) Microdata. The data were compiled from responses to the
ACS questions regarding the county where workers reside and the county
to which workers commute. As we discussed in the FYs 2016 through 2020
IPPS/LTCH PPS final rules (80 FR 49501, 81 FR 56930, 82 FR 38150, 83 FR
41384, and 84 FR 42318 respectively), the same policies, procedures,
and computation that were used for the FY 2012 out-migration adjustment
were applicable for FYs 2016 through 2020, and we are proposing to use
them again for FY 2021. We have applied the same policies, procedures,
and computations since FY 2012, and we believe they continue to be
appropriate for FY 2021. We refer readers to the FY 2016 IPPS/LTCH PPS
final rule (80 FR 49500 through 49502) for a full explanation of the
revised data source.
For FY 2021, the out-migration adjustment will continue to be based
on the data derived from the custom tabulation of the ACS utilizing
2008 through 2012 (5-year) Microdata. For future fiscal years, we may
consider determining out-migration adjustments based on data from the
next Census or other available data, as appropriate. For FY 2021, we
are not proposing any changes to the methodology or data source that we
used for FY 2016 (81 FR 25071). (We refer readers to a full discussion
of the out-migration adjustment, including rules on deeming hospitals
reclassified under section 1886(d)(8) or section 1886(d)(10) of the Act
to have waived the out-migration adjustment, in the FY 2012 IPPS/LTCH
PPS final rule (76 FR 51601 through 51602).)
Table 2 associated with this proposed rule (which is available via
the internet on the CMS website) includes the proposed out-migration
adjustments for the FY 2021 wage index. In addition, as discussed in
the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20367), we have added a
Table 4, ``List of Counties Eligible for the Out-Migration Adjustment
under Section 1886(d)(13) of the Act.'' For this proposed rule, Table 4
consists of the following: A list of counties that would be eligible
for the out-migration adjustment for FY 2021 identified by FIPS county
code, the proposed FY 2021 out-migration adjustment, and the number of
years the adjustment would be in effect. We believe this table makes
this information more transparent and provides the public with easier
access to this information. We note that we intend to make the
information available annually via Table 4 associated with the IPPS/
LTCH PPS proposed and final rules, and are including it among the
tables associated with this FY 2021 IPPS/LTCH PPS proposed rule that
are available via the internet on the CMS website.

K. Reclassification From Urban to Rural Under Section 1886(d)(8)(E) of
the Act Implemented at 42 CFR 412.103

1. Application for Rural Status and Lock-In Date
Under section 1886(d)(8)(E) of the Act, a qualifying prospective
payment hospital located in an urban area may apply for rural status
for payment purposes separate from reclassification through the MGCRB.
Specifically, section 1886(d)(8)(E) of the Act provides that, not later
than 60 days after the receipt of an application (in a form and manner
determined by the Secretary) from a subsection (d) hospital that
satisfies certain criteria, the Secretary shall treat the hospital as
being located in the rural area (as defined in paragraph (2)(D)) of the
State in which the hospital is located. We refer readers to the
regulations at 42 CFR 412.103 for the general criteria and application
requirements for a subsection (d) hospital to reclassify from urban to
rural status in accordance with section 1886(d)(8)(E) of the Act. The
FY 2012 IPPS/LTCH PPS final rule (76 FR 51595 through 51596) includes
our policies regarding the effect of wage data from reclassified or
redesignated hospitals. We refer readers to the FY 2020 IPPS/LTCH PPS
final rule (84 FR 42332 through 42336) for a discussion on our current
policy to calculate the rural floor without the wage data of urban
hospitals reclassifying to rural areas under 42 CFR 412.103.
Because the wage index is part of the methodology for determining
the prospective payments to hospitals for each fiscal year, we stated
in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56931) that we believed
there should be a definitive timeframe within which a hospital should
apply for rural status in order for the reclassification to be
reflected in the next Federal fiscal year's wage data used for setting
payment rates. Therefore, in the FY 2017 IPPS/LTCH PPS final rule (81
FR 56931 through 56932), we revised Sec. 412.103(b) by adding
paragraph (6) to add a lock-in date by which a hospital's application
for rural status must be filed in order to be treated as rural in the
wage index and budget neutrality calculations for payment rates for the
next Federal fiscal year. In the FY 2019 IPPS/LTCH PPS final rule (83
FR 41384 through 41386), we changed the lock-in date to provide for
additional time in the ratesetting process and to match the lock-in
date with another existing deadline, the usual public comment deadline
for the IPPS proposed rule. We revised Sec. 412.103(b)(6) to specify
that, in order for a hospital to be treated as rural in the wage index
and budget neutrality calculations under Sec. 412.64(e)(1)(ii), (e)(2)
and (4), and (h) for payment rates for the next Federal fiscal year,
the hospital's application must be approved by the CMS Regional Office
in accordance with the requirements of Sec. 412.103 no later than 60
days after the public display date at the Office of the Federal
Register of the IPPS proposed rule for the next Federal fiscal year.
The lock-in date does not affect the timing of payment changes
occurring at the hospital-specific level as a result of
reclassification from urban to rural under Sec. 412.103. As we
discussed in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56931) and the
FY 2019 IPPS/LTCH PPS final rule (83 FR 41385 through 41386), this
lock-in date also does not change the current regulation that allows
hospitals that qualify under Sec. 412.103(a) to request, at any time
during a cost reporting period, to reclassify from urban to rural. A
hospital's rural status and claims payment reflecting its rural status
continue to be effective on the filing date of its reclassification
application, which is the date the CMS Regional

[[Page 32730]]

Office receives the application, in accordance with Sec. 412.103(d).
The hospital's IPPS claims will be paid reflecting its rural status
beginning on the filing date (the effective date) of the
reclassification, regardless of when the hospital applies.
2. Proposed Change to the Regulations To Allow Electronic Submission of
Appeals to the Administrator and Copy to CMS
The regulation at Sec. 412.278(b)(1) addresses a hospital's
request for the Administrator's review of an MGCRB decision. This
regulation currently states that a request for Administrator review
filed by facsimile (FAX) or other electronic means will not be
accepted. In addition, Sec. 412.278(b)(1) requires a hospital to mail
a copy of its request for review to CMS's Hospital and Ambulatory
Policy Group.
We believe that these policies of prohibiting electronic submission
of requests for Administrator review and requiring paper copies to be
mailed to CMS are outdated and overly restrictive. In the interest of
burden reduction and to promote ease of requests, we are proposing to
eliminate the prohibition on submitting a request by facsimile or other
electronic means so that hospitals may also submit requests for
Administrator review of MGCRB decisions electronically. In addition, we
are proposing to require the hospital to submit an electronic copy of
its request for review to CMS's Hospital and Ambulatory Policy Group.
We are specifying that copies to CMS' Hospital and Ambulatory Policy
Group should be submitted via email to [email protected].
Accordingly, we are proposing to revise the regulation at Sec.
412.278(b)(1) to read: The hospital's request for review must be in
writing and sent to the Administrator, in care of the Office of the
Attorney Advisor. The request must be received by the Administrator
within 15 days after the date the MGCRB issues its decision. The
hospital must also submit an electronic copy of its request for review
to CMS's Hospital and Ambulatory Policy Group.
3. Clarification of Applicable Rural Referral Center (RRC) Criteria for
Purposes of Meeting Urban to Rural Reclassification at Sec.
412.103(a)(3)
As discussed in section IV.D. of the preamble of this proposed
rule, for purposes of qualifying for RRC classification, a rural
hospital that does not meet the bed size requirement at Sec.
412.96(b)(1)(ii) can qualify as an RRC if the hospital meets two
mandatory prerequisites (a minimum case-mix index (CMI) and a minimum
number of discharges), and at least one of three optional criteria
(relating to specialty composition of medical staff, source of
inpatients, or referral volume). Specifically, a hospital may
demonstrate that its case-mix index is at least equal to the national
case-mix index value as established by CMS or the median case-mix index
value for urban hospitals located in each region, in accordance with
Sec. 412.96(c)(1), and that it has a number of discharges at least
equal to 5,000 discharges or, if less, the median number of discharges
for urban hospitals located in each region, in accordance with Sec.
412.96(c)(2). CMS publishes the national and regional case-mix index
values and the national and regional number of discharges for the
purpose of these criteria in the annual notice of prospective payment
rates published in the Federal Register.
For purposes of qualifying for urban to rural reclassification
under Sec. 412.103, a hospital can demonstrate that it would qualify
as a rural referral center as set forth in Sec. 412.96, if the
hospital were located in a rural area. This condition is set forth at
Sec. 412.103(a)(3).
It has come to our attention that there is some confusion regarding
which fiscal year's published case mix index (CMI) or numbers of
discharges criteria would be used in the situation where a hospital is
seeking to meet the urban to rural reclassification criterion at Sec.
412.103(a)(3) by meeting the alternative criteria at Sec. 412.96(c):
(1) The criteria published in the final rule in effect on the filing
date of the hospital's Sec. 412.103 application, or (2) the criteria
that would be in effect during the fiscal year that any RRC
classification would become effective (that is, the beginning of the
hospital's cost reporting period).
Therefore, we are clarifying that for purposes of meeting the urban
to rural reclassification criterion at Sec. 412.103(a)(3), the
appropriate CMI values and numbers of discharges to demonstrate RRC
eligibility are those published in the IPPS/LTCH PPS final rule in
effect as of the filing date (that is, the effective date) of the
hospital's application for reclassification under Sec. 412.103. For
purposes of RRC classification under Sec. 412.96(c), the appropriate
CMI values and numbers of discharges are those published in the IPPS/
LTCH PPS final rule in effect when the RRC classification will be
effective at the start of the hospital's next cost reporting period,
consistent with Sec. 412.96(h)(3) and (i)(3).
For example, Hospital A has a cost reporting period beginning
October 1. It applies on September 1, 2020 for urban to rural
reclassification under Sec. 412.103(a)(3) and for RRC status, by
meeting the alternative criteria at Sec. 412.96(c). For Hospital A's
urban to rural reclassification request, the appropriate national or
regional CMI value and number of discharges that the hospital must meet
or exceed are the values published in the FY 2020 IPPS/LTCH PPS Final
Rule since that is the rule in effect as of the filing date (that is,
effective date) of Hospital A's urban to rural reclassification
application. For the RRC classification request, the appropriate
national or regional CMI value and number of discharges that the
hospital must meet or exceed are the values published in the FY 2021
IPPS/LTCH PPS final rule since that is the rule that will be in effect
when the RRC classification will become effective at the start of the
hospital's next cost reporting period. We note that this policy applies
regardless of whether a hospital seeks only Sec. 412.103 rural
reclassification, or Sec. 412.103 rural reclassification along with
RRC classification.
We believe our policy is appropriate considering that a hospital
may apply for rural reclassification under Sec. 412.103 at any time,
as previously discussed in section III.K.1. of the preamble of this
proposed rule. We clarified in the FY 2018 IPPS/LTCH PPS final rule (82
FR 38151) that while applications for RRC status must be submitted
during the last quarter of a hospital's cost reporting period in
accordance with section 1886(d)(5)(C)(i) of the Act, applications for
rural reclassification may be submitted at any time, including
applications of hospitals seeking rural reclassification under Sec.
412.103(a)(3). A hospital is permitted at any time to submit an urban
to rural reclassification request on the basis of qualifying for RRC
status under Sec. 412.103(a)(3), even before the publication of the
CMI and discharge criteria in the IPPS/LTCH PPS final rule for the
period in which any RRC classification would be effective (that is, the
start of the hospital's next cost reporting period).

L. Process for Requests for Wage Index Data Corrections

1. Process for Hospitals To Request Wage Index Data Corrections
The preliminary, unaudited Worksheet S-3 wage data files and the
preliminary CY 2016 occupational mix data files for the proposed FY
2021 wage index were made available on May 17, 2019 through the
internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-
Fee-for-Service-Payment/AcuteInpatientPPS/Wage-

[[Page 32731]]

Index-Files-Items/FY2021-Wage-Index-Home-Page.
On January 31, 2020, we posted a public use file (PUF) at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY2021-Wage-Index-Home-Page
containing FY 2021 wage index data available as of January 30, 2020.
This PUF contains a tab with the Worksheet S-3 wage data (which
includes Worksheet S-3, Parts II and III wage data from cost reporting
periods beginning on or after October 1, 2016 through September 30,
2017; that is, FY 2017 wage data), a tab with the occupational mix data
(which includes data from the CY 2016 occupational mix survey, Form
CMS-10079), a tab containing the Worksheet S-3 wage data of hospitals
deleted from the January 31, 2020 wage data PUF, and a tab containing
the CY 2016 occupational mix data of the hospitals deleted from the
January 31, 2020 occupational mix PUF. In a memorandum dated January
29, 2020, we instructed all MACs to inform the IPPS hospitals that they
service of the availability of the January 31, 2020 wage index data
PUFs, and the process and timeframe for requesting revisions in
accordance with the FY 2021 Wage Index Timetable.
In the interest of meeting the data needs of the public, beginning
with the proposed FY 2009 wage index, we post an additional PUF on the
CMS website that reflects the actual data that are used in computing
the proposed wage index. The release of this file does not alter the
current wage index process or schedule. We notify the hospital
community of the availability of these data as we do with the current
public use wage data files through our Hospital Open Door Forum. We
encourage hospitals to sign up for automatic notifications of
information about hospital issues and about the dates of the Hospital
Open Door Forums at the CMS website at: http://www.cms.gov/Outreach-and-Education/Outreach/OpenDoorForums/index.html.
In a memorandum dated April 29, 2019, we instructed all MACs to
inform the IPPS hospitals that they service of the availability of the
preliminary wage index data files and the CY 2016 occupational mix
survey data files posted on May 17, 2019, and the process and timeframe
for requesting revisions.
If a hospital wished to request a change to its data as shown in
the May 17, 2019 preliminary wage and occupational mix data files, the
hospital had to submit corrections along with complete, detailed
supporting documentation to its MAC so that the MAC received them by
September 3, 2019. Hospitals were notified of this deadline and of all
other deadlines and requirements, including the requirement to review
and verify their data as posted in the preliminary wage index data
files on the internet, through the letters sent to them by their MACs.
November 15, 2019 was the deadline for MACs to complete all desk
reviews for hospital wage and occupational mix data and transmit
revised Worksheet S-3 wage data and occupational mix data to CMS.
November 5, 2019 was the date by when MACs notified State hospital
associations regarding hospitals that failed to respond to issues
raised during the desk reviews. Additional revisions made by the MACs
were transmitted to CMS throughout January 2020. CMS published the wage
index PUFs that included hospitals' revised wage index data on January
31, 2020. Hospitals had until February 14, 2020, to submit requests to
the MACs to correct errors in the January 31, 2020 PUF due to CMS or
MAC mishandling of the wage index data, or to revise desk review
adjustments to their wage index data as included in the January 31,
2020 PUF. Hospitals also were required to submit sufficient
documentation to support their requests. Hospitals' requests and
supporting documentation must be received by the MAC by the February
deadline (that is, by February 14, 2020 for the FY 2021 wage index).
After reviewing requested changes submitted by hospitals, MACs were
required to transmit to CMS any additional revisions resulting from the
hospitals' reconsideration requests by March 19, 2020. Under our
current policy as adopted in the FY 2018 IPPS/LTCH PPS final rule (82
FR 38153), the deadline for a hospital to request CMS intervention in
cases where a hospital disagreed with a MAC's handling of wage data on
any basis (including a policy, factual, or other dispute) was April 2,
2020. Data that were incorrect in the preliminary or January 31, 2020
wage index data PUFs, but for which no correction request was received
by the February 14, 2020 deadline, are not considered for correction at
this stage. In addition, April 2, 2020 was the deadline for hospitals
to dispute data corrections made by CMS of which the hospital is
notified after the January 31, 2020 PUF and at least 14 calendar days
prior to April 2, 2020 (that is, March 19, 2020), that do not arise
from a hospital's request for revisions. The hospital's request and
supporting documentation must be received by CMS (and a copy received
by the MAC) by the April deadline (that is, by April 2, 2020 for the FY
2021 wage index). We refer readers to the wage index timeline for
complete details.
Hospitals are given the opportunity to examine Table 2 associated
with this proposed rule, which is listed in section VI. of the Addendum
to this proposed rule and available via the internet on the CMS website
at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2021-IPPS-Proposed-Rule-Home-Page.html. Table 2
contains each hospital's proposed adjusted average hourly wage used to
construct the wage index values for the past 3 years, including the FY
2017 data used to construct the proposed FY 2021 wage index. We note
that the proposed hospital average hourly wages shown in Table 2 only
reflect changes made to a hospital's data that were transmitted to CMS
by early February 2020.
We plan to post the final wage index data PUFs in late April 2020
via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY2021-Wage-Index-Home-Page. The April 2020 PUFs are made
available solely for the limited purpose of identifying any potential
errors made by CMS or the MAC in the entry of the final wage index data
that resulted from the correction process previously described (the
process for disputing revisions submitted to CMS by the MACs by March
19, 2020, and the process for disputing data corrections made by CMS
that did not arise from a hospital's request for wage data revisions as
discussed earlier).
After the release of the April 2020 wage index data PUFs, changes
to the wage and occupational mix data can only be made in those very
limited situations involving an error by the MAC or CMS that the
hospital could not have known about before its review of the final wage
index data files. Specifically, neither the MAC nor CMS will approve
the following types of requests:
Requests for wage index data corrections that were
submitted too late to be included in the data transmitted to CMS by the
MACs on or before March 19, 2020.
Requests for correction of errors that were not, but could
have been, identified during the hospital's review of the January 31,
2020 wage index PUFs.
Requests to revisit factual determinations or policy
interpretations made by the MAC or CMS during the wage index data
correction process.
If, after reviewing the April 2020 final wage index data PUFs, a
hospital

[[Page 32732]]

believes that its wage or occupational mix data are incorrect due to a
MAC or CMS error in the entry or tabulation of the final data, the
hospital is given the opportunity to notify both its MAC and CMS
regarding why the hospital believes an error exists and provide all
supporting information, including relevant dates (for example, when it
first became aware of the error). The hospital is required to send its
request to CMS and to the MAC so that it is received no later than May
29, 2020. May 29, 2020 is also the deadline for hospitals to dispute
data corrections made by CMS of which the hospital is notified on or
after 13 calendar days prior to April 2, 2019 (that is, March 20,
2020), and at least 14 calendar days prior to May 29, 2020 (that is,
May 15, 2020), that do not arise from a hospital's request for
revisions. (Data corrections made by CMS of which a hospital is
notified on or after 13 calendar days prior to May 29, 2020 (that is,
May 16, 2020) may be appealed to the Provider Reimbursement Review
Board (PRRB)). In accordance with the FY 2021 wage index timeline
posted on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Downloads/FY-2021-Hospital-Wage-Index-Development-Time-Table.pdf, the May appeals must be sent via
mail and email to CMS and the MACs. We refer readers to the wage index
timeline for complete details.
Verified corrections to the wage index data received timely (that
is, by May 29, 2020) by CMS and the MACs will be incorporated into the
final FY 2021 wage index, which will be effective October 1, 2020.
We created the processes previously described to resolve all
substantive wage index data correction disputes before we finalize the
wage and occupational mix data for the FY 2021 payment rates.
Accordingly, hospitals that do not meet the procedural deadlines set
forth earlier will not be afforded a later opportunity to submit wage
index data corrections or to dispute the MAC's decision with respect to
requested changes. Specifically, our policy is that hospitals that do
not meet the procedural deadlines as previously set forth (requiring
requests to MACs by the specified date in February and, where such
requests are unsuccessful, requests for intervention by CMS by the
specified date in April) will not be permitted to challenge later,
before the PRRB, the failure of CMS to make a requested data revision.
We refer readers also to the FY 2000 IPPS final rule (64 FR 41513) for
a discussion of the parameters for appeals to the PRRB for wage index
data corrections. As finalized in the FY 2018 IPPS/LTCH PPS final rule
(82 FR 38154 through 38156), this policy also applies to a hospital
disputing corrections made by CMS that do not arise from a hospital's
request for a wage index data revision. That is, a hospital disputing
an adjustment made by CMS that did not arise from a hospital's request
for a wage index data revision would be required to request a
correction by the first applicable deadline. Hospitals that do not meet
the procedural deadlines set forth earlier will not be afforded a later
opportunity to submit wage index data corrections or to dispute CMS'
decision with respect to changes.
Again, we believe the wage index data correction process described
earlier provides hospitals with sufficient opportunity to bring errors
in their wage and occupational mix data to the MAC's attention.
Moreover, because hospitals have access to the final wage index data
PUFs by late April 2020, they have the opportunity to detect any data
entry or tabulation errors made by the MAC or CMS before the
development and publication of the final FY 2021 wage index by August
2020, and the implementation of the FY 2021 wage index on October 1,
2020. Given these processes, the wage index implemented on October 1
should be accurate. Nevertheless, in the event that errors are
identified by hospitals and brought to our attention after May 29,
2020, we retain the right to make midyear changes to the wage index
under very limited circumstances.
Specifically, in accordance with 42 CFR 412.64(k)(1) of our
regulations, we make midyear corrections to the wage index for an area
only if a hospital can show that: (1) The MAC or CMS made an error in
tabulating its data; and (2) the requesting hospital could not have
known about the error or did not have an opportunity to correct the
error, before the beginning of the fiscal year. For purposes of this
provision, ``before the beginning of the fiscal year'' means by the May
deadline for making corrections to the wage data for the following
fiscal year's wage index (for example, May 29, 2020 for the FY 2021
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
website prior to publishing both the proposed and final IPPS rules, and
the MACs notify hospitals directly of any wage index data changes after
completing their desk reviews, we do not expect that midyear
corrections will be necessary. However, under our current policy, if
the correction of a data error changes the wage index value for an
area, the revised wage index value will be effective prospectively from
the date the correction is made.
In the FY 2006 IPPS final rule (70 FR 47385 through 47387 and
47485), we revised 42 CFR 412.64(k)(2) to specify that, effective on
October 1, 2005, that is, beginning with the FY 2006 wage index, a
change to the wage index can be made retroactive to the beginning of
the Federal fiscal year only when CMS determines all of the following:
(1) The MAC or CMS made an error in tabulating data used for the wage
index calculation; (2) the hospital knew about the error and requested
that the MAC and CMS correct the error using the established process
and within the established schedule for requesting corrections to the
wage index data, before the beginning of the fiscal year for the
applicable IPPS update (that is, by the May 29, 2020 deadline for the
FY 2021 wage index); and (3) CMS agreed before October 1 that the MAC
or CMS made an error in tabulating the hospital's wage index data and
the wage index should be corrected.
In those circumstances where a hospital requested a correction to
its wage index data before CMS calculated the final wage index (that
is, by the May 29, 2020 deadline for the FY 2021 wage index), and CMS
acknowledges that the error in the hospital's wage index data was
caused by CMS' or the MAC's mishandling of the data, we believe that
the hospital should not be penalized by our delay in publishing or
implementing the correction. As with our current policy, we indicated
that the provision is not available to a hospital seeking to revise
another hospital's data. In addition, the provision cannot be used to
correct prior years' wage index data; and it can only be used for the
current Federal fiscal year. In situations where our policies would
allow midyear corrections other than those specified in 42 CFR
412.64(k)(2)(ii), we continue to believe that it is appropriate to make
prospective-only corrections to the wage index.
We note that, as with prospective changes to the wage index, the
final retroactive correction will be made irrespective of whether the
change increases or decreases a hospital's payment rate. In addition,
we note that the policy of retroactive adjustment will still apply in
those instances where a final judicial decision reverses a CMS denial
of a hospital's wage index data revision request.

[[Page 32733]]

2. Process for Data Corrections by CMS After the January 31 Public Use
File (PUF)
The process set forth with the wage index timeline discussed in
section III.L.1. of the preamble of this proposed rule allows hospitals
to request corrections to their wage index data within prescribed
timeframes. In addition to hospitals' opportunity to request
corrections of wage index data errors or MACs' mishandling of data, CMS
has the authority under section 1886(d)(3)(E) of the Act to make
corrections to hospital wage index and occupational mix data in order
to ensure the accuracy of the wage index. As we explained in the FY
2016 IPPS/LTCH PPS final rule (80 FR 49490 through 49491) and the FY
2017 IPPS/LTCH PPS final rule (81 FR 56914), section 1886(d)(3)(E) of
the Act requires the Secretary to adjust the proportion of hospitals'
costs attributable to wages and wage-related costs for area differences
reflecting the relative hospital wage level in the geographic areas of
the hospital compared to the national average hospital wage level. We
believe that, under section 1886(d)(3)(E) of the Act, we have
discretion to make corrections to hospitals' data to help ensure that
the costs attributable to wages and wage-related costs in fact
accurately reflect the relative hospital wage level in the hospitals'
geographic areas.
We have an established multistep, 15-month process for the review
and correction of the hospital wage data that is used to create the
IPPS wage index for the upcoming fiscal year. Since the origin of the
IPPS, the wage index has been subject to its own annual review process,
first by the MACs, and then by CMS. As a standard practice, after each
annual desk review, CMS reviews the results of the MACs' desk reviews
and focuses on items flagged during the desk review, requiring that, if
necessary, hospitals provide additional documentation, adjustments, or
corrections to the data. This ongoing communication with hospitals
about their wage data may result in the discovery by CMS of additional
items that were reported incorrectly or other data errors, even after
the posting of the January 31 PUF, and throughout the remainder of the
wage index development process. In addition, the fact that CMS analyzes
the data from a regional and even national level, unlike the review
performed by the MACs that review a limited subset of hospitals, can
facilitate additional editing of the data that may not be readily
apparent to the MACs. In these occasional instances, an error may be of
sufficient magnitude that the wage index of an entire CBSA is affected.
Accordingly, CMS uses its authority to ensure that the wage index
accurately reflects the relative hospital wage level in the geographic
area of the hospital compared to the national average hospital wage
level, by continuing to make corrections to hospital wage data upon
discovering incorrect wage data, distinct from instances in which
hospitals request data revisions.
We note that CMS corrects errors to hospital wage data as
appropriate, regardless of whether that correction will raise or lower
a hospital's average hourly wage. For example, as discussed in section
III.C. of the preamble of the FY 2019 IPPS/LTCH PPS final rule (83 FR
41364), in situations where a hospital did not have documentable
salaries, wages, and hours for housekeeping and dietary services, we
imputed estimates, in accordance with policies established in the FY
2015 IPPS/LTCH PPS final rule (79 FR 49965 through 49967). Furthermore,
if CMS discovers after conclusion of the desk review, for example, that
a MAC inadvertently failed to incorporate positive adjustments
resulting from a prior year's wage index appeal of a hospital's wage-
related costs such as pension, CMS would correct that data error and
the hospital's average hourly wage would likely increase as a result.
While we maintain CMS' authority to conduct additional review and
make resulting corrections at any time during the wage index
development process, in accordance with the policy finalized in the FY
2018 IPPS/LTCH PPS final rule (82 FR 38154 through 38156) and as first
implemented with the FY 2019 wage index (83 FR 41389), hospitals are
able to request further review of a correction made by CMS that did not
arise from a hospital's request for a wage index data correction.
Instances where CMS makes a correction to a hospital's data after the
January 31 PUF based on a different understanding than the hospital
about certain reported costs, for example, could potentially be
resolved using this process before the final wage index is calculated.
We believe this process and the timeline for requesting such
corrections (as described earlier and in the FY 2018 IPPS/LTCH PPS
final rule) promote additional transparency to instances where CMS
makes data corrections after the January 31 PUF, and provide
opportunities for hospitals to request further review of CMS changes in
time for the most accurate data to be reflected in the final wage index
calculations. These additional appeals opportunities are described
earlier and in the FY 2021 Wage Index Development Time Table, as well
as in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38154 through 38156).
3. Update to Wage Index Development Timetable To Include Time Zone for
Deadlines
During the FY 2021 Wage Index development process, we received
inquiries regarding the time zone for deadlines in the Wage Index
Development Timetable. Specifically, hospitals asked if revision
requests submitted after 11:59 p.m. Eastern Standard Time (EST) could
be accepted if the deadline had not yet passed in the time zone where
the hospitals are located. The current timetable does not specify time
zones. To eliminate confusion and promote clear deadlines, we are
proposing to use Eastern Standard Time (EST) as the time zone for wage
index deadlines after October 1, 2020 on the FY 2022 Wage Index
Development Timetable. We believe using one time zone is important for
a clear and consistent deadline for all hospitals. We also believe that
EST is an appropriate time zone for the deadline because CMS's central
office headquarters are located in the EST and because it is consistent
with the time zone used for other CMS deadlines, such as the deadline
to register to report certain quality data via the CMS Web Interface
(see the Registration Guide available for download at https://qpp.cms.gov/mips/how-to-register-for-CMS-WI-and-CAHPS) and applications
for ACOs to participate in the Shared Savings Program (see deadlines
outlined at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/for-acos/application-types-and-timeline,
in accordance with Sec. 425.202). We welcome commenters' input on
which time zone is most reasonable for all hospitals and appropriate
for supporting consistent, clear deadlines.

M. Proposed Labor-Related Share for the Proposed FY 2021 Wage Index

Section 1886(d)(3)(E) of the Act directs the Secretary to adjust
the proportion of the national prospective payment system base payment
rates that are attributable to wages and wage-related costs by a factor
that reflects the relative differences in labor costs among geographic
areas. It also directs the Secretary to estimate from time to time the
proportion of hospital costs that are labor-related and to adjust the
proportion (as estimated by the Secretary from time to time) of
hospitals' costs that are attributable to wages and wage-related costs
of the

[[Page 32734]]

DRG prospective payment rates. We refer to the portion of hospital
costs attributable to wages and wage-related costs as the labor-related
share. The labor-related share of the prospective payment rate is
adjusted by an index of relative labor costs, which is referred to as
the wage index.
Section 403 of Public Law 108-173 amended section 1886(d)(3)(E) of
the Act to provide that the Secretary must employ 62 percent as the
labor-related share unless this would result in lower payments to a
hospital than would otherwise be made. However, this provision of
Public Law 108-173 did not change the legal requirement that the
Secretary estimate from time to time the proportion of hospitals' costs
that are attributable to wages and wage-related costs. Thus, hospitals
receive payment based on either a 62-percent labor-related share, or
the labor-related share estimated from time to time by the Secretary,
depending on which labor-related share resulted in a higher payment.
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38158 through
38175), we rebased and revised the hospital market basket. We
established a 2014-based IPPS hospital market basket to replace the FY
2010-based IPPS hospital market basket, effective October 1, 2017.
Using the 2014-based IPPS market basket, we finalized a labor-related
share of 68.3 percent for discharges occurring on or after October 1,
2017. In addition, in FY 2018, we implemented this revised and rebased
labor-related share in a budget neutral manner (82 FR 38522). However,
consistent with section 1886(d)(3)(E) of the Act, we did not take into
account the additional payments that would be made as a result of
hospitals with a wage index less than or equal to 1.0000 being paid
using a labor-related share lower than the labor-related share of
hospitals with a wage index greater than 1.0000. In the FY 2020 IPPS/
LTCH PPS final rule (84 FR 42325), for FY 2020, we continued to use a
labor-related share of 68.3 percent for discharges occurring on or
after October 1, 2019.
The labor-related share is used to determine the proportion of the
national IPPS base payment rate to which the area wage index is
applied. We include a cost category in the labor-related share if the
costs are labor intensive and vary with the local labor market. In this
proposed rule, for FY 2021, we are not proposing to make any further
changes to the national average proportion of operating costs that are
attributable to wages and salaries, employee benefits, professional
fees: Labor-related, administrative and facilities support services,
installation, maintenance, and repair services, and all other labor-
related services. Therefore, for FY 2021, we are proposing to continue
to use a labor-related share of 68.3 percent for discharges occurring
on or after October 1, 2020.
As discussed in section IV.B. of the preamble of this proposed
rule, prior to January 1, 2016, Puerto Rico hospitals were paid based
on 75 percent of the national standardized amount and 25 percent of the
Puerto Rico-specific standardized amount. As a result, we applied the
Puerto Rico-specific labor-related share percentage and nonlabor-
related share percentage to the Puerto Rico-specific standardized
amount. Section 601 of the Consolidated Appropriations Act, 2016 (Pub.
L. 114-113) amended section 1886(d)(9)(E) of the Act to specify that
the payment calculation with respect to operating costs of inpatient
hospital services of a subsection (d) Puerto Rico hospital for
inpatient hospital discharges on or after January 1, 2016, shall use
100 percent of the national standardized amount. Because Puerto Rico
hospitals are no longer paid with a Puerto Rico-specific standardized
amount as of January 1, 2016, under section 1886(d)(9)(E) of the Act as
amended by section 601 of the Consolidated Appropriations Act, 2016,
there is no longer a need for us to calculate a Puerto Rico-specific
labor-related share percentage and nonlabor-related share percentage
for application to the Puerto Rico-specific standardized amount.
Hospitals in Puerto Rico are now paid 100 percent of the national
standardized amount and, therefore, are subject to the national labor-
related share and nonlabor-related share percentages that are applied
to the national standardized amount. Accordingly, for FY 2021, we are
not proposing a Puerto Rico-specific labor-related share percentage or
a nonlabor-related share percentage.
Tables 1A and 1B, which are published in section VI. of the
Addendum to this FY 2021 IPPS/LTCH PPS proposed rule and available via
the internet on the CMS website, reflect the proposed national labor-
related share, which is also applicable to Puerto Rico hospitals. For
FY 2021, for all IPPS hospitals (including Puerto Rico hospitals) whose
wage indexes are less than or equal to 1.0000, we are proposing to
apply the wage index to a labor-related share of 62 percent of the
national standardized amount. For all IPPS hospitals (including Puerto
Rico hospitals) whose wage indexes are greater than 1.000, for FY 2021,
we are proposing to apply the wage index to a proposed labor-related
share of 68.3 percent of the national standardized amount.

IV. Other Decisions and Changes to the IPPS for Operating System

A. Proposed Changes to MS-DRGs Subject to Postacute Care Transfer
Policy and MS-DRG Special Payments Policies (Sec. 412.4)

1. Background
Existing regulations at 42 CFR 412.4(a) define discharges under the
IPPS as situations in which a patient is formally released from an
acute care hospital or dies in the hospital. Section 412.4(b) defines
acute care transfers, and Sec. 412.4(c) defines postacute care
transfers. Our policy set forth in Sec. 412.4(f) provides that when a
patient is transferred and his or her length of stay is less than the
geometric mean length of stay for the MS-DRG to which the case is
assigned, the transferring hospital is generally paid based on a
graduated per diem rate for each day of stay, not to exceed the full
MS-DRG payment that would have been made if the patient had been
discharged without being transferred.
The per diem rate paid to a transferring hospital is calculated by
dividing the full MS-DRG payment by the geometric mean length of stay
for the MS-DRG. Based on an analysis that showed that the first day of
hospitalization is the most expensive (60 FR 45804), our policy
generally provides for payment that is twice the per diem amount for
the first day, with each subsequent day paid at the per diem amount up
to the full MS-DRG payment (Sec. 412.4(f)(1)). Transfer cases also are
eligible for outlier payments. In general, the outlier threshold for
transfer cases, as described in Sec. 412.80(b), is equal to the fixed-
loss outlier threshold for nontransfer cases (adjusted for geographic
variations in costs), divided by the geometric mean length of stay for
the MS-DRG, and multiplied by the length of stay for the case, plus 1
day.
We established the criteria set forth in Sec. 412.4(d) for
determining which DRGs qualify for postacute care transfer payments in
the FY 2006 IPPS final rule (70 FR 47419 through 47420). The
determination of whether a DRG is subject to the postacute care
transfer policy was initially based on the Medicare Version 23.0
GROUPER (FY 2006) and data from the FY 2004 MedPAR file. However, if a
DRG did not exist in Version 23.0 or a DRG included in Version 23.0 is
revised, we use the current version of the Medicare GROUPER and the
most recent complete year of MedPAR data to determine if the DRG is
subject to the postacute care

[[Page 32735]]

transfer policy. Specifically, if the MS-DRG's total number of
discharges to postacute care equals or exceeds the 55th percentile for
all MS-DRGs and the proportion of short-stay discharges to postacute
care to total discharges in the MS-DRG exceeds the 55th percentile for
all MS-DRGs, CMS will apply the postacute care transfer policy to that
MS-DRG and to any other MS-DRG that shares the same base MS-DRG. The
statute directs us to identify MS-DRGs based on a high volume of
discharges to postacute care facilities and a disproportionate use of
postacute care services. As discussed in the FY 2006 IPPS final rule
(70 FR 47416), we determined that the 55th percentile is an appropriate
level at which to establish these thresholds. In that same final rule
(70 FR 47419), we stated that we will not revise the list of DRGs
subject to the postacute care transfer policy annually unless we are
making a change to a specific MS-DRG.
To account for MS-DRGs subject to the postacute care policy that
exhibit exceptionally higher shares of costs very early in the hospital
stay, Sec. 412.4(f) also includes a special payment methodology. For
these MS-DRGs, hospitals receive 50 percent of the full MS-DRG payment,
plus the single per diem payment, for the first day of the stay, as
well as a per diem payment for subsequent days (up to the full MS-DRG
payment (Sec. 412.4(f)(6)). For an MS-DRG to qualify for the special
payment methodology, the geometric mean length of stay must be greater
than 4 days, and the average charges of 1-day discharge cases in the
MS-DRG must be at least 50 percent of the average charges for all cases
within the MS-DRG. MS-DRGs that are part of an MS-DRG severity level
group will qualify under the MS-DRG special payment methodology policy
if any one of the MS-DRGs that share that same base MS-DRG qualifies
(Sec. 412.4(f)(6)).
Prior to the enactment of the Bipartisan Budget Act of 2018 (Pub.
L. 115-123), under section 1886(d)(5)(J) of the Act, a discharge was
deemed a ``qualified discharge'' if the individual was discharged to
one of the following postacute care settings:
A hospital or hospital unit that is not a subsection (d)
hospital.
A skilled nursing facility.
Related home health services provided by a home health
agency provided within a timeframe established by the Secretary
(beginning within 3 days after the date of discharge).
Section 53109 of the Bipartisan Budget Act of 2018 amended section
1886(d)(5)(J)(ii) of the Act to also include discharges to hospice care
provided by a hospice program as a qualified discharge, effective for
discharges occurring on or after October 1, 2018. Accordingly,
effective for discharges occurring on or after October 1, 2018, if a
discharge is assigned to one of the MS-DRGs subject to the postacute
care transfer policy and the individual is transferred to hospice care
by a hospice program, the discharge is subject to payment as a transfer
case. In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41394), we made
conforming amendments to Sec. 412.4(c) of the regulation to include
discharges to hospice care occurring on or after October 1, 2018 as
qualified discharges. We specified that hospital bills with a Patient
Discharge Status code of 50 (Discharged/Transferred to Hospice--Routine
or Continuous Home Care) or 51 (Discharged/Transferred to Hospice,
General Inpatient Care or Inpatient Respite) are subject to the
postacute care transfer policy in accordance with this statutory
amendment. Consistent with our policy for other qualified discharges,
CMS claims processing software has been revised to identify cases in
which hospice benefits were billed on the date of hospital discharge
without the appropriate discharge status code. Such claims will be
returned as unpayable to the hospital and may be rebilled with a
corrected discharge code.
2. Proposed Changes for FY 2021
As discussed in section II.F. of the preamble of the FY 2021 IPPS/
LTCH PPS proposed rule, based on our analysis of FY 2019 MedPAR claims
data, we are proposing to make changes to a number of MS-DRGs,
effective for FY 2021. Specifically, we are proposing to do the
following:
Reassign procedure codes from MS-DRG 16 (Autologous Bone
Marrow Transplant with CC/MCC or T-Cell Immunotherapy) to create new
MS-DRG 18 (Chimeric Antigen Receptor [CAR] T-cell Immunotherapy) for
cases reporting the administration of CAR T-cell therapy.
Create new MS-DRG 019 (Simultaneous Pancreas and Kidney
Transplant with Hemodialysis).
Reassign procedures involving head, face, neck, ear, nose,
mouth, or throat by creating six new MS-DRGs 140-142 (Major Head and
Neck Procedures with MCC, with CC, and without CC/MCC, respectively)
and 143-145 (Other Ear, Nose, Mouth and Throat O.R. Procedures with
MCC, with CC, and without CC/MCC, respectively) and deleting MS-DRGs
129-130 (Major Head and Neck Procedures with CC/MCC or Major Device,
and without CC/MCC, respectively, MS-DRGs 131-132 (Cranial and Facial
Procedures with CC/MCC and without CC/MCC, respectively) and MS-DRGs
133-134 (Other Ear, Nose, Mouth and Throat O.R. Procedures with CC/MCC
and without CC/MCC, respectively).
Reassign procedure codes from MS-DRGs 469-470 (Major Hip
and Knee Joint Replacement or Reattachment of Lower Extremity with MCC
or Total Ankle Replacement, and without MCC, respectively) and create
two new MS-DRGs, 521 and 522 (Hip Replacement with Principal Diagnosis
of Hip Fracture with MCC and without MCC, respectively) for cases
reporting a hip replacement procedure with a principal diagnosis of a
hip fracture.
Reassign procedure codes from MS-DRG 652 (Kidney
Transplant) into two new MS-DRGs, 650 and 651 (Kidney Transplant with
Hemodialysis with MCC and without MCC, respectively) for cases
reporting hemodialysis with a kidney transplant during the same
admission.
In light of the proposed changes to these MS-DRGs for FY 2021,
according to the regulations under Sec. 412.4(d), we evaluated these
MS-DRGs using the general postacute care transfer policy criteria and
data from the FY 2019 MedPAR file. If an MS-DRG qualified for the
postacute care transfer policy, we also evaluated that MS-DRG under the
special payment methodology criteria according to regulations at Sec.
412.4(f)(6). We continue to believe it is appropriate to assess newly
proposed MS-DRGs and reassess revised MS-DRGs when proposing
reassignment of procedure codes or diagnosis codes that would result in
material changes to an MS-DRG. MS-DRGs 469 and 470 (Major Hip and Knee
Joint Replacement or Reattachment of Lower Extremity with MCC or Total
Ankle Replacement, and without MCC, respectively) are currently subject
to the postacute care transfer policy, and as proposed to be revised,
would continue to qualify to be included on the list of MS-DRGs that
are subject to the postacute care transfer policy. Proposed new MS-DRGs
521 and 522 (Hip Replacement with Principal Diagnosis of Hip Fracture
with MCC and without MCC, respectively) would also qualify to be
included on the list of MS-DRGs that are subject to the postacute care
transfer policy. We are therefore proposing to add MS-DRGs 521 and 522
to the list of MS-DRGs that are subject to the postacute care transfer
policy. We note that MS-DRGs that are subject to the postacute transfer
policy for FY 2020 and are not revised will continue to be subject to
the policy in FY 2021.

[[Page 32736]]

Using the December 2019 update of the FY 2019 MedPAR file, we
developed the following chart which sets forth the analysis of the
postacute care transfer policy criteria completed for this proposed
rule with respect to each of these proposed new or revised MS-DRGs. For
the FY 2021 final rule, we intend to update this analysis using the
most recent available data at that time.
BILLING CODE 4120-01-P

[[Page 32737]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.170

[[Page 32738]]

Based on our annual review of proposed new or revised MS-DRGs and
analysis of the December 2019 update of the FY 2019 MedPAR file, we
identified MS-DRGs that we are proposing to include on the list of MS-
DRGs subject to the special payment policy methodology. Based on our
analysis of proposed changes to MS-DRGs included in this proposed rule,
we determined that proposed MS-DRGs 521 and 522 (Hip Replacement with
Principal Diagnosis of Hip Fracture with MCC and without MCC,
respectively) would meet the criteria for the MS-DRG special payment
methodology. Therefore, we are proposing that proposed MS-DRGs 521 and
522 would be subject to the MS-DRG special payment methodology,
effective FY 2021.
For the FY 2021 final rule, we intend to update this analysis using
the most recent available data at that time.
[GRAPHIC] [TIFF OMITTED] TP29MY20.171

BILLING CODE 4120-01-C
The proposed postacute care transfer and special payment policy
status of these MS-DRGs is reflected in Table 5 associated with this
proposed rule, which is listed in section VI. of the Addendum to this
proposed rule and available via the internet on the CMS website.

B. Proposed Changes in the Inpatient Hospital Update for FY 2021 (Sec.
412.64(d))

1. Proposed FY 2021 Inpatient Hospital Update
In accordance with section 1886(b)(3)(B)(i) of the Act, each year
we update the national standardized amount for inpatient hospital
operating costs by a factor called the ``applicable percentage
increase.'' For FY 2021, we are setting the applicable percentage
increase by applying the adjustments listed in this section in the same
sequence as we did for FY 2020. (We note that section
1886(b)(3)(B)(xii) of the Act required an additional reduction each
year only for FYs 2010 through 2019.) Specifically, consistent with
section 1886(b)(3)(B) of the Act, as amended by sections 3401(a) and
10319(a) of the Affordable Care Act, we are setting the applicable
percentage increase by applying the following adjustments in the
following sequence. The applicable percentage increase under the IPPS
for FY 2021 is equal to the rate-of-increase in the hospital market
basket for IPPS hospitals in all areas, subject to all of the
following:
A reduction of one-quarter of the applicable percentage
increase (prior to the application of other statutory adjustments; also
referred to as the market basket update or rate-of-increase (with no
adjustments)) for hospitals that fail to submit quality information
under rules established by the Secretary in accordance with section
1886(b)(3)(B)(viii) of the Act.
A reduction of three-quarters of the applicable percentage
increase (prior to the application of other statutory adjustments; also
referred to as the market basket update or rate-of-increase (with no
adjustments)) for hospitals not considered to be meaningful EHR users
in accordance with section 1886(b)(3)(B)(ix) of the Act.
An adjustment based on changes in economy-wide
productivity (the multifactor productivity (MFP) adjustment).
Section 1886(b)(3)(B)(xi) of the Act, as added by section 3401(a)
of the Affordable Care Act, states that application of the MFP
adjustment may result in the applicable percentage increase being less
than zero.
In compliance with section 404 of the MMA, in the FY 2018 IPPS/LTCH
PPS final rule (82 FR 38158 through 38175), we replaced the FY 2010-
based IPPS operating market basket with the rebased and revised 2014-
based IPPS operating market basket, effective with FY 2018.
We are proposing to base the proposed FY 2021 market basket update
used to determine the applicable percentage increase for the IPPS on
IHS Global Inc.'s (IGI's) fourth quarter 2019 forecast of the 2014-
based IPPS market basket rate-of-increase with historical data through
third quarter 2019, which is estimated to be 3.0 percent. We also are
proposing that if more recent data subsequently become available (for
example, a more recent estimate of the market basket and the MFP
adjustment), we would use such data, if appropriate, to determine the
FY 2021 market basket update and the MFP adjustment in the final rule.
For FY 2021, depending on whether a hospital submits quality data
under the rules established in accordance with section
1886(b)(3)(B)(viii) of the Act (hereafter referred to as a hospital
that submits quality data) and is a meaningful EHR user under section
1886(b)(3)(B)(ix) of the Act (hereafter referred to as a hospital that
is a meaningful EHR user), there are four possible applicable
percentage increases that can be applied to the standardized amount, as
specified in the table that appears later in this section.
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689 through
51692), we finalized our methodology for calculating and applying the
MFP adjustment. As we explained in that rule, section
1886(b)(3)(B)(xi)(II) of the Act, as added by section 3401(a) of the
Affordable Care Act, defines this

[[Page 32739]]

productivity adjustment as equal to the 10-year moving average of
changes in annual economy-wide, private nonfarm business MFP (as
projected by the Secretary for the 10-year period ending with the
applicable fiscal year, calendar year, cost reporting period, or other
annual period). The Bureau of Labor Statistics (BLS) publishes the
official measure of private nonfarm business MFP. We refer readers to
the BLS website at http://www.bls.gov/mfp for the BLS historical
published MFP data.
MFP is derived by subtracting the contribution of labor and capital
input growth from output growth. The projections of the components of
MFP are currently produced by IGI, a nationally recognized economic
forecasting firm with which CMS contracts to forecast the components of
the market baskets and MFP. As we discussed in the FY 2016 IPPS/LTCH
PPS final rule (80 FR 49509), beginning with the FY 2016 rulemaking
cycle, the MFP adjustment is calculated using the revised series
developed by IGI to proxy the aggregate capital inputs. Specifically,
in order to generate a forecast of MFP, IGI forecasts BLS aggregate
capital inputs using a regression model. A complete description of the
MFP projection methodology is available on the CMS website at: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html.
For FY 2021, we are proposing an MFP adjustment of 0.4 percentage
point. Similar to the market basket update, for this proposed rule, we
used IGI's fourth quarter 2019 forecast of the MFP adjustment to
compute the proposed FY 2021 MFP adjustment. As noted previously, we
are proposing that if more recent data subsequently become available,
we would use such data, if appropriate, to determine the FY 2021 market
basket update and the MFP adjustment for the final rule.
Based on these data, for this proposed rule, we have determined
four proposed applicable percentage increases to the standardized
amount for FY 2021, as specified in the following table:
[GRAPHIC] [TIFF OMITTED] TP29MY20.172

In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42344), we revised
our regulations at 42 CFR 412.64(d) to reflect the current law for the
update for FY 2020 and subsequent fiscal years. Specifically, in
accordance with section 1886(b)(3)(B) of the Act, we added paragraph
(d)(1)(viii) to Sec. 412.64 to set forth the applicable percentage
increase to the operating standardized amount for FY 2020 and
subsequent fiscal years as the percentage increase in the market basket
index, subject to the reductions specified under Sec. 412.64(d)(2) for
a hospital that does not submit quality data and Sec. 412.64(d)(3) for
a hospital that is not a meaningful EHR user, less an MFP adjustment.
(As previously noted, section 1886(b)(3)(B)(xii) of the Act required an
additional reduction each year only for FYs 2010 through 2019.)
Section 1886(b)(3)(B)(iv) of the Act provides that the applicable
percentage increase to the hospital-specific rates for SCHs and MDHs
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 and MDHs also is subject to section
1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) and
10319(a) of the Affordable Care Act. (Under current law, the MDH
program is effective for discharges on or before September 30, 2022, as
discussed in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41429 through
41430).)
For FY 2021, we are proposing the following updates to the
hospital-specific rates applicable to SCHs and MDHs: A proposed update
of 2.6 percent for a hospital that submits quality data and is a
meaningful EHR user; a proposed update of 1.85 percent for a hospital
that fails to submit quality data and is a meaningful EHR user; a
proposed update of 0.35 percent for a hospital that submits quality
data and is not a meaningful EHR user; and a proposed update of -0.4
percent for a hospital that fails to submit quality data and is not a
meaningful EHR user. As noted previously, for this FY 2021 IPPS/LTCH
PPS proposed rule, we are using IGI's fourth quarter 2019 forecast of
the 2014-based IPPS market basket update with historical data through
third quarter 2019. Similarly, we used IGI's fourth quarter 2019
forecast of the MFP adjustment. We are proposing that if more recent
data subsequently become available (for example, a more recent estimate
of the market basket increase and the MFP adjustment), we would use

[[Page 32740]]

such data, if appropriate, to determine the update in the final rule.
2. FY 2021 Puerto Rico Hospital Update
As discussed in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56937
through 56938), prior to January 1, 2016, Puerto Rico hospitals were
paid based on 75 percent of the national standardized amount and 25
percent of the Puerto Rico-specific standardized amount. Section 601 of
Public Law 114-113 amended section 1886(d)(9)(E) of the Act to specify
that the payment calculation with respect to operating costs of
inpatient hospital services of a subsection (d) Puerto Rico hospital
for inpatient hospital discharges on or after January 1, 2016, shall
use 100 percent of the national standardized amount. Because Puerto
Rico hospitals are no longer paid with a Puerto Rico-specific
standardized amount under the amendments to section 1886(d)(9)(E) of
the Act, there is no longer a need for us to determine an update to the
Puerto Rico standardized amount. Hospitals in Puerto Rico are now paid
100 percent of the national standardized amount and, therefore, are
subject to the same update to the national standardized amount
discussed under section IV.B.1. of the preamble of this proposed rule.
Accordingly, in this FY 2021 IPPS/LTCH PPS proposed rule, for FY 2021,
we are proposing an applicable percentage increase of 2.6 percent to
the standardized amount for hospitals located in Puerto Rico.
We note that section 1886(b)(3)(B)(viii) of the Act, which
specifies the adjustment to the applicable percentage increase for
``subsection (d)'' hospitals that do not submit quality data under the
rules established by the Secretary, is not applicable to hospitals
located in Puerto Rico.
In addition, section 602 of Public Law 114-113 amended section
1886(n)(6)(B) of the Act to specify that Puerto Rico hospitals are
eligible for incentive payments for the meaningful use of certified EHR
technology, effective beginning FY 2016, and also to apply the
adjustments to the applicable percentage increase under section
1886(b)(3)(B)(ix) of the Act to Puerto Rico hospitals that are not
meaningful EHR users, effective FY 2022. Accordingly, because the
provisions of section 1886(b)(3)(B)(ix) of the Act are not applicable
to hospitals located in Puerto Rico until FY 2022, the adjustments
under this provision are not applicable for FY 2021.

C. Proposed Amendment To Address Short Cost Reporting Periods During
Applicable Timeframe for Establishment of Service Area for Sole
Community Hospitals Under Sec. 412.92(c)(3)

Sections 1886(d)(5)(D) and (d)(5)(G) of the Act provide special
payment protections under the IPPS to sole community hospitals (SCHs)
and Medicare-dependent, small rural hospitals (MDHs), respectively.
Section 1886(d)(5)(D)(iii) of the Act defines an SCH in part as a
hospital that the Secretary determines is located more than 35 road
miles from another hospital or that, by reason of factors such as
isolated location, weather conditions, travel conditions, or absence of
other like hospitals (as determined by the Secretary), is the sole
source of inpatient hospital services reasonably available to Medicare
beneficiaries. The regulations at 42 CFR 412.92 set forth the criteria
that a hospital must meet to be classified as a SCH. For more
information on SCHs, we refer readers to the FY 2009 IPPS/LTCH PPS
final rule (74 FR 43894 through 43897).
The criteria to be classified as an SCH are set forth at 42 CFR
412.92(a). Under the criteria at 42 CFR 412.92(a)(1)(i) and (ii), CMS
classifies a hospital as a sole community hospital if it is located:
(1) In a rural area; and (2) between 25 and 35 miles from other like
hospitals and meets one of the following criteria:
No more than 25 percent of residents who become hospital
inpatients or no more than 25 percent of the Medicare beneficiaries who
become hospital inpatients in the hospital's service area are admitted
to other like hospitals located within a 35-mile radius of the
hospital, or, if larger, within its service area.
The hospital has fewer than 50 beds and the MAC certifies
that the hospital would have met the previously discussed criteria were
it not for the fact that some beneficiaries or residents were forced to
seek care outside the service area due to the unavailability of
necessary specialty services at the community hospital.
The term ``service area'' is defined under the regulations at 42
CFR 412.92(c)(3) as the area from which a hospital draws at least 75
percent of its inpatients during the most recent 12-month cost
reporting period ending before it applies for classification as a sole
community hospital. For more information on service areas, we refer
readers to the FY 2002 IPPS final rule (66 FR 39875).
We have become aware of some situations where a hospital's most
recent cost reporting period prior to seeking SCH classification is a
short cost reporting period (that is, less than a 12-month cost
reporting period). We are therefore proposing to amend Sec.
412.92(c)(3) to clarify our policy in this situation. Specifically, we
are proposing to amend Sec. 412.92(c)(3) to reflect that where the
hospital's cost reporting period ending before it applies for
classification as a sole community hospital is for less than 12 months,
the hospital's most recent 12-month or longer cost reporting period
before the short period is used. We note that this policy is consistent
with our policy for determining Medicare utilization for purposes of
MDH classification, as reflected in the regulations at 42 CFR
412.108(a)(1)(v). We are inviting public comment on our proposed
amendment to Sec. 412.92(c)(3) to reflect our policy that if the
hospital's most recent cost reporting period is shorter than 12 months,
the next most recent cost reporting period is used to determine the
service area for purposes of SCH classification, provided it is at
least 12 months.

D. Rural Referral Centers (RRCs)--Proposed 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
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 special treatment under both the DSH payment
adjustment and the criteria for geographic reclassification.
Section 402 of Public Law 108-173 raised the DSH payment adjustment
for RRCs such that they are not subject to the 12-percent cap on DSH
payments that is applicable to other rural hospitals. RRCs also are not
subject to the proximity criteria when applying for geographic
reclassification. In addition, they do not have to meet the requirement
that a hospital's average hourly wage must exceed, by a certain
percentage, the average hourly wage of the labor market area in which
the hospital is located.
Section 4202(b) of Public Law 105-33 states, in part, that any
hospital classified as an RRC by the Secretary for FY 1991 shall be
classified as such an RRC for FY 1998 and each subsequent fiscal year.
In the August 29, 1997 IPPS final rule with comment period (62 FR
45999), we reinstated RRC status for all hospitals that lost that
status due to triennial review or MGCRB reclassification. However, we
did not reinstate the status of hospitals that lost RRC status because
they were now

[[Page 32741]]

urban for all purposes because of the OMB designation of their
geographic area as urban. Subsequently, in the August 1, 2000 IPPS
final rule (65 FR 47089), we indicated that we were revisiting that
decision. Specifically, we stated that we would permit hospitals that
previously qualified as an RRC and lost their status due to OMB
redesignation of the county in which they are located from rural to
urban, to be reinstated as an RRC. Otherwise, a hospital seeking RRC
status must satisfy all of the other applicable criteria. We use the
definitions of ``urban'' and ``rural'' specified in subpart D of 42 CFR
part 412. One of the criteria under which a hospital may qualify as an
RRC is to have 275 or more beds available for use (Sec.
412.96(b)(1)(ii)). A rural hospital that does not meet the bed size
requirement can qualify as an RRC if the hospital meets two mandatory
prerequisites (a minimum case-mix index (CMI) and a minimum number of
discharges), and at least one of three optional criteria (relating to
specialty composition of medical staff, source of inpatients, or
referral volume). (We refer readers to Sec. 412.96(c)(1) through (5)
and the September 30, 1988 Federal Register (53 FR 38513) for
additional discussion.) With respect to the two mandatory
prerequisites, a hospital may be classified as an RRC if--
The hospital's CMI is at least equal to the lower of the
median CMI for urban hospitals in its census region, excluding
hospitals with approved teaching programs, or the median CMI for all
urban hospitals nationally; and
The hospital's number of discharges is at least 5,000 per
year, or, if fewer, the median number of discharges for urban hospitals
in the census region in which the hospital is located. The number of
discharges criterion for an osteopathic hospital is at least 3,000
discharges per year, as specified in section 1886(d)(5)(C)(i) of the
Act.
1. Case-Mix Index (CMI)
Section 412.96(c)(1) provides that CMS establish updated national
and regional CMI values in each year's annual notice of prospective
payment rates for purposes of determining RRC status. The methodology
we used to determine the national and regional CMI values is set forth
in the regulations at Sec. 412.96(c)(1)(ii). The proposed national
median CMI value for FY 2021 is based on the CMI values of all urban
hospitals nationwide, and the proposed regional median CMI values for
FY 2021 are based on the CMI values of all urban hospitals within each
census region, excluding those hospitals with approved teaching
programs (that is, those hospitals that train residents in an approved
GME program as provided in Sec. 413.75). These proposed values are
based on discharges occurring during FY 2019 (October 1, 2018 through
September 30, 2019), and include bills posted to CMS' records through
December 2019.
In this FY 2021 IPPS/LTCH PPS proposed rule, we are proposing that,
in addition to meeting other criteria, if rural hospitals with fewer
than 275 beds are to qualify for initial RRC status for cost reporting
periods beginning on or after October 1, 2020, they must have a CMI
value for FY 2019 that is at least--
1.70435 (national--all urban); or
The median CMI value (not transfer-adjusted) for urban
hospitals (excluding hospitals with approved teaching programs as
identified in Sec. 413.75) calculated by CMS for the census region in
which the hospital is located.
The proposed median CMI values by region are set forth in this
table. We intend to update the proposed CMI values in the FY 2021 final
rule to reflect the updated FY 2019 MedPAR file, which will contain
data from additional bills received through March 2020.
[GRAPHIC] [TIFF OMITTED] TP29MY20.173

A hospital seeking to qualify as an RRC should obtain its hospital-
specific CMI value (not transfer-adjusted) from its MAC. Data are
available on the Provider Statistical and Reimbursement (PS&R) System.
In keeping with our policy on discharges, the CMI values are computed
based on all Medicare patient discharges subject to the IPPS MS-DRG-
based payment.
2. Discharges
Section 412.96(c)(2)(i) provides that CMS set forth the national
and regional numbers of discharges criteria in each year's annual
notice of prospective payment rates for purposes of determining RRC
status. As specified in section 1886(d)(5)(C)(ii) of the Act, the
national standard is set at 5,000 discharges. For FY 2021, we are
proposing to update the regional standards based on discharges for
urban hospitals' cost reporting periods that began during FY 2018 (that
is, October 1, 2017 through September 30, 2018), which are the latest
cost report data available at the time this proposed rule was
developed. Therefore, we are proposing that, in addition to meeting
other criteria, a hospital, if it is to qualify for initial RRC status
for cost reporting periods beginning on or after October 1, 2020, must
have, as the number of discharges for its cost reporting period that
began during FY 2018, at least--

[[Page 32742]]

5,000 (3,000 for an osteopathic hospital); or
If less, the median number of discharges for urban
hospitals in the census region in which the hospital is located. We
refer readers to the proposed numbers of discharges as set forth in
this table. We intend to update these numbers in the FY 2021 final rule
based on the latest available cost report data.
[GRAPHIC] [TIFF OMITTED] TP29MY20.174

We note that because the median number of discharges for hospitals
in each census region is greater than the national standard of 5,000
discharges, under this proposed rule, 5,000 discharges is the minimum
criterion for all hospitals, except for osteopathic hospitals for which
the minimum criterion is 3,000 discharges.
a. Proposed Amendment to Sec. 412.96(c)(2) for Hospital Cost Reporting
Periods That Are Longer or Shorter Than 12 Months
As previously noted, in addition to meeting other criteria, to
qualify for initial RRC status for cost reporting periods beginning on
or after October 1 of a given fiscal year, under Sec. 412.96(c)(2), a
hospital must meet the minimum number of discharges during its cost
reporting period that began during the same fiscal year as the cost
reporting periods used to compute the regional median discharges. We
typically use the cost reporting periods that are 3 years prior to the
fiscal year for which a hospital is seeking RRC status to compute the
regional median discharges, as these are generally the latest cost
report data available at the time of the development of the proposed
and final rules. For example, and as discussed previously, for FY 2021,
we are proposing to update the regional standards based on discharges
for urban hospitals' cost reporting periods that began during FY 2018.
We have become aware of situations where a hospital's cost
reporting period that began during the fiscal year used to compute the
regional median discharge values for a given fiscal year is a short
cost reporting period (that is, less than 12 months) and as a result,
the provider may not meet the minimum discharges requirement.
Conversely, there may also be situations where a hospital's cost
reporting period that began during the fiscal year used to compute the
regional median discharge values for a given fiscal year is a long cost
reporting period (that is, greater than 12 months). We are proposing to
amend the RRC regulations to add a new paragraph (c)(2)(iii) to Sec.
412.96 stating that if the hospital's cost reporting period that began
during the same fiscal year as the cost reporting periods used to
compute the regional median discharges is for less than 12 months or
longer than 12 months, the hospital's number of discharges for that
cost reporting period will be annualized to estimate the total number
of discharges for a 12 month cost reporting period. We believe this
policy, which is generally consistent with how we have addressed short
cost reporting periods for purposes of determining discharges for RRC
status in the past, provides a more level playing field for purposes of
determining the number of discharges for those hospitals for which the
applicable cost reporting period is shorter or longer than 12 months.
We are proposing that to annualize the discharges, the MAC would divide
the discharges by the number of days in the hospital's cost reporting
period and then multiply by the length of a full year (365 or 366
calendar days, as applicable) to estimate the total number of
discharges for a 12-month cost reporting period. For example, a short
cost reporting period beginning on January 1 and ending on October 31
that is 10 months (or 304 days) with 4,200 discharges would be
annualized in a non-leap year as follows: (4,200 / 304) x 365 = 5,043
discharges annualized. Under this proposal, if the hospital has
multiple cost reports beginning in the same fiscal year and none of
those cost reports are for 12 months, the hospital's number of
discharges in the hospital's longest cost report beginning in that
fiscal year would be annualized to estimate the total number of
discharges for a 12 month cost reporting period. We are inviting public
comment on our proposed annualization methodology and our proposed
amendment to Sec. 412.96(c)(2).

E. Proposed 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. The additional payment adjustment to a low-volume hospital
provided for under section 1886(d)(12) of the Act is in addition to any
payment calculated under section 1886 of the Act. 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.
As discussed in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41398
through 41399), section 50204 of the

[[Page 32743]]

Bipartisan Budget Act of 2018 (Pub. L. 115-123) modified the definition
of a low-volume hospital and the methodology for calculating the
payment adjustment for low-volume hospitals for FYs 2019 through 2022.
(Section 50204 also extended prior changes to the definition of a low-
volume hospital and the methodology for calculating the payment
adjustment for low-volume hospitals through FY 2018.) Currently, the
low-volume hospital qualifying criteria provide that a hospital must
have fewer 3,800 total discharges during the fiscal year, and the
hospital must be located more than 15 road miles from the nearest
``subsection (d)'' hospital. These criteria will remain in effect
through FY 2022. Beginning with FY 2023, the low-volume hospital
qualifying criteria and payment adjustment will revert to the statutory
requirements that were in effect prior to FY 2011. Therefore, in order
for a hospital to continue to qualify as a low-volume hospital on or
after October 1, 2022, it must have fewer 200 total discharges during
the fiscal year and be located more than 25 road miles from the nearest
``subsection (d)'' hospital (see Sec. 412.101(b)(2)(i)). (For
additional information on the low-volume hospital payment adjustment
prior to FY 2018, we refer readers to the FY 2017 IPPS/LTCH PPS final
rule (81 FR 56941 through 56943). For additional information on the
low-volume hospital payment adjustment for FY 2018, we refer readers to
the FY 2018 IPPS notice (CMS-1677-N) that appeared in the Federal
Register on April 26, 2018 (83 FR 18301 through 18308).)
2. Temporary Changes to the Low-Volume Hospital Definition and Payment
Adjustment Methodology for FYs 2019 Through 2022
As discussed earlier, section 50204 of the Bipartisan Budget Act of
2018 further modified the definition of a low-volume hospital and the
methodology for calculating the payment adjustment for low-volume
hospitals for FYs 2019 through 2022. Specifically, the qualifying
criteria for low-volume hospitals under section 1886(d)(12)(C)(i) of
the Act were amended to specify that, for FYs 2019 through 2022, 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 3,800 total discharges during the fiscal year. Section
1886(d)(12)(D) of the Act was also amended to provide that, for
discharges occurring in FYs 2019 through 2022, the Secretary shall
determine the applicable percentage increase using a continuous, linear
sliding scale ranging from an additional 25 percent payment adjustment
for low-volume hospitals with 500 or fewer discharges to a zero percent
additional payment for low-volume hospitals with more than 3,800
discharges in the fiscal year. Consistent with the requirements of
section 1886(d)(12)(C)(ii) of the Act, the term ``discharge'' for
purposes of these provisions refers to total discharges, regardless of
payer (that is, Medicare and non-Medicare discharges).
In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41399), to implement
this requirement, we specified a continuous, linear sliding scale
formula to determine the low-volume hospital payment adjustment for FYs
2019 through 2022 that is similar to the continuous, linear sliding
scale formula used to determine the low-volume hospital payment
adjustment originally established by the Affordable Care Act and
implemented in the regulations at Sec. 412.101(c)(2)(ii) in the FY
2011 IPPS/LTCH PPS final rule (75 FR 50240 through 50241). Consistent
with the statute, we provided that qualifying hospitals with 500 or
fewer total discharges will receive a low-volume hospital payment
adjustment of 25 percent. For qualifying hospitals with fewer than
3,800 discharges but more than 500 discharges, the low-volume payment
adjustment is calculated by subtracting from 25 percent the proportion
of payments associated with the discharges in excess of 500. As such,
for qualifying hospitals with fewer than 3,800 total discharges but
more than 500 total discharges, the low-volume hospital payment
adjustment for FYs 2019 through 2022 is calculated using the following
formula:

Low-Volume Hospital Payment Adjustment = 0.25-[0.25 / 3,300] x (number
of total discharges-500) = (95 / 330)-(number of total discharges /
13,200).

For this purpose, we specified that the ``number of total
discharges'' is determined as total discharges, which includes Medicare
and non-Medicare discharges during the fiscal year, based on the
hospital's most recently submitted cost report. The low-volume hospital
payment adjustment for FYs 2019 through 2022 is set forth in the
regulations at 42 CFR 412.101(c)(3).
3. Process for Requesting and Obtaining the Low-Volume Hospital Payment
Adjustment
In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50238 through 50275
and 50414) and subsequent rulemaking (for example, the FY 2019 IPPS/
LTCH PPS final rule (83 FR 41399 through 41401), we discussed the
process for requesting and obtaining the low-volume hospital payment
adjustment. Under this previously established process, a hospital makes
a written request for the low-volume payment adjustment under Sec.
412.101 to its MAC. This request must contain sufficient documentation
to establish that the hospital meets the applicable mileage and
discharge criteria. The MAC will determine if the hospital qualifies as
a low-volume hospital by reviewing the data the hospital submits with
its request for low-volume hospital status in addition to other
available data. Under this approach, a hospital will know in advance
whether or not it will receive a payment adjustment under the low-
volume hospital policy. The MAC and CMS may review available data such
as the number of discharges, 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 information on our existing process for requesting the
low-volume hospital payment adjustment, we refer readers to the FY 2019
IPPS/LTCH PPS final rule (83 FR 41399 through 41401).)
As explained earlier, for FY 2019 and subsequent fiscal years, the
discharge determination is made based on the hospital's number of total
discharges, that is, Medicare and non-Medicare discharges, as was the
case for FYs 2005 through 2010. Under Sec. 412.101(b)(2)(i) and Sec.
412.101(b)(2)(iii), a hospital's most recently submitted cost report is
used to determine if the hospital meets the discharge criterion to
receive the low-volume payment adjustment in the current year. As
discussed in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41399 and
41400), 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. (For
FYs 2011 through 2018, the most recently available MedPAR data were
used to determine the hospital's Medicare discharges because non-
Medicare discharges were not used to determine if a hospital met the
discharge criterion for those years.) Therefore, a hospital should
refer to its most recently submitted cost report for total discharges
(Medicare and non-Medicare) in order to decide whether or not to apply
for low-volume hospital status for a particular fiscal year.
As also discussed in the FY 2019 IPPS/LTCH PPS final rule, in
addition to the discharge criterion, for FY 2019

[[Page 32744]]

and for subsequent fiscal years, eligibility for the low-volume
hospital payment adjustment is also dependent upon the hospital meeting
the applicable mileage criterion specified in Sec. 412.101(b)(2)(i) or
(iii) for the fiscal year. Specifically, to meet the mileage criterion
to qualify for the low-volume hospital payment adjustment for FY 2021,
as was the case for FYs 2019 and 2020, a hospital must be located more
than 15 road miles from the nearest subsection (d) hospital. (We define
in Sec. 412.101(a) the term ``road miles'' to mean ``miles'' as
defined in Sec. 412.92(c)(1) (75 FR 50238 through 50275 and 50414).)
For establishing that the hospital meets the mileage criterion, the use
of a web-based mapping tool as part of the documentation is acceptable.
The MAC will determine if the information submitted by the hospital,
such as the name and street address of the nearest hospitals, location
on a map, and distance from the hospital requesting low-volume hospital
status, is sufficient to document that it meets the mileage criterion.
If not, the MAC will follow up with the hospital to obtain additional
necessary information to determine whether or not the hospital meets
the applicable mileage criterion.
In accordance with our previously established process, a hospital
must make a written request for low-volume hospital status that is
received by its MAC by September 1 immediately preceding the start of
the Federal fiscal year for which the hospital is applying for low-
volume hospital status in order for the applicable low-volume hospital
payment adjustment to be applied to payments for its discharges for the
fiscal year beginning on or after October 1 immediately following the
request (that is, the start of the Federal fiscal year). For a hospital
whose request for low-volume hospital status is received after
September 1, if the MAC determines the hospital meets the criteria to
qualify as a low-volume hospital, the MAC will apply the applicable
low-volume hospital payment adjustment to determine payment for the
hospital's discharges for the fiscal year, effective prospectively
within 30 days of the date of the MAC's low-volume status
determination.
Consistent with this previously established process, for FY 2021,
we are proposing that a hospital must submit a written request for low-
volume hospital status to its MAC that includes sufficient
documentation to establish that the hospital meets the applicable
mileage and discharge criteria (as described earlier). Consistent with
historical practice, for FY 2021, we are proposing that a hospital's
written request must be received by its MAC no later than September 1,
2020 in order for the low-volume hospital payment adjustment to be
applied to payments for its discharges beginning on or after October 1,
2020. If a hospital's written request for low-volume hospital status
for FY 2021 is received after September 1, 2020, and if the MAC
determines the hospital meets the criteria to qualify as a low-volume
hospital, the MAC would apply the low-volume hospital payment
adjustment to determine the payment for the hospital's FY 2021
discharges, effective prospectively within 30 days of the date of the
MAC's low-volume hospital status determination. We note that this
proposal is consistent with the process for requesting and obtaining
the low-volume hospital payment adjustment for FY 2020 (84 FR 42348
through 42349).
Under this process, a hospital receiving the low-volume hospital
payment adjustment for FY 2020 may continue to receive a low-volume
hospital payment adjustment for FY 2021 without reapplying if it
continues to meet the applicable mileage and discharge criteria (which,
as discussed previously, are the same qualifying criteria that apply
for FY 2020). In this case, a hospital's request can include a
verification statement that it continues to meet the mileage criterion
applicable for FY 2021. (Determination of meeting the discharge
criterion is discussed earlier in this section.) We note that a
hospital must continue to meet the applicable qualifying criteria as a
low-volume hospital (that is, the hospital must meet the applicable
discharge criterion and mileage criterion for the fiscal year) in order
to receive the payment adjustment in that fiscal year; that is, low-
volume hospital status is not based on a ``one-time'' qualification (75
FR 50238 through 50275). Consistent with historical policy, a hospital
must submit its request, including this written verification, for each
fiscal year for which it seeks to receive the low-volume hospital
payment adjustment, and in accordance with the timeline described
earlier.

F. Indirect Medical Education (IME) Payment Adjustment Factor (Sec.
412.105)

Under the IPPS, an additional payment amount is made to hospitals
with residents in an approved graduate medical education (GME) program
in order to reflect the higher indirect patient care costs of teaching
hospitals relative to nonteaching hospitals. The payment amount is
determined by use of a statutorily specified adjustment factor. The
regulations regarding the calculation of this additional payment, known
as the IME adjustment, are located at Sec. 412.105. We refer readers
to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51680) for a full
discussion of the IME adjustment and IME adjustment factor. Section
1886(d)(5)(B)(ii)(XII) of the Act provides that, for discharges
occurring during FY 2008 and fiscal years thereafter, the IME formula
multiplier is 1.35. Accordingly, for discharges occurring during FY
2021, the formula multiplier is 1.35. We estimate that application of
this formula multiplier for the FY 2021 IME adjustment will result in
an increase in IPPS payment of 5.5 percent for every approximately 10
percent increase in the hospital's resident-to-bed ratio.

G. Payment Adjustment for Medicare Disproportionate Share Hospitals
(DSHs) for FY 2021 (Sec. 412.106)

1. General Discussion
Section 1886(d)(5)(F) of the Act provides for additional Medicare
payments to subsection (d) hospitals that serve a significantly
disproportionate number of low-income patients. The Act specifies two
methods by which a hospital may qualify for the Medicare
disproportionate share hospital (DSH) adjustment. Under the first
method, hospitals that are located in an urban area and have 100 or
more beds may receive a Medicare DSH payment adjustment if the hospital
can demonstrate that, during its cost reporting period, more than 30
percent of its net inpatient care revenues are derived from State and
local government payments for care furnished to needy patients with low
incomes. This method is commonly referred to as the ``Pickle method.''
The second method for qualifying for the DSH payment adjustment, which
is the most common, is based on a complex statutory formula under which
the DSH payment adjustment is based on the hospital's geographic
designation, the number of beds in the hospital, and the level of the
hospital's disproportionate patient percentage (DPP). A hospital's DPP
is the sum of two fractions: the ``Medicare fraction'' and the
``Medicaid fraction.'' The Medicare fraction (also known as the ``SSI
fraction'' or ``SSI ratio'') is computed by dividing the number of the
hospital's inpatient days that are furnished to patients who were
entitled to both Medicare Part A and Supplemental Security Income (SSI)
benefits by the hospital's total number of patient days furnished to
patients entitled to benefits under Medicare Part A. The Medicaid
fraction is computed by dividing the hospital's number of inpatient
days furnished to patients

[[Page 32745]]

who, for such days, were eligible for Medicaid, but were not entitled
to benefits under Medicare Part A, by the hospital's total number of
inpatient days in the same period.
Because the DSH payment adjustment is part of the IPPS, the
statutory references to ``days'' in section 1886(d)(5)(F) of the Act
have been interpreted to apply only to hospital acute care inpatient
days. Regulations located at 42 CFR 412.106 govern the Medicare DSH
payment adjustment and specify how the DPP is calculated as well as how
beds and patient days are counted in determining the Medicare DSH
payment adjustment. Under Sec. 412.106(a)(1)(i), the number of beds
for the Medicare DSH payment adjustment is determined in accordance
with bed counting rules for the IME adjustment under Sec. 412.105(b).
Section 3133 of the Patient Protection and Affordable Care Act, as
amended by section 10316 of the same Act and section 1104 of the Health
Care and Education Reconciliation Act (Pub. L. 111-152), added a
section 1886(r) to the Act that modifies the methodology for computing
the Medicare DSH payment adjustment. (For purposes of this proposed
rule, we refer to these provisions collectively as section 3133 of the
Affordable Care Act.) Beginning with discharges in FY 2014, hospitals
that qualify for Medicare DSH payments under section 1886(d)(5)(F) of
the Act receive 25 percent of the amount they previously would have
received under the statutory formula for Medicare DSH payments. This
provision applies equally to hospitals that qualify for DSH payments
under section 1886(d)(5)(F)(i)(I) of the Act and those hospitals that
qualify under the Pickle method under section 1886(d)(5)(F)(i)(II) of
the Act.
The remaining amount, equal to an estimate of 75 percent of what
otherwise would have been paid as Medicare DSH payments, reduced to
reflect changes in the percentage of individuals who are uninsured, is
available to make additional payments to each hospital that qualifies
for Medicare DSH payments and that has uncompensated care. The payments
to each hospital for a fiscal year are based on the hospital's amount
of uncompensated care for a given time period relative to the total
amount of uncompensated care for that same time period reported by all
hospitals that receive Medicare DSH payments for that fiscal year.
As provided by section 3133 of the Affordable Care Act, section
1886(r) of the Act requires that, for FY 2014 and each subsequent
fiscal year, a subsection (d) hospital that would otherwise receive DSH
payments made under section 1886(d)(5)(F) of the Act receives two
separately calculated payments. Specifically, section 1886(r)(1) of the
Act provides that the Secretary shall pay to such subsection (d)
hospital (including a Pickle hospital) 25 percent of the amount the
hospital would have received under section 1886(d)(5)(F) of the Act for
DSH payments, which represents the empirically justified amount for
such payment, as determined by the MedPAC in its March 2007 Report to
Congress. We refer to this payment as the ``empirically justified
Medicare DSH payment.''
In addition to this empirically justified Medicare DSH payment,
section 1886(r)(2) of the Act provides that, for FY 2014 and each
subsequent fiscal year, the Secretary shall pay to such subsection (d)
hospital an additional amount equal to the product of three factors.
The first factor is the difference between the aggregate amount of
payments that would be made to subsection (d) hospitals under section
1886(d)(5)(F) of the Act if subsection (r) did not apply and the
aggregate amount of payments that are made to subsection (d) hospitals
under section 1886(r)(1) of the Act for such 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 FY 2018 and subsequent fiscal years, 1
minus the percent change in the percent of individuals who are
uninsured, as determined by comparing the percent of individuals who
were uninsured in 2013 (as estimated by the Secretary, based on data
from the Census Bureau or other sources the Secretary determines
appropriate, and certified by the Chief Actuary of CMS), and the
percent of individuals who were uninsured in the most recent period for
which data are available (as so estimated and certified), minus 0.2
percentage point for FYs 2018 and 2019.
The third factor is a percent that, for each subsection (d)
hospital, represents the quotient of the amount of uncompensated care
for such hospital for a period selected by the Secretary (as estimated
by the Secretary, based on appropriate data), including the use of
alternative data where the Secretary determines that alternative data
are available which are a better proxy for the costs of subsection (d)
hospitals for treating the uninsured, and the aggregate amount of
uncompensated care for all subsection (d) hospitals that receive a
payment under section 1886(r) of the Act. Therefore, this third factor
represents a hospital's uncompensated care amount for a given time
period relative to the uncompensated care amount for that same time
period for all hospitals that receive Medicare DSH payments in the
applicable fiscal year, expressed as a percent.
For each hospital, the product of these three factors represents
its additional payment for uncompensated care for the applicable fiscal
year. We refer to the additional payment determined by these factors as
the ``uncompensated care payment.''
Section 1886(r) of the Act applies to FY 2014 and each subsequent
fiscal year. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50620
through 50647) and the FY 2014 IPPS interim final rule with comment
period (78 FR 61191 through 61197), we set forth our policies for
implementing the required changes to the Medicare DSH payment
methodology made by section 3133 of the Affordable Care Act for FY
2014. In those rules, we noted that, because section 1886(r) of the Act
modifies the payment required under section 1886(d)(5)(F) of the Act,
it affects only the DSH payment under the operating IPPS. It does not
revise or replace the capital IPPS DSH payment provided under the
regulations at 42 CFR part 412, subpart M, which were established
through the exercise of the Secretary's discretion in implementing the
capital IPPS under section 1886(g)(1)(A) of the Act.
Finally, section 1886(r)(3) of the Act provides that there shall be
no administrative or judicial review under section 1869, section 1878,
or otherwise of any estimate of the Secretary for purposes of
determining the factors described in section 1886(r)(2) of the Act or
of any period selected by the Secretary for the purpose of determining
those factors. Therefore, there is no administrative or judicial review
of the estimates developed for purposes of applying the three factors
used to determine uncompensated care payments, or the periods selected
in order to develop such estimates.
2. Eligibility for Empirically Justified Medicare DSH Payments and
Uncompensated Care Payments
As explained earlier, the payment methodology under section 3133 of
the Affordable Care Act applies to ``subsection (d) hospitals'' that
would otherwise receive a DSH payment made under section 1886(d)(5)(F)
of the Act. Therefore, hospitals must receive empirically justified
Medicare DSH payments in a fiscal year in order to receive an
additional Medicare uncompensated care payment for that

[[Page 32746]]

year. Specifically, section 1886(r)(2) of the Act states that, in
addition to the payment made to a subsection (d) hospital under section
1886(r)(1) of the Act, the Secretary shall pay to such subsection (d)
hospitals an additional amount. Because section 1886(r)(1) of the Act
refers to empirically justified Medicare DSH payments, the additional
payment under section 1886(r)(2) of the Act is limited to hospitals
that receive empirically justified Medicare DSH payments in accordance
with section 1886(r)(1) of the Act for the applicable fiscal year.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50622) and the FY
2014 IPPS interim final rule with comment period (78 FR 61193), we
provided that hospitals that are not eligible to receive empirically
justified Medicare DSH payments in a fiscal year will not receive
uncompensated care payments for that year. We also specified that we
would make a determination concerning eligibility for interim
uncompensated care payments based on each hospital's estimated DSH
status for the applicable fiscal year (using the most recent data that
are available). We indicated that our final determination on the
hospital's eligibility for uncompensated care payments will be based on
the hospital's actual DSH status at cost report settlement for that
payment year.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50622) and in the
rulemaking for subsequent fiscal years, we have specified our policies
for several specific classes of hospitals within the scope of section
1886(r) of the Act. In this FY 2021 IPPS/LTCH PPS proposed rule), we
discuss our specific policies regarding eligibility to receive
empirically justified Medicare DSH payments and uncompensated care
payments for FY 2021 with respect to the following hospitals:
Subsection (d) Puerto Rico hospitals that are eligible for
DSH payments also are eligible to receive empirically justified
Medicare DSH payments and uncompensated care payments under the new
payment methodology (78 FR 50623 and 79 FR 50006).
Maryland hospitals are not eligible to receive empirically
justified Medicare DSH payments and uncompensated care payments under
the payment methodology of section 1886(r) of the Act because they are
not paid under the IPPS. As discussed in the FY 2019 IPPS/LTCH PPS
final rule (83 FR 41402 through 41403), CMS and the State have entered
into an agreement to govern payments to Maryland hospitals under a new
payment model, the Maryland Total Cost of Care (TCOC) Model, which
began on January 1, 2019. Under the Maryland TCOC Model, Maryland
hospitals will not be paid under the IPPS in FY 2021, and will be
ineligible to receive empirically justified Medicare DSH payments and
uncompensated care payments under section 1886(r) of the Act.
Sole community hospitals (SCHs) that are paid under their
hospital-specific rate are not eligible for Medicare DSH payments. SCHs
that are paid under the IPPS Federal rate receive interim payments
based on what we estimate and project their DSH status to be prior to
the beginning of the Federal fiscal year (based on the best available
data at that time) subject to settlement through the cost report, and
if they receive interim empirically justified Medicare DSH payments in
a fiscal year, they also will receive interim uncompensated care
payments for that fiscal year on a per discharge basis, subject as well
to settlement through the cost report. Final eligibility determinations
will be made at the end of the cost reporting period at settlement, and
both interim empirically justified Medicare DSH payments and
uncompensated care payments will be adjusted accordingly (78 FR 50624
and 79 FR 50007).
Medicare-dependent, small rural hospitals (MDHs) are paid
based on the IPPS Federal rate or, if higher, the IPPS Federal rate
plus 75 percent of the amount by which the Federal rate is exceeded by
the updated hospital-specific rate from certain specified base years
(76 FR 51684). The IPPS Federal rate that is used in the MDH payment
methodology is the same IPPS Federal rate that is used in the SCH
payment methodology. Section 50205 of the Bipartisan Budget Act of 2018
(Pub. L. 115-123), enacted on February 9, 2018, extended the MDH
program for discharges on or after October 1, 2017, through September
30, 2022. Because MDHs are paid based on the IPPS Federal rate, they
continue to be eligible to receive empirically justified Medicare DSH
payments and uncompensated care payments if their DPP is at least 15
percent, and we apply the same process to determine MDHs' eligibility
for empirically justified Medicare DSH and uncompensated care payments
as we do for all other IPPS hospitals. Due to the extension of the MDH
program, MDHs will continue to be paid based on the IPPS Federal rate
or, if higher, the IPPS Federal rate plus 75 percent of the amount by
which the Federal rate is exceeded by the updated hospital-specific
rate from certain specified base years. Accordingly, we will continue
to make a determination concerning eligibility for interim
uncompensated care payments based on each hospital's estimated DSH
status for the applicable fiscal year (using the most recent data that
are available). Our final determination on the hospital's eligibility
for uncompensated care payments will be based on the hospital's actual
DSH status at cost report settlement for that payment year. In
addition, as we do for all IPPS hospitals, we will calculate a Factor 3
and an uncompensated care payment amount for all MDHs, regardless of
whether they are projected to be eligible for Medicare DSH payments
during the fiscal year, but the denominator of Factor 3 of the
uncompensated care payment methodology will be based only on the
uncompensated care data from the hospitals that we have projected to be
eligible for Medicare DSH payments during the fiscal year.
IPPS hospitals that elect to participate in the Bundled
Payments for Care Improvement Advanced Initiative (BPCI Advanced) model
starting October 1, 2018, will continue to be paid under the IPPS and,
therefore, are eligible to receive empirically justified Medicare DSH
payments and uncompensated care payments. For further information
regarding the BPCI Advanced model, we refer readers to the CMS website
at: https://innovation.cms.gov/initiatives/bpci-advanced/.
IPPS hospitals that are participating in the Comprehensive
Care for Joint Replacement Model (80 FR 73300) continue to be paid
under the IPPS and, therefore, are eligible to receive empirically
justified Medicare DSH payments and uncompensated care payments.
Hospitals participating in the Rural Community Hospital
Demonstration Program are not eligible to receive empirically justified
Medicare DSH payments and uncompensated care payments under section
1886(r) of the Act because they are not paid under the IPPS (78 FR
50625 and 79 FR 50008). The Rural Community Hospital Demonstration
Program was originally authorized for a 5-year period by section 410A
of the Medicare Prescription Drug, Improvement, and Modernization Act
of 2003 (MMA) (Pub. L. 108-173), and extended for another 5-year period
by sections 3123 and 10313 of the Affordable Care Act (Pub. L. 114-
255). The period of performance for this 5-year extension period ended
December 31, 2016. Section 15003 of the 21st Century Cures Act (Pub. L.
114-255), enacted December 13, 2016, again amended section 410A of
Public Law 108-173 to require a 10-year extension period (in place of
the 5-year extension required by the Affordable Care Act),

[[Page 32747]]

therefore requiring an additional 5-year participation period for the
demonstration program. Section 15003 of Public Law 114-255 also
required a solicitation for applications for additional hospitals to
participate in the demonstration program. At the time of issuance of
this proposed rule, there are 27 hospitals participating in the
demonstration program. Under the payment methodology that applies
during the second 5 years of the extension period under the
demonstration program, participating hospitals do not receive
empirically justified Medicare DSH payments, and they are also excluded
from receiving interim and final uncompensated care payments.
3. Empirically Justified Medicare DSH Payments
As we have discussed earlier, section 1886(r)(1) of the Act
requires the Secretary to pay 25 percent of the amount of the Medicare
DSH payment that would otherwise be made under section 1886(d)(5)(F) of
the Act to a subsection (d) hospital. Because section 1886(r)(1) of the
Act merely requires the program to pay a designated percentage of these
payments, without revising the criteria governing eligibility for DSH
payments or the underlying payment methodology, we stated in the FY
2014 IPPS/LTCH PPS final rule that we did not believe that it was
necessary to develop any new operational mechanisms for making such
payments. Therefore, in the FY 2014 IPPS/LTCH PPS final rule (78 FR
50626), we implemented this provision by advising MACs to simply adjust
the interim claim payments to the requisite 25 percent of what would
have otherwise been paid. We also made corresponding changes to the
hospital cost report so that these empirically justified Medicare DSH
payments can be settled at the appropriate level at the time of cost
report settlement. We provided more detailed operational instructions
and cost report instructions following issuance of the FY 2014 IPPS/
LTCH PPS final rule that are available on the CMS website at: http://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2014-Transmittals-Items/R5P240.html.
4. Uncompensated Care Payments
As we discussed earlier, section 1886(r)(2) of the Act provides
that, for each eligible hospital in FY 2014 and subsequent years, the
uncompensated care payment is the product of three factors. These three
factors represent our estimate of 75 percent of the amount of Medicare
DSH payments that would otherwise have been paid, an adjustment to this
amount for the percent change in the national rate of uninsurance
compared to the rate of uninsurance in 2013, and each eligible
hospital's estimated uncompensated care amount relative to the
estimated uncompensated care amount for all eligible hospitals. In this
section of this proposed rule, we discuss the data sources and
methodologies for computing each of these factors, our final policies
for FYs 2014 through 2020, and our proposed policies for FY 2021.
a. Proposed Calculation of Factor 1 for FY 2021
Section 1886(r)(2)(A) of the Act establishes Factor 1 in the
calculation of the uncompensated care payment. Section 1886(r)(2)(A) of
the Act states that this factor is equal to the difference between: (1)
The aggregate amount of payments that would be made to subsection (d)
hospitals under section 1886(d)(5)(F) of the Act if section 1886(r) of
the Act did not apply for such fiscal year (as estimated by the
Secretary); and (2) the aggregate amount of payments that are made to
subsection (d) hospitals under section 1886(r)(1) of the Act for such
fiscal year (as so estimated). Therefore, section 1886(r)(2)(A)(i) of
the Act represents the estimated Medicare DSH payments that would have
been made under section 1886(d)(5)(F) of the Act if section 1886(r) of
the Act did not apply for such fiscal year. Under a prospective payment
system, we would not know the precise aggregate Medicare DSH payment
amount that would be paid for a Federal fiscal year until cost report
settlement for all IPPS hospitals is completed, which occurs several
years after the end of the Federal fiscal year. Therefore, section
1886(r)(2)(A)(i) of the Act provides authority to estimate this amount,
by specifying that, for each fiscal year to which the provision
applies, such amount is to be estimated by the Secretary. Similarly,
section 1886(r)(2)(A)(ii) of the Act represents the estimated
empirically justified Medicare DSH payments to be made in a fiscal
year, as prescribed under section 1886(r)(1) of the Act. Again, section
1886(r)(2)(A)(ii) of the Act provides authority to estimate this
amount.
Therefore, Factor 1 is the difference between our estimates of: (1)
The amount that would have been paid in Medicare DSH payments for the
fiscal year, in the absence of the new payment provision; and (2) the
amount of empirically justified Medicare DSH payments that are made for
the fiscal year, which takes into account the requirement to pay 25
percent of what would have otherwise been paid under section
1886(d)(5)(F) of the Act. In other words, this factor represents our
estimate of 75 percent (100 percent minus 25 percent) of our estimate
of Medicare DSH payments that would otherwise be made, in the absence
of section 1886(r) of the Act, for the fiscal year.
As we did for FY 2020, in this FY 2021 IPPS/LTCH PPS proposed rule,
in order to determine Factor 1 in the uncompensated care payment
formula for FY 2021, we are proposing to continue the policy
established in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50628
through 50630) and in the FY 2014 IPPS interim final rule with comment
period (78 FR 61194) of determining Factor 1 by developing estimates of
both the aggregate amount of Medicare DSH payments that would be made
in the absence of section 1886(r)(1) of the Act and the aggregate
amount of empirically justified Medicare DSH payments to hospitals
under 1886(r)(1) of the Act. Consistent with the policy that has
applied in previous years, these estimates will not be revised or
updated subsequent to the publication of our final projections in the
FY 2021 IPPS/LTCH PPS final rule.
Therefore, in order to determine the two elements of proposed
Factor 1 for FY 2021 (Medicare DSH payments prior to the application of
section 1886(r)(1) of the Act, and empirically justified Medicare DSH
payments after application of section 1886(r)(1) of the Act), for this
proposed rule, we used the most recently available projections of
Medicare DSH payments for the fiscal year, as calculated by CMS' Office
of the Actuary using the most recently filed Medicare hospital cost
reports with Medicare DSH payment information and the most recent
Medicare DSH patient percentages and Medicare DSH payment adjustments
provided in the IPPS Impact File. The determination of the amount of
DSH payments is partially based on the Office of the Actuary's Part A
benefits projection model. One of the results of this model is
inpatient hospital spending. Projections of DSH payments require
projections for expected increases in utilization and case-mix. The
assumptions that were used in making these projections and the
resulting estimates of DSH payments for FY 2018 through FY 2021 are
discussed in the table titled ``Factors Applied for FY 2018 through FY
2021 to Estimate Medicare DSH Expenditures Using FY 2017 Baseline.''
For purposes of calculating Factor 1 and modeling the impact of
this FY 2021 IPPS/LTCH PPS proposed rule, we

[[Page 32748]]

used the Office of the Actuary's December 2019 Medicare DSH estimates,
which were based on data from the September 2019 update of the Medicare
Hospital Cost Report Information System (HCRIS) and the FY 2020 IPPS/
LTCH PPS final rule IPPS Impact File, published in conjunction with the
publication of the FY 2020 IPPS/LTCH PPS final rule. Because SCHs that
are projected to be paid under their hospital-specific rate are
excluded from the application of section 1886(r) of the Act, these
hospitals also were excluded from the December 2019 Medicare DSH
estimates. Furthermore, because section 1886(r) of the Act specifies
that the uncompensated care payment is in addition to the empirically
justified Medicare DSH payment (25 percent of DSH payments that would
be made without regard to section 1886(r) of the Act), Maryland
hospitals, which are not eligible to receive DSH payments, were also
excluded from the Office of the Actuary's December 2019 Medicare DSH
estimates. The 27 hospitals that are participating in the Rural
Community Hospital Demonstration Program were also excluded from these
estimates because, under the payment methodology that applies during
the second 5 years of the extension period, these hospitals are not
eligible to receive empirically justified Medicare DSH payments or
interim and final uncompensated care payments.
For this proposed rule, using the data sources as previously
discussed, the Office of the Actuary's December 2019 estimate for
Medicare DSH payments for FY 2021 without regard to the application of
section 1886(r)(1) of the Act, is approximately $14.004 billion.
Therefore, also based on the December 2019 estimate, the estimate of
empirically justified Medicare DSH payments for FY 2021, with the
application of section 1886(r)(1) of the Act, is approximately $3.840
billion (or 25 percent of the total amount of estimated Medicare DSH
payments for FY 2021). Under Sec. 412.106(g)(1)(i) of the regulations,
Factor 1 is the difference between these two estimates of the Office of
the Actuary. Therefore, in this proposed rule, we are proposing that
Factor 1 for FY 2021 would be $11,518,901,035.84, which is equal to 75
percent of the total amount of estimated Medicare DSH payments for FY
2021 ($15,358,534,714.46 minus $3,839,633,678.61). We note that
consistent with our approach in previous rulemakings, OACT intends to
use more recent data that may become available for purposes of
projecting the final Factor 1 estimates for the FY 2021 IPPS/LTCH PPS
final rule.
The Factor 1 estimates for proposed rules are generally consistent
with the economic assumptions and actuarial analysis used to develop
the President's Budget estimates under current law, and the Factor 1
estimates for the final rule are generally consistent with those used
for the Midsession Review of the President's Budget. As we have in the
past, for additional information on the development of the President's
Budget, we refer readers to the Office of Management and Budget website
at: https://www.whitehouse.gov/omb/budget. We recognize that our
reliance on the economic assumptions and actuarial analysis used to
develop the President's Budget in estimating Factor 1 has an impact on
stakeholders who wish to replicate the Factor 1 calculation, such as
modelling the relevant Medicare Part A portion of the budget, but we
believe commenters are able to meaningfully comment on our proposed
estimate of Factor 1 without replicating the President's Budget.
For a general overview of the principal steps involved in
projecting future inpatient costs and utilization, we refer readers to
the ``2019 Annual Report of the Boards of Trustees of the Federal
Hospital Insurance and Federal Supplementary Medical Insurance Trust
Funds'' available on the CMS website at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/index.html?redirect=/reportstrustfunds/ under
``Downloads.'' We note that the annual reports of the Medicare Boards
of Trustees to Congress represent the Federal Government's official
evaluation of the financial status of the Medicare Program. The
actuarial projections contained in these reports are based on numerous
assumptions regarding future trends in program enrollment, utilization
and costs of health care services covered by Medicare, as well as other
factors affecting program expenditures. In addition, although the
methods used to estimate future costs based on these assumptions are
complex, they are subject to periodic review by independent experts to
ensure their validity and reasonableness.
We also refer readers to the 2017 Actuarial Report on the Financial
Outlook for Medicaid for a discussion of general issues regarding
Medicaid projections. (available at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/MedicaidReport).
In this proposed rule, we include information regarding the data
sources, methods, and assumptions employed by the actuaries in
determining the OACT's estimate of Factor 1. In summary, we indicate
the historical HCRIS data update OACT used to identify Medicare DSH
payments, we explain that the most recent Medicare DSH payment
adjustments provided in the IPPS Impact File were used, and we provide
the components of all the update factors that were applied to the
historical data to estimate the Medicare DSH payments for the upcoming
fiscal year, along with the associated rationale and assumptions. This
discussion also includes a description of the ``Other'' and
``Discharges'' assumptions, and also provides additional information
regarding how we address the Medicaid and CHIP expansion.
The Office of the Actuary's estimates for FY 2021 for this proposed
rule began with a baseline of $14.004 billion in Medicare DSH
expenditures for FY 2017. The following table shows the factors applied
to update this baseline through the current estimate for FY 2021:

[[Page 32749]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.175

In this table, the discharges column shows the increase in the
number of Medicare fee-for-service (FFS) inpatient hospital discharges.
The figures for FY 2018 are based on Medicare claims data that have
been adjusted by a completion factor to account for incomplete claims
data. The discharge figure for FY 2019 is based on preliminary data for
2019. The discharge figures for FY 2020 and FY 2021 are assumptions
based on recent trends recovering back to the long-term trend and
assumptions related to how many beneficiaries will be enrolled in
Medicare Advantage (MA) plans. The case-mix column shows the increase
in case-mix for IPPS hospitals. The case-mix figures for FY 2018 and FY
2019 are based on actual data adjusted by a completion factor. The FY
2020 and FY 2021 increases are estimates based on the recommendation of
the 2010-2011 Medicare Technical Review Panel. The ``Other'' column
shows the increase in other factors that contribute to the Medicare DSH
estimates. These factors include the difference between the total
inpatient hospital discharges and the IPPS discharges, and various
adjustments to the payment rates that have been included over the years
but are not reflected in the other columns (such as the change in rates
for the 2-midnight stay policy). In addition, the ``Other'' column
includes a factor for the Medicaid expansion due to the Affordable Care
Act. The factor for Medicaid expansion was developed using public
information and statements for each State regarding its intent to
implement the expansion. Based on this information, it is assumed that
55 percent of all individuals who were potentially newly eligible
Medicaid enrollees in 2018 resided in States that had elected to expand
Medicaid eligibility and, for 2020 and thereafter, that 58 percent of
such individuals would reside in expansion States. In the future, these
assumptions may change based on actual participation by States. For a
discussion of general issues regarding Medicaid projections, we refer
readers to the 2017 Actuarial Report on the Financial Outlook for
Medicaid, which is available on the CMS website at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/Downloads/MedicaidReport2017.pdf. We note that, in
developing their estimates of the effect of Medicaid expansion on
Medicare DSH expenditures, our actuaries have assumed that the new
Medicaid enrollees are healthier than the average Medicaid recipient
and, therefore, use fewer hospital services. Specifically, based on
data from the President's Budget, the OACT assumed per capita spending
for Medicaid beneficiaries who enrolled due to the expansion to be 50
percent of the average per capita expenditures for a pre-expansion
Medicaid beneficiary due to the better health of these beneficiaries.
This assumption is consistent with recent internal estimates of
Medicaid per capita spending pre-expansion and post-expansion.
The following table shows the factors that are included in the
``Update'' column of the previous table:
[GRAPHIC] [TIFF OMITTED] TP29MY20.176

b. Calculation of Proposed Factor 2 for FY 2021
(1) Background
Section 1886(r)(2)(B) of the Act establishes Factor 2 in the
calculation of the uncompensated care payment. Section
1886(r)(2)(B)(ii) of the Act provides that, for FY 2018 and subsequent
fiscal years, the second factor is 1 minus the percent change in the
percent of individuals who are uninsured, as determined by comparing
the percent of individuals who were uninsured in 2013 (as estimated by
the Secretary, based on data from the Census Bureau or other sources
the Secretary determines appropriate, and certified by the Chief
Actuary of CMS)

[[Page 32750]]

and the percent of individuals who were uninsured in the most recent
period for which data are available (as so estimated and certified),
minus 0.2 percentage point for FYs 2018 and 2019. In FY 2020 and
subsequent fiscal years, there is no longer a reduction. We note that,
unlike section 1886(r)(2)(B)(i) of the Act, which governed the
calculation of Factor 2 for FYs 2014, 2015, 2016, and 2017, section
1886(r)(2)(B)(ii) of the Act permits the use of a data source other
than the CBO estimates to determine the percent change in the rate of
uninsurance beginning in FY 2018. In addition, for FY 2018 and
subsequent years, the statute does not require that the estimate of the
percent of individuals who are uninsured be limited to individuals who
are under 65 years of age.
As we discussed in the FY 2018 IPPS/LTCH PPS final rule (82 FR
38197), in our analysis of a potential data source for the rate of
uninsurance for purposes of computing Factor 2 in FY 2018, we
considered the following: (a) The extent to which the source accounted
for the full U.S. population; (b) the extent to which the source
comprehensively accounted for both public and private health insurance
coverage in deriving its estimates of the number of uninsured; (c) the
extent to which the source utilized data from the Census Bureau; (d)
the timeliness of the estimates; (e) the continuity of the estimates
over time; (f) the accuracy of the estimates; and (g) the availability
of projections (including the availability of projections using an
established estimation methodology that would allow for calculation of
the rate of uninsurance for the applicable Federal fiscal year). As we
explained in the FY 2018 IPPS/LTCH PPS final rule, these considerations
are consistent with the statutory requirement that this estimate be
based on data from the Census Bureau or other sources the Secretary
determines appropriate and help to ensure the data source will provide
reasonable estimates for the rate of uninsurance that are available in
conjunction with the IPPS rulemaking cycle. We are proposing to use the
same methodology as was used in FY 2018 through FY 2020 to determine
Factor 2 for FY 2021.
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38197 and 38198), we
explained that we determined the source that, on balance, best meets
all of these considerations is the uninsured estimates produced by CMS'
Office of the Actuary (OACT) as part of the development of the National
Health Expenditure Accounts (NHEA). The NHEA represents the
government's official estimates of economic activity (spending) within
the health sector. The information contained in the NHEA has been used
to study numerous topics related to the health care sector, including,
but not limited to, changes in the amount and cost of health services
purchased and the payers or programs that provide or purchase these
services; the economic causal factors at work in the health sector; the
impact of policy changes, including major health reform; and
comparisons to other countries' health spending. Of relevance to the
determination of Factor 2 is that the comprehensive and integrated
structure of the NHEA creates an ideal tool for evaluating changes to
the health care system, such as the mix of the insured and uninsured,
because this information is integral to the well-established NHEA
methodology. In this section of this proposed rule, we describe some
aspects of the methodology used to develop the NHEA that were
particularly relevant in estimating the percent change in the rate of
uninsurance for FY 2018 through FY 2020 that we believe continue to be
relevant in developing the estimate for FY 2021. A full description of
the methodology used to develop the NHEA is available on the CMS
website at: https://www.cms.gov/files/document/definitions-sources-and-methods.pdf.
The NHEA estimates of U.S. population reflect the Census Bureau's
definition of the resident-based population, which includes all people
who usually reside in the 50 States or the District of Columbia, but
excludes residents living in Puerto Rico and areas under U.S.
sovereignty, members of the U.S. Armed Forces overseas, and U.S.
citizens whose usual place of residence is outside of the United
States, plus a small (typically less than 0.2 percent of population)
adjustment to reflect Census undercounts. In past years, the estimates
for Factor 2 were made using the CBO's uninsured population estimates
for the under 65 population. For FY 2018 and subsequent years, the
statute does not restrict the estimate to the measurement of the
percent of individuals under the age of 65 who are uninsured.
Accordingly, as we explained in the FY 2018 IPPS/LTCH PPS proposed and
final rules, we believe it is appropriate to use an estimate that
reflects the rate of uninsurance in the United States across all age
groups. In addition, we continue to believe that a resident-based
population estimate more fully reflects the levels of uninsurance in
the United States that influence uncompensated care for hospitals than
an estimate that reflects only legal residents. The NHEA estimates of
uninsurance are for the total U.S. population (all ages) and not by
specific age cohort, such as the population under the age of 65.
The NHEA includes comprehensive enrollment estimates for total
private health insurance (PHI) (including direct and employer-sponsored
plans), Medicare, Medicaid, the Children's Health Insurance Program
(CHIP), and other public programs, and estimates of the number of
individuals who are uninsured. Estimates of total PHI enrollment are
available for 1960 through 2018, estimates of Medicaid, Medicare, and
CHIP enrollment are available for the length of the respective
programs, and all other estimates (including the more detailed
estimates of direct-purchased and employer-sponsored insurance) are
available for 1987 through 2018. The NHEA data are publicly available
on the CMS website at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/index.html.
In order to compute Factor 2, the first metric that is needed is
the proportion of the total U.S. population that was uninsured in 2013.
In developing the estimates for the NHEA, OACT's methodology included
using the number of uninsured individuals for 1987 through 2009 based
on the enhanced Current Population Survey (CPS) from the State Health
Access Data Assistance Center (SHADAC). The CPS, sponsored jointly by
the U.S. Census Bureau and the U.S. Bureau of Labor Statistics (BLS),
is the primary source of labor force statistics for the population of
the United States. (We refer readers to the website at: http://www.census.gov/programs-surveys/cps.html.) The enhanced CPS, available
from SHADAC (available at: http://datacenter.shadac.org) accounts for
changes in the CPS methodology over time. OACT further adjusts the
enhanced CPS for an estimated undercount of Medicaid enrollees (a
population that is often not fully captured in surveys that include
Medicaid enrollees due to a perceived stigma associated with being
enrolled in the Medicaid program or confusion about the source of their
health insurance).
To estimate the number of uninsured individuals for 2010 through
2018, the OACT extrapolates from the 2009 CPS data using data from the
National Health Interview Survey (NHIS). The NHIS is one of the major
data collection programs of the National Center for Health Statistics
(NCHS), which is part of the Centers for Disease Control and Prevention
(CDC). The U.S. Census Bureau is the data collection agent for

[[Page 32751]]

the NHIS. The NHIS results have been instrumental over the years in
providing data to track health status, health care access, and progress
toward achieving national health objectives. For further information
regarding the NHIS, we refer readers to the CDC website at: https://www.cdc.gov/nchs/nhis/index.htm.
The next metrics needed to compute Factor 2 are projections of the
rate of uninsurance in both CY 2020 and CY 2021. On an annual basis,
OACT projects enrollment and spending trends for the coming 10-year
period. Those projections (currently for years 2019 through 2028) use
the latest NHEA historical data, which presently run through 2018. The
NHEA projection methodology accounts for expected changes in enrollment
across all of the categories of insurance coverage previously listed.
The sources for projected growth rates in enrollment for Medicare,
Medicaid, and CHIP include the latest Medicare Trustees Report, the
Medicaid Actuarial Report, or other updated estimates as produced by
OACT. Projected rates of growth in enrollment for private health
insurance and the uninsured are based largely on OACT's econometric
models, which rely on the set of macroeconomic assumptions underlying
the latest Medicare Trustees Report. Greater detail can be found in
OACT's report titled ``Projections of National Health Expenditure:
Methodology and Model Specification,'' which is available on the CMS
website at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/ProjectionsMethodology.pdf.
The use of data from the NHEA to estimate the rate of uninsurance
is consistent with the statute and meets the criteria we have
identified for determining the appropriate data source. Section
1886(r)(2)(B)(ii) of the Act instructs the Secretary to estimate the
rate of uninsurance for purposes of Factor 2 based on data from the
Census Bureau or other sources the Secretary determines appropriate.
The NHEA utilizes data from the Census Bureau; the estimates are
available in time for the IPPS rulemaking cycle; the estimates are
produced by OACT on an annual basis and are expected to continue to be
produced for the foreseeable future; and projections are available for
calendar year time periods that span the upcoming fiscal year.
Timeliness and continuity are important considerations because of our
need to be able to update this estimate annually. Accuracy is also a
very important consideration and, all things being equal, we would
choose the most accurate data source that sufficiently meets our other
criteria.
(2) Proposed Factor 2 for FY 2021
Using these data sources and the previously described
methodologies, the OACT estimates that the uninsured rate for the
historical, baseline year of 2013 was 14 percent and for CYs 2020 and
2021 is 9.5 percent and 9.5 percent, respectively.\462\ As required by
section 1886(r)(2)(B)(ii) of the Act, the Chief Actuary of CMS has
certified these estimates.
As with the CBO estimates on which we based Factor 2 in prior
fiscal years, the NHEA estimates are for a calendar year. In the
rulemaking for FY 2014, many commenters noted that the uncompensated
care payments are made for the fiscal year and not on a calendar year
basis and requested that CMS normalize the CBO estimate to reflect a
fiscal year basis. Specifically, commenters requested that CMS
calculate a weighted average of the CBO estimate for October through
December 2013 and the CBO estimate for January through September 2014
when determining Factor 2 for FY 2014. We agreed with the commenters
that normalizing the estimate to cover FY 2014 rather than CY 2014
would more accurately reflect the rate of uninsurance that hospitals
would experience during the FY 2014 payment year. Accordingly, we
estimated the rate of uninsurance for FY 2014 by calculating a weighted
average of the CBO estimates for CY 2013 and CY 2014 (78 FR 50633). We
have continued this weighted average approach of rate of uninsurance
projections for each Federal fiscal year since the FY 2014 IPPS/LTCH
PPS final rule.
We continue to believe that, in order to estimate the rate of
uninsurance during a fiscal year more accurately, Factor 2 should
reflect the estimated rate of uninsurance that hospitals will
experience during the fiscal year, rather than the rate of uninsurance
during only one of the calendar years that the fiscal year spans.
Accordingly, we are proposing to continue to apply the weighted average
approach used in past fiscal years in order to estimate the rate of
uninsurance for FY 2021. The OACT has certified this estimate of the
fiscal year rate of uninsurance to be reasonable and appropriate for
purposes of section 1886(r)(2)(B)(ii) of the Act. We may also consider
the use of more recent data that may become available for purposes of
estimating the rates of uninsurance used in the calculation of the
final Factor 2 for FY 2021.
The calculation of the proposed Factor 2 for FY 2021 using a
weighted average of the OACT's projections for CY 2020 and CY 2021 is
as follows:
Percent of individuals without insurance for CY 2013: 14
percent.
Percent of individuals without insurance for CY 2020: 9.5
percent.
Percent of individuals without insurance for CY 2021: 9.5
percent.
Percent of individuals without insurance for FY 2021 (0.25
times 0.095) + (0.75 times 0.095): 9.5 percent.

1-[bond]((0.095-0.14)/0.14)[bond] = 1-0.3214 = 0.6786 (67.86 percent).

For FY 2020 and subsequent fiscal years, section 1886(r)(2)(B)(ii)
of the Act no longer includes any reduction to the previous
calculation. Therefore, we are proposing that Factor 2 for FY 2021
would be 67.86 percent.
The proposed FY 2021 uncompensated care amount is
$15,358,534,714.46x x 0.6786 = $7,816,726,242.92.
[GRAPHIC] [TIFF OMITTED] TP29MY20.177

We are inviting public comments on our proposed methodology for
calculating Factor 2 for FY 2021.
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\462\ Certification of Rates of Uninsured. April 3, 2020.
Available at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInPatientPPS/dsh.html.
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c. Calculation of Proposed Factor 3 for FY 2021
(1) General Background
Section 1886(r)(2)(C) of the Act defines Factor 3 in the
calculation of the uncompensated care payment. As we have discussed
earlier, section 1886(r)(2)(C) of the Act states that Factor 3 is equal
to the percent, for each subsection (d) hospital, that represents the
quotient of: (1) The amount of uncompensated care for such hospital for
a period selected by the Secretary (as estimated by the Secretary,
based on appropriate data (including, in the case where the Secretary
determines alternative data are available that are a

[[Page 32752]]

better proxy for the costs of subsection (d) hospitals for treating the
uninsured, the use of such alternative data)); and (2) the aggregate
amount of uncompensated care for all subsection (d) hospitals that
receive a payment under section 1886(r) of the Act for such period (as
so estimated, based on such data).
Therefore, Factor 3 is a hospital-specific value that expresses the
proportion of the estimated uncompensated care amount for each
subsection (d) hospital and each subsection (d) Puerto Rico hospital
with the potential to receive Medicare DSH payments relative to the
estimated uncompensated care amount for all hospitals estimated to
receive Medicare DSH payments in the fiscal year for which the
uncompensated care payment is to be made. Factor 3 is applied to the
product of Factor 1 and Factor 2 to determine the amount of the
uncompensated care payment that each eligible hospital will receive for
FY 2014 and subsequent fiscal years. In order to implement the
statutory requirements for this factor of the uncompensated care
payment formula, it was necessary to determine: (1) The definition of
uncompensated care or, in other words, the specific items that are to
be included in the numerator (that is, the estimated uncompensated care
amount for an individual hospital) and the denominator (that is, the
estimated uncompensated care amount for all hospitals estimated to
receive Medicare DSH payments in the applicable fiscal year); (2) the
data source(s) for the estimated uncompensated care amount; and (3) the
timing and manner of computing the quotient for each hospital estimated
to receive Medicare DSH payments. The statute instructs the Secretary
to estimate the amounts of uncompensated care for a period based on
appropriate data. In addition, we note that the statute permits the
Secretary to use alternative data in the case where the Secretary
determines that such alternative data are available that are a better
proxy for the costs of subsection (d) hospitals for treating
individuals who are uninsured.
In the course of considering how to determine Factor 3 during the
rulemaking process for FY 2014, the first year this provision was in
effect, we considered defining the amount of uncompensated care for a
hospital as the uncompensated care costs of that hospital and
determined that Worksheet S-10 of the Medicare cost report potentially
provides the most complete data regarding uncompensated care costs for
Medicare hospitals. However, because of concerns regarding variations
in the data reported on Worksheet S-10 and the completeness of these
data, we did not use Worksheet S-10 data to determine Factor 3 for FY
2014, or for FYs 2015, 2016, or 2017. Instead, we believed that the
utilization of insured low-income patients, as measured by patient
days, would be a better proxy for the costs of hospitals in treating
the uninsured and therefore appropriate to use in calculating Factor 3
for these years. Of particular importance in our decision making was
the relative newness of Worksheet S-10, which went into effect on May
1, 2010. At the time of the rulemaking for FY 2014, the most recent
available cost reports would have been from FYs 2010 and 2011, which
were submitted on or after May 1, 2010, when the new Worksheet S-10
went into effect. We believed that concerns about the standardization
and completeness of the Worksheet S-10 data could be more acute for
data collected in the first year of the Worksheet's use (78 FR 50635).
In addition, we believed that it would be most appropriate to use data
elements that have been historically publicly available, subject to
audit, and used for payment purposes (or that the public understands
will be used for payment purposes) to determine the amount of
uncompensated care for purposes of Factor 3 (78 FR 50635). At the time
we issued the FY 2014 IPPS/LTCH PPS final rule, we did not believe that
the available data regarding uncompensated care from Worksheet S-10 met
these criteria and, therefore, we believed they were not reliable
enough to use for determining FY 2014 uncompensated care payments. For
FYs 2015, 2016, and 2017, the cost reports used for calculating
uncompensated care payments (that is, FYs 2011, 2012, and 2013) were
also submitted prior to the time that hospitals were on notice that
Worksheet S-10 could be the data source for calculating uncompensated
care payments. Therefore, we believed it was also appropriate to use
proxy data to calculate Factor 3 for these years. We indicated our
belief that Worksheet S-10 could ultimately serve as an appropriate
source of more direct data regarding uncompensated care costs for
purposes of determining Factor 3 once hospitals were submitting more
accurate and consistent data through this reporting mechanism.
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38202), we stated
that we could no longer conclude that alternative data to the Worksheet
S-10 are available for FY 2014 that are a better proxy for the costs of
subsection (d) hospitals for treating individuals who are uninsured.
Hospitals were on notice as of FY 2014 that Worksheet S-10 could
eventually become the data source for CMS to calculate uncompensated
care payments. Furthermore, hospitals' cost reports from FY 2014 had
been publicly available for some time, and CMS had analyses of
Worksheet S-10, conducted both internally and by stakeholders,
demonstrating that Worksheet S-10 accuracy had improved over time.
Analyses performed by MedPAC had already shown that the correlation
between audited uncompensated care data from 2009 and the data from the
FY 2011 Worksheet S-10 was over 0.80, as compared to a correlation of
approximately 0.50 between the audited uncompensated care data and 2011
Medicare SSI and Medicaid days. Based on this analysis, MedPAC
concluded that use of Worksheet S-10 data was already better than using
Medicare SSI and Medicaid days as a proxy for uncompensated care costs,
and that the data on Worksheet S-10 would improve over time as the data
are actually used to make payments (81 FR 25090). In addition, a 2007
MedPAC analysis of data from the Government Accountability Office (GAO)
and the American Hospital Association (AHA) had suggested that Medicaid
days and low-income Medicare days are not an accurate proxy for
uncompensated care costs (80 FR 49525).
Subsequent analyses from Dobson/DaVanzo, originally commissioned by
CMS for the FY 2014 rulemaking and updated in later years, compared
Worksheet S-10 and IRS Form 990 data and assessed the correlation in
Factor 3s derived from each of the data sources. Our analyses on
balance led us to believe that we had reached a tipping point in FY
2018 with respect to the use of the Worksheet S-10 data. We refer
readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38201 through
38203) for a complete discussion of these analyses.
We found further evidence for this tipping point when we examined
changes to the FY 2014 Worksheet S-10 data submitted by hospitals
following the publication of the FY 2017 IPPS/LTCH PPS final rule. In
the FY 2017 IPPS/LTCH PPS final rule, as part of our ongoing quality
control and data improvement measures for the Worksheet S-10, we
referred readers to Change Request 9648, Transmittal 1681, titled ``The
Supplemental Security Income (SSI)/Medicare Beneficiary Data for Fiscal
Year 2014 for Inpatient Prospective Payment System (IPPS) Hospitals,
Inpatient Rehabilitation Facilities (IRFs), and Long Term Care

[[Page 32753]]

Hospitals (LTCHs),'' issued on July 15, 2016 (available at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Downloads/R1681OTN.pdf). In this transmittal, as part of the process for ensuring
complete submission of Worksheet S-10 by all eligible DSH hospitals, we
instructed MACs to accept amended Worksheets S-10 for FY 2014 cost
reports submitted by hospitals (or initial submissions of Worksheet S-
10 if none had been submitted previously) and to upload them to the
Health Care Provider Cost Report Information System (HCRIS) in a timely
manner. The transmittal stated that, for revisions to be considered,
hospitals were required to submit their amended FY 2014 cost report
containing the revised Worksheet S-10 (or a completed Worksheet S-10 if
no data were included on the previously submitted cost report) to the
MAC no later than September 30, 2016. For the FY 2018 IPPS/LTCH PPS
proposed rule (82 FR 19949 through 19950), we examined hospitals' FY
2014 cost reports to see if the Worksheet S-10 data on those cost
reports had changed as a result of the opportunity for hospitals to
submit revised Worksheet S-10 data for FY 2014. Specifically, we
compared hospitals' FY 2014 Worksheet S-10 data as they existed in the
first quarter of CY 2016 with data from the fourth quarter of CY 2016.
We found that the FY 2014 Worksheet S-10 data had changed over that
time period for approximately one quarter of hospitals that receive
uncompensated care payments. The fact that the Worksheet S-10 data
changed for such a significant number of hospitals following a review
of the cost report data they originally submitted and that the revised
Worksheet S-10 information is available to be used in determining
uncompensated care costs contributed to our belief that we could no
longer conclude that alternative data are available that are a better
proxy than the Worksheet S-10 data for the costs of subsection (d)
hospitals for treating individuals who are uninsured.
We also recognized commenters' concerns that, in using Medicaid
days as part of the proxy for uncompensated care, it would be possible
for hospitals in States that choose to expand Medicaid to receive
higher uncompensated care payments because they may have more Medicaid
patient days than hospitals in a State that does not choose to expand
Medicaid. Because the earliest Medicaid expansions under the Affordable
Care Act began in 2014, the 2011, 2012, and 2013 Medicaid days used to
calculate uncompensated care payments in FYs 2015, 2016, and 2017 are
the latest available data on Medicaid utilization that do not reflect
the effects of these Medicaid expansions. Accordingly, if we had used
only low-income insured days to estimate uncompensated care for FY
2018, we would have needed to hold the time period of these data
constant and use data on Medicaid days from 2011, 2012, and 2013 in
order to avoid the risk of any redistributive effects arising from the
decision to expand Medicaid in certain States. As a result, we would
have been using older data that may provide a less accurate proxy for
the level of uncompensated care being furnished by hospitals,
contributing to our growing concerns regarding the continued use of
low-income insured days as a proxy for uncompensated care costs in FY
2018.
To address concerns raised by commenters regarding a lack of clear
and concise line level instructions, CMS issued Transmittal 10, which
clarified and revised the instructions for reporting charity care on
Worksheet S-10. For a discussion of the revisions and clarifications
included in Transmittal 10, we refer the reader to the FY 2020 IPPS/
LTCH PPS final rule (84 FR 42360). On September 29, 2017, we issued
Transmittal 11, which clarified the definitions and instructions for
uncompensated care, non-Medicare bad debt, non-reimbursed Medicare bad
debt, and charity care, as well as modifying the calculations relative
to uncompensated care costs and adding edits to ensure the integrity of
the data reported on Worksheet S-10. Transmittal 11 is available for
download on the CMS website at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2017Downloads/R11p240.pdf. We further
clarified that full or partial discounts given to uninsured patients
who meet the hospital's charity care policy or financial assistance
policy/uninsured discount policy (hereinafter referred to as Financial
Assistance Policy or FAP) may be included on Line 20, Column 1 of
Worksheet S-10. These clarifications applied to cost reporting periods
beginning on or after October 1, 2013. We also modified the application
of the CCR. We specified that the CCR will not be applied to the
deductible and coinsurance amounts for insured patients approved for
charity care and non-reimbursed Medicare bad debt. The CCR will be
applied to the charges for uninsured patients approved for charity care
or an uninsured discount, non-Medicare bad debt, and charges for
noncovered days exceeding a length of stay limit imposed on patients
covered by Medicaid or other indigent care programs. As discussed in
more detail in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42360 and
42361), we have also provided opportunities for hospitals to submit
revisions to their Worksheet S-10 data for FY 2014 and FY 2015 cost
reports.
As discussed in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41424),
due to the overwhelming feedback from commenters emphasizing the
importance of audits in ensuring the accuracy and consistency of data
reported on the Worksheet S-10, we expected to begin audits of the
Worksheet S-10 in the Fall of 2018. The audit protocol instructions
were still under development at the time of the FY 2019 IPPS/LTCH PPS
final rule; yet, we noted the audit protocols would be provided to the
MACs in advance of the audit. Once the audit protocol instructions were
complete, we began auditing the Worksheet S-10 data for selected
hospitals in the Fall of 2018 so that the audited uncompensated care
data from these hospitals would be available in time for use in the FY
2020 IPPS/LTCH PPS proposed rule. The audits began with 1 year of data
(that is, FY 2015 cost reports) in order to maximize the available
audit resources and not spread those audit resources over multiple
years, potentially diluting their effectiveness. We chose to begin the
audits with the FY 2015 cost reports primarily because this was the
most recent year of data that we had broadly allowed to be resubmitted
by hospitals, and many hospitals had already made considerable efforts
to amend their FY 2015 reports in preparation for the FY 2019
rulemaking. We also considered that we had used the FY 2015 data as
part of the calculation of the FY 2019 uncompensated care payments;
therefore, the data had been subject to public comment and scrutiny.
(2) Background on the Methodology Used To Calculate Factor 3 for FY
2020
Section 1886(r)(2)(C) of the Act governs both the selection of the
data to be used in calculating Factor 3, and also allows the Secretary
the discretion to determine the time periods from which we will derive
the data to estimate the numerator and the denominator of the Factor 3
quotient. Specifically, section 1886(r)(2)(C)(i) of the Act defines the
numerator of the quotient as the amount of uncompensated care for such
hospital for a period selected by the Secretary. Section
1886(r)(2)(C)(ii) of the Act defines the denominator as the aggregate
amount of uncompensated care for all subsection (d) hospitals that
receive a

[[Page 32754]]

payment under section 1886(r) of the Act for such period. In the FY
2014 IPPS/LTCH PPS final rule (78 FR 50638), we adopted a process of
making interim payments with final cost report settlement for both the
empirically justified Medicare DSH payments and the uncompensated care
payments required by section 3133 of the Affordable Care Act.
Consistent with that process, we also determined the time period from
which to calculate the numerator and denominator of the Factor 3
quotient in a way that would be consistent with making interim and
final payments. Specifically, we must have Factor 3 values available
for hospitals that we estimate will qualify for Medicare DSH payments
and for those hospitals that we do not estimate will qualify for
Medicare DSH payments but that may ultimately qualify for Medicare DSH
payments at the time of cost report settlement.
In the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19418 and 19419),
we proposed to use audited FY 2015 data to calculate Factor 3 for FY
2020. Given that we had conducted audits of the FY 2015 Worksheet S-10
data and had previously used the FY 2015 data to determine
uncompensated care payments, and the fact that the FY 2015 data were
the most recent data that we had allowed to be resubmitted to date, we
believed, on balance, that the FY 2015 Worksheet S-10 data were the
best available data to use for calculating Factor 3 for FY 2020.
In the FY 2020 IPPS/LTCH PPS proposed rule, we recognized that, for
FY 2019, we used 3 years of data in the calculation of Factor 3 in
order to smooth over anomalies between cost reporting periods and to
mitigate undue fluctuations in the amount of uncompensated care
payments from year to year. However, we stated that, for FY 2020, we
believed mixing audited and unaudited data for individual hospitals by
averaging multiple years of data could potentially lead to a less
smooth result, which would be counter to our original goal in using 3
years of data. As we stated in the FY 2020 IPPS/LTCH PPS proposed rule,
to the extent that the audited FY 2015 data for a hospital are
relatively different from its unaudited FY 2014 data and/or its
unaudited FY 2016 data, we potentially would be diluting the effect of
our considerable auditing efforts and introducing unnecessary
variability into the calculation if we continued to use 3 years of data
to calculate Factor 3. As an example, we noted that approximately 10
percent of audited hospitals had more than a $20 million difference
between their audited FY 2015 data and their unaudited FY 2016 data.
Although we proposed to use the Worksheet S-10 data from the FY
2015 cost reports to calculate Factor 3 for FY 2020, we acknowledged
that some hospitals had raised concerns regarding some of the
adjustments made to the FY 2015 cost reports following the audits of
those cost reports (for example adjustments made to Line 22 of
Worksheet S-10). In particular, hospitals had raised concerns regarding
the instructions in effect for FY 2015, especially compared to the
reporting instructions that were effective for cost reporting periods
beginning on or after October 1, 2016, contending that some adjustments
would not have been made if CMS had chosen as an alternative to audit
the FY 2017 reports. Accordingly, we sought public comments on whether
the changes in the reporting instructions between the FY 2015 cost
reports and the FY 2017 cost reports had resulted in a better common
understanding among hospitals of how to report uncompensated care costs
and improved relative consistency and accuracy across hospitals in
reporting these costs. We also sought public comments on whether, due
to the changes in the reporting instructions, we should use a single
year of uncompensated care cost data from the FY 2017 reports, instead
of the FY 2015 reports, to calculate Factor 3 for FY 2020.
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42368), we finalized
our proposal to use the FY 2015 Worksheet S-10 cost report data in the
methodology for determining Factor 3 for FY 2020. Although some
commenters expressed support for the alternative policy of using the FY
2017 Worksheet S-10 data to determine each hospital's share of
uncompensated care costs in FY 2020, given the feedback from commenters
in response to both the FY 2019 and FY 2020 IPPS/LTCH PPS proposed
rules, emphasizing the importance of audits in ensuring the accuracy
and consistency of data reported on the Worksheet S-10, we concluded
that the FY 2015 Worksheet S-10 data were the best available audited
data to be used in determining Factor 3 for FY 2020. We also noted that
we had begun auditing the FY 2017 data in July 2019, with the goal of
having the FY 2017 audited data available for future rulemaking.
With respect to the Worksheet S-10 data, we indicated our belief
that the definition of uncompensated care adopted in FY 2018 was still
appropriate because it incorporates the most commonly used factors
within uncompensated care as reported by stakeholders, including
charity care costs and non-Medicare bad debt costs. Therefore, for
purposes of calculating Factor 3 and uncompensated care costs for FY
2020, we again defined ``uncompensated care'' as the amount on Line 30
of Worksheet S-10, which is the cost of charity care (Line 23) and the
cost of non-Medicare bad debt and non-reimbursable Medicare bad debt
(Line 29).
In the FY 2020 IPPS/LTCH PPS final rule, we continued to apply the
following policies as part of the Factor 3 methodology: (1) The merger
policies that were initially adopted in the FY 2015 IPPS/LTCH PPS final
rule (79 FR 50020); (2) the policy for providers with multiple cost
reports, beginning in the same fiscal year, of using the longest cost
report and annualizing Medicaid data and uncompensated care data if a
hospital's cost report does not equal 12 months of data; (3) the policy
for the rare cases where a provider has multiple cost reports,
beginning in the same fiscal year, but one report also spans the
entirety of the following fiscal year, such that the hospital has no
cost report for that fiscal year, of using the cost report that spans
both fiscal years for the latter fiscal year; and (4) the policies
regarding the application of statistical trim methodologies to
potentially aberrant CCRs and potentially aberrant uncompensated care
costs reported on the Worksheet S-10.
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 19419), we finalized
a modified new hospital policy for new hospitals that did not have data
for the cost reporting period(s) used in the Factor 3 calculation for
FY 2020. Generally, new hospitals do not yet have available data to
project their eligibility for DSH payments because there is a lag until
the SSI ratio and Medicaid ratio become available. However, we noted
that there are some hospitals (that is, hospitals with CCNs established
after October 1, 2015) that have a preliminary projection of being
eligible for DSH payments based on their most recent available
disproportionate patient percentages. Under the modified policy adopted
for FY 2020, new hospitals that are eligible for Medicare DSH may
receive interim empirically justified DSH payments. However, because
these hospitals do not have a FY 2015 cost report to use in the Factor
3 calculation and the projection of eligibility for DSH payments is
still preliminary, the MAC will make a final determination concerning
whether the hospital is eligible to receive Medicare DSH payments at
cost report settlement based on its FY 2020 cost report. If the

[[Page 32755]]

hospital is ultimately determined to be eligible for Medicare DSH
payments for FY 2020, the hospital will receive an uncompensated care
payment calculated using a Factor 3, where the numerator is the
uncompensated care costs reported on Worksheet S-10 of the hospital's
FY 2020 cost report, and the denominator is the sum of the
uncompensated care costs reported on Worksheet S-10 of the FY 2015 cost
reports for all DSH-eligible hospitals. In the FY 2020 IPPS/LTCH PPS
final rule, we noted that, given the time period of the data used to
calculate Factor 3, any hospitals with a CCN established after October
1, 2015, would be considered new and subject to this policy in FY 2020.
For a discussion of the policy that we finalized for FY 2020 for
new Puerto Rico hospitals, we refer readers to the FY 2020 IPPS/LTCH
PPS final rule (84 FR 42370 and 42371). In brief, Puerto Rico hospitals
that do not have a FY 2013 cost report are considered new hospitals and
subject to the new hospital policy, as previously discussed.
Specifically, the numerator of the Factor 3 calculation will be the
uncompensated care costs reported on Worksheet S-10 of the hospital's
FY 2020 cost report and the denominator is the same denominator that is
determined prospectively for purposes of determining Factor 3 for all
DSH-eligible hospitals. We stated that we believe the discussion in the
FY 2020 IPPS/LTCH PPS proposed rule of our intent to determine Factor 3
for these hospitals using their uncompensated care costs gave new
Puerto Rico hospitals sufficient time to take the steps necessary to
ensure that their uncompensated care costs for FY 2020 are accurately
reported on their FY 2020 Worksheet S-10. In addition, we indicated
that we expect MACs to review FY 2020 reports from new hospitals, as
necessary, which will address past commenters' concerns regarding the
need for further review of Puerto Rico hospitals' uncompensated care
data before these data are used to determine Factor 3.
In the FY 2020 IPPS/LTCH PPS final rule (83 FR 42371), for Indian
Health Service and Tribal hospitals, and subsection (d) Puerto Rico
hospitals that have a FY 2013 cost report, we continued the policy we
first adopted for FY 2018 of substituting data regarding FY 2013 low-
income insured days for the Worksheet S-10 data when determining Factor
3. As we discussed in the FY 2018 IPPS/LTCH PPS final rule (82 FR
38209), the use of data from Worksheet S-10 to calculate the
uncompensated care amount for Indian Health Service and Tribal
hospitals may jeopardize these hospitals' uncompensated care payments
due to their unique funding structure. With respect to Puerto Rico
hospitals that would not be subject to the new hospital policy, we
indicated that we continued to agree with concerns raised by commenters
that the uncompensated care data reported by these hospitals need to be
further examined before the data are used to determine Factor 3.
Accordingly, for these hospitals, we determined Factor 3 based on
Medicaid days from FY 2013 and the most recent update of SSI days. The
aggregated amount of uncompensated care that is used in the Factor 3
denominator for these hospitals continued to be based on the low-income
patient proxy; that is, the aggregate amount of uncompensated care
determined for all DSH-eligible hospitals using the low-income insured
days proxy. We stated our belief that this approach was appropriate as
the FY 2013 data reflect the most recent available information
regarding these hospitals' low-income insured days before any expansion
of Medicaid. In addition, because we continued to use 1 year of insured
low-income patient days as a proxy for uncompensated care for Puerto
Rico hospitals and residents of Puerto Rico are not eligible for SSI
benefits, we continued to use a proxy for SSI days for Puerto Rico
hospitals consisting of 14 percent of the hospital's Medicaid days, as
finalized in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56953 through
56956).
Therefore, for FY 2020, we computed Factor 3 for each hospital by--
Step 1: Selecting the provider's longest cost report from its
Federal fiscal year (FFY) 2015 cost reports. (Alternatively, in the
rare case when the provider has no FFY 2015 cost report because the
cost report for the previous Federal fiscal year spanned the FFY 2015
time period, the previous Federal fiscal year cost report would be used
in this step.)
Step 2: Annualizing the uncompensated care costs (UCC) from
Worksheet S-10 Line 30, if the cost report is more than or less than 12
months. (If applicable, use the statewide average CCR (urban or rural)
to calculate uncompensated care costs.)
Step 3: Combining annualized uncompensated care costs for hospitals
that merged.
Step 4: Calculating Factor 3 for Indian Health Service and Tribal
hospitals and Puerto Rico hospitals that have a FY 2013 cost report
using the low-income insured days proxy based on FY 2013 cost report
data and the most recent available SSI ratio (or, for Puerto Rico
hospitals, 14 percent of the hospital's FY 2013 Medicaid days).
(Alternatively, in the rare case when the provider has no FFY
applicable cost report because the cost report for the previous Federal
fiscal year spanned the time period, the previous Federal fiscal year
cost report would be used in this step.) The denominator is calculated
using the low-income insured days proxy data from all DSH eligible
hospitals. Consistent with the policy adopted in the FY 2019 IPPS/LTCH
PPS final rule, if a hospital did not have both Medicaid days for FY
2013 and SSI days for FY 2017 available for use in the calculation of
Factor 3 in Step 4, we considered the hospital not to have data
available for Step 4.
Step 5: Calculating Factor 3 for the remaining DSH eligible
hospitals using annualized uncompensated care costs (Worksheet S-10
Line 30) based on FY 2015 cost report data (from Step 3). The hospitals
for which Factor 3 was calculated in Step 4 are excluded from this
calculation.
We amended the regulations at Sec. 412.106 by adding a new
paragraph (g)(1)(iii)(C)(6) to reflect the methodology for computing
Factor 3 for FY 2020.
(3) Proposed Methodology for Calculating Factor 3 for FY 2021 and
Subsequent Fiscal Years
(a) Proposal To Use Audited FY 2017 Data To Calculate Factor 3 for FY
2021
Since the publication of the FY 2020 IPPS/LTCH PPS final rule, we
have continued to monitor the reporting of Worksheet S-10 data in order
to determine the most appropriate data to use in the calculation of
Factor 3 for FY 2021. Audits of FY 2017 cost reports began in June 2019
and those audited reports are now available, in time for the
development of this proposed rule. Feedback from the audits of the FY
2015 reports and lessons learned were incorporated into the audit
process for the FY 2017 reports. We again chose to audit 1 year of data
(that is, FY 2017) in order to maximize the available audit resources
and not spread those audit resources over multiple years, potentially
diluting their effectiveness.
Given that the FY 2017 Worksheet S-10 data were submitted under the
revised cost reporting instructions that were effective on October 1,
2017, and we have also undertaken provider outreach regarding
potentially aberrant data in FY 2017 reports and conducted audits of
these data (84 FR 42371), we believe, on balance, that the FY 2017
Worksheet S-10 data are the best available data to use for calculating

[[Page 32756]]

Factor 3 for FY 2021. For a detailed discussion of the cost reporting
instruction changes between FY 2015 and FY 2017 reports, we refer the
reader to the FY 2020 IPPS/LTCH PPS final rule (84 FR 42368 and 42369).
For the reasons discussed in the FY 2020 IPPS/LTCH PPS proposed and
final rules (84 FR 19419 and 84 FR 42364), we continue to believe that
mixing audited and unaudited data for individual hospitals by averaging
multiple years of data could potentially lead to a less smooth result.
To the extent that the audited FY 2017 data for a hospital are
relatively different from its FY 2015 data (whether audited or
unaudited) and/or its unaudited FY 2016 data, we potentially would be
diluting the effect of the revisions to the cost reporting instructions
and our considerable auditing efforts, while introducing unnecessary
variability into the calculation if we were to use multiple years of
data to calculate Factor 3 for FY 2021. We recognize that the FY 2015
reports include audited data for some hospitals, however, the FY 2017
cost reports are the most recent year of audited data and, as
previously discussed reflect the revisions to the Worksheet S-10 cost
report instructions that were effective on October 1, 2017.
Accordingly, we are proposing to use a single year of Worksheet S-
10 data from FY 2017 cost reports to calculate Factor 3 in the FY 2021
methodology for all eligible hospitals with the exception of Indian
Health Service (IHS) and Tribal hospitals and Puerto Rico hospitals. As
discussed in a later section, we are proposing to continue to use the
low-income insured days proxy to calculate Factor 3 for these hospitals
for one more year. We note that the proposed uncompensated care
payments to hospitals whose FY 2017 Worksheet S-10 data have been
audited represent approximately 65 percent of the proposed total
uncompensated care payments for FY 2021. For purposes of this FY 2021
proposed rule, we have used a HCRIS extract updated through February
19, 2020. We note that we intend to use the March 2020 update of HCRIS
for the FY 2021 final rule and the respective March updates for all
future final rules. However, we invite the public to submit comments on
this intention regarding the use of the March update of HCRIS, and we
may also consider the use of more recent data that may become available
after March 2020, but prior to the development of the final rule, if
appropriate, for purposes of calculating the final Factor 3 for
purposes of the FY 2021 IPPS/LTCH PPS final rule.
(b) Proposal To Use Most Recent Available Single Year of Audited
Worksheet S-10 Data To Calculate Factor 3 for All Subsequent Fiscal
Years
While the number of audited hospitals may change from year to year
depending on audit experience and the availability of audit resources,
we expect the Worksheet S-10 data for an increasing number of hospitals
will be audited in future cost reporting years. As a result, we have
confidence that the best available data in future years will be the
Worksheet S-10 data for cost reporting years for which audits have been
conducted. In addition, we believe that establishing a policy that
would apply not only for FY 2021, but also for all subsequent fiscal
years would help providers have greater predictability for planning
purposes. Therefore, we are proposing that for FY 2022 and all
subsequent fiscal years, we would use the most recent single year of
cost report data that have been audited for a significant number of
hospitals receiving substantial Medicare uncompensated care payments to
calculate Factor 3 for all eligible hospitals, with the exception of
Indian Health Service and Tribal hospitals. We note that we intend to
consider the comments received on this proposed rule, and may revisit
this proposal for FY 2022 and subsequent fiscal years either in the
final rule or through future rulemaking.
Given the unique nature of IHS and Tribal Hospitals and of the
patient populations they serve, we believe it may be appropriate to
restructure Medicare DSH payments and uncompensated care payments to
these hospitals beginning in FY 2022. As discussed in prior rulemaking
(for example, 82 FR 38188), the principal mission of the IHS is the
provision of health care to American Indians and Alaska Natives
throughout the United States. In carrying out that mission, IHS
operates under two primary authorizing statutes. The first statute, the
Snyder Act, authorizes IHS to expend such moneys as Congress may
determine from time to time appropriate for the conservation of the
health of American Indians or Alaska Natives. We refer readers to 25
U.S.C. 13 (providing that the Bureau of Indian Affairs (BIA) will
expend funds as appropriated for, among other things, the conservation
of health of American Indians and Alaska Natives); and 42 U.S.C.
2001(a) (transferring the responsibility for American Indian and Alaska
Native health care from BIA to HHS). The second statute, the Indian
Health Care Improvement Act (IHCIA), established IHS as an agency
within the Public Health Service of HHS and provides authority for
numerous programs to address particular health initiatives for American
Indians and Alaska Natives, such as alcohol and substance abuse and
diabetes (25 U.S.C. 1601 et seq.). IHS and Tribal hospitals are charged
with addressing the health of American Indians and Alaska Natives and
are uniquely situated to provide services to this population.
When Congress was considering reductions to the Medicare DSH
payments and the creation of the Medicare uncompensated care payments
under section 3133 the Affordable Care Act, one significant source of
available information was the analysis done by the Medicare Payment
Advisory Commission (MedPAC) in its March 2007 Report to the Congress.
We note that section 1886(r)(1) of the Act explicitly refers to this
March 2007 Report to Congress as the basis for reducing DSH payments to
25 percent of the amount that would otherwise be paid under section
1886(d)(5)(F) of the Act. We have reviewed MedPAC's analysis in the
March 2007 Report to Congress and it is not apparent that MedPAC was
focused on the unique aspects of IHS and Tribal hospitals described
above when developing its recommendations for possible changes to DSH
payments. Rather, it appears that MedPAC's analysis was focused on
broader underlying issues and hospitals more generally.
Given the unique nature of IHS and Tribal hospitals, and the fact
that we do not believe that the DSH analysis available to Congress at
the time section 3133 of the Affordable Care Act was being developed
was focused on the specific circumstances of these hospitals, we
believe it may be appropriate, beginning in FY 2022, to use our
authority under section 1886(d)(5)(I)(i) of the Act to create an
exception for IHS and Tribal hospitals from Medicare DSH payments under
1886(d)(5)(F), as amended by section 3133 of the Affordable Care Act.
This exception would also have the consequence that IHS and Tribal
hospitals would be excluded from the calculation of Medicare
uncompensated care payments under 1886(r). Concurrently, we believe it
may be appropriate to use our authority under section 1886(d)(5)(I)(i)
to adjust payments to IHS and Tribal hospitals through the creation of
a new IHS and Tribal hospital Medicare DSH payment. The methodology for
determining this IHS and Tribal hospital Medicare DSH payment would
mirror the calculation of the Medicare DSH payment under

[[Page 32757]]

1886(d)(5)(F) except that the payment would be determined at 100
percent of the calculated amount rather than 25 percent of the
calculated amount as required under section 3133 of the Affordable Care
Act. We seek comment on this potential restructuring of the Medicare
DSH and uncompensated care payments to IHS and Tribal hospitals
beginning in FY 2022. We also intend to consider input received on this
issue through consultation with IHS and Tribal hospitals.
(c) Proposed Definition of ``Uncompensated Care''
We continue to believe that the definition of ``uncompensated
care'' first adopted in FY 2018 when we started to incorporate data
from Worksheet S-10 into the determination of Factor 3 and that was
used again in both FY 2019 and FY 2020 is appropriate, as it
incorporates the most commonly used factors within uncompensated care
as reported by stakeholders, namely, charity care costs and bad debt
costs, and correlates to Line 30 of Worksheet S-10. Therefore, we are
proposing that, for purposes of determining uncompensated care costs
and calculating Factor 3 for FY 2021 and subsequent fiscal years,
``uncompensated care'' would continue to be defined as the amount on
Line 30 of Worksheet S-10, which is the cost of charity care (Line 23)
and the cost of non-Medicare bad debt and non-reimbursable Medicare bad
debt (Line 29). We refer readers to the FY 2020 IPPS/LTCH PPS rule (84
FR 42369 and 42370), for a detailed discussion of additional topics
related to definition of uncompensated care.
In the FY 2020 IPPS/LTCH PPS final rule, we stated that, we would
attempt to address commenters' concerns regarding the Worksheet S-10
through future cost report clarifications to further improve and refine
the information that is reported on Worksheet S-10 in order to support
collection of the information necessary to implement section 1886(r)(2)
of the Act. (84 FR 42370). We note that the Paper Reduction Act (PRA)
package for Form CMS-2552-10 (OMB Control Number 0938-0050, expiration
date March 31, 2022) offers an additional opportunity to comment on the
cost reporting instructions. For further information regarding PRA, we
refer the reader to the CMS website at: https://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995.
(d) Proposed Changes to the Methodology for Calculating Factor 3 for FY
2021 and Subsequent Fiscal Years
The proposed changes to the methodology for calculating Factor 3
include the following:
Merger Multiplier for Acquired Hospital Data
In the FY 2015 IPPS/LTCH PPS final rule, we defined a merger as an
acquisition where the Medicare provider agreement of one hospital is
subsumed into the provider agreement of the surviving provider (79 FR
50020). In that final rule, we adopted a policy for calculating Factor
3 for hospitals that undergo a merger during or after the time period
of the data that is used in the Factor 3 calculations, as well as a
separate policy for a merger that occurs after the development of the
final rule for the applicable fiscal year. A proposed policy for newly
merged hospitals is discussed in the next section. In the FY 2019 IPPS/
LTCH PPS final rule, we finalized a policy for determining the
uncompensated care costs of hospitals that have multiple cost reporting
periods starting in the same fiscal year of using the longest cost
report beginning in the applicable fiscal year and annualizing the
uncompensated care data if a hospital's cost report does not equal 12
months of data (83 FR 41427). This policy applied for all hospitals,
including those involved in a merger. However, taking into
consideration past comments regarding mergers, including comments on
the FY 2019 IPPS/LTCH PPS proposed rule which suggested that we not
annualize the uncompensated care costs data provided in short cost
reporting periods for acquired hospitals because their uncompensated
care costs for the remaining part of year are included in the new
combined hospital's cost report (83 FR 41427), we are proposing to
modify the annualization policy that was finalized in FY 2019 with
respect to merged hospitals.
We note that for most mergers, the effective date of the merger
coincides with the cost reporting end date for the hospital that is
being acquired. In effect, this means that the FY 2015 merger policy of
combining uncompensated care costs (UCC) across CCNs results in adding
together data reported on the cost report for two different CCNs (the
acquired hospital and the surviving hospital) to estimate the merged
hospital's post-merger total UCC. For mergers with a recent merger
effective date, such as a merger in Federal fiscal year 2019 (that is,
a merger after the period of the FY 2017 cost reports we are proposing
to use for the Factor 3 calculation), we continue to believe the
current policy of annualizing and combining across historical cost
reports produces the best available estimate for post-merger total UCC.
For example, if the acquired hospital's FY 2017 cost report includes
less than 12 months of data, we would annualize the data to reflect a
full 12 months of data. Similarly, in this example, if the surviving
hospital's cost report includes less than 12 months of data, we would
annualize its uncompensated care data. However, as discussed below, we
are proposing a modification to this policy when the merger effective
date occurs partway through the surviving hospital's cost reporting
period.
In some mergers, the merger effective date does not coincide with
the start date for the surviving hospital's cost reporting period. When
the merger effective date does not coincide with the start date of the
surviving hospital's cost reporting period, the policy of annualizing
the acquired hospital's data before combining data across hospital cost
reports could substantially overestimate the acquired hospital's UCC,
given that the surviving hospital's cost report reflects the UCC
incurred by the acquired hospital during the portion of the year after
the merger effective date. In other words, when the merger effective
date is partway through the surviving hospital's cost reporting period,
annualizing acquired hospital's data may double-count UCC for the
portion of the year that overlaps with the remainder of the surviving
hospital's cost reporting period.
Accordingly, when the merger effective date occurs partway through
the surviving hospital's cost reporting period, to more accurately
estimate UCC for the hospitals involved in a merger, we are proposing
not to annualize the acquired hospital's data. Further, we are
proposing to use only the portion of the acquired hospital's
unannualized UCC data that reflects the UCC incurred prior to the
merger effective date, but after the start of the surviving hospital's
current cost reporting period. Specifically, we are proposing to
calculate a multiplier to be applied to an acquired hospital's UCC when
the merger effective date occurs partway through the surviving
hospital's cost reporting period. This multiplier will represent the
portion of the UCC data from the acquired hospital that should be
incorporated with the surviving hospital's data to determine UCC for
purposes of determining Factor 3 for the surviving hospital. This
multiplier is obtained by calculating the number of days between the
start of the

[[Page 32758]]

applicable cost reporting period for the surviving hospital and the
merger effective date, and then dividing this result by the total
number of days in the reporting period of the acquired hospital.
Applying this multiplier to the acquired hospital's unannualized UCC
data will determine the final portion of the acquired hospital's UCC
that should be added to that of the surviving hospital for purposes of
determining Factor 3.
As an example, if the cost reporting period start dates of the
acquired and surviving hospitals align and a merger occurs halfway
through the surviving hospital's cost reporting period (for example,
the hospital's fiscal year), then ultimately, the cost report for the
surviving hospital for that fiscal year would already reflect half a
year of the acquired hospital's UCC (because the merger occurred
halfway through the surviving hospital's cost reporting period and the
UCC data reported by the surviving hospital incorporate any UCC
incurred by the acquired hospital during the second half of the fiscal
year). For illustrative purposes, consider that the cost reporting
period start dates of the acquired and surviving hospitals are 10/01/
2016; the cost reporting period end date of the acquired hospital is
06/30/2017; and the merger acquisition date is 07/01/2017. Thus, there
are 273 days between the start of the cost reporting period of the
surviving hospital and the merger effective date, and the cost
reporting period of the acquired hospital is 273 days. The multiplier,
as previously defined, would be 1 (273 days divided by 273 days) and
all of the acquired hospital's unannualized UCC data for the period 10/
01/2016 to 06/30/2017 would be added to that of the surviving hospital
for purposes of calculating Factor 3 for FY 2021. It is not necessary
to annualize the acquired hospital's data from its short cost report,
because the UCC incurred by the acquired hospital for the remainder of
the surviving hospital's fiscal year post-merger (07/01/2017 to 09/30/
2017) are already included in the UCC data reported by the surviving
hospital for the cost reporting period ending on 09/30/2017.
As another example, assume the merger effective date is the same as
the start date for the surviving hospital's cost reporting period and
the surviving hospital's cost reporting period is 12 months long. In
this example, we believe it would not be necessary to combine
uncompensated care costs across multiple cost reports, because the
surviving hospital's cost report already reflects 12 months of
uncompensated care costs for the merged hospital. In this example, the
multiplier would be 0 because there are 0 days between the start of the
surviving hospital's cost reporting period and the merger effective
date, and there would be no need to combine data from the acquired
hospital given that the surviving hospital's cost report reflects all
post-merger UCC data for the acquired hospital.
Newly Merged Hospitals
We propose to continue to treat hospitals that merge after the
development of the final rule similar to new hospitals. As explained in
the FY 2015 IPPS/LTCH PPS final rule, for these newly merged hospitals,
we do not have data currently available to calculate a Factor 3 amount
that accounts for the merged hospital's uncompensated care burden (79
FR 50021). In the FY 2015 IPPS/LTCH PPS final rule, we finalized a
policy under which Factor 3 for hospitals that we do not identify as
undergoing a merger until after the public comment period and
additional review period following the publication of the final rule or
that undergo a merger during the fiscal year would be recalculated
similar to new hospitals (79 FR 50021 and 50022).
Consistent with the policy adopted in the FY 2015 IPPS/LTCH PPS
final rule, we are proposing to treat newly merged hospitals in a
similar manner as new hospitals, such that the newly merged hospital's
final uncompensated care payment would be determined at cost report
settlement where the numerator of the newly merged hospital's Factor 3
would be based on the cost report of only the surviving hospital (that
is, the newly merged hospital's cost report) for the current fiscal
year. However, if the hospital's cost reporting period includes less
than 12 months of data, we propose that the newly merged hospital's
cost report's data would be annualized for purposes of the Factor 3
calculation. We note that we are not proposing that the multiplier
calculation discussed previously would be used, as that would only be
necessary for estimating post-merger data using historical reports. The
acquired hospital's uncompensated care payment for the fiscal year
during which the merger occurs would be determined using the
prospectively determined Factor 3 amount for the acquired hospital and
then pro rated, if applicable. We refer the reader to the detailed
discussion in the FY 2015 IPPS/LTCH PPS rule regarding the calculation
of pro rata uncompensated care payments (79 FR 50151 through 50153).
Consistent with past policy, we also are proposing that the interim
uncompensated care payments for the newly merged hospital would be
based only on the data for the surviving hospital's CCN available the
time of the development of the final rule. In other words, for FY 2021,
eligibility for a newly merged hospital to receive interim
uncompensated care payments and the amount of any interim uncompensated
care payments, would be based only on the FY 2017 cost report available
for the surviving CCN at the time the final rule is developed. However,
at cost report settlement, we would determine the newly merged
hospital's final uncompensated care payment based on the uncompensated
care costs reported on its FY 2021 cost report. That is, we would
revise the numerator of Factor 3 for the newly merged hospital to
reflect the uncompensated care costs reported on the newly merged
hospital's FY 2021 cost report.
Annualization and Long Cost Reports
We are proposing to continue the policy that was finalized in the
FY 2018 IPPS/LTCH PPS final rule of annualizing uncompensated care cost
data reported on the Worksheet S-10 if a hospital's cost report does
not equal 12 months of data, except in the case of mergers, which would
be subject to the proposed modified merger policy previously discussed.
In addition, we are proposing to continue the policies that were
finalized in the FY 2019 IPPS/LTCH final rule (83 FR 41415) regarding
the use of the longest cost report available within the Federal fiscal
year. However, we are proposing to modify our current policy for those
rare situations where a hospital has a cost report that starts in one
fiscal year but spans the entirety of the following fiscal year such
that the hospital has no cost report starting in that subsequent fiscal
year. Under this proposal, we would use the cost report that spans both
fiscal years for purposes of calculating Factor 3 when data for the
latter fiscal year is used in the Factor 3 methodology. The current
policy for this rare situation includes the criterion that the hospital
have multiple cost reports beginning in the same fiscal year. However,
we no longer believe this is a necessary condition, given that we have
identified some hospitals that have no FY 2017 cost report, but that
only have one FY 2016 cost report, which spans the entire FY 2017
period.
New Hospital for Purposes of Factor 3
We are proposing to continue the new hospital policy that was
finalized in the FY 2020 IPPS/LTCH PPS final rule.

[[Page 32759]]

Specifically, for new hospitals that do not have an FY 2017 cost report
to use in the Factor 3 calculation (that is, hospitals with CCNs
established on or after October 1, 2017) that may have a preliminary
projection of being eligible for DSH payments based on their most
recent available disproportionate patient percentage, we are proposing
that the MAC would make a final determination concerning whether the
hospital is eligible to receive Medicare DSH payments at cost report
settlement based on its FY 2021 cost report. If the hospital is
ultimately determined to be eligible for Medicare DSH payments for FY
2021, the hospital would receive an uncompensated care payment
calculated using a Factor 3, where the numerator is the uncompensated
care costs reported on Worksheet S-10 of the hospital's FY 2021 cost
report, and the denominator is the sum of the uncompensated care costs
reported on Worksheet S-10 of the FY 2017 cost reports for all DSH-
eligible hospitals. This denominator would be the same denominator that
is determined prospectively for purposes of determining Factor 3 for
all DSH-eligible hospitals, with the exception of Puerto Rico hospitals
and IHS and Tribal hospitals. The new hospital would not receive
interim uncompensated care payments before cost report settlement
because we would have no FY 2017 uncompensated care data on which to
determine what those interim payments should be.
IHS and Tribal Hospitals
For the reasons discussed in the FY 2018 IPPS/LTCH PPS final rule
(82 FR 38209), we continue to recognize that the use of data from
Worksheet S-10 to calculate the uncompensated care amount for IHS and
Tribal hospitals for FY 2021 may jeopardize these hospitals' payments
due to their unique funding structure. Prior to this proposed
rulemaking for FY 2021, CMS consulted with IHS and Tribal hospitals
regarding Worksheet S-10 uncompensated care reporting as well as any
potential barriers under the current cost reporting instructions to
reporting by IHS and Tribal hospitals on Worksheet S-10. During the
consultation, representatives of some hospitals indicated that it was
not clear to them that they could submit Worksheet S-10 data given the
historical use of the low-income patient proxy when determining Factor
3 for these hospitals. CMS reiterated that the use of low-income
patient proxy when determining Factor 3 does not preclude the
submission of Worksheet S-10 data by these hospitals. CMS explained
that IHS and Tribal Hospitals should be aware of and comply with the
instructions and requirements for the submission of Worksheet S-10
data. For an overview of the instructions and requirements, one source
is the MLN Matters[supreg] Special Edition article ``Updates to
Medicare's Cost Report Worksheet S-10 to Capture Uncompensated Care
Data'' that was released on September 29, 2017 and is available on the
CMS website at https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/Downloads/SE17031.pdf. Another
source of information is the ``Worksheet S-10--Hospital Uncompensated
and Indigent Care Data Following 2018 IPPS Final Rule Questions and
Answers'' that is also available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Downloads/Worksheet-S-10-UCC-QandAs.pdf. As discussed
previously in this section, CMS continues to consider the feedback
provided during IHS and Tribal consultation for purposes of determining
what policies should apply with respect to DSH and uncompensated care
payments to IHS and Tribal hospitals in future years. We also seek
comment on this issue to assist future rulemaking. We also note that
the Paper Reduction Act (PRA) package for Form CMS 2552-10 will be an
additional opportunity for comments on the Worksheet S-10 instructions.
Therefore, for IHS and Tribal hospitals that have a FY 2013 cost
report, we are proposing to continue the policy first adopted for the
FY 2018 rulemaking regarding the low-income patient proxy.
Specifically, for FY 2021 we are proposing to determine Factor 3 for
these hospitals based on Medicaid days for FY 2013 and the most recent
update of SSI days. The aggregate amount of uncompensated care that is
used in the Factor 3 denominator for these hospitals would continue to
be based on the low-income patient proxy; that is, the aggregate amount
of uncompensated care determined for all DSH eligible hospitals using
the low-income insured days proxy. We continue to believe this approach
is appropriate because the FY 2013 data reflect the most recent
available information regarding these hospitals' Medicaid days before
any expansion of Medicaid. At the time of development of this proposed
rule, for modeling purposes, we computed Factor 3 for these hospitals
using FY 2013 Medicaid days from a HCRIS extract updated through
February 19, 2020, and the most recent available FY 2018 SSI days.
Puerto Rico Hospitals
With respect to Puerto Rico hospitals, we considered calculating
their Factor 3 amounts for FY 2021 using the same methodology we are
proposing for hospitals other than IHS and Tribal hospitals. However,
we concluded that the recent natural disasters in Puerto Rico may
negatively impact the ability of these hospitals to engage in the FY
2021 rulemaking on the particular issue of the data to be used to
determine Factor 3 for Puerto Rico hospitals, while simultaneously
focusing on ensuring that their FY 2018 uncompensated care Worksheet S-
10 data is accurately reported and available for use in calculating FY
2022 Medicare uncompensated care payments consistent with our proposed
approach for FY 2022 and subsequent fiscal years.
Accordingly, for FY 2021 we are proposing to determine Factor 3 for
Puerto Rico hospitals that have a FY 2013 cost report based on the low-
income patient proxy. We would determine Factor 3 for these hospitals
based on Medicaid days for FY 2013 and the most recent update of SSI
days. The aggregate amount of uncompensated care that is used in the
Factor 3 denominator for these hospitals would continue to be based on
the low-income patient proxy; that is, the aggregate amount of
uncompensated care determined for all DSH eligible hospitals using the
low-income insured days proxy. We continue to believe the use of FY
2013 data in determining the low-income insured days proxy is
appropriate because the FY 2013 data reflect the most recent available
information regarding these hospitals' Medicaid days before any
expansion of Medicaid. At the time of development of the proposed rule,
for modeling purposes, we computed Factor 3 for these hospitals using
FY 2013 Medicaid days from a recent HCRIS extract and the most recent
available FY 2018 SSI days. In addition, because we are proposing to
continue to use 1 year of insured low-income patient days as a proxy
for uncompensated care for Puerto Rico hospitals and residents of
Puerto Rico are not eligible for SSI benefits, we are proposing to
continue to use a proxy for SSI days for Puerto Rico hospitals,
consisting of 14 percent *COM007*of a hospital's Medicaid days, as
finalized in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56953 through
56956).
All-Inclusive Rate Providers
In FY 2018 IPPS/LTCH PPS final rule (82 FR 38218), we indicated
that we would further explore which trims are

[[Page 32760]]

appropriate to apply to the CCRs on Line 1 of Worksheet S-10, including
whether it is appropriate to apply a unique trim to certain subsets of
hospitals, such as all-inclusive rate providers. We noted that all-
inclusive rate providers have the ability to compute and enter their
appropriate CCR on Worksheet S-10, Line 1, by answering Yes to the
question on Worksheet S-2, Part I, Line 115, and not have it computed
using information from Worksheet C, Part I. We stated that we would
give more consideration to the utilization of statewide averages in
substituting outlier CCRs, and that we intended to consider other
approaches that would ensure validity of the trim methodology and not
penalize hospitals that use alternative methods of cost apportionment
in future rulemaking. In the FY 2020 IPPS/LTCH PPS proposed rule (84 FR
19420), we stated that we had examined the CCRs from the FY 2015 cost
reports and believed the risk that all-inclusive rate providers will
have aberrant CCRs and, consequently, aberrant uncompensated care data,
was mitigated by the proposal to apply the trim methodology for
potentially aberrant uncompensated care costs to all hospitals.
In preparation for the FY 2021 rulemaking, we conducted a review of
the CCRs from the FY 2017 cost reports from all-inclusive rate
providers (AIRPs) and determined that in rare situations they may
include a potentially aberrant CCR (Worksheet S-10 line 1) which
results in a ratio of total UCC to total operating costs of greater
than 50 percent. For FY 2021, we continue to believe that all-inclusive
rate providers should be excluded from the CCR trim methodology because
all-inclusive rate providers have alternative methods of cost
apportionment that are different from those used in the standard CCR
calculation. However, in order to ensure that we are able to calculate
a reasonable estimate of the hospital's FY 2017 UCC, we are proposing
to modify the potentially aberrant UCC trim methodology when it is
applied to all-inclusive rate providers. Specifically, we are proposing
that when an AIRP's total UCC are greater than 50 percent of its total
operating costs when calculated using the CCR included on its FY 2017
cost report, we would recalculate UCC using the CCR reported on
Worksheet S-10, line 1 of the hospital's most recent available prior
year cost report that would not result in UCC of over 50 percent of
total operating costs. That is, we would apply the CCR from Worksheet
S-10 line 1 of that prior cost report to the data reported on Worksheet
S-10 of the FY 2017 cost report. For purposes of this proposed rule, we
identified a few AIRPs that have UCC in excess of 50 percent of their
total operating costs. For these hospitals, we used the CCR from
Worksheet S-10, line 1 of their FY 2015 cost report in place of the CCR
reported on Worksheet S-10, line 1 of their FY 2017 cost report, in
order to re-calculate their UCC. We believe this approach produces a
more accurate estimate of the AIRP's UCC for purposes of determining
Factor 3, while continuing to reflect the information on uncompensated
care included in the AIRP's FY 2017 cost report, which for the reasons
discussed previously we believe is the most appropriate data to be used
in determining Factor 3 for FY 2021.
Proposed CCR Trim Methodology
The calculation of a hospital's total uncompensated care costs on
Worksheet S-10 requires the use of the hospital's cost to charge ratio
(CCR). Similar to the process used in the FY 2018 IPPS/LTCH PPS final
rule (82 FR 38217 through 38218), the FY 2019 IPPS/LTCH PPS final rule
(83 FR 41415 and 41416), and the FY 2020 IPPS/LTCH PPS final rule (84
FR 42372) for trimming CCRs, we are proposing the following steps to
determine the applicable CCR:
Step 1: Remove Maryland hospitals. In addition, we would remove
all-inclusive rate providers because their CCRs are not comparable to
the CCRs calculated for other IPPS hospitals.
Step 2: For FY 2017 cost reports, calculate a CCR ``ceiling'' with
the following data: for each IPPS hospital that was not removed in Step
1 (including non-DSH eligible hospitals), we would use cost report data
to calculate a CCR by dividing the total costs on Worksheet C, Part I,
Line 202, Column 3 by the charges reported on Worksheet C, Part I, Line
202, Column 8. (Combining data from multiple cost reports from the same
fiscal year is not necessary, as the longer cost report would be
selected.) The ceiling would be calculated as 3 standard deviations
above the national geometric mean CCR for the applicable fiscal year.
This approach is consistent with the methodology for calculating the
CCR ceiling used for high-cost outliers. Remove all hospitals that
exceed the ceiling so that these aberrant CCRs do not skew the
calculation of the statewide average CCR. (For purposes of this
proposed rule, this trim would remove 12 hospitals that have a CCR
above the calculated ceiling of 0.937 for FY 2017 cost reports.)
Step 3: Using the CCRs for the remaining hospitals in Step 2,
determine the urban and rural statewide average CCRs for FY 2017 for
hospitals within each State (including non-DSH eligible hospitals),
weighted by the sum of total hospital discharges from Worksheet S-3,
Part I, Line 14, Column 15. (We note that this is not a change from the
methodology used in past years. In past rules, we inadvertently
referred to Column 14, rather than Column 15.)
Step 4: Assign the appropriate statewide average CCR (urban or
rural) calculated in Step 3 to all hospitals, excluding all-inclusive
rate providers, with a CCR for FY 2017 greater than 3 standard
deviations above the national geometric mean for that fiscal year (that
is, the CCR ``ceiling''). For this proposed rule, the statewide average
CCR would apply to 12 hospitals, of which 4 hospitals have FY 2017
Worksheet S-10 data.
Step 5: For providers that did not report a CCR on Worksheet S-10,
Line 1, we would assign them the statewide average CCR as determined in
step 3.
After completing the above steps, we propose to re-calculate the
hospital's uncompensated care costs (Line 30) using the trimmed CCR
(the statewide average CCR (urban or rural, as applicable)).
Uncompensated Care Data Trim Methodology
After applying the CCR trim methodology, we note that there are
rare situations where a hospital has potentially aberrant data that are
unrelated to CCR. Therefore, we are proposing to continue the trim
methodology for potentially aberrant UCC that was finalized in the FY
2019 and FY 2020 IPPS/LTCH PPS final rules. That is, if the hospital's
uncompensated care costs for FY 2017 are an extremely high ratio
(greater than 50 percent) of its total operating costs, we propose to
determine the ratio of uncompensated care costs to the hospital's total
operating costs from another available cost report, and to apply that
ratio to the total operating expenses for the potentially aberrant
fiscal year to determine an adjusted amount of uncompensated care
costs. Specifically, if the FY 2017 cost report is determined to
include potentially aberrant data, we are proposing that data from the
FY 2018 cost report would be used for the ratio calculation. Thus, the
hospital's uncompensated care costs for FY 2017 would be trimmed by
multiplying its FY 2017 total operating costs by the ratio of
uncompensated care costs to total operating costs from the hospital's
FY 2018 cost report to calculate an estimate of the hospital's

[[Page 32761]]

uncompensated care costs for FY 2017 for purposes of determining Factor
3 for FY 2021.
However, because we have audited the FY 2017 Worksheet S-10 data
for a number of hospitals, we believe it is necessary to modify the UCC
data trim methodology for hospitals whose FY 2017 cost report has been
audited. Because the UCC data for these hospitals have been subject to
audit, we believe there is increased confidence that if high
uncompensated care costs are reported by these audited hospitals, the
information is accurate. Therefore, we no longer believe it is
necessary to apply the trim methodology for these audited hospitals.
That is, we would exclude hospitals that were part of the audits from
the trim methodology for potentially aberrant UCC. For those hospitals
that do not have audited Worksheet S-10 data, we propose to continue to
apply the trim methodology as previously described.
Summary of Proposed Methodology
In summary, for FY 2021, we are proposing to compute Factor 3 for
each hospital using the following steps--
Step 1: Select the provider's longest cost report from its Federal
fiscal year (FFY) 2017 cost reports. (Alternatively, in the rare case
when the provider has no FFY 2017 cost report because the cost report
for the previous Federal fiscal year spanned the FFY 2017 time period,
the previous Federal fiscal year cost report would be used in this
step.)
Step 2: Annualize the uncompensated care costs (UCC) from Worksheet
S-10 Line 30, if the cost report is more than or less than 12 months.
(If applicable, use the statewide average CCR (urban or rural) to
calculate uncompensated care costs.)
Step 3: Combine adjusted and/or annualized uncompensated care costs
for hospitals that merged using the proposed merger policy, discussed
earlier.
Step 4: Calculate Factor 3 for Indian Health Service and Tribal
hospitals and Puerto Rico hospitals using the low-income insured days
proxy based on FY 2013 cost report data and the most recent available
SSI ratio (or, for Puerto Rico hospitals, 14 percent of the hospital's
FY 2013 Medicaid days). The denominator is calculated using the low-
income insured days proxy data from all DSH eligible hospitals.
Step 5: Calculate Factor 3 for the remaining DSH eligible hospitals
using annualized uncompensated care costs (Worksheet S-10 Line 30)
based on FY 2017 cost report data (from Step 1, 2 or 3). The hospitals
for which Factor 3 was calculated in Step 4 are excluded from this
calculation.
We are proposing to amend the regulation at Sec. 412.106 by adding
a new paragraph (g)(1)(iii)(C)(7) to reflect the proposed methodology
for computing Factor 3 for FY 2021. We are also proposing to add a new
paragraph (g)(1)(iii)(C)(8) to reflect the proposal for all subsequent
fiscal years to use the most recent available single year of audited
Worksheet S-10 data to calculate Factor 3 for all eligible hospitals,
except IHS and Tribal hospitals.
(e) Proposals Related to the per Discharge Amount of Interim
Uncompensated Care Payments
Consistent with the policy adopted in FY 2014 and applied in each
subsequent fiscal year, we are proposing to use a 3-year average of the
number of discharges for a hospital to produce an estimate of the
amount of the uncompensated care payment per discharge. Specifically,
the hospital's total uncompensated care payment amount, is divided by
the hospital's historical 3-year average of discharges computed using
the most recent available data. The result of that calculation is a per
discharge payment amount that will be used to make interim
uncompensated care payments to each projected DSH eligible hospital.
The interim uncompensated care payments made to the hospital during the
fiscal year are reconciled following the end of the year to ensure that
the final payment amount is consistent with the hospital's
prospectively determined uncompensated care payment for the Federal
fiscal year.
In response to our proposal in the FY 2020 IPPS/LTCH PPS proposed
rule to continue to determine interim uncompensated care payments using
a 3-year average of discharges, we received a comment expressing
concern that discharge growth discrepancies create the risk of
overpayments of interim uncompensated care payments and unstable cash
flows for CMS, hospitals, and MA plans (84 FR 42373). Taking the
commenter's concerns into consideration, for FY 2021, we are proposing
a voluntary process through which a hospital may submit a request to
its Medicare Administrative Contractor (MAC) for a lower per discharge
interim uncompensated care payment amount, including a reduction to
zero, once before the beginning of the Federal fiscal year and/or once
during the Federal fiscal year. In conjunction with this request, the
hospital would be required to provide supporting documentation
demonstrating there would likely be a significant recoupment (for
example, 10 percent or more of the hospital's total uncompensated care
payment or at least $100,000) at cost report settlement if the per
discharge amount were not lowered. For example, a hospital might submit
documentation showing a large projected increase in discharges during
the fiscal year to support reduction of its per discharge uncompensated
care payment amount. As another example, a hospital might request that
its per discharge uncompensated care payment amount be reduced to zero
midyear if the hospital's interim uncompensated care payments during
the year have already surpassed the total uncompensated care payment
calculated for the hospital.
We are proposing that the hospital's MAC would evaluate these
requests and the supporting documentation before the beginning of the
Federal fiscal year and/or with midyear requests when the 3-year
average of discharges is lower than hospital's projected FY 2021
discharges. If following review of the request and the supporting
documentation, the MAC agrees that there likely would be significant
recoupment of the hospital's interim Medicare uncompensated care
payments at cost report settlement, the only change that would be made
would be to lower the per discharge amount either to the amount
requested by the hospital or another amount determined by the MAC to be
appropriate to reduce the likelihood of a substantial recoupment at
cost report settlement. No change would be made to the total
uncompensated care payment amount determined for the hospital on the
basis of its Factor 3. In other words, this proposal does not change
how the total uncompensated care payment amount will be reconciled at
cost report settlement.
(f) Process for Notifying CMS of Merger Updates and To Report Upload
Issues
As we have done for every proposed and final rule beginning in FY
2014, in conjunction with both the FY 2021 IPPS/LTCH PPS proposed rule
and final rule, we will publish on the CMS website a table listing
Factor 3 for all hospitals that we estimate would receive empirically
justified Medicare DSH payments in FY 2021 (that is, those hospitals
that would receive interim uncompensated care payments during the
fiscal year), and for the remaining subsection (d) hospitals and
subsection (d) Puerto Rico hospitals that have the potential of
receiving a Medicare DSH payment in the event that they receive an
empirically justified Medicare DSH payment for the fiscal year as

[[Page 32762]]

determined at cost report settlement. We note that, at the time of
development of the proposed rule, the FY 2018 SSI ratios were
available. Accordingly, for purposes of the proposed rule, we computed
Factor 3 for Indian Health Service and Tribal hospitals and Puerto Rico
hospitals using the most recent available data regarding SSI days from
the FY 2018 SSI ratios.
We also will publish a supplemental data file containing a list of
the mergers that we are aware of and the computed uncompensated care
payment for each merged hospital.
Hospitals have 60 days from the date of public display of this FY
2021 IPPS/LTCH PPS proposed rule to review the table and supplemental
data file published on the CMS website in conjunction with this
proposed rule and to notify CMS in writing of issues related to mergers
and/or to report potential upload discrepancies due to MAC mishandling
of the Worksheet S-10 data during the report submission process (for
example, report not reflecting audit results due to MAC mishandling or
most recent report differs from previously accepted amended report due
to MAC mishandling). Comments raising issues that are specific to the
information included in the table and supplemental data file can be
submitted to the CMS DSH inbox at [email protected]. All other
comments submitted in response to our proposed policies for determining
uncompensated care payments for FY 2021 must be submitted in one of
three ways found in the ADDRESSES section of this proposed rule before
the close of the comment period in order to be assured consideration.
In addition, this CMS DSH inbox is not intended for Worksheet S-10
audit process related emails, which should be directed to the MACs. We
will address comments related to mergers and/or reporting upload
discrepancies submitted to the CMS DSH inbox as appropriate in the
table and the supplemental data file that we publish on the CMS website
in conjunction with the publication of the FY 2021 IPPS/LTCH PPS final
rule.
For FY 2021, we are proposing that after the publication of the FY
2021 IPPS/LTCH PPS final rule, hospitals would have 15 business days
from the date of public display of the FY 2021 IPPS/LTCH PPS final rule
to review and submit comments on the accuracy of the table and
supplemental data file published in conjunction with the final rule.
Any changes to Factor 3 will be posted on the CMS website prior to
October 1, 2020. We acknowledge that this is less time compared to
previous years. However, there is only a limited amount of time to
review the information submitted by the hospitals and to implement the
finalized policies before the start of the Federal fiscal year. In
general, we believe hospitals will have sufficient opportunity during
the proposed rule's comment period to provide information about recent
and/or pending mergers and/or to report upload discrepancies. We
currently expect to use data from the March 2020 HCRIS extract for the
FY 2021 final rule, which contributes to our increased confidence that
hospitals will be able to comment on mergers and report any upload
discrepancies during the comment period for this proposed rule. As
noted earlier in this section, for purposes of calculating final Factor
3 in the FY 2021 IPPS/LTCH PPS final rule, we may also consider using
more recent data that may become available after March 2020, but before
the final rule. In the event that there are any remaining merger
updates and/or upload discrepancies after the final rule, the 15
business days from the date of public display of the FY 2021 IPPS/LTCH
PPS final rule deadline should allow for the time necessary to prepare
and make any corrections to Factor 3 calculations before the beginning
of the Federal fiscal year. In addition, we intend to revisit in future
rulemaking whether to discontinue this additional comment process after
the final rule, because we believe, in general, the comment period on
the proposed rule should provide sufficient opportunity for hospitals
to notify CMS regarding pending mergers and/or to report upload
discrepancies.
We are inviting public comments on our proposed methodology for
calculating Factor 3 for FY 2021, including, but not limited to, our
proposed use of FY 2017 Worksheet S-10 data. In addition, we also
request public comments on our proposal to calculate Factor 3 for all
subsequent fiscal years and for all eligible hospitals, except Indian
Health Service and Tribal hospitals, using the most recent available
single year of audited Worksheet S-10 data. We are also seeking
comments on the potential use of our exceptions and adjustments
authority under section 1886(d)(5)(I)(i) of the Act to restructure the
DSH and uncompensated care payments to IHS and Tribal hospitals for FY
2022 and subsequent fiscal years, as described earlier.

H. Proposed Payment for Allogeneic Hematopoietic Stem Cell Acquisition
Costs (Sec. 412.113)

1. Background
Medicare reimburses allogeneic hematopoietic stem cell transplants
provided to Medicare beneficiaries for the treatment of certain
diagnoses if such treatment is considered reasonable and necessary.
Allogeneic hematopoietic stem cell transplants involve collecting or
acquiring stem cells from a healthy donor's bone marrow, peripheral
blood, or cord blood for intravenous infusion to the recipient.
Currently, acquisition costs associated with allogeneic hematopoietic
stem cell transplants are included in the operating costs of inpatient
hospital services for subsection (d) hospitals (that is, hospitals paid
under the IPPS). In addition, IPPS payments for acquisition services
associated with allogeneic hematopoietic stem cell transplants are
currently included in the MS-DRG payments for the allogeneic
hematopoietic stem cell transplants when the transplants occurred in
the inpatient setting.
Section 108 of the Further Consolidated Appropriations Act, 2020
(Pub. L. 116-94), provides that, effective for cost reporting periods
beginning on or after October 1, 2020, costs related to hematopoietic
stem cell acquisition for the purpose of an allogeneic hematopoietic
stem cell transplant are not included in the definition of ``operating
costs of inpatient hospital services'' at section 1886(a)(4) of the
Act. In addition, section 108 of the Further Consolidated
Appropriations Act, 2020 provides that in the case of a subsection (d)
hospital that furnishes an allogeneic hematopoietic stem cell
transplant, payment to such hospital for hematopoietic stem cell
acquisition shall be made on a reasonable cost basis, and that the
Secretary shall specify the items included in such hematopoietic stem
cell acquisition in rulemaking. Section 108 of the Further Consolidated
Appropriations Act, 2020, also requires that, beginning in FY 2021, the
payments made based on reasonable cost for the acquisition costs of
allogeneic hematopoietic stem cells be made in a budget neutral manner.
We discuss each of the amendments under section 108 of the Further
Consolidated Appropriations Act, 2020, and our proposed codification
and implementation of those amendments, in the sections that follow.

[[Page 32763]]

2. Proposed Revisions to the Regulations for the Payment for Allogeneic
Hematopoietic Stem Cell Acquisition Costs
a. Payment for Allogeneic Hematopoietic Stem Cell Acquisition Costs on
a Reasonable Cost Basis
Division N, Section 108 of the Further Consolidated Appropriations
Act, 2020 (Pub. L. 116-94) amended section 1886(d)(5) of the Act by
adding a new paragraph (M)(i) which requires that, for cost reporting
periods beginning on or after October 1, 2020, in the case of a
subsection (d) hospital that furnishes an allogeneic hematopoietic stem
cell transplant to an individual during such a period, payment to such
hospital for hematopoietic stem cell acquisition shall be made on a
reasonable cost basis. We are proposing to amend 42 CFR 412.113 to
reflect this new statutory requirement by adding a new paragraph (e).
This proposed new paragraph (e) states that for cost reporting periods
beginning on or after October 1, 2020, in the case of a subsection (d)
hospital that furnishes an allogeneic hematopoietic stem cell
transplant to an individual, Medicare payment to such hospital for
hematopoietic stem cell acquisition costs is made on a reasonable cost
basis. This is the same way hospitals with approved transplant centers
are reimbursed for their acquisition costs for solid organs under 42
CFR 412.113(d).
We are proposing to add new paragraph (e)(3) to 42 CFR 412.113 to
specify that a subsection (d) hospital that furnishes allogeneic
hematopoietic stem cell transplants be required to formulate a standard
acquisition charge. The hospital's standard acquisition charge is based
on costs expected to be reasonably and necessarily incurred in the
acquisition of hematopoietic stem cells. The standard acquisition
charge does not represent the cost of acquiring stem cells for an
individual allogeneic hematopoietic stem cell transplant; rather, it is
a charge that approximates the hospital's average cost of acquiring
hematopoietic stem cells for all of its allogeneic hematopoietic stem
cell transplants. We are proposing that the standard acquisition charge
would be billed and paid on an interim payment basis as a ``pass-
through'' item in accordance with 42 CFR 413.60 and 413.64. The actual
charges by ancillary cost center from the provider's records would be
included on the Medicare cost report and converted to reasonable cost
using the corresponding ancillary cost-to-charge ratios. At the end of
the cost reporting period, a settlement determination would be made of
the actual cost incurred compared to the interim payments made during
the period.
We are proposing to add new paragraph (e)(5) to 42 CFR 412.113 to
specify that a subsection (d) hospital maintain an itemized statement
that identifies the services furnished in collecting hematopoietic stem
cells, the charges, the person receiving the service (donor/recipient,
if donor the provider must identify the prospective recipient), and the
recipient's health care insurance number.
We are proposing to add new paragraph (e)(4) to 42 CFR 412.113 to
specify that the hospital's Medicare share of the hematopoietic stem
cell acquisition costs is based on the ratio of the number of its
allogeneic hematopoietic stem cell transplants furnished to Medicare
beneficiaries to the total number of its allogeneic hematopoietic stem
cell transplants furnished to all patients, regardless of payer,
applied to reasonable cost. This is the same methodology used to
reimburse transplant hospitals with approved transplant programs for
their acquisition costs for solid organs, and will be further discussed
in a forthcoming Paperwork Reduction Act (PRA) package as referenced in
section IV.H.3. of this proposed rule.
In addition, we are proposing to amend 42 CFR 412.1(a) to reflect
the new statutory requirement by revising the parenthetical identifying
other costs related to inpatient hospital services that are paid for on
a reasonable cost basis to include costs related to hematopoietic stem
cell acquisition for the purpose of an allogeneic hematopoietic stem
cell transplant. In addition, we are proposing to make formatting
changes to 42 CFR 412.1(a) to improve the readability of this
paragraph. We are also proposing to add new paragraph (e)(6) to 42 CFR
412.2 to add the costs of hematopoietic stem cell acquisition for the
purpose of an allogeneic hematopoietic stem cell transplant to the list
of services which are paid for on a reasonable cost basis.
b. Definition of Allogeneic Hematopoietic Stem Cell Transplant
Division N, Section 108 of the Further Consolidated Appropriations
Act, 2020 (Pub. L. 116-94) amended section 1886(d)(5) of the Act by
adding a new paragraph (M)(ii) which defines the term `allogeneic
hematopoietic stem cell transplant' to mean, with respect to an
individual, the intravenous infusion of hematopoietic cells derived
from bone marrow, peripheral blood stem cells, or cord blood, but not
including embryonic stem cells, of a donor to an individual that are or
may be used to restore hematopoietic function in such individual having
an inherited or acquired deficiency or defect. We are proposing to
codify this definition by adding new paragraph (e)(1) to 42 CFR
412.113.
c. Items Included as Allogeneic Hematopoietic Stem Cell Acquisition
Costs
As noted, Division N, Section 108 of the Further Consolidated
Appropriations Act, 2020 (Pub. L. 116-94) amended section 1886(d)(5) of
the Act by adding a new paragraph (M)(i), which also requires that the
Secretary specify the items included as allogeneic hematopoietic stem
cell acquisition costs through rulemaking. Allogeneic hematopoietic
stem cell acquisition costs apply only to hematopoietic allogeneic stem
cell transplants, for which stem cells are obtained from a donor (other
than the recipient himself or herself). Specifically, we are proposing
that allogeneic hematopoietic stem cell acquisition costs would include
registry fees from a national donor registry described in 42 U.S.C.
274k, if applicable, for stem cells from an unrelated donor; tissue
typing of donor and recipient; donor evaluation; physician pre-
admission/pre-procedure donor evaluation services; costs associated
with the collection procedure such as, general routine and special care
services, procedure/operating room and other ancillary services, and
apheresis services; post-operative/post-procedure evaluation of donor;
and the preparation and processing of stem cells derived from bone
marrow, peripheral blood stem cells, or cord blood (but not including
embryonic stem cells). We are also proposing to codify this definition
of allogeneic hematopoietic stem cell acquisition costs by adding new
proposed paragraph (e)(2) to 42 CFR 412.113. We invite public comments
on whether any additional items should be included in the final rule.
3. Clarification of Hospital Cost Reporting Instructions
In the CY 2017 Outpatient Prospective Payment System (OPPS) final
rule that appeared in the November 14, 2016 Federal Register (81 FR
79587), we finalized the policy to update the Medicare hospital cost
report (Form CMS-2552-10, OMB control number 0938-0050, expiration date
March 31, 2022) by adding a new standard cost center, line 77
``Allogeneic Stem Cell Acquisition'' to Worksheet A (and applicable
worksheets) with the standard cost center code of ``07700''. The new
cost center line was

[[Page 32764]]

established in order to record any acquisition costs related to
allogeneic stem cell transplants as defined in Section 231.11, Chapter
4, of the Medicare Claims Processing Manual (Pub. 100-04) in order to
develop an accurate estimate of allogeneic hematopoietic stem cell
donor acquisition costs for future ratesetting for CY 2017 and
subsequent years. Note there is a similar discussion of allogeneic stem
cell acquisition costs when the transplant occurs in the inpatient
setting found in the Medicare Claims Processing Manual (Pub 100-04),
Chapter 3, Section 90.3.1. However, with the establishment of this line
came additional challenges on how to reclassify expenses into the new
cost center from routine and ancillary departments. In addition, we
found inconsistencies in the reporting of costs and charges for
allogeneic hematopoietic stem cell acquisition costs.
The current cost reporting instructions require providers to report
on line 77, the acquisition costs for allogeneic stem cell transplants.
Line 77 only allows providers to report direct expenses, and does not
provide a method for determining other routine and ancillary costs that
are part of the allogeneic stem cell acquisition costs. Some providers
are reclassifying costs from routine and ancillary cost centers to line
77. However, this practice does not align costs and charges properly in
accordance with the Provider Reimbursement Manual, 15-1, chapter 23,
sections 2300, 2302.7 and 2302.8 (available online at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Paper-Based-Manuals-Items/CMS021929.). In addition, in order to reimburse
allogeneic hematopoietic stem cell acquisition costs on a reasonable
cost basis as required by the Further Consolidated Appropriations Act,
2020 (Pub. L. 116-94), and to accommodate the reporting of both direct
and indirect costs on line 77 as well as routine and ancillary costs
associated with the acquisition of hematopoietic stem cells, we are
modifying cost reporting forms and instructions. We are developing a
worksheet similar to the Worksheet D-4 for solid organs that will allow
providers to capture costs from line 77 as well as to report charges by
routine and ancillary cost center and compute the related costs.
Changes to the forms and instructions will be described in more
detail in a forthcoming Paperwork Reduction Act (PRA) package, with
comment period. In addition, the forthcoming PRA package will address
providers' requests for a standardized format for data collection as
referenced in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41681 through
41684) and Worksheet S-10 modifications as referenced in the FY 2020
IPPS/LTCH PPS final rule (84 FR 42375).
4. Budget Neutrality for the Reasonable Cost Based Payment for
Allogeneic Hematopoietic Stem Cell Acquisition Costs
Section 108 of the Further Consolidated Appropriations Act, 2020
(Pub. L. 116-94) amended section 1886(d)(4)(C)(iii) of the Act to
require that beginning with FY 2021, the reasonable cost based payments
for allogeneic hematopoietic stem cell acquisition costs be made in a
manner that assures that the aggregate IPPS payments for discharges in
the fiscal year are not greater or less than those that would have been
made without such payments; that is, that the reasonable cost based
payments for allogeneic hematopoietic stem cell acquisition costs be
made in a budget neutral manner.
To implement this requirement, we are proposing to make an
adjustment to the standardized amount to ensure the effects of the
additional payments for allogeneic hematopoietic stem cell acquisition
costs are budget neutral, as required under section 108 of Public Law
116-94. We are also proposing to codify this budget neutrality
requirement by adding new paragraph (e)(5) to 412.64 to specify that
CMS makes an adjustment to the standardized amount to ensure that the
reasonable cost based payments for allogeneic hematopoietic stem cell
acquisition costs are made in a manner so that aggregate payments to
hospitals are not affected.
When the allogeneic stem cell transplant occurs in the inpatient
setting, the hospital identifies stem cell acquisition charges for
allogeneic hematopoietic stem cell transplants separately using revenue
code 0815 on the inpatient hospital bill (see Medicare Claims
Processing Manual, CMS Pub. 100-04, Chapter 3, section 90.3.1.B., which
is available online at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03pdf.pdf). To estimate the
reasonable cost based payments for allogeneic hematopoietic stem cell
acquisition costs for purposes of the proposed budget neutrality
adjustment, we used the charges reported on the hospital's inpatient
claim in revenue center code 0815 (which is reflected in the MedPAR
field for the Revenue Center Allogeneic Stem Cell Acquisition/Donor
Services) and converted those charges to costs by applying the
hospital's operating cost-to-charge ratio (CCR) (that is, the same
hospital-specific CCR used to estimate the hospital's operating outlier
payments).
Based on the latest data for this proposed rule (claims from the
December 2019 update of the FY 2019 MedPAR file and CCRs from the
December 2019 update of the PSF), we estimate that reasonable cost
based payments for allogeneic hematopoietic stem cell acquisition costs
for FY 2021 would be $15,865,373.61. Therefore, the total amount that
we are proposing to use to make an adjustment to the standardized
amounts to ensure the additional payments for allogeneic hematopoietic
stem cell acquisition costs are budget neutral is $15,865,373.61. We
are further proposing that if more recent data become available for the
final rule, we would use that data to determine the final amount we
would use to make the budget neutrality adjustment. (We refer readers
to section II.A.4.f. of the Addendum of this proposed rule for
discussion of the budget neutrality adjustment factor we are proposing
to apply to the standardized amounts for FY 2021 based on these
estimated allogeneic hematopoietic stem cell acquisition costs.)

I. Proposed Payment Adjustment for CAR T-cell Clinical Trial Cases
(Sec. Sec. 412.85 and 412.312)

As discussed in section II.D.2.b. of the preamble of this proposed
rule, we are proposing to create new MS-DRG 018 for cases that include
procedures describing CAR T-cell therapies, which are currently
reported using ICD-10-PCS procedure codes XW033C3 or XW043C3. As a
requestor noted, a large percentage of the total cases that would group
to any new MS-DRG for CAR T-cell therapy cases would be clinical trial
cases, in which the provider typically does not incur the cost of the
drug. By comparison, for non-clinical trial cases involving CAR T-cell
therapy, the drug cost is an extremely large portion of the total
costs. To address this, as described in section II.E.2.b. of this
proposed rule, we are proposing to modify our relative weight
methodology for proposed new MS-DRG 018 in order to develop a relative
weight that is reflective of the typical costs of providing CAR T-cell
therapies relative to other IPPS services. Specifically, in determining
the relative weights, we are proposing that clinical trial claims that
group to proposed new MS-DRG 018 would not be included when calculating
the average cost for

[[Page 32765]]

proposed new MS-DRG 018 that is used to calculate the relative weight
for this MS-DRG, so that the relative weight reflects the costs of the
CAR T-cell therapy drug. For additional details on the proposed
modifications to our relative weight methodology relating to clinical
trial cases involving CAR-T cell therapy, we refer readers to section
II.E.2.b. of this proposed rule.
Cases involving clinical trials, like non-clinical trial cases, are
currently paid using the relative weight for the MS-DRG to which the
case is assigned. However, given that the drug cost is an extremely
large portion of the total costs of the non-clinical trial CAR T-cell
therapy cases, and that the relative weight for proposed new MS-DRG 018
assumes that the provider has incurred the costs of the CAR T-cell
therapy drug, we are proposing to apply an adjustment to the payment
amount for clinical trial cases that would group to proposed new MS-DRG
018. We are proposing to calculate this proposed adjustment using the
same methodology that we are proposing to use to adjust the case count
for purposes of the relative weight calculations:
Calculate the average cost for cases to be assigned to
proposed new MS-DRG 018 that contain ICD-10-CM diagnosis code Z00.6 or
contain standardized drug charges of less than $373,000.
Calculate the average cost for cases to be assigned to
proposed new MS-DRG 018 that do not contain ICD-10-CM diagnosis code
Z00.6 or standardized drug charges of at least $373,000.
Calculate an adjustor by dividing the average cost
calculated in step 1 by the average cost calculated in step 2.
Apply this adjustor when calculating payments for clinical
trial cases that group to MS-DRG 018 by multiplying the relative weight
for MS-DRG 018 by the adjustor.
Consistent with our methodology for calculating the proposed case
count adjustment for purposes of the relative weight calculations, for
FY 2021, for purposes of calculating this proposed payment adjustment,
we identified clinical trial claims as claims that contain ICD-10-CM
diagnosis code Z00.6 (Encounter for examination for normal comparison
and control in clinical research program) or contain standardized drug
charges of less than $373,000.
For FY 2021, based on the claims data from the December 2019 update
of the FY 2019 MedPAR files used for this proposed rule, the ratio of
the average cost for CAR T-cell therapy cases identified as clinical
trial cases to the average cost for non-clinical trial CAR T-cell
therapy cases (that is, those cases not identified as being clinical
trial cases) is 0.15. Therefore, we are proposing that the adjustor
that would be applied to CAR T-cell therapy clinical trial cases would
be 0.15. For example, if the relative weight for proposed new MS-DRG
018 is 30.00, we would multiply 30.00 by the adjustor of 0.15 as part
of the calculation of the payment for clinical trial claims assigned to
proposed new MS-DRG 018.
The clinical trial cases involving CAR T-cell therapy that would be
subject to this proposed adjustment would be those cases that would
group to proposed new MS-DRG 18 and include ICD-10-CM diagnosis code
Z00.6 (Encounter for examination for normal comparison and control in
clinical research program). ICD-10-CM diagnosis code Z00.6 is required
to be included with clinical trial cases and we expect hospitals to
include this code for clinical trial cases that would group to proposed
MS-DRG 18 for FY 2021 and all subsequent years. Consistent with our
historical practice, we are also proposing to update the value of the
adjustor based on more recent data for the final rule.
We are also proposing to amend our regulations at 42 CFR part 412,
subpart F (for operating IPPS payments), and 42 CFR 412.312 (for
capital IPPS payments) to codify this proposed payment adjustment for
certain clinical trial cases. Under 42 CFR part 412, subpart F, we are
proposing to redesignate existing Sec. 412.86 (which sets forth
payment for extraordinarily high-cost day outliers for discharges
occurring before October 1, 1997) as new Sec. 412.83, and to add a new
center heading and new Sec. 412.85 to codify the proposed payment
adjustment for certain clinical trial cases. We are also proposing to
make conforming changes to Sec. 412.82(c) to replace the reference to
Sec. 412.86 with Sec. 412.83, and proposing to reserve Sec. 412.86.
We are proposing this restructuring to subpart F in order to keep the
sections related to payment for outlier cases together under the
``Payment for Outlier Cases'' center heading when adding the proposed
section to codify the proposed payment adjustment for certain clinical
trial cases. Specifically, proposed new Sec. 412.85 provides for a
payment adjustment for a discharge assigned to MS-DRG 018 that is part
of a clinical trial as determined by CMS based on the reporting of a
diagnosis code indicating the encounter is part of a clinical research
program on the claim for the discharge. Proposed new Sec. 412.85
further provides that payment for such a discharge is adjusted by
adjusting the DRG weighting factor determined under Sec. 412.60(b) by
a factor that reflects the average cost for cases to be assigned to MS-
DRG 018 that are part of a clinical trial to the average cost for cases
to be assigned to MS-DRG 018 that are not part of a clinical trial.
Similarly, we are proposing to add paragraph (f) to Sec. 412.312 to
specify that in determining the capital IPPS payments under that
section for certain clinical trial cases as described in Sec.
412.85(b), the DRG weighting factor described in Sec. 412.312(b)(1) is
adjusted as described in Sec. 412.85(c).
We are inviting public comments on our proposals.

J. Proposed Changes for Hospitals With High Percentage of End Stage
Renal Disease (ESRD) Discharges (Sec. 412.104)

Under Sec. 412.104(a), CMS provides an additional payment to a
hospital for inpatient services provided to End Stage Renal Disease
(ESRD) beneficiaries who receive a dialysis treatment during a hospital
stay, if the hospital has established that ESRD beneficiary discharges,
excluding discharges classified into MS-DRG 652 (Kidney Transplant),
MS-DRG 682 (Renal Failure with MCC), MS-DRG 683 (Renal Failure with
CC), MS-DRG 684 (Renal Failure without CC/MCC) and MS-DRG 685 (Admit
for Renal Dialysis), where the beneficiary received dialysis services
during the inpatient stay, constitute 10 percent or more of its total
Medicare discharges. (We note that in existing Sec. 412.104(a), the
title of MS DRG 652 is mistakenly shown as ``Renal Failure'' instead of
``Kidney Transplant''.)
As discussed in section II.D.8.a. of the preamble of this proposed
rule, for FY 2021, we are proposing to create a new Pre-MDC MS-DRG for
cases describing the performance of hemodialysis during an admission
where the patient received a simultaneous pancreas/kidney transplant.
We are also proposing to create two new MS-DRGs with a two-way severity
level split for cases describing the performance of hemodialysis in an
admission where the patient received a kidney transplant in MDC 11.
These proposed new MS-DRGs are proposed new MS-DRG 019 (Simultaneous
Pancreas/Kidney Transplant with Hemodialysis), proposed new MS-DRG 650
(Kidney Transplant with Hemodialysis with MCC), and proposed new MS-DRG
651 (Kidney Transplant with Hemodialysis without MCC). The relative
weights for these proposed MS-DRGs reflect the resources related to the
provision of inpatient hemodialysis. Accordingly, we

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believe that discharges classified to these proposed new MS-DRGs should
be excluded in determining a hospital's eligibility for the additional
payment for hospitals with high percentages of ESRD discharges and,
therefore, are proposing to add MS-DRGs 019, 650, and 651 to the list
of excluded MS-DRGs set forth in Sec. 412.104(a). Furthermore, under
the proposed MS-DRG logic for kidney transplants, a case with a
hemodialysis procedure reported on the claim would no longer group to
MS-DRG 652 (Kidney Transplant). We also note that MS-DRG 685 (Admit for
Renal Dialysis) was deleted effective FY 2019 (83 FR 41201 through
41202). Therefore, we are proposing to remove MS-DRGs 652 and 685 from
the list of excluded MS-DRGs set forth in Sec. 412.104(a).
We are proposing to revise Sec. 412.104(a) to reflect these
proposed changes to the MS-DRG logic for kidney transplants and the
previous deletion of MS-DRG 685. We are also proposing to make
formatting changes to this provision to list the MS-DRG exclusions.

K. Hospital Readmissions Reduction Program: Proposed Updates and
Changes (Sec. Sec. 412.150 Through 412.154)

1. Statutory Basis for the Hospital Readmissions Reduction Program
Section 1886(q) of the Act, as amended by section 15002 of the 21st
Century Cures Act, establishes the Hospital Readmissions Reduction
Program. Under the Hospital Readmissions Reduction Program, Medicare
payments under the acute inpatient prospective payment system for
discharges from an applicable hospital, as defined under section
1886(d) of the Act, may be reduced to account for certain excess
readmissions. Section 15002 of the 21st Century Cures Act requires the
Secretary to compare hospitals with respect to the proportion of
beneficiaries who are dually eligible for Medicare and full-benefit
Medicaid (dual eligibles) in determining the extent of excess
readmissions. We refer readers to the FY 2016 IPPS/LTCH PPS final rule
(80 FR 49530 through 49531) and the FY 2018 IPPS/LTCH PPS final rule
(82 FR 38221 through 38240) for a detailed discussion of and additional
information on the statutory history of the Hospital Readmissions
Reduction Program.
2. Regulatory Background
We refer readers to the following final rules for detailed
discussions of the regulatory background and descriptions of the
current policies for the Hospital Readmissions Reduction Program:

FY 2012 IPPS/LTCH PPS final rule (76 FR 51660 through 51676).
FY 2013 IPPS/LTCH PPS final rule (77 FR 53374 through 53401).
FY 2014 IPPS/LTCH PPS final rule (78 FR 50649 through 50676).
FY 2015 IPPS/LTCH PPS final rule (79 FR 50024 through 50048).
FY 2016 IPPS/LTCH PPS final rule (80 FR 49530 through 49543).
FY 2017 IPPS/LTCH PPS final rule (81 FR 56973 through 56979).
FY 2018 IPPS/LTCH PPS final rule (82 FR 38221 through 38240).
FY 2019 IPPS/LTCH PPS final rule (83 FR 41431 through 41439).
FY 2020 IPPS/LTCH PPS final rule (84 FR 42380 through 42390).

These rules describe the general framework for the implementation
of the Hospital Readmissions Reduction Program, including: (1) The
selection of measures for the applicable conditions/procedures; (2) the
measure removal factors policy; (3) the calculation of the excess
readmission ratio (ERR), which is used, in part, to calculate the
payment adjustment factor; (4) the calculation of the proportion of
``dually eligible'' Medicare beneficiaries, which is used to stratify
hospitals into peer groups and establish the peer group median ERRs;
(5) the calculation of the payment adjustment factor, specifically
addressing the base operating DRG payment amount, aggregate payments
for excess readmissions (including calculating the peer group median
ERRs), aggregate payments for all discharges, and the neutrality
modifier; (6) the opportunity for hospitals to review and submit
corrections using a process similar to what is currently used for
posting results on Hospital Compare or its successor; (7) the adoption
of an extraordinary circumstances exception policy to address hospitals
that experience a disaster or other extraordinary circumstance; (8) the
clarification that the public reporting of ERRs will be posted on an
annual basis to the Hospital Compare website or its successor as soon
as is feasible following the review and corrections period; and (9) the
specification that the definition of ``applicable hospital'' does not
include hospitals and hospital units excluded from the IPPS, such as
LTCHs, cancer hospitals, children's hospitals, IRFs, IPFs, CAHs, and
hospitals in United States territories and Puerto Rico.
We have also codified certain requirements of the Hospital
Readmissions Reduction Program at 42 CFR 412.152 through 412.154. In
section IV.K.11. of the preamble of this proposed rule, we are
proposing to update the regulatory text to reflect the policies that we
are proposing in this proposed rule.
3. Summary of Proposed Policies for the Hospital Readmissions Reduction
Program
In section IV.K.6. of the preamble of this proposed rule, we are
proposing the automatic adoption of applicable periods policy beginning
with the FY 2023 program year and all subsequent program years, unless
otherwise specified by the Secretary. In section IV.K.11. of the
preamble of this proposed rule, we are proposing to update the
definition of applicable period at 42 CFR 412.152 to align with this
proposal.
We discuss these proposals in greater detail in this rule.
4. Current Measures for FY 2021 and Subsequent Years
The Hospital Readmissions Reduction Program currently includes six
applicable conditions/procedures: Acute myocardial infarction (AMI);
heart failure (HF); pneumonia; elective primary total hip arthroplasty/
total knee arthroplasty (THA/TKA); chronic obstructive pulmonary
disease (COPD); and coronary artery bypass graft (CABG) surgery.
We continue to believe the measures we have adopted adequately meet
the goals of the Hospital Readmissions Reduction Program. Therefore, we
are not proposing to remove or adopt any additional measures at this
time.
We refer readers to the FY 2019 IPPS/LTCH PPS final rule (83 FR
41431 through 41439) for more information about how the Hospital
Readmissions Reduction Program supports CMS' goal of bringing quality
measurement, transparency, and improvement together with value-based
purchasing to the hospital inpatient care setting through the
Meaningful Measures Initiative.
5. Definition of ``Dual-Eligible'' Beginning in FY 2021 and for
Subsequent Years
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38226 through
38229), as part of implementing the 21st Century Cures Act, we
finalized the definition of dual-eligible as follows: ``[A]n individual
would be counted as a full-benefit dual patient if the beneficiary was
identified as full-benefit dual status in the State [Medicare
Modernization Act] (MMA) files for the month he/she was discharged from
the hospital.'' In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41437
through 41438), we codified this definition at 42 CFR 412.152 along
with other definitions

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pertinent to dual-eligibility calculations for assigning hospitals into
peer groups. In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42384
through 42385), we finalized an update to the definition of ``dual-
eligible'' to specify that, for the payment adjustment factors
beginning with the FY 2021 program year, ``dual-eligible'' is a patient
beneficiary who has been identified as having full benefit status in
both the Medicare and Medicaid programs in data sourced from the State
MMA files for the month the beneficiary was discharged from the
hospital, except for those patient beneficiaries who die in the month
of discharge, who will be identified using the previous month's data
sourced from the State MMA files.
The updated definition accounts for misidentification of the dual-
eligible status of patient beneficiaries who die in the month of
discharge, which can occur under the previous definition. We estimated
that the number of misidentified patient beneficiaries was very small,
and our analysis showed that this very small total increase did not
have a large impact on peer grouping assignments or payment
adjustments. We remind readers that we finalized this updated
definition for FY 2021 and for subsequent program years. We refer
readers to the FY 2020 IPPS/LTCH PPS final rule (84 FR 42384 through
42385) for a more detailed discussion of this topic. We are not
proposing any updates to our definition of ``dual-eligible''
beneficiaries in this proposed rule.
6. Proposed Automatic Adoption of Applicable Periods for FY 2023 and
Subsequent Years
We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR
51671) and the FY 2013 IPPS/LTCH PPS final rule (77 FR 53375) for
discussion of our previously finalized policy for defining applicable
periods. In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41434 through
41435) and the FY 2020 IPPS/LTCH PPS final rule (84 FR 42387), we
finalized the following ``applicable periods'' consistent with the
definition specified at 42 CFR412.152, to calculate the readmission
payment adjustment factor for FY 2021 and FY 2022, respectively:
The 3-year time period of July 1, 2016 through June 30,
2019 for FY 2021.
The 3-year time period of July 1, 2017 through June 30,
2020 for FY 2022.
This is the 3-year period from which data are being collected in
order to calculate ERRs and payment adjustment factors for the fiscal
year; this includes aggregate payments for excess readmissions and
aggregate payments for all discharges used in the calculation of the
payment adjustment. The ``applicable period'' for dual eligibles is the
same as the ``applicable period'' that we otherwise adopt for purposes
of the Hospital Readmissions Reduction Program.
We continue to believe that the 3-year period is the appropriate
data collection period for the Hospital Readmissions Reduction Program
measures. In order to provide greater certainty around future
applicable periods for the Hospital Readmissions Reduction Program, we
are proposing the automatic adoption of applicable periods for FY 2023
and all subsequent program years for the Hospital Readmissions
Reduction Program. Beginning in FY 2023, the applicable period for the
Hospital Readmissions Reduction Program will be the 3-year period
beginning 1 year advanced from previous program fiscal year's start of
the applicable period. That is, for FY 2023, the applicable period for
the Hospital Readmissions Reduction Program measures and for
determining dual eligibility will be the 3-year period from July 1,
2018 through June 30, 2021, which is advanced 1 year from the
applicable period for the FY 2022 Hospital Readmissions Reduction
Program. Under this proposed policy, for all subsequent years, we would
advance this 3-year period by 1 year unless otherwise specified by the
Secretary, which we would convey through notice and comment rulemaking.
Similarly, the applicable period for dual eligibility would continue to
correspond to the applicable period for the Hospital Readmissions
Reduction Program, unless otherwise specified by the Secretary. We
believe that the automatic adoption of the applicable period each year
will streamline the process and provide additional clarity and
consistency to the Program.
7. Identification of Aggregate Payments for Each Condition/Procedure
and All Discharges for FY 2021
When calculating the numerator (aggregate payments for excess
readmissions), we determine the base operating DRG payment amount for
an individual hospital for the applicable period for each condition/
procedure using Medicare inpatient claims from the MedPAR file with
discharge dates that are within the applicable period. Under our
established methodology, we use the update of the MedPAR file for each
Federal fiscal year, which is updated 6 months after the end of each
Federal fiscal year within the applicable period, as our data source.
In identifying discharges for the applicable conditions/procedures
to calculate the aggregate payments for excess readmissions, we apply
the same exclusions to the claims in the MedPAR file as are applied in
the measure methodology for each of the applicable conditions/
procedures. For the FY 2021 applicable period, this includes the
discharge diagnoses for each applicable condition/procedure based on a
list of specific ICD-10-CM and ICD-10-PCS code sets, as applicable, for
that condition/procedure, because diagnoses and procedure codes for
discharges occurring on or after October 1, 2015 (FY 2016) began
reporting under the ICD-10-CM and ICD-10-PCS code sets as opposed to
the previous ICD-9-CM code set.
We identify Medicare fee-for-service (FFS) claims that meet the
criteria as previously described for each applicable condition/
procedure to calculate the aggregate payments for excess readmissions.
This means that claims paid for under Medicare Part C (Medicare
Advantage) are not included in this calculation. This policy is
consistent with the methodology to calculate ERRs based solely on
admissions and readmissions for Medicare FFS patients. Therefore,
consistent with our established methodology, for FY 2021, we are
proposing to continue to exclude admissions for patients enrolled in
Medicare Advantage (MA), as identified in the Medicare Enrollment
Database.
In this proposed rule, for FY 2021, we are proposing to determine
aggregate payments for excess readmissions, and aggregate payments for
all discharges using data from MedPAR claims with discharge dates that
align with the FY 2021 applicable period. As we stated in FY 2018 IPPS/
LTCH PPS final rule (82 FR 38232), we will determine the neutrality
modifier using the most recently available full year of MedPAR data.
However, we note that, for the purpose of modeling the proposed FY 2021
readmissions payment adjustment factors for this proposed rule, we are
using the proportion of dual-eligibles, excess readmission ratios, and
aggregate payments for each condition/procedure and all discharges for
applicable hospitals from the FY 2020 Hospital Readmissions Reduction
Program applicable period. For the FY 2021 program year, applicable
hospitals will have the opportunity to review and correct calculations
based on the proposed FY 2021 applicable period of July 1, 2016 to June
30, 2019, before they are made public under our policy regarding
reporting of hospital-specific information. Again, we reiterate that

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this period is intended to review the program calculations, and not the
underlying data. For more information on the review and corrections
process, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77
FR 53399 through 53401).
In this proposed rule, we are proposing to continue to use MedPAR
data corresponding to the applicable period for the Hospital
Readmissions Reduction Program calculations. We are proposing to use
the March update of the fiscal year MedPAR to identify discharges
within the applicable period during that fiscal year.
8. Calculation of Payment Adjustment Factors for FY 2021
As we discussed in the FY 2018 IPPS/LTCH PPS final rule (82 FR
38226), section 1886(q)(3)(D) of the Act requires the Secretary to
group hospitals and apply a methodology that allows for separate
comparisons of hospitals within peer groups in determining a hospital's
adjustment factor for payments applied to discharges beginning in FY
2019.
We refer readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR
38226 through 38237) for a detailed discussion of the payment
adjustment methodology. In the FY 2021 IPPS/LTCH PPS proposed rule, we
are not proposing any changes to this payment adjustment calculation
methodology for FY 2021.
9. Calculation of Payment Adjustment for FY 2021
Section 1886(q)(3)(A) of the Act defines the payment adjustment
factor for an applicable hospital for a fiscal year as ``equal to the
greater of: (i) the ratio described in subparagraph (B) for the
hospital for the applicable period (as defined in paragraph (5)(D)) for
such fiscal year; or (ii) the floor adjustment factor specified in
subparagraph (C).'' Section 1886(q)(3)(B) of the Act, in turn,
describes the ratio used to calculate the adjustment factor.
Specifically, it states that the ratio is equal to 1 minus the ratio
of--(1) the aggregate payments for excess readmissions; and (2) the
aggregate payments for all discharges, scaled by the neutrality
modifier. The calculation of this ratio is codified at 42 CFR
412.154(c)(1) and the floor adjustment factor is codified at 42 CFR
412.154(c)(2). Section 1886(q)(3)(C) of the Act specifies the floor
adjustment factor at 0.97 for FY 2015 and subsequent fiscal years.
Consistent with section 1886(q)(3) of the Act, codified in our
regulations at 42 CFR 412.154(c)(2), for FY 2021, the payment
adjustment factor will be either the greater of the ratio or the floor
adjustment factor of 0.97. Under our established policy, the ratio is
rounded to the fourth decimal place. In other words, for FY 2021, a
hospital subject to the Hospital Readmissions Reduction Program would
have an adjustment factor that is between 1.0 (no reduction) and 0.9700
(greatest possible reduction).
For additional information on the FY 2021 payment calculation, we
refer readers to the Hospital Readmissions Reduction Program
information and resources available on our QualityNet website. We are
not proposing any changes to our calculation of payment methodology in
this proposed rule.
10. Confidential Reporting of Stratified Data for Hospital Quality
Measures
Consistent with our plans described in the FY 2020 IPPS/LTCH PPS
final rule (84 FR 42388 through 42390), we will include in confidential
hospital-specific reports (HSR) data stratified by patient dual-
eligible status for the six readmissions measures included in the
Hospital Readmissions Reduction Program in the Spring of 2020. These
data will include two disparity methodologies designed to illuminate
potential disparities within individual hospitals and across hospitals
nationally and will supplement the measure data currently publicly
reported on the Hospital Compare website. However, this stratified data
would be in confidential reports and not publicly reported at this
time. The first methodology, the Within-Hospital Disparity Method,
highlights differences in outcomes for dual-eligible versus non-dual-
eligible patients within an individual hospital, while the second
methodology, the Dual Eligible Outcome Method, allows for a comparison
of performance in care for dual-eligible patients across hospitals (82
FR 38405 through 38407; 83 FR 41598; 84 FR 42388 through 42389). These
two disparity methods are separate from the methodology used by the
Hospital Readmissions Reduction Program that assesses hospital
performance relative to other hospitals with a similar proportion of
dual-eligible patients (that is, peer group), and we emphasize that the
two disparity methods would not be used in payment adjustment factor
calculations under the Hospital Readmissions Reduction Program.
We note that the two disparity methods do not place any additional
collection or reporting burden on hospitals because dual-eligibility
data are readily available in claims data. In addition, we reiterate
that these confidential hospital-specific reports data do not impact
the calculation of hospital payment adjustment factors under the
Hospital Readmissions Reduction Program.
We are not proposing any updates to the confidential reporting of
stratified data in this proposed rule.
11. Proposed Regulatory Revisions
We are proposing to revise 42 CFR 412.152 to reflect the proposed
policy to automatically adopt applicable periods for the Program, as
previously discussed in section IV.K.6. of the preamble of this
proposed rule. Specifically, we are proposing to revise the definition
of ``applicable period'' and ``applicable period for dual-eligibility''
as follows:
Applicable period is, with respect to a fiscal year, the 3-year
period (specified by the Secretary) from which data are collected in
order to calculate excess readmission ratios and adjustments under the
Hospital Readmissions Reduction Program. The applicable period for FY
2022 is the 3-year period from July 1, 2017 through June 30, 2020.
Beginning with the FY 2023 program year, the applicable period is the
3-year period advanced by 1-year from the prior year's period from
which data are collected in order to calculate excess readmission
ratios and adjustments under the Hospital Readmissions Reduction
Program, unless otherwise specified by the Secretary. That is, the
applicable period for FY 2023 is the 3-year period from July 1, 2018
through June 30, 2021.
Applicable period for dual-eligibility is the 3-year data period
corresponding to the applicable period for the Hospital Readmissions
Reduction Program, unless otherwise established by the Secretary.

L. Hospital Value-Based Purchasing (VBP) Program: Updates

1. Background
a. Statutory Background and Overview of Past Program Years
Section 1886(o) of the Act requires the Secretary to establish a
hospital value-based purchasing program (the Hospital VBP Program)
under which value-based incentive payments are made in a fiscal year
(FY) to hospitals that meet 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.
For more of the statutory background and descriptions of our
current policies for the Hospital VBP Program, we refer readers to the
Hospital Inpatient VBP Program final rule (76 FR 26490 through 26547);
the FY 2012 IPPS/LTCH PPS final rule (76 FR 51653 through 51660);

[[Page 32769]]

the CY 2012 OPPS/ASC final rule with comment period (76 FR 74527
through 74547); the FY 2013 IPPS/LTCH PPS final rule (77 FR 53567
through 53614); the FY 2014 IPPS/LTCH PPS final rule (78 FR 50676
through 50707); the CY 2014 OPPS/ASC final rule (78 FR 75120 through
75121); the FY 2015 IPPS/LTCH PPS final rule (79 FR 50048 through
50087); the FY 2016 IPPS/LTCH PPS final rule (80 FR 49544 through
49570); the FY 2017 IPPS/LTCH PPS final rule (81 FR 56979 through
57011); the CY 2017 OPPS/ASC final rule with comment period (81 FR
79855 through 79862); the FY 2018 IPPS/LTCH PPS final rule (82 FR 38240
through 38269); the FY 2019 IPPS/LTCH PPS final rule (83 FR 41440
through 41472); and the FY 2020 IPPS/LTCH PPS final rule (84 FR 42390
through 42402).
We also have codified certain requirements for the Hospital VBP
Program at 42 CFR 412.160 through 412.167.
b. FY 2021 Program Year Payment Details
Section 1886(o)(7)(B) of the Act instructs the Secretary to reduce
the base operating DRG payment amount for a hospital for each discharge
in a fiscal year by an applicable percent. Under section 1886(o)(7)(A)
of the Act, the sum total of these reductions in a fiscal year must
equal the total amount available for value-based incentive payments for
all eligible hospitals for the fiscal year, as estimated by the
Secretary. We finalized details on how we would implement these
provisions in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53571 through
53573), and we refer readers to that rule for further details.
Under section 1886(o)(7)(C)(v) of the Act, the applicable percent
for the FY 2021 program year is 2.00 percent. Using the methodology we
adopted in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53571 through
53573), we estimate that the total amount available for value-based
incentive payments for FY 2021 is approximately $1.9 billion, based on
the December 2019 update of the FY 2019 MedPAR file. We intend to
update this estimate in the FY 2021 IPPS/LTCH PPS final rule using the
March 2020 update of the FY 2019 MedPAR file.
As finalized in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53573
through 53576), we will utilize a linear exchange function to translate
this estimated amount available into a value-based incentive payment
percentage for each hospital, based on its Total Performance Score
(TPS). We will then calculate a value-based incentive payment
adjustment factor that will be applied to the base operating DRG
payment amount for each discharge occurring in FY 2021, on a per-claim
basis. We are publishing proxy value-based incentive payment adjustment
factors in Table 16 associated with this proposed rule (which is
available via the internet on the CMS website). The proxy factors are
based on the TPSs from the FY 2020 program year. These FY 2020
performance scores are the most recently available performance scores
hospitals have been given the opportunity to review and correct. The
slope of the linear exchange function used to calculate the proxy
value-based incentive payment adjustment factors in Table 16 is
2.8109876851. This slope, along with the estimated amount available for
value-based incentive payments, is also published in Table 16.
We intend to update this table as Table 16A associated with the
final rule (which will be available on the CMS website) to reflect
changes based on the March 2020 update to the FY 2019 MedPAR file. We
also intend to update the slope of the linear exchange function used to
calculate those updated proxy value-based incentive payment adjustment
factors. The updated proxy value-based incentive payment adjustment
factors for FY 2021 will continue to be based on historic FY 2020
program year TPSs because hospitals will not have been given the
opportunity to review and correct their actual TPSs for the FY 2021
program year until after the FY 2021 IPPS/LTCH PPS final rule is
published.
After hospitals have been given an opportunity to review and
correct their actual TPSs for FY 2021, we will post as Table 16B
associated with the final rule (which will be available via the
internet on the CMS website) the actual value-based incentive payment
adjustment factors, exchange function slope, and estimated amount
available for the FY 2021 program year. We expect Table 16B will be
posted on the CMS website in the Fall of 2020.
2. Retention and Removal of Quality Measures
a. Retention of Previously Adopted Hospital VBP Program Measures and
Relationship Between the Hospital IQR and Hospital VBP Program Measure
Sets
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53592), we finalized
a policy to retain measures from prior program years for each
successive program year, unless otherwise proposed and finalized. In
the FY 2019 IPPS/LTCH PPS final rule (83 FR 41440 through 41441), we
finalized a revision to our regulations at 42 CFR 412.164(a) to clarify
that once we have complied with the statutory prerequisites for
adopting a measure for the Hospital VBP Program (that is, we have
selected the measure from the Hospital IQR Program measure set and
included data on that measure on Hospital Compare or its successor for
at least 1 year prior to its inclusion in a Hospital VBP Program
performance period), the Hospital VBP Program statute does not require
that the measure continue to remain in the Hospital IQR Program. We are
not proposing any changes to these policies in this proposed rule.
b. Measure Removal Factors for the Hospital VBP Program
In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41441 through
41446), in alignment with the Hospital IQR Program, we finalized
measure removal factors for the Hospital VBP Program, and we refer
readers to that final rule for details. We are not proposing any
changes to these policies in this proposed rule.
c. Summary of Previously Adopted Measures for the FY 2023 and FY 2024
Program Years
We refer readers to the FY 2020 IPPS/LTCH PPS final rule (84 FR
42392 through 42393) for summaries of previously adopted measures for
the FY 2022 and FY 2023 program years, and to the tables in this
section showing summaries of previously adopted measures for the FY
2023 and FY 2024 program years. We note that we are not proposing to
add new measures or remove measures from the Hospital VBP Program in
this proposed rule.
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3. Previously Adopted Baseline and Performance Periods
a. Background
Section 1886(o)(4) of the Act requires the Secretary to establish a
performance period for the Hospital VBP Program that begins and ends
prior to the beginning of such fiscal year. We refer readers to the FY
2017 IPPS/LTCH PPS final rule (81 FR 56998 through 57003) for baseline
and performance periods that we have adopted for the FY 2020, FY 2021,
and FY 2022 program years. In the same final rule, we finalized a
schedule for all future baseline and performance periods for previously
adopted measures. We refer readers to the FY 2018 IPPS/LTCH PPS final
rule (82 FR 38256 through 38261), the FY 2019 IPPS/LTCH PPS final rule
(83 FR 41466 through 41469), and the FY 2020 IPPS/LTCH PPS final rule
(84 FR 42393 through 42395) for additional baseline and performance
periods that we have adopted for the FY 2022, FY 2023, and subsequent
program years.
b. Person and Community Engagement Domain
Since the FY 2015 program year, we have adopted a 12-month baseline
period and a 12-month performance period for measures in the Person and
Community Engagement domain (previously referred to as the Patient- and
Caregiver-Centered Experience of Care/Care Coordination domain) (77 FR
53598; 78 FR 50692; 79 FR 50072; 80 FR 49561). In the FY 2017 IPPS/LTCH
PPS final rule (81 FR 56998), we finalized our proposal to adopt a 12-
month performance period for the Person and Community Engagement domain
that runs on the calendar year 2 years prior to the applicable program
year and a 12-month baseline period that runs on the calendar year 4
years prior to the applicable program year, for the FY 2019 program
year and subsequent years.
We are not proposing any changes to these policies in this proposed
rule.
c. Clinical Outcomes Domain
For the FY 2020 and FY 2021 program years, we adopted a 36-month
baseline period and a 36-month performance period for measures in the
Clinical Outcomes domain (previously referred to as the Clinical Care
domain) (79 FR 50073; 80 FR 49563 through 49564). In the FY 2017 IPPS/
LTCH PPS final rule (81 FR 57001), we also adopted a 22-month
performance period and a 36-month baseline period specifically for the
MORT-30-PN (updated cohort) measure for the FY 2021 program year.
In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57000), we adopted a
36-month performance period and a 36-month baseline period for the FY
2022 program year for each of the previously finalized measures in the
Clinical Outcomes domain--that is, the MORT-30-AMI, MORT-30-HF, MORT-
30-COPD, COMP-HIP-KNEE, and MORT-30-CABG measures. In the same final
rule (81 FR 57001), we adopted a 34-month performance period and a 36-
month baseline period for the MORT-30-PN (updated cohort) measure for
the FY 2022 program year.
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38259), we adopted a
36-month performance period and a 36-month baseline period for the
MORT-30-AMI, MORT-30-HF, MORT-30-COPD, MORT-30-CABG, MORT-30-PN
(updated cohort), and COMP-HIP-KNEE measures for the FY 2023 program
year and subsequent years. Specifically, for the mortality measures
(MORT-30-AMI, MORT-30-HF, MORT-30-COPD, MORT-30-CABG, and MORT-30-PN
(updated cohort)), the performance period runs for 36 months from July
1, 5 years prior to the applicable fiscal program year, to June 30, 2
years prior to the applicable fiscal program year, and the baseline
period runs for 36 months from July 1, 10 years prior to the applicable
fiscal program year, to June 30, 7 years prior to the applicable fiscal
program year. For the COMP-HIP-KNEE measure, the performance period
runs for 36 months from April 1, 5 years prior to the applicable fiscal
program year, to March 31, 2 years prior to the applicable fiscal
program year, and the baseline period runs for 36 months from April 1,
10 years prior to the applicable fiscal program year, to March 31, 7
years prior to the applicable fiscal program year.
We are not proposing any changes to the length of these performance
or baseline periods in this proposed rule.
d. Safety Domain
In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57000), we finalized
our proposal to adopt a performance period for all measures in the
Safety domain--with the exception of the CMS Patient Safety and Adverse
Events Composite (CMS PSI 90) measure--that runs on the calendar year 2
years prior to the applicable program year and a baseline period that
runs on the calendar year 4 years prior to the applicable program year
for the FY 2019 program year and subsequent program years.
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38258), for the FY
2023 program year, we adopted a 21-month baseline period (October 1,
2015 to June 30, 2017) and a 24-month performance period (July 1, 2019
to June 30, 2021) for the CMS PSI 90 measure. In the FY 2018 IPPS/LTCH
PPS final rule (82 FR 38258 through 38259), we adopted a 24-month
performance period and a 24-month baseline period for the CMS PSI 90
measure for the FY 2024 program year and subsequent years.
Specifically, the performance period runs from July 1, 4 years prior to
the applicable fiscal program year, to June 30, 2 years prior to the
applicable fiscal program year, and the baseline period runs from July
1, 8 years prior to the applicable fiscal program year, to June 30, 6
years prior to the applicable fiscal program year.
We are not proposing any changes to these policies in this proposed
rule.
e. Efficiency and Cost Reduction Domain
Since the FY 2016 program year, we have adopted a 12-month baseline
period and a 12-month performance period for the MSPB measure in the
Efficiency and Cost Reduction domain (78 FR 50692; 79 FR 50072; 80 FR
49562). In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56998), we
finalized our proposal to adopt a 12-month performance period for the
MSPB measure that runs on the calendar year 2 years prior to the
applicable program year and a 12-month baseline period that runs on the
calendar year 4 years prior to the applicable program year for the FY
2019 program year and subsequent years.
We are not proposing any changes to these policies in this proposed
rule.
f. Summary of Previously Adopted Baseline and Performance Periods for
the FY 2023 Through FY 2026 Program Years
These tables summarize the baseline and performance periods that we
have previously adopted.

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4. Performance Standards for the Hospital VBP Program
a. Background
Section 1886(o)(3)(A) of the Act requires the Secretary to
establish performance standards for the measures selected under the
Hospital VBP Program for a performance period for the applicable fiscal
year. The performance standards must include levels of achievement and
improvement, as required by section 1886(o)(3)(B) of the Act, and must
be established no later than 60 days before the beginning of the
performance period for the fiscal year involved, as required by section
1886(o)(3)(C) of the Act. We refer readers to the Hospital Inpatient
VBP Program final rule (76 FR 26511 through 26513) for further
discussion of achievement and improvement standards under the Hospital
VBP Program.
In addition, when establishing the performance standards, section
1886(o)(3)(D) of the Act requires the Secretary to consider appropriate
factors, such as: (1) Practical experience with the measures involved,
including whether a significant proportion of hospitals failed to meet
the performance standard during previous performance periods; (2)
historical performance standards; (3) improvement rates; and (4) the
opportunity for continued improvement.
We refer readers to the FY 2013, FY 2014, and FY 2015 IPPS/LTCH PPS
final rules (77 FR 53599 through 53605; 78 FR 50694 through 50699; and
79 FR 50077 through 50081, respectively) for a more detailed discussion
of the general scoring methodology used in the Hospital VBP Program. We
refer readers to the FY 2020 IPPS/LTCH PPS final rule (84 FR 42396) for
previously established performance standards for the FY 2022 program
year.
We note that the performance standards for all of the following
measures are calculated with lower values representing better
performance:
CDC NHSN HAI measures (CLABSI, CAUTI, CDI, MRSA
Bacteremia, and Colon and Abdominal Hysterectomy SSI).
CMS PSI 90 measure.
COMP-HIP-KNEE measure.
MSPB measure.
This distinction is made in contrast to other measures--HCAHPS and
the mortality measures, which use survival rates rather than mortality
rates--for which higher values indicate better performance. As
discussed further in the FY 2014 IPPS/LTCH PPS final rule (78 FR
50684), the performance standards for the Colon and Abdominal
Hysterectomy SSI measure are computed separately for each procedure
stratum, and we first award achievement and improvement points to each
stratum separately, and then compute a weighted average of the points
awarded to each stratum by predicted infections.
b. Previously Established and Estimated Performance Standards for the
FY 2023 Program Year
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38264 through
38265), we established performance standards for the FY 2023 program
year for the Clinical Outcomes domain measures (MORT-30-AMI, MORT-30-
HF, MORT-30-PN (updated cohort), MORT-30-COPD, MORT-30-CABG, and COMP-
HIP-KNEE) and for the Efficiency and Cost Reduction domain measure
(MSPB). In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41471 through
41472), we established, for the FY 2023 program year, the performance
standards for the Safety domain measure, CMS PSI 90. We note that the
performance standards for the MSPB measure are based on performance
period data. Therefore, we are unable to provide numerical equivalents
for the standards at this time.
In accordance with our methodology for calculating performance
standards discussed more fully in the Hospital Inpatient VBP Program
final rule (76 FR 26511 through 26513) and codified at 42 CFR 412.160,
we are estimating additional performance standards for the FY 2023
program year. We note that the numerical values for the performance
standards for the Safety and Person and Community Engagement domains
for the FY 2023 program year in these tables are estimates based on the
most recently available data, and we intend to update the numerical
values in the FY 2021 IPPS/LTCH PPS final rule.
The previously established and estimated performance standards for
the measures in the FY 2023 program year are set out in this table.

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The eight dimensions of the HCAHPS measure are calculated to
generate the HCAHPS Base Score. For each of the eight dimensions,
Achievement Points (0-10 points) and Improvement Points (0-9 points)
are calculated, the larger of which is then summed across the eight
dimensions to create the HCAHPS Base Score (0-80 points). Each of the
eight dimensions is of equal weight; therefore, the HCAHPS Base Score
ranges from 0 to 80 points. HCAHPS Consistency Points are then
calculated, which range from 0 to 20 points. The Consistency Points
take into consideration the scores of all eight Person and Community
Engagement dimensions. The final element of the scoring formula is the
summation of the HCAHPS Base Score and the HCAHPS Consistency Points,
which results in the Person and Community Engagement Domain score that
ranges from 0 to 100 points.

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c. Previously Established Performance Standards for Certain Measures
for the FY 2024 Program Year
We have adopted certain measures for the Safety domain, Clinical
Outcomes domain, and Efficiency and Cost Reduction domain for future
program years in order to ensure that we can adopt baseline and
performance periods of sufficient length for performance scoring
purposes. In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41472), we
established performance standards for the FY 2024 program year for the
Clinical Outcomes domain measures (MORT-30-AMI, MORT-30-HF, MORT-30-PN
(updated cohort), MORT-30-COPD, MORT-30-CABG, and COMP-HIP-KNEE) and
the Efficiency and Cost Reduction domain measure (MSPB). In the FY 2020
IPPS/LTCH PPS final rule (84 FR 42395 through 42398), we established,
for the FY 2024 program year, the performance standards for the Safety
domain measure, CMS PSI 90. We note that the performance standards for
the MSPB measure are based on performance period data. Therefore, we
are unable to provide numerical equivalents for the standards at this
time. The previously established performance standards for these
measures are set out in this table.
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d. Previously Established and Newly Established Performance Standards
for Certain Measures for the FY 2025 Program Year
We have adopted certain measures for the Safety domain, Clinical
Outcomes domain, and the Efficiency and Cost Reduction domain for
future program years in order to ensure that we can adopt baseline and
performance periods of sufficient length for performance scoring
purposes. In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42398 through
42399), we established performance standards for the FY 2025 program
year for the Clinical Outcomes domain measures (MORT-30-AMI, MORT-30-
HF, MORT-30-PN (updated cohort), MORT-30-COPD, MORT-30-CABG, and COMP-
HIP-KNEE) and the Efficiency and Cost Reduction domain

[[Page 32778]]

measure (MSPB). We note that the performance standards for the MSPB
measure are based on performance period data. Therefore, we are unable
to provide numerical equivalents for the standards at this time.
In accordance with our methodology for calculating performance
standards discussed more fully in the Hospital Inpatient VBP Program
final rule (76 FR 26511 through 26513), and codified at 42 CFR 412.160,
we are establishing performance standards for the CMS PSI 90 measure
for the FY 2025 program year. The previously established and newly
established performance standards for these measures are set out in
this table.
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e. Newly Established Performance Standards for Certain Measures for the
FY 2026 Program Year
As previously discussed, we have adopted certain measures for the
Clinical Outcomes domain (MORT-30-AMI, MORT-30-HF, MORT-30-PN (updated
cohort), MORT-30-COPD, MORT-30-CABG, and COMP-HIP-KNEE) and the
Efficiency and Cost Reduction domain (MSPB) for future program years in
order to ensure that we can adopt baseline and performance periods of
sufficient length for performance scoring purposes. In accordance with
our methodology for calculating performance standards discussed more
fully in the Hospital Inpatient VBP Program final rule (76 FR 26511
through 26513), and our performance standards definitions codified at
42 CFR 412.160, we are establishing the following performance standards
for the FY 2026 program year for the Clinical Outcomes domain and the
Efficiency and Cost Reduction domain. We note that the performance
standards for the MSPB measure are based on performance period data.
Therefore, we are unable to provide numerical equivalents for the
standards at this time. The newly established performance standards for
these measures are set out in this table.

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5. Scoring Methodology and Data Requirements
a. Domain Weighting for the FY 2022 Program Year and Subsequent Years
for Hospitals That Receive a Score on All Domains
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38266), we adopted a
policy to retain the equal weight of 25 percent for each of the four
domains in the Hospital VBP Program for the FY 2020 program year and
subsequent years for hospitals that receive a score in all domains. We
are not proposing any changes to these domain weights in this proposed
rule.
b. Domain Weighting for the FY 2022 Program Year and Subsequent Years
for Hospitals Receiving Scores on Fewer Than Four Domains
In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50084 through
50085), for the FY 2017 program year and subsequent years, we adopted a
policy that hospitals must receive domain scores on at least three of
four quality domains in order to receive a TPS, and hospitals with
sufficient data on only three domains will have their TPSs
proportionately reweighted. We are not proposing any changes to these
domain weights in this proposed rule.
c. Minimum Numbers of Measures for Hospital VBP Program Domains
Based on our previously finalized policies (82 FR 38266), for a
hospital to receive domain scores:
A hospital must report a minimum number of 100 completed
HCAHPS surveys for a hospital to receive a Person and Community
Engagement domain score.
A hospital must receive a minimum of two measure scores
within the Clinical Outcomes domain to receive a Clinical Outcomes
domain score.
A hospital must receive a minimum of two measure scores
within the Safety domain to receive a Safety domain score.
A hospital must receive a minimum of one measure score
within the Efficiency and Cost Reduction domain to receive an
Efficiency and Cost Reduction domain score.
We are not proposing any changes to these policies in this proposed
rule.
d. Minimum Numbers of Cases for Hospital VBP Program Measures
(1) Background
Section 1886(o)(1)(C)(ii)(IV) of the Act requires the Secretary to
exclude for the fiscal year hospitals that do not report a minimum
number (as determined by the Secretary) of cases for the measures that
apply to the hospital for the performance period for the fiscal year.
For additional discussion of the previously finalized minimum numbers
of cases for measures under the Hospital VBP Program, we refer readers
to the Hospital Inpatient VBP Program final rule (76 FR 26527 through
26531); the CY 2012 OPPS/ASC final rule (76 FR 74532 through 74534);
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53608 through 53610); the
FY 2015 IPPS/LTCH PPS final rule (79 FR 50085 through 50086); the FY
2016 IPPS/LTCH PPS final rule (80 FR 49570); the FY 2017 IPPS/LTCH PPS
final rule (81 FR 57011); the FY 2018 IPPS/LTCH PPS final rule (82 FR
38266 through 38267); the FY 2019 IPPS/LTCH PPS final rule (83 FR 41465
through 41466); and the FY 2020 IPPS/LTCH PPS final rule (84 FR 42399
through 42400). We are not proposing any changes to these policies in
this proposed rule.
(2) Summary of Previously Adopted Minimum Number of Cases
The previously adopted minimum numbers of cases for these measures
are set forth in this table.
BILLING CODE 4120-01-P

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BILLING CODE 4120-01-C
e. Summary of Previously Adopted Administrative Policies for NHSN
Healthcare-Associated Infection (HAI) Measure Data
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42400 through
42402), we finalized our proposal for the Hospital VBP Program to use
the same data to calculate the CDC NHSN HAI measures that the HAC
Reduction Program uses for purposes of calculating the measures under
that program, beginning on January 1, 2020 for CY 2020 data collection,
which would apply to the Hospital VBP Program starting with data for
the FY 2022 program year performance period. In the FY 2020 IPPS/LTCH
PPS final rule (84 FR 42402), we also finalized our proposal for the
Hospital VBP Program to use the same processes adopted by the HAC
Reduction Program for hospitals to review and correct data for the CDC
NHSN HAI measures and to rely on HAC Reduction Program validation to
ensure the accuracy of CDC NHSN HAI measure data used in the Hospital
VBP Program. We are not proposing any changes to these policies in this
proposed rule.
We also refer readers to section IV.M. of the preamble of this
proposed rule for additional information about HAC Reduction Program
refinements to validation policies for the CDC NHSN HAI measures.

M. Hospital-Acquired Condition (HAC) Reduction Program: Proposed
Updates and Changes (42 CFR 412.170)

1. Regulatory Background
We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR
50707 through 50708) for a general overview of the HAC Reduction
Program and to the same final rule (78 FR 50708 through 50709) for a
detailed discussion of the statutory basis for the Program. For
additional descriptions of our previously finalized policies for the
HAC Reduction Program, we also refer readers to the following final
rules:
The FY 2014 IPPS/LTCH PPS final rule (78 FR 50707 through
50729).
The FY 2015 IPPS/LTCH PPS final rule (79 FR 50087 through
50104).
The FY 2016 IPPS/LTCH PPS final rule (80 FR 49570 through
49581).
The FY 2017 IPPS/LTCH PPS final rule (81 FR 57011 through
57026).
The FY 2018 IPPS/LTCH PPS final rule (82 FR 38269 through
38278).
The FY 2019 IPPS/LTCH PPS final rule (83 FR 41472 through
41492).
The FY 2020 IPPS/LTCH PPS final rule (84 FR 42402 through
42411).
These rules describe the general framework for the HAC Reduction
Program's implementation, including: (1) The relevant definitions
applicable to the program; (2) the payment adjustment under the
program; (3) the measure selection process and conditions for the
program, including a risk adjustment and scoring methodology; (4)
performance scoring; (5) data collection; (6) validation; (7) measure
removal factors policy; (8) the process for making hospital-specific
performance information available to the public, including the
opportunity for a hospital to review the information and submit
corrections; (9) the extraordinary circumstance exception policy; and
(10) limitation of administrative and judicial review. We remind
readers that data collection and validation policies (items (5) and
(6)) were finalized in the FY 2019 IPPS/LTCH PPS final rule (83 FR
41472 through 41492) and further clarified in the FY 2020 IPPS/LTCH PPS
final rule (84 FR 42402 through 42411).
We have also codified certain requirements of the HAC Reduction
Program at 42 CFR 412.170 through 412.172.
2. Summary of Proposed Policies for the HAC Reduction Program
In section IV.M.4. of the preamble of this proposed rule, we are
proposing the automatic adoption of applicable periods beginning with
the FY 2023 program year and all subsequent program years, unless
otherwise specified by the Secretary. In section IV.M.6. of the
preamble of this proposed rule, we are proposing refinements to the HAC
Reduction Program validation procedures. Finally, in section IV.M.7. of
the preamble of this proposed rule, we are proposing to update the
definition of applicable period at 42 CFR 412.170 to align with this
proposal.
3. Measures for FY 2021 and Subsequent Years
a. Current Measures
The HAC Reduction Program has adopted six measures to date. In the
FY 2014 IPPS/LTCH PPS final rule (78 FR 50717), we finalized the use of
five CDC NHSN HAI measures: (1) CAUTI; (2) CDI; (3) CLABSI; (4) Colon
and Abdominal Hysterectomy SSI; and (5) MRSA Bacteremia. In the FY 2017
IPPS/LTCH PPS final rule (81 FR 57014), we also finalized the use of
the CMS PSI 90 measure. These previously finalized measures, with their
full measure names, are shown in this table.
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[[Page 32782]]

Technical specifications for the CMS PSI 90 measure can be found on
the QualityNet website. Technical specifications for the CDC NHSN HAI
measures can be found at CDC's NHSN website at: http://www.cdc.gov/nhsn/acute-care-hospital/index.html. Both websites provide measure
updates and other information necessary to guide hospitals
participating in the collection of HAC Reduction Program data.
In this proposed rule, we are not proposing to adopt or remove any
measures.
b. Measure Removal Factors Policy
We refer readers to the FY 2019 IPPS/LTCH PPS final rule (83 FR
41472 through 41474) for more information about how the HAC Reduction
Program supports CMS' goal of bringing quality measurement,
transparency, and improvement together with value-based purchasing to
the hospital inpatient care setting through the Meaningful Measures
Initiative. We also refer readers to the FY 2020 IPPS/LTCH PPS final
rule (84 FR 42404 through 42406) for information about our measure
removal and retention factors for the HAC Reduction Program. In this
proposed rule, we are not proposing any removal and retention factor
policy changes.
4. Applicable Period for the HAC Reduction FY 2023 Program Year and
Subsequent Years
As we stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50717),
we believe that using 24-month data collection periods for the CMS PSI
90 and CDC NHSN HAI measures for the HAC Reduction Program provides
hospitals and the general public the most current data available. The
24-month data period also allows time to complete the complex
calculation process for these measures, to perform comprehensive
quality assurance to enhance the accuracy of measure results, and to
disseminate confidential reports on hospital-level results to
individual hospitals. Though we had truncated the applicable period to
shorter than a 24-month data collection period for the CMS PSI 90 to
accommodate the transition to the ICD-10 classification system for FY
2018 and 2019,\463\ we returned to using the full 24-month data
collection period as soon as the ICD-10 transition was complete. In the
FY 2018 IPPS/LTCH PPS final rule (82 FR 38271), for FY 2020, we
finalized the applicable period for the CMS PSI 90 as the 24-month
period from July 1, 2016 through June 30, 2018. Additionally, we
finalized the applicable period for the CDC NHSN HAI measures (CLABSI,
CAUTI, Colon and Abdominal Hysterectomy SSI, MRSA Bacteremia, and CDI),
as the 24-month period from January 1, 2017 through December 31, 2018.
We have finalized the 24-month applicable periods for FYs 2021 and 2022
\464\ consistent with these applicable periods and with the definition
specified at Sec. 412.170.
---------------------------------------------------------------------------

\463\ FY 2017 IPPS/LTCH PPS final rule (81 FR 57020).
\464\ FY 2019 IPPS/LTCH PPS final rule (83 FR 41489); FY 2020
IPPS/LTCH PPS final rule (84 FR 42410).
---------------------------------------------------------------------------

We continue to believe that the 24-month period is the appropriate
data collection period for both the CMS PSI 90 and CDC NHSN HAI
measures. In order to provide greater certainty around future
applicable periods for the HAC Reduction Program, we are proposing the
automatic adoption of applicable periods for the FY 2023 program year
and all subsequent program years for the HAC Reduction Program.
Beginning in FY 2023, the applicable period for both the CMS PSI 90 and
CDC NHSN HAI measures will be the 24-month period beginning 1 year
advanced from the previous program year's start of the applicable
period. That is, for FY 2023, the applicable period for the CMS PSI 90
would be the 24-month period from July 1, 2019 through June 30, 2021,
and the applicable period for CDC NHSN HAI measures would be the 24-
month period from January 1, 2020 through December 31, 2022, which is
advanced 1 year from the applicable period for the FY 2022 HAC
Reduction Program. All subsequent years would advance this 24-month
period by 1 year unless otherwise specified by the Secretary, which we
would convey through notice and comment rulemaking. We believe that the
automatic adoption of the applicable period each year would streamline
the process and provide additional clarity and consistency to the
Program.
5. HAC Reduction Program Scoring Methodology and Scoring Review and
Corrections Period
In FY 2019 IPPS/LTCH PPS final rule (83 FR 41484 through 41489), we
adopted the Equal Measure Weights approach to scoring and clarified the
``Scoring Calculations Review and Correction Period'' (83 FR 41484).
Hospitals must register for a QualityNet Secure Portal account in order
to access their annual hospital-specific reports. We will continue
using this scoring methodology and the ``Scoring Calculations Review
and Correction Period'' process in FY 2021 and for subsequent years.
6. Validation of HAC Reduction Program Data
a. Background
In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41478 through
41484), we adopted processes to validate the CDC NHSN HAI measure data
used in the HAC Reduction Program, because the Hospital IQR Program
finalized its proposals to remove CDC NHSN HAI measures from its
program. In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42406 through
42410), we provided additional clarification to the validation
selection and scoring methodology. We also refer readers to the
QualityNet website for more information regarding chart-abstracted data
validation of measures.
In the FY 2019 IPPS/LTCH PPS final rule, we finalized our policy
that the HAC Reduction Program will begin validation with Q3 2020
discharges, which must be reported by February 2021 using the following
validation schedule.

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We also adopted a policy that any nonsubstantive updates to the
procedures for validation of chart-abstracted measures will be provided
on the QualityNet website.
---------------------------------------------------------------------------

\465\ The CMS Clinical Data Abstraction Center (CDAC) performs
the validation.
---------------------------------------------------------------------------

We are proposing several changes to the process for validation of
HAC Reduction Program measure data to align this program with the
proposed changes to the Hospital IQR Program measure validation
process. Specifically, we intend to align the hospital selection and
submission quarters beginning with FY 2024 Hospital IQR and HAC
Reduction Programs validation so that we only require one pool of
hospitals to submit data for validation. We believe that this would
reduce burden and streamline processes. Our specific proposals to
update the HAC Reduction Program validation process are described later
in this section. For more information on the proposed updates to the
Hospital IQR measure validation process, see section VIII.A. of the
preamble of this proposed rule.
b. Proposed Updates to Process for Validation of HAC Reduction Program
Measure Data
1. Aligning Submission Quarters to Hospital IQR Submissions
To support the transition to an aligned validation program for the
HAC Reduction Program and the Hospital IQR Program, we are proposing to
change the quarters of data used for HAC Reduction Program measure
validation. Under the existing validation structure, hospitals selected
for validation for the FY 2023 program year would be required to submit
HAC Reduction Program measure data from the third and fourth quarters
of 2020 and the first and second quarters of 2021 (as depicted in the
table in section IV.M.6.a. of the preamble of this proposed rule).
In order to align the quarters used for HAC Reduction Program and
Hospital IQR validation, we are proposing to only use measure data from
the third and fourth quarters of 2020 for the FY 2023 program year
(illustrated in this table). We would use measure data from only these
quarters for both the random and targeted validation pools.
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For the FY 2024 program year and subsequent years, we are proposing
to use measure data from all of CY 2021 for both the HAC Reduction
Program and the Hospital IQR Program. Under this proposal, the data
submission deadlines for chart-abstracted measures would be in the
middle of the month, the fifth month following the end of the reporting
quarter.
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We invite public comment on our proposal to align submission
quarters and deadlines with the Hospital IQR Program.
2. Aligning Hospital Selection
Currently, a total of up to 600 hospitals may be selected for
validation under the HAC Reduction Program. This is achieved by the HAC
Reduction Program taking an annual sample of up to 400 randomly
selected hospitals and selecting up to 200 hospitals using targeting
criteria. We are not proposing any changes to the hospital selection
for validation for the FY 2023 program year. However, we are proposing
to update the policies to reduce the total validation pool from up to
600 hospitals to up to 400 hospitals, effective with validation for the
FY 2024 program year. This would align with proposals being made by the
Hospital IQR Program in section VIII.A. of the preamble of this
proposed rule. To achieve this reduction, we propose reducing the
randomly selected hospital pool from up to 400 hospitals to up to 200
hospitals for validation for the FY 2024 program year and subsequent
years. We note that these would be the same hospitals as those selected
for validation under the Hospital IQR Program to the extent that the
IQR program has measures for those hospitals; therefore, we would be
selecting a total of up to 400 hospitals across both the HAC Reduction
Program and the Hospital IQR Program. This would reduce the total
number of hospitals selected for validation across both programs by
approximately one third each year. We believe reducing the total number
of hospitals randomly selected for chart-abstracted measure validation
to ``up to 200'' would maintain a sufficient sample size for a
statistically meaningful estimate of hospitals' reporting accuracy and
help streamline the process for both programs. We invite public comment
on our proposal to align hospital selection with the Hospital IQR
Program for FY 2024 payment determination and subsequent years.
3. Requiring the Use of Digital Submissions for Medical Records
Requests
We are proposing to require hospitals to submit digital files when
submitting medical records for validation of HAC Reduction Program
measures, for the FY 2024 program year and subsequent years. Currently,
hospitals may choose to submit paper copies of medical records for
chart-abstracted measure validation or they may submit patient charts
for validation by securely transmitting electronic versions of medical
information (83 FR 41478 through 41484). Currently, submission via
secure transmission can either entail downloading or copying the
digital image of the patient chart onto CD, DVD, or flash drive, or
submission of PDFs using a CMS-approved secured file transfer system.
In this proposed rule, in alignment with proposals made for the
Hospital IQR Program in section VIII.A. of the preamble of this
proposed rule, we are proposing to discontinue the option of sending
CD, DVD, or flash drives containing digital images of patient charts,
beginning with Q1 2021 for FY 2024 program year validation. Under this
proposal, hospitals would be required to submit PDF copies of medical
records using direct electronic files submission via a CMS-approved
secure file transmission process. We would continue to reimburse
hospitals at $3.00 per chart, consistent with current reimbursement for
electronic submissions of charts.
We strive to provide the public with accurate quality data while
maintaining alignment with hospital recordkeeping practices. We
appreciate that hospitals have rapidly adopted EHR systems as their
primary source of information about patient care, which can facilitate
the process of producing electronic copies of medical records (78 FR
50834). Additionally, we monitor the medical records submissions to the
CMS Clinical Data Abstraction Center (CDAC) contractor, and have found
almost two-thirds of providers use the option to submit PDF copies of
medical records as electronic files. We note that paper submissions can
be reimbursed at a higher rate than for electronic submissions,
especially for longer records because paper submissions are reimbursed
on a per page basis, while electronic submissions are reimbursed using
a flat rate for each submission. In our assessment based on the
monitoring we believe the electronic submissions can be a more
effective and efficient process for the hospitals selected for
validation. Requiring electronic file submissions reduces the burden of
not only coordinating numerous paper-based pages of medical records and
making photocopies, but also shipping it to the CDAC. Therefore, we
believe it is appropriate to require that hospitals use electronic
submissions via a CMS-approved secure file transmission process. We
invite public comment on this proposal in section VIII.A of the
preamble of this proposed rule.
7. Regulatory Updates (42 CFR 412.170)
We are proposing to amend the definition of applicable period at 42
CFR 412.170 to align with our proposed automatic adoption of applicable
periods in future program years. Section 412.170 currently defines
applicable period as the 2-year period specified by the Secretary from
which data are collected in order to calculate the total hospital-
acquired condition score under the HAC Reduction Program. The proposed
amendment to the definition would add language to specify: (1) The
applicable period of the CMS PSI 90 and CDC NHSN HAI measures for the
FY 2023 HAC Reduction Program; and (2) beginning with the FY 2023
program year, the applicable period will be advanced by 1 year from the
prior from the prior fiscal year's applicable period. This addition to
the definition at 42 CFR 412.170 makes it so applicable periods for
future program years do not need to be defined during rulemaking.

N. Payments for Indirect and Direct Graduate Medical Education Costs
(Sec. Sec. 412.105 and 413.75 Through 413.83)

1. Overview of Medicare Direct GME and IME
The Medicare program makes payments to teaching hospitals to
account for two types of costs, the direct costs (direct GME) and the
indirect costs (IME) of a hospital's graduate medical education
program. Direct GME payments represent the direct costs of training
residents (for example, resident salaries, fringe benefits, and
teaching physician costs associated with an approved GME program) and
generally are calculated by determining the product of the Medicare
patient load (that is, the percentage of the hospital's Medicare
inpatient days), the hospital's per resident payment amount, and the
weighted number of FTE residents training at the hospital during the
cost reporting period.
The IME adjustment is made to teaching hospitals for the additional
indirect patient care costs attributable to teaching activities. For
example, teaching hospitals typically offer more technologically
advanced treatments to their patients, and therefore, patients who are
sicker and need more sophisticated treatment are more likely to go to
teaching hospitals. Furthermore, there are additional costs related to
the presence of inefficiencies associated with teaching residents
resulting from the additional tests or procedures ordered by residents
and the demands put on physicians who supervise, and staff who support,
the residents. IME payments are made for each inpatient

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discharge as a percentage add-on adjustment to the Hospital Inpatient
Prospective Payment System (IPPS) payment, and are calculated based on
the hospital's ratio of FTE residents to available beds as defined at
Sec. 412.105(b). The statutory formula for calculating the IME
adjustment is: c x [(1 + r)\.405\ - 1], where ``r'' represents the
hospital's ratio of FTE residents to beds, and ``c'' represents an IME
multiplier, which is set by the Congress.
The amount of IME payment a hospital receives for a particular
discharge is dependent upon the number of FTE residents the hospital
trains, the hospital's number of available beds, the current level of
the statutory IME multiplier, and the per discharge IPPS payment.
Sections 1886(d)(5)(B)(v) and 1886(h)(4)(F) of the Act established
hospital specific limits (that is, caps) on the number of allopathic
and osteopathic FTE residents that hospitals may count for purposes of
calculating indirect and direct GME payments, respectively.
2. Existing Regulations Related to Residency Program or Teaching
Hospital Closure
The regulations at 42 CFR 413.79(h) for direct GME, and 42 CFR
412.105(f)(1)(ix) for IME provide for a hospital that is closing or
closing its residency program(s) to volunteer to temporarily transfer a
portion of its hospital-specific direct GME and IME FTE resident caps
to other hospitals that are willing to accept and train the displaced
resident(s) for the duration of the resident's training program. CMS
first implemented regulations regarding residents displaced by teaching
hospital closure in the July 30, 1999 IPPS final rule (64 FR 41522). We
made the change to allow a receiving hospital to receive temporary IME
and direct GME cap adjustments in limited circumstances due to hospital
closure for assuming the training of displaced residents because of a
reluctance on the part of receiving hospitals to assume these displaced
residents without attending increases to their IME and direct GME FTE
resident caps to ensure receipt of Medicare funding. We define
``closure of a hospital'' at 42 CFR 413.79(h)(1)(i) as a situation in
which ``the hospital terminates its Medicare agreement under the
provisions of Sec. 489.52 of this chapter.'' At 42 CFR 413.79(h)(2),
our regulations state that a hospital may receive a temporary
adjustment to its FTE cap to reflect residents added because of another
hospital's closure if the hospital meets the following: The hospital is
training additional residents from a hospital that closed on or after
July 1, 1996, and no later than 60 days after the hospital begins to
train the residents, the hospital submits a request to its contractor
for a temporary adjustment to its FTE cap, documents that the hospital
is eligible for this temporary adjustment by identifying the residents
who have come from the closed hospital and have caused the hospital to
exceed its cap, and specifies the length of time the adjustment is
needed.
Subsequently, in the August 1, 2001 IPPS final rule (66 FR 39899),
we further added to the regulations at 42 CFR 413.79(h) to also allow a
receiving hospital to receive temporary IME and direct GME cap
adjustments due to closure of a residency program (although the
hospital itself would remain open) for assuming the training of
displaced residents due to similar reluctance on the part of receiving
hospitals to accept these displaced residents without attending
increases to their IME and direct GME FTE resident caps to ensure
receipt of Medicare funding. We define ``closure of a hospital
residency training program'' at 42 CFR 413.79(h)(1)(ii) to mean the
hospital ceases to offer training for residents in a particular
approved medical residency training program. However, because the
hospital with the closing program itself remains open in the case of
program closure, it retains its full IME and direct GME FTE resident
caps. In order to prevent the situation of double payment for the same
FTE resident cap slots, where the originating hospital closes a program
and fills its vacated slots with residents from a different specialty,
while the receiving hospital also receives payment for training the
displaced resident, we stated in regulation that a receiving hospital
could only receive the temporary FTE resident cap adjustment if the
originating hospital with the closed program voluntarily agreed to
temporarily reduce its FTE resident caps for the duration of the
displaced residents' training at the receiving hospital (see 66 FR
39900 August 1, 2001). We revised the regulations at 42 CFR
413.79(h)(3) to specify the responsibilities of the closing hospital or
program and the receiving hospital.
3. Proposed Policy Change Related to Medical Residents Affected by
Residency Program or Teaching Hospital Closure
When teaching hospitals have closed, we receive many inquiries from
concerned stakeholders about whether Medicare IME and direct GME
funding could be seamlessly maintained for the medical residents that
would have to find alternate training hospitals to complete their
training. However, although not explicitly stated in regulations text,
our current policy is that the definition of a displaced resident is
one that is physically present at the hospital training on the day
prior to or the day of hospital or program closure. This longstanding
policy derived from the fact that in both the regulations text under
hospital closure and program closure, there is a requirement that the
receiving hospital identifies the residents'' who have come from the
closed hospital,'' or ``identifies the residents who were in training
at the time of the program's closure'' (see 42 CFR 413.79(h)(2)(ii) and
(h)(3)(ii)(B)). We considered the residents who were physically present
at the hospital to be those residents who were ``training at the time
of the program or hospital closure,'' thereby granting them the status
of ``displaced residents.'' However, stakeholders have voiced their
concern that by limiting the ``displaced residents'' to only those
physically present at the time of closure, it becomes much more
administratively challenging for the following groups of residents at
closing hospitals/programs to have their residencies continue to be
funded by Medicare: (1) Residents who leave the program after the
closure is publicly announced to continue training at another hospital,
but before the actual closure; (2) residents assigned to and training
at planned rotations at other hospitals who will be unable to return to
their rotations at the closing hospital or program; and (3) individuals
(such as medical students or would-be fellows) who matched into GME
programs at the closing hospital or program but have not yet started
training at the closing hospital or program. Other groups of residents
who, under current policy, are already considered ``displaced
residents'' include--(1) residents who are physically training in the
hospital on the day prior to or day of program or hospital closure; and
(2) residents who would have been at the closing hospital/program on
the day prior to or of closure, but for the fact that they were on
approved leave at that time, and will be unable to return to their
training at the closing hospital/program.
We are proposing to amend the Medicare policy with regard to
closing teaching hospitals and closing residency programs to address
the needs of residents attempting to find alternative hospitals in
which to complete their training and the incentives of originating and
receiving hospitals with regard to seamless Medicare IME and direct GME
funding. We are proposing

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to change two aspects of the current Medicare policy. First, rather
than link the Medicare temporary funding for the affected residents to
the day prior to or the day of program or hospital closure, we propose
that the key day would be the day that the closure was publicly
announced (for example, via a press release or a formal notice to the
Accreditation Council on Graduate Medical Education (ACGME)). This
would provide greater flexibility for the residents to transfer while
the hospital operations or residency programs were winding down, rather
than waiting until the last day of hospital or program operation. This
would address the needs of the first group of residents as previously
described: Residents who would leave the program after the closure was
publicly announced to continue training at another hospital, but before
the day of actual closure. Second, by removing the link between
Medicare temporary funding for the residents, and the day prior to or
the day of program or hospital closure, we propose to also allow
funding to be transferred temporarily for the second and third group of
residents who are not physically at the closing hospital/closing
program, but had intended to train at (or return to training at, in the
case of residents on rotation) the closing hospital/closing program.
Thus, we are proposing to revise our policy with regard to which
residents can be considered ``displaced'' for Medicare temporary FTE
resident cap transfer purposes in the situation where a hospital
announces publicly that it is closing, and/or that it is closing a
residency program(s). Specifically, we are proposing to add the
definition of ``displaced resident'' in new 42 CFR 413.79(h)(1)(iii) to
read as set out in the regulatory text of this document.
Current IME regulations at 42 CFR 412.105(f)(1)(ix) link to the
direct GME regulations at 42 CFR 413.79(h), so this proposed regulation
change would apply to the IME FTE cap transfers for displaced residents
as well. In order to fully coordinate these IME regulations with the
new proposed definition of ``displaced resident,'' we are proposing to
slightly modify the regulations at 42 CFR 412.105(f)(1)(ix) to add the
word ``displaced'' to describe residents added by a receiving hospital
due to a hospital or program closure. In addition, we are proposing to
change another detail of the policy specific to the requirements for
the receiving hospital. To apply for the temporary increase in the
Medicare resident cap, the receiving hospital would have to submit a
letter to its Medicare Administrative Contractor within 60 days of
beginning the training of the displaced residents. In the July 30, 1999
IPPS final rule (64 FR 41523), we stated that this letter must include
the names and social security numbers of the displaced residents, the
hospital and programs in which the residents were training previously,
and the amount of the cap increase needed for each resident (based on
how much the receiving hospital is in excess of its caps and the length
of time for which the adjustments are needed (42 CFR 413.79(h)(2)(ii)).
To reduce the amount of personally identifiable information (PII)
included in these agreements, we are proposing to no longer require the
full social security number for each resident. However, in order to
still provide enough information for the hospitals and MACs to be able
to differentiate among many residents, some which may have similar
names, we are proposing to require the receiving hospital to include
the names and the last four digits of each displaced resident's social
security number.
We are also noting that as under current policy, the maximum number
of FTE resident cap slots that could be transferred to all receiving
hospitals is the number of IME and direct GME FTE resident cap slots
belonging to the hospital that has the closed program, or that is
closing. Therefore, if the originating hospital is training residents
in excess of its caps, then being a displaced resident does not
guarantee that a cap slot will be transferred along with that resident.
A closure situation does not grant the Medicare program the authority
to fund additional residency slots in excess of the cap amounts at the
originating hospital. If there are more displaced residents than
available cap slots, the slots may be apportioned, according to the
closing hospital's discretion. The decision to transfer a cap slot if
one is available is voluntary and made at the sole discretion of the
originating hospital (42 CFR 413.79(h)(3)(ii)). However, if the
originating hospital decides to do so, then it is the originating
hospital's and/or sponsor's responsibility to determine how much of an
available cap slot goes with a particular resident (if any). (Also note
that only to the extent a receiving hospital would exceed its FTE cap
by training displaced residents would it be eligible for the temporary
adjustment (66 FR 39899, Sec. 413.79(h)(3)(i)(B)). A receiving
hospital is paid for the displaced resident using its own direct GME
and IME factors, that is, the same rates as those used for residents in
its own programs (see 66 FR 39901 August 1, 2001).

O. Rural Community Hospital Demonstration Program

1. Introduction
The Rural Community Hospital Demonstration was originally
authorized for a 5-year period by section 410A of the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003 (MMA)
(Pub. L. 108-173), and extended for another 5-year period by sections
3123 and 10313 of the Affordable Care Act (Pub. L. 111-148).
Subsequently, section 15003 of the 21st Century Cures Act (Pub. L. 114-
255), enacted December 13, 2016, amended section 410A of Public Law
108-173 to require a 10-year extension period (in place of the 5-year
extension required by the Affordable Care Act, as further discussed in
this proposed rule). Section 15003 also required that, no later than
120 days after enactment of Public Law 114-255, the Secretary had to
issue a solicitation for applications to select additional hospitals to
participate in the demonstration program for the second 5 years of the
10-year extension period, so long as the maximum number of 30 hospitals
stipulated by Public Law 114-148 was not exceeded. In this proposed
rule, we are providing a description of the provisions of section 15003
of Public Law 114-255, our final policies for implementation, and the
finalized budget neutrality methodology for the extension period
authorized by section 15003 of Public Law 114-255. We note that the
periods of participation for a number of the hospitals selected prior
to the extension period authorized by Public Law 114-255 will have
ended by the close of FY 2021, and that the budget neutrality
methodology for this upcoming fiscal year will take into account the
schedule of end dates.
2. Background
Section 410A(a) of Public Law 108-173 required the Secretary to
establish a demonstration program to test the feasibility and
advisability of establishing rural community hospitals to furnish
covered inpatient hospital services to Medicare beneficiaries. The
demonstration pays rural community hospitals under a reasonable cost-
based methodology for Medicare payment purposes for covered inpatient
hospital services furnished to Medicare beneficiaries. A rural
community hospital, as defined in section 410A(f)(1) of Public Law 108-
173, is a hospital that--
Is located in a rural area (as defined in section
1886(d)(2)(D) of the Act) or is treated as being located in a rural
area under section 1886(d)(8)(E) of the Act;

[[Page 32787]]

Has fewer than 51 beds (excluding beds in a distinct part
psychiatric or rehabilitation unit) as reported in its most recent cost
report;
Provides 24-hour emergency care services; and
Is not designated or eligible for designation as a CAH
under section 1820 of the Act.
Section 410A of Public Law 108-173 required a 5-year period of
performance. Subsequently, sections 3123 and 10313 of Public Law 111-
148 required the Secretary to conduct the demonstration program for an
additional 5-year period, to begin on the date immediately following
the last day of the initial 5-year period. Public Law 111-148 required
the Secretary to provide for the continued participation of rural
community hospitals in the demonstration program during the 5-year
extension period, in the case of a rural community hospital
participating in the demonstration program as of the last day of the
initial 5-year period, unless the hospital made an election to
discontinue participation. In addition, Public Law 111-148 limited the
number of hospitals participating to no more than 30. We refer readers
to previous final rules for a summary of the selection and
participation of these hospitals. Starting from December 2014 and
extending through December 2016, the 21 hospitals that were still
participating in the demonstration ended their scheduled periods of
performance on a rolling basis, respectively, according to the end
dates of the hospitals' cost report periods.
3. Provisions of the 21st Century Cures Act (Pub. L. 114-255) and
Finalized Policies for Implementation
a. Statutory Provisions
As stated earlier, section 15003 of Public Law 114-255 further
amended section 410A of Public Law 108-173 to require the Secretary to
conduct the Rural Community Hospital Demonstration for a 10-year
extension period (in place of the 5-year extension period required by
Public Law 111-148), beginning on the date immediately following the
last day of the initial 5-year period under section 410A(a)(5) of
Public Law 108-173. Thus, the Secretary is required to conduct the
demonstration for an additional 5-year period. Specifically, section
15003 of Public Law 114-255 amended section 410A(g)(4) of Public Law
108-173 to require that, for hospitals participating in the
demonstration as of the last day of the initial 5-year period, the
Secretary shall provide for continued participation of such rural
community hospitals in the demonstration during the 10-year extension
period, unless the hospital makes an election, in such form and manner
as the Secretary may specify, to discontinue participation.
Furthermore, section 15003 of Public Law 114-255 added subsection
(g)(5) to section 410A of Public Law 108-173 to require that, during
the second 5 years of the 10-year extension period, the Secretary shall
apply the provisions of section 410A(g)(4) of Public Law 108-173 to
rural community hospitals that are not described in subsection (g)(4)
but that were participating in the demonstration as of December 30,
2014, in a similar manner as such provisions apply to hospitals
described in subsection (g)(4).
In addition, section 15003 of Public Law 114-255 amended section
410A of Public Law 108-173 to add paragraph (g)(6)(A). This new
paragraph required that the Secretary issue a solicitation for
applications no later than 120 days after enactment of paragraph (g)(6)
to select additional rural community hospitals located in any State to
participate in the demonstration program for the second 5 years of the
10-year extension period, without exceeding the maximum number of
hospitals (that is, 30) permitted under section 410A(g)(3) of Public
Law 108-173 (as amended by Public Law 111-148). Section 410A(g)(6)(B)
provided that, in determining which hospitals submitting an application
pursuant to this solicitation were to be selected for participation in
the demonstration, the Secretary must give priority to rural community
hospitals located in one of the 20 States with the lowest population
densities, as determined using the 2015 Statistical Abstract of the
United States. The Secretary was also instructed to consider closures
of hospitals located in rural areas in the State in which an applicant
hospital is located during the 5-year period immediately preceding the
date of enactment of Public Law 114-255 (December 13, 2016), as well as
the population density of the State in which the rural community
hospital is located.
b. Terms of Participation for the Extension Period Authorized by Public
Law 114-255
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38280), we finalized
our policy with regard to the effective date for the application of the
reasonable cost-based payment methodology under the demonstration for
those previously participating hospitals choosing to participate in the
second 5-year extension period. According to our finalized policy, each
previously participating hospital began the second 5 years of the 10-
year extension period and payment for services provided under the cost-
based payment methodology under section 410A of Public Law 108-173 (as
amended by section 15003 of Public Law 114-255) on the date immediately
after the period of performance ended under the first 5-year extension
period.
Seventeen of the 21 hospitals that completed their periods of
participation under the extension period authorized by Public Law 111-
148 elected to continue in the second 5-year extension period for the
full second 5-year extension period. (Of the four hospitals that did
not elect to continue participating, three hospitals converted to CAH
status during the time period of the second 5-year extension period).
Therefore, the 5-year period of performance for each of these hospitals
started on dates beginning May 1, 2015 and extending through January 1,
2017. On November 20, 2017, we announced that, as a result of the
solicitation issued earlier in the year responding to the requirement
in Public Law 114-255, 13 additional hospitals were selected to
participate in the demonstration in addition to these 17 hospitals
continuing participation from the first 5-year extension period.
(Hereafter, these two groups are referred to as ``newly participating''
and ``previously participating'' hospitals, respectively.) We announced
that each of these newly participating hospitals would begin its 5-year
period of participation effective with the start of the first cost-
reporting period on or after October 1, 2017. One of the hospitals
selected from the solicitation in 2017 withdrew from the demonstration
program prior to beginning participation in the demonstration on July
1, 2018. In addition, one of the previously participating hospitals
closed effective January 2019, and another withdrew effective October
1, 2019. Therefore, 27 hospitals were participating in the
demonstration as of this date--15 previously participating and 12 newly
participating. For four of the previously participating hospitals, this
5-year period of participation will end during FY 2020; for 8 of the
remaining 11 hospitals among this group, participation will end during
FY 2021, with participation ending for the other three on December 31,
2021. The newly participating hospitals are all scheduled to end their
participation either at the end of FY 2022 or during FY 2023.

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4. Budget Neutrality
a. Statutory Budget Neutrality Requirement
Section 410A(c)(2) of Public Law 108-173 requires that, in
conducting the demonstration program under this section, the Secretary
shall ensure that the aggregate payments made by the Secretary do not
exceed the amount which the Secretary would have paid if the
demonstration program under this section was not implemented. This
requirement is commonly referred to as ``budget neutrality.''
Generally, when we implement a demonstration program on a budget
neutral basis, the demonstration program is budget neutral on its own
terms; in other words, the aggregate payments to the participating
hospitals do not exceed the amount that would be paid to those same
hospitals in the absence of the demonstration program. Typically, this
form of budget neutrality is viable when, by changing payments or
aligning incentives to improve overall efficiency, or both, a
demonstration program may reduce the use of some services or eliminate
the need for others, resulting in reduced expenditures for the
demonstration program's participants. These reduced expenditures offset
increased payments elsewhere under the demonstration program, thus
ensuring that the demonstration program as a whole is budget neutral or
yields savings. However, the small scale of this demonstration program,
in conjunction with the payment methodology, made it extremely unlikely
that this demonstration program could be held to budget neutrality
under the methodology normally used to calculate it--that is, cost-
based payments to participating small rural hospitals were likely to
increase Medicare outlays without producing any offsetting reduction in
Medicare expenditures elsewhere. In addition, a rural community
hospital's participation in this demonstration program would be
unlikely to yield benefits to the participants if budget neutrality
were to be implemented by reducing other payments for these same
hospitals. Therefore, in the 12 IPPS final rules spanning the period
from FY 2005 through FY 2016, we adjusted the national inpatient PPS
rates by an amount sufficient to account for the added costs of this
demonstration program, thus applying budget neutrality across the
payment system as a whole rather than merely across the participants in
the demonstration program. (A different methodology was applied for FY
2017.) As we discussed in the FYs 2005 through 2017 IPPS/LTCH PPS final
rules (69 FR 49183; 70 FR 47462; 71 FR 48100; 72 FR 47392; 73 FR 48670;
74 FR 43922, 75 FR 50343, 76 FR 51698, 77 FR 53449, 78 FR 50740, 79 FR
50145; 80 FR 49585; and 81 FR 57034, respectively), we believe that the
language of the statutory budget neutrality requirements permits the
agency to implement the budget neutrality provision in this manner.
b. Methodology Used in Previous Final Rules for Periods Prior to the
Extension Period Authorized by the 21st Century Cures Act (Pub. L. 114-
255)
We have generally incorporated two components into the budget
neutrality offset amounts identified in the final IPPS rules in
previous years. First, we have estimated the costs of the demonstration
for the upcoming fiscal year, generally determined from historical,
``as submitted'' cost reports for the hospitals participating in that
year. Update factors representing nationwide trends in cost and volume
increases have been incorporated into these estimates, as specified in
the methodology described in the final rule for each fiscal year.
Second, as finalized cost reports became available, we determined the
amount by which the actual costs of the demonstration for an earlier,
given year, differed from the estimated costs for the demonstration set
forth in the final IPPS rule for the corresponding fiscal year, and
incorporated that amount into the budget neutrality offset amount for
the upcoming fiscal year. If the actual costs for the demonstration for
the earlier fiscal year exceeded the estimated costs of the
demonstration identified in the final rule for that year, this
difference was added to the estimated costs of the demonstration for
the upcoming fiscal year when determining the budget neutrality
adjustment for the upcoming fiscal year. Conversely, if the estimated
costs of the demonstration set forth in the final rule for a prior
fiscal year exceeded the actual costs of the demonstration for that
year, this difference was subtracted from the estimated cost of the
demonstration for the upcoming fiscal year when determining the budget
neutrality adjustment for the upcoming fiscal year. (We note that we
have calculated this difference for FYs 2005 through 2015 between the
actual costs of the demonstration as determined from finalized cost
reports once available, and estimated costs of the demonstration as
identified in the applicable IPPS final rules for these years).
c. Budget Neutrality Methodology for the Extension Period Authorized by
the 21st Century Cures Act (Pub. L. 114-255)
(1) General Approach
We finalized our budget neutrality methodology for periods of
participation under the second 5 years of the 10-year extension period
in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38285 through 38287).
Similar to previous years, we stated in this rule, as well as in the FY
2019 and FY 2020 IPPS/LTCH PPS proposed and final rules (83 FR 20444
and 41503, and 84 FR19452 and 42421, respectively) that we would
incorporate an estimate of the costs of the demonstration, generally
determined from historical, ``as submitted'' cost reports for the
participating hospitals and appropriate update factors, into a budget
neutrality offset amount to be applied to the national IPPS rates for
the upcoming fiscal year. In addition, we stated that we would continue
to apply our general policy from previous years of including, as a
second component to the budget neutrality offset amount, the amount by
which the actual costs of the demonstration for an earlier, given year
(as determined from finalized cost reports when available) differed
from the estimated costs for the demonstration set forth in the final
IPPS rule for the corresponding fiscal year.
In these proposed and final rules, we described several distinct
components to the budget neutrality offset amount for the specific
fiscal years of the extension period authorized by Public Law 114-255.
We included a component to our overall methodology similar
to previous years, according to which an estimate of the costs of the
demonstration for both previously and newly participating hospitals for
the upcoming fiscal year is incorporated into a budget neutrality
offset amount to be applied to the national IPPS rates for the upcoming
fiscal year. In the FY 2019 IPPS final rule (83 FR 41506), we included
such an estimate of the costs of the demonstration for each of FYs 2018
and 2019 into the budget neutrality offset amount for FY 2019. In the
FY 2020 IPPS final rule, we included an estimate of the costs of the
demonstration for FY 2020 for 28 hospitals.
Similar to previous years, we continued to implement the
policy of determining the difference between the actual costs of the
demonstration as determined from finalized cost reports for a given
fiscal year and the estimated costs indicated in the corresponding
year's final rule, and including that

[[Page 32789]]

difference as a positive or negative adjustment in the upcoming year's
final rule. (For each previously participating hospital that has
decided to participate in the second 5 years of the 10-year extension
period, the cost-based payment methodology under the demonstration
began on the date immediately following the end date of its period of
performance for the first 5-year extension period. In addition, for
previously participating hospitals that converted to CAH status during
the time period of the second 5-year extension period, the
demonstration payment methodology was applied to the date following the
end date of its period of performance for the first extension period to
the date of conversion). In the FY 2020 final rule, we included the
difference between the amount determined for the cost of the
demonstration in each of FYs 2014 and 2015 and the estimated amount
included in the budget neutrality offset in the final rule for each of
these respective fiscal years. For FY 2016 and subsequent years we will
use finalized cost reports when available that detail the actual costs
of the demonstration for each of these fiscal years and incorporate
these amounts into the budget neutrality calculation.
(2) Methodology for Estimating Demonstration Costs for FY 2021
We are using a methodology similar to previous years, according to
which an estimate of the costs of the demonstration for the upcoming
fiscal year is incorporated into a budget neutrality offset amount to
be applied to the national IPPS rates for the upcoming fiscal year,
that is, FY 2021. Noting again that four of the previously
participating hospitals will end their participation during FY 2020, we
are conducting this estimate for FY 2021 on the basis of the 23
hospitals that will participate during that fiscal year. The
methodology for calculating this amount for FY 2021 proceeds according
to the following steps:
Step 1: For each of these 23 hospitals, we identify the reasonable
cost amount calculated under the reasonable cost-based methodology for
covered inpatient hospital services, including swing beds, as indicated
on the ``as submitted'' cost report for the most recent cost reporting
period available. For each of these hospitals, these ``as submitted''
cost reports are those with cost report period end dates in CY 2018. We
note that among the eight hospitals that are scheduled to end
participation during FY 2021, five will end prior to September 30,
2021. Therefore, consistent with previous practice, we prorate the cost
amounts for these hospitals by the fraction of total months in the
demonstration period of participation that fall within FY 2021 out of
the total of 12 months in the fiscal year. For example, for a hospital
whose period of performance ends June 30, 2021, this prorating factor
is 0.75. We sum these hospital-specific amounts to arrive at a total
general amount representing the costs for covered inpatient hospital
services, including swing beds, across the total 23 hospitals
participating during FY 2021.
Then, we multiply this amount by the FYs 2019, 2020 and 2021 IPPS
market basket percentage increases, which are formulated by the CMS
Office of the Actuary. (We are using the proposed market basket
percentage increase for FY 2021, which can be found at section II.A. of
the Addendum to this proposed rule). The result for the 23
participating hospitals is the general estimated reasonable cost amount
for covered inpatient hospital services for FY 2021.
Consistent with our methods in previous years for formulating this
estimate, we are applying the IPPS market basket percentage increases
for FYs 2019 through 2021 to the applicable estimated reasonable cost
amount (previously described) in order to model the estimated FY 2021
reasonable cost amount under the demonstration. We believe that the
IPPS market basket percentage increases appropriately indicate the
trend of increase in inpatient hospital operating costs under the
reasonable cost methodology for the years involved.
Step 2: For each of the participating hospitals, we identify the
estimated amount that would otherwise be paid in FY 2021 under
applicable Medicare payment methodologies for covered inpatient
hospital services, including swing beds (as indicated on the same set
of ``as submitted'' cost reports as in Step 1), if the demonstration
were not implemented. (Also, similar to step 1, we are prorating the
amounts for hospitals whose period of participation ends prior to the
end of FY 2021 by the fraction of total months in the demonstration
period of participation for the hospital that fall within FY 2021 out
of the total of 12 months in the fiscal year). We sum these hospital-
specific amounts, and, in turn, multiply this sum by the FYs 2019, 2020
and 2021 IPPS applicable percentage increases. (Again, for FY 2021, we
are using the proposed applicable percentage increase, per section
II.A. of the Addendum of this proposed rule). This methodology differs
from Step 1, in which we apply the market basket percentage increases
to the hospitals' applicable estimated reasonable cost amount for
covered inpatient hospital services. We believe that the IPPS
applicable percentage increases are appropriate factors to update the
estimated amounts that generally would otherwise be paid without the
demonstration. This is because IPPS payments constitute the majority of
payments that would otherwise be made without the demonstration and the
applicable percentage increase is the factor used under the IPPS to
update the inpatient hospital payment rates.
Step 3: We subtract the amount derived in Step 2 from the amount
derived in Step 1. According to our methodology, the resulting amount
indicates the total difference for the 23 hospitals (for covered
inpatient hospital services, including swing beds), which will be the
general estimated amount of the costs of the demonstration for FY 2021.
For this proposed rule, the resulting amount is $40,804,704, which
we are incorporating into the budget neutrality offset adjustment for
FY 2021. This estimated amount is based on the specific assumptions
regarding the data sources used, that is, recently available ``as
submitted'' cost reports and historical update factors for cost and
payment. If updated data become available prior to the final rule, we
would use them as appropriate to estimate the costs for the
demonstration program for FY 2021 in accordance with our methodology
for determining the budget neutrality estimate).
(3) Reconciling Actual and Estimated Costs of the Demonstration for
Previous Years
As described earlier, we have calculated the difference for FYs
2005 through 2015 between the actual costs of the demonstration, as
determined from finalized cost reports once available, and estimated
costs of the demonstration as identified in the applicable IPPS final
rules for these years.
At this point, not all cost reports have been finalized for the 19
hospitals that completed cost report periods under the demonstration
payment methodology beginning in FY 2016. If the entire set of
finalized cost reports is available prior to the FY 2021 IPPS/LTCH
final rule, we will include in the final budget neutrality offset
amount for FY 2021 the difference between the actual cost as determined
from these cost reports and the estimated amount identified in the
final rule for FY 2016 in the final rule for the upcoming fiscal year.

[[Page 32790]]

(4) Total Proposed Budget Neutrality Offset Amount for FY 2020
Therefore, for this FY 2021 IPPS/LTCH PPS proposed rule, the budget
neutrality offset amount for FY 2021 is based on the amount determined
under section II.A. of the Addendum of this proposed rule, representing
the difference applicable to FY 2021 between the sum of the estimated
reasonable cost amounts that would be paid under the demonstration to
the 23 hospitals participating in the fiscal year for covered inpatient
hospital services and the sum of the estimated amounts that would
generally be paid if the demonstration had not been implemented. This
estimated amount is $40,804,704.

P. Market-Based MS-DRG Relative Weight Proposed Data Collection and
Potential Change in Methodology for Calculating MS-DRG Relative Weights

1. Overview
On October 12, 2017, President Trump issued Executive Order (E.O.)
13813 on Promoting Healthcare Choice and Competition Across the United
States. E.O. 13813 directs the administration, to the extent consistent
with law, to facilitate, ``the development and operation of a
healthcare system that provides high-quality care at affordable prices
for the American people,'' by increasing consumer choice and promoting
competition in healthcare markets and by removing and revising
government regulation.
As a result of E.O. 13813, the Secretary published a report
entitled, ``Reforming America's Healthcare System Through Choice and
Competition,'' which recognized the importance of price transparency in
bringing down the cost of healthcare. Building on the importance of
transparency in healthcare pricing, in accordance with the President's
E.O. on Improving Price and Quality Transparency in American Healthcare
to Put Patients First (issued on June 24, 2019), we proposed in the CY
2020 Proposed Changes to Hospital Outpatient Prospective Payment and
Ambulatory Surgical Center Payment Systems (OPPS/ASC PPS) proposed rule
to establish requirements for all hospitals in the United States to
make available to the public their standard charges for the items and
services they provide, including their payer-specific negotiated
charges for all of their items and services, and a more consumer-
friendly display of their payer-specific negotiated charges for certain
selected shoppable services (84 FR 39571). In the CY 2020 OPPS/ASC PPS,
Price Transparency Requirements for Hospitals to Make Standard Charges
Public final rule (CMS-1717-F2, referred to herein as the Hospital
Price Transparency final rule) (84 FR 65538), we finalized these
requirements for all hospitals in the United States for making hospital
standard charges available to the public, beginning January 1, 2021, as
well as an enforcement scheme to enforce those requirements. We also
finalized that the term ``standard charge'' means the regular rate
established by the hospital for an item or service provided to a
specific group of paying patient, and includes all of the following as
defined in our regulations at 45 CFR 180.20: (1) Gross charge; (2)
payer-specific negotiated charge; (3) de-identified minimum negotiated
charge; (4) de-identified maximum negotiated charge; and (5) discounted
cash price.
There are three broad types of hospital rates, depending on the
patient and payer: (1) Medicaid and Medicare fee for service (FFS)
rates; (2) negotiated rates with private insurers or health plans; and
(3) uninsured or self-pay, as discussed in the Hospital Price
Transparency final rule (84 FR 65538).
Medicaid FFS rates are dictated by each State and tend to be at the
lower end of market rates. Medicare FFS rates are determined by CMS and
those rates tend to be higher than Medicaid rates within a state.
Privately negotiated rates vary with the competitive structure of the
geographic market and usually tend to be somewhat higher than Medicare
rates, but in some areas of the country the two sets of rates tend to
converge. Uninsured or self-pay patient rates are often the same as
chargemaster \466\ (gross) rates, which are usually highly inflated in
order to secure higher payments from Medicare and private payers.\467\
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\466\ CMS currently refers to chargemasters as a Charge
Description Master or CDM, which means the list of all individual
items and services maintained by a hospital for which the hospital
has established a charge.
\467\ Richman BD, et al. Battling the Chargemaster: A Simple
Remedy to Balance Billing for Unavoidable Out-of-Network Care. Am J
Manag Care. 2017;23(4):e100-e105 Available at: https://www.ajmc.com/journals/issue/2017/2017-vol23-n4/battling-the-chargemaster-a-simple-remedy-to-balance-billing-for-unavoidable-out-of-network-care.
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Under the old hospital reimbursement system, the more services a
hospital provided and longer a patient's stay, the greater the
reimbursement. Congress, recognizing that the reimbursement system
created disincentives to provide efficient care, enacted in 1983 a
prospective payment system. The primary objective of the prospective
payment system is to create incentives for hospitals to operate
efficiently and minimize unnecessary costs while at the same time
ensuring that payments are sufficient to adequately compensate
hospitals for their legitimate costs in delivering necessary care to
Medicare beneficiaries.
To partly compensate hospitals for certain overly costly
hospitalizations, hospitals may receive an ``outlier'' payment which is
based on the hospital's billed charges, adjusted to cost, in comparison
to the payment that would otherwise be received and an outlier
threshold (see 42 CFR 412.84). To determine whether an individual case
would qualify for an outlier payment, the hospital's cost-to-charge
ratio (CCR) is applied to the covered charges to estimate the costs of
the case. In the late 1990s, many hospitals began manipulating or
gaming that ratio to make it easier to qualify for outlier payments.
The larger the charges, the smaller the ratio, but it takes time for
the ratio to be updated (unless the hospital directly updated their
cost-to-charge ratio with the MAC). Thus, by way of example, if a
hospital had a cost-to-charge ratio 1 to 5, or 20 percent, then a pill
which cost the hospital $1 to purchase might be billed to a patient at
$5. However, if the hospital doubled the charge to the patient to $10,
the corresponding change in its ratio would take time to be updated.
Its costs might look like $2 instead of $1 in the interim. Rule changes
such as those made in the IPPS/LTCH PPS Change in Methodology for
Determining Payment for Extraordinarily High-Cost Cases (Cost Outliers)
Final Rule (June 9, 2003; 68 FR 34497 through 34504), we established
policies related to updating CCRs and the reconciliation of outlier
payments, which reduced such manipulation (for more information
regarding these changes we refer readers to: https://www.govinfo.gov/content/pkg/FR-2003-06-09/pdf/03-14492.pdf). Nevertheless, some
hospitals' charges do not reflect market rates. Hospital bills that are
generated off these chargemaster rates can be inherently unreasonable
when judged against prevailing market rates.
Recognizing that chargemaster (gross) rates rarely reflect the true
market costs, we believe that by reducing our reliance on the hospital
chargemaster, we can adjust Medicare payment rates so that they reflect
the relative market value for inpatient items and services.
Additionally, we have received public feedback that the Medicare
program's use of hospital gross charges for some payments in
ratesetting has served as the most significant barrier to hospitals'
efforts to rebase their chargemasters.

[[Page 32791]]

These stakeholders argued that this Medicare payment process serves as
a barrier for rebasing changes, because any reduction in charges
requires coordination with Medicare, Medicaid and commercial health
plans so that any changes occur in a revenue-neutral manner to the
hospital. We continue to believe that our existing administrative
mechanisms for hospitals to voluntarily lower their charges adequately
address these commenters' concerns. Specifically, if a hospital is
planning on voluntarily lowering its charges, it can request a CCR
change pursuant to 42 CFR 412.84(i)(1) and as also discussed in prior
rulemaking (84 FR 42630). Nevertheless, we agree in general that a
decreased reliance on hospital chargemasters in Medicare payment would
be desirable, if an appropriate alternative mechanism exists and is
permitted by statute.
Furthermore, the goal of reducing the Medicare program's reliance
on the chargemaster and adopting payment strategies that are more
reflective of the commercial insurance market was showcased within E.O.
13890 on Protecting and Improving Medicare for Our Nation's Seniors,
which President Trump issued on October 3, 2019. The E.O. described the
market benefits provided under the Medicare Advantage program as
providing, ``efficient and value-based care through choice and private
competition, and has improved aspects of the Medicare program that
previously failed seniors.'' E.O. 13890 then directed the Medicare
program to adopt and implement those market-based recommendations
developed pursuant to Executive Order 13813 of October 12, 2017
(Promoting Healthcare Choice and Competition Across the United States),
and published in the Administration's report on, ``Reforming America's
Healthcare System Through Choice and Competition.'' Furthermore, E.O.
13890 directed HHS to identify, ``approaches to modify Medicare FFS
payments to more closely reflect the prices paid for services in MA and
the commercial insurance market, to encourage more robust price
competition, and otherwise to inject market pricing into Medicare FFS
reimbursement.'' E.O. 13890 directed the Secretary, in consultation
with other partners, to produce a report with approaches to achieve the
goal of establishing more market-based pricing within Medicare FFS
reimbursements within 180 days of the E.O.'s issuance. (For additional
information on E.O. 13890, we refer readers to: https://www.federalregister.gov/documents/2019/10/08/2019-22073/protecting-and-improving-medicare-for-our-nations-seniors.) (For more information on
E.O. 13813, we direct readers to: https://www.federalregister.gov/documents/2017/10/17/2017-22677/promoting-healthcare-choice-and-competition-across-the-united-states.)
In order to reduce the Medicare program's reliance on the hospital
chargemaster, thereby advancing the critical goals of E.O.s 13813 and
13890, and to support the development of a market-based approach to
payment under the Medicare FFS system, we are proposing that hospitals
would be required to report certain market-based payment rate
information on their Medicare cost report for cost reporting periods
ending on or after January 1, 2021, to be used in a potential change to
the methodology for calculating the IPPS MS-DRG relative weights to
reflect relative market-based pricing.
As described further in section IV.P.2.c. of the preamble of this
proposed rule, we are specifically proposing that hospitals would
report on the Medicare cost report two median payer-specific negotiated
charges ``by MS-DRG.'' For a third-party payer that uses the same MS-
DRG patient classification system used by Medicare, the payer-specific
negotiated charges that the hospital uses to calculate the median by
MS-DRG would be the payer-specific negotiated charges the hospital
negotiated with that third party payer for the MS-DRG to which the
patient discharge was classified. However, we recognize that not all
third party payers use the MS-DRG patient classification system. For
those third party payers that do not, the payer-specific negotiated
charges they negotiate with hospitals would be based on the system used
by that third party payer, such as per diem rates or APR-DRGs. In that
case, the hospital would determine and report the median payer-specific
negotiated charges by MS-DRG using its payer-specific negotiated
charges for the same or similar package of services that can be
crosswalked to an MS-DRG. For simplicity, we refer to this data
collection herein as collecting the median payer-specific negotiated
charge by MS-DRG. We believe the use of these data in the MS-DRG
relative weight setting methodology would represent a significant and
important step in reducing the Medicare program's reliance on hospital
chargemasters, and would better reflect relative market-based pricing
in Medicare FFS inpatient reimbursements.
Specifically, we are proposing that hospitals would report on the
Medicare cost report: (1) The median payer-specific negotiated charge
that the hospital has negotiated with all of its Medicare Advantage
(MA) organizations (also referred to as MA organizations) payers, by
MS-DRG; and (2) the median payer-specific negotiated charge the
hospital has negotiated with all of its third-party payers, which would
include MA organizations, by MS-DRG. The market-based rate information
we are proposing to collect on the Medicare cost report would be the
median of the payer-specific negotiated charges by MS-DRG, as described
previously, for a hospital's MA organization payers and all of its
third party payers. The payer-specific negotiated charges used by
hospitals to calculate these medians would be the payer-specific
negotiated charges for service packages that hospitals are required to
make public under the requirements we finalized in the Hospital Price
Transparency final rule (84 FR 65524) that can be cross-walked to an
MS-DRG. If we finalize this market-based data collection proposal,
hospitals would use the payer-specific negotiated charge data that they
would be required to make public, as a result of the Hospital Price
Transparency final rule, to then calculate the median payer-specific
negotiated charges (as described further in section IV.P.2.c. of this
proposed rule) to report on the Medicare cost report. We believe that
because hospitals are already required to publically report payer-
specific negotiated charges, in accordance with the Hospital Price
Transparency final rule, that the additional calculation and reporting
of the median payer-specific negotiated charge will be less burdensome
for hospitals.
We are also seeking comment on a potential change to the
methodology for calculating the IPPS MS-DRG relative weights to
incorporate this market-based rate information, beginning in FY 2024,
which we may consider adopting in the FY 2021 IPPS/LTCH PPS final rule.
As described in greater detail in section IV.P.d. of the preamble of
this proposed rule, this alternative methodology would involve using
hospitals' reported median payer-specific negotiated charges to develop
market-based IPPS payments to reflect the relative hospital resources
used to provide inpatient services to patients. The use of payer-
specific negotiated charges would replace the current use of gross
charges that are reflected on a hospital's chargemaster and cost
information from Medicare cost reports for the development of the IPPS
MS-DRG relative weights. CMS is requesting comment on the use of
hospitals' reported median payer-specific

[[Page 32792]]

negotiated charge data, which would be calculated using a subset of the
payer-specific negotiated charges that, starting January 1, 2021,
hospitals are required to make public under 45 CFR part 180. As
proposed, the median payer-specific negotiated charges calculated and
submitted by hospitals for each MS-DRG would be limited to charges
hospitals have negotiated with: (1) MA organizations; and (2) third
party payers, including MA organizations. As noted previously, we
believe the use of payer-specific negotiated charge data in the MS-DRG
relative weight setting methodology would help reduce the Medicare
program's reliance on hospital chargemasters, and would reflect
relative market-based pricing in Medicare FFS inpatient reimbursements.
2. Market-Based MS-DRG Relative Weight Estimation
a. Overview
Section 1886(d)(4)(A) of the Act states that the Secretary shall
establish a classification of inpatient hospital discharges by
diagnosis-related groups and a methodology for classifying specific
hospital discharges within these groups. Section 1886(d)(4)(B) of the
Act states that for each such diagnosis-related group the Secretary
shall assign an appropriate weighting factor which reflects the
relative hospital resources used with respect to discharges classified
within that group compared to discharges classified within other
groups. For the reasons discussed, we believe the use of market-based
data, to be collected on the Medicare cost report, may support the
development of an appropriate market-based approach to payment under
the Medicare FFS system by incorporating such data into the estimation
of the relative hospital resources used with respect to discharges
classified within a single MS-DRG compared to discharges classified
within other MS-DRGs, as required by statute.
We currently use a cost-based methodology to estimate an
appropriate weight for each MS-DRG. These weights reflect the relative
hospital resources used with respect to discharges classified within
that MS-DRG compared to discharges classified within other MS-DRGs. The
current cost-based methodology primarily uses hospital charges from the
MedPAR claims data and cost report data from the Healthcare Cost Report
Information System (HCRIS) to establish the MS-DRG relative weights
(the collection of cost report data is authorized under OMB 0938-0050,
which is used to produce both files). (We refer readers to section
II.E. of this proposed rule for the discussion of the methodology we
are proposing to use to recalibrate the FY 2021 MS-DRG cost-based
relative weights.) This cost-based methodology was originally proposed
and finalized with revisions in the FY 2007 IPPS rulemaking (71 FR
24006 through 24011 and 71 FR 47881 through 47898); it has since been
modified in subsequent IPPS rulemaking. Prior to the FY 2007 IPPS
rulemaking, we used a charge-based DRG relative weight methodology.
Hospitals are already required to make their payer-specific
negotiated charge data for service packages publicly available under
the Hospital Price Transparency final rule. Consistent with the desire
to reduce the Medicare program's reliance on the hospital chargemaster,
as well as to inject market pricing into Medicare FFS reimbursement, we
believe it is again appropriate to reconsider our current approach to
calculating the MS-DRG relative weights. For these reasons, we have
reexamined the need to continue to use the charges on IPPS hospital
claims, in conjunction with charge and cost data on hospital cost
reports, to estimate the MS-DRG relative weights. In particular, we are
considering whether the payer-specific negotiated charges by MS-DRG for
MA organizations, or alternatively the payer-specific negotiated
charges by MS-DRG for all third party payers (we note that this would
include MA organization data), or some other approach that would
reflect relative market-based charges by MS-DRG, could provide an
appropriate basis for estimating the relative hospital resources used
with respect to discharges classified within a single MS-DRG compared
to discharges classified within other MS-DRGs, as required by statute.
b. Research Comparing Medicare, Medicare Advantage Organization, and
Commercial Payment Rates
As an initial matter, we focused on the charges negotiated between
hospitals and MA organizations given that MA plans are often paying for
the same units and types of services as fee-for-service (FFS) Medicare.
As part of our consideration of this issue, we looked to existing
public research on the relationship between Medicare FFS inpatient
payment rates and the payment rates negotiated between hospitals and MA
organizations. Berenson et al.\468\ surveyed senior hospital and health
plan executives and found that MA plans nominally pay only 100 to 105
percent of traditional Medicare rates and, in real economic terms,
possibly less. Respondents broadly identified three primary reasons for
near payment equivalence: Statutory and regulatory provisions that
limit out-of-network payments to traditional Medicare rates, de facto
budget constraints that MA plans face because of the need to compete
with traditional Medicare and other MA plans, and a market equilibrium
that permits relatively lower MA rates as long as commercial rates
remain well above the traditional Medicare rates.
---------------------------------------------------------------------------

\468\ Berenson RA, Sunsine JH, Helms D, Lawton E. Why Medicare
Advantage plans pay hospitals traditional Medicare prices. Health
Aff (Millwood). 2015;34(8):1289-1295.
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We next researched empirically based comparisons of Medicare FFS
rates, MA organization rates, and rates of other commercial payers.
Baker et al.\469\ used data from Medicare and the Health Care Cost
Institute (HCCI) to identify the prices paid for hospital services by
FFS Medicare, MA plans, and commercial insurers in 2009 and 2012. They
calculated the average price per admission, and its trend over time, in
each of the three types of insurance for fixed baskets of hospital
admissions across metropolitan areas. After accounting for differences
in hospital networks, geographic areas, and case-mix between MA and FFS
Medicare, they found that MA plans paid 5.6 percent less for hospital
services compared to FFS Medicare. For the time period studied, the
authors suggest that at least one channel through which MA plans paid
lower prices was by obtaining greater discounts on types of FFS
Medicare admissions that were known to have very short lengths-of-stay.
They also found that the rates paid by commercial plans were much
higher than those of either MA or FFS Medicare, and growing. At least
some of this difference they indicated came from the much higher prices
that commercial plans paid for profitable service lines.
---------------------------------------------------------------------------

\469\ Baker LC, Bundorf MK, Devlin AM, Kessler DP. Medicare
Advantage plans pay less than traditional Medicare pays. Health Aff
(Millwood). 2016;35(8):1444-1451.
---------------------------------------------------------------------------

Maeda and Nelson \470\ also analyzed data from the HCCI in their
research. They compared the hospital prices paid by MA organizations
and commercial plans with Medicare FFS prices using 2013 claims from
the HCCI. The HCCI claims were used to calculate hospital prices for
private insurers, and

[[Page 32793]]

Medicare's payment rules were used to estimate Medicare FFS prices. The
authors focused on stays at acute care hospitals in metropolitan
statistical areas (MSAs). They found MA prices to be roughly equal to
Medicare FFS prices, on average, but commercial prices were 89 percent
higher than FFS prices. In addition, commercial prices varied greatly
across and within MSAs, but MA prices varied much less. The authors
considered their results generally consistent with the Baker et al.
study findings in that hospital payments by MA plans were much more
similar to Medicare FFS levels than they were to commercial payment
levels, although they noted that they used slightly different methods
to calculate Medicare FFS prices.
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\470\ Maeda JLK, Nelson L. How Do the Hospital Prices Paid by
Medicare Advantage Plans and Commercial Plans Compare with Medicare
Fee-for-Service Prices? The Journal of Health Care Organization,
Provision, and Financing. 2018;55(1-8).
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In their study, Maeda and Nelson also examined whether the ratio of
MA prices to FFS prices varied across DRGs to assess whether there were
certain DRGs for which MA plans tended to pay more or less than FFS.
They ranked the ratio of MA prices to FFS prices and adjusted for
outlier payments. The authors state that they found that, ``there were
some DRGs where the average MA price was much higher than FFS and there
were some DRGs where the average MA price was a bit lower than FFS.''
For example, for the time period in question, on average, MA plans paid
129 percent more than FFS for rehabilitation stays (DRG 945), 33
percent more for depressive neuroses (DRG 881), and 27 percent more for
stays related to psychoses (DRG 885). But MA plans paid an average of 9
percent less than FFS for stays related to pathological fractures (DRG
542) and wound debridement and skin graft (DRG 464) (see Online
Appendix Table 5 from their study). The authors state these results
suggest that there may be certain services where MA plans pay more than
FFS possibly because the FFS rates for those services are too low, but
that there may be other services where MA plans pay less than FFS
possibly because the FFS rates for those DRGs are too high (Maeda,
Nelson, 2018 p. 5).
Taken as a whole, we believe this body of research suggests that
payer-specific charges negotiated between hospitals and MA
organizations are generally well-correlated with Medicare IPPS payment
rates, and payer-specific charges negotiated between hospitals and
other commercial payers are generally not as well-correlated with
Medicare IPPS payment rates. With respect to either type of payer-
specific negotiated charges, there may be instances where those
negotiated charges may reflect the relative hospital resources used
within an MS-DRG differently than our current cost-based methodology.
Considering the public availability of payer-specific negotiated
charges starting in CY 2021 and the desire to reduce the Medicare
program's reliance on the hospital chargemaster to thereby address the
directives in E.O.s 13813 and 13890, we believe we could adjust the
methodology for calculating the MS-DRG relative weights to reflect a
more market-based approach under our existing authority under sections
1886(d)(4)(A) and 1886(d)(4)(B) of the Act.
c. Proposed Market-Based Data Collection
For the reasons discussed, in order to support the development of a
relative market-based payment methodology under the IPPS, as well as
satisfy E.O.s 13813 and E.O. 13890 by reducing our reliance on the
hospital chargemaster, we propose to collect market-based payment rate
information on Medicare cost reports beginning with cost reporting
periods ending on or after January 1, 2021. Sections 1815(a) and
1833(e) of the Act provide that no Medicare payments will be made to a
provider unless it has furnished the information, as may be requested
by the Secretary, to determine the amount of payments due the provider
under the Medicare program. We require that providers follow reasonable
cost principles under section 1861(v)(1)(A) of the Act when completing
the Medicare cost report. Under the regulations at 42 CFR 413.20 and
413.24, we define adequate cost data and require cost reports from
providers on an annual basis. As previously discussed, the collection
of this market-based data on the Medicare cost report would allow for
the adoption of market-based strategies in determining Medicare FFS
payments and would reduce our reliance on the hospital chargemaster for
ratesetting purposes, in particular for purposes of estimating the
appropriate weighting factor to reflect the relative hospital resources
used with respect to hospital discharges, as required under sections
1886(d)(4)(B) and 1886(d)(4)(C) of the Act.
First, we propose to collect on the Medicare cost report the median
payer-specific negotiated charge that the hospital has negotiated with
all of its MA organization payers, by MS-DRG. Second, we propose to
collect on the Medicare cost report the median payer-specific
negotiated charge the hospital has negotiated with all of its third-
party payers, which would include MA organizations, by MS-DRG. We
propose to collect the median of the hospital payer-specific negotiated
charges, because the median is a common measure of central tendency
that is less influenced by outlier values. As described in more detail
later in this section, we are proposing to collect the hospital's
median payer-specific negotiated charges by MS-DRG, which would be
calculated using the payer-specific negotiated charge data for service
packages that hospitals are required to make public under the Hospital
Price Transparency final rule that can be cross-walked to an MS-DRG.
Medicare certified providers, such as Medicare certified hospitals,
are required to submit an annual cost report to their Medicare
Administrative Contractor (MAC). The Medicare cost report contains
provider information such as facility characteristics, cost and charges
by cost center, in total and for Medicare, Medicare settlement data,
and financial statement data. The cost report must be submitted in a
standard (ASCII) electronic cost report (ECR) format. CMS maintains the
cost report data in the HCRIS dataset. The HCRIS data supports our
reimbursement policymaking, congressional studies, legislative health
care reimbursement initiatives, Medicare profit margin analysis, and
relative weight updates. As such, every data point from hospital cost
reports beginning on or after May 1, 2010 is reflected on the HCRIS
dataset, and available for public access and use.
Accordingly, if we were to finalize this proposal to collect the
proposed market-based information (specifically, the median payer-
specific negotiated charges negotiated between a hospital and all its
MA organization payers, by MS-DRG and the median payer-specific
negotiated charges negotiated between a hospital and all its third
party payers, by MS-DRG) on the cost report, this data would become
publicly accessible on the HCRIS dataset in a de-identified manner and
would be usable for analysis by third parties. The data would, by
definition, be de-identified since we are proposing that the hospital
calculate the median rate (that is, the specific rate that is
negotiated between a hospital and a specific third party payer for an
MS-DRG would not be reported and need to be de-identified). For more
information or to obtain HCRIS data we refer readers to: https://www.cms.gov/Research-Statistics-Data-and-Systems/Downloadable-Public-Use-Files/Cost-Reports/Cost-Reports-by-Fiscal-Year.html.
A payer-specific negotiated charge is the charge that a hospital
has negotiated with a third party payer for an item or service provided
by the hospital. We

[[Page 32794]]

note that the definition of third party payer, for the purposes of this
proposed rule and data collection proposal, includes MA organizations.
As described later in this section, we are proposing that the two
median payer-specific negotiated charges by MS-DRG that hospitals would
be required to report on the Medicare cost report for cost reporting
periods ending on or after January 1, 2021, would be calculated using
the payer-specific negotiated charges for service packages that
hospitals are required to make publically available under the Hospital
Price Transparency final rule that can be cross-walked to a MS-DRG.
The Hospital Price Transparency final rule requires that hospitals
make publicly available via the internet their standard charges
(including, as applicable, gross charges, payer-specific negotiated
charges, de-identified minimum negotiated charges, de-identified
maximum negotiated charges, and discounted cash prices) in two
different ways: (1) A single machine-readable file containing a list of
standard charges for all items and services provided by the hospital
that complies with requirements described in 45 CFR 180.50; and (2) a
consumer-friendly list of standard charges for as many of the 70 CMS-
specified shoppable services that are provided by the hospital, and as
many additional hospital-selected shoppable services as is necessary
for a combined total of at least 300 shoppable services, that complies
with requirements described in 45 CFR 180.60. For purposes of this
proposed rule and data collection proposal, we propose that hospitals
would calculate the median payer-specific negotiated charge by MS-DRG
using the payer-specific negotiated charge data by MS-DRG from the
single machine-readable file for all items and services (as required by
the Hospital Price Transparency final rule) and not the version of
payer-specific negotiated charge data included within the file for
public production, in a consumer-friendly manner, of CMS-specified and
hospital-selected shoppable services.
The following is our proposed methodology for how each hospital
would calculate its median payer-specific negotiated charge for MA
organizations by MS-DRG and its median payer-specific negotiated charge
for all third party payers by MS-DRG. As we are proposing to collect
this data for purposes of incorporating market-based rate information
into the IPPS payment methodologies, the median payer-specific
negotiated charge data would be reported by MS-DRG for consistency with
the grouping system that we currently use to classify inpatient
hospital discharges under section 1886(d)(4)(A) of the Act. Therefore,
as referenced previously, hospitals would report the payer-specific
negotiated charges by MS-DRG and not by another DRG classification
system.
To determine the median payer-specific negotiated charge for MA
organizations for a given MS-DRG, a hospital would list, by MS-DRG,
each discharge in its cost reporting period that was paid for by an MA
organization, and the corresponding payer-specific negotiated charge
that was negotiated as payment for items and services provided for that
discharge. The median payer-specific negotiated charge for payers that
are MA organizations, for that MS-DRG, would be the median payer-
specific negotiated charge in that list of discharges.
A simplified example for the purpose of illustrating this process
is as follows. Hospital A has negotiated four different payer-specific
charges with four MA organizations for hypothetical MS-DRG 123. The
four payer-specific negotiated charges are $7,300, $7,400, $7,600, and
$7,700. In its cost reporting period, Hospital A had 3 discharges for
which $7,300 was the basis for payment for the items and services
provided for that discharge, 2 discharges for which $7,400 was the
basis for payment for the items and services provided for that
discharge, 1 discharge for which $7,600 was the basis for payment for
the items and services provided for that discharge, and 1 discharge for
which $7,700 was the basis for payment for the items and services
provided for that discharge. Therefore, for Hospital A, the payer-
specific negotiated charges for its list of discharges paid for by MA
organizations in its cost reporting period for MS-DRG 123 is $7,300,
$7,300, $7,300, $7,400, $7,400, $7,600, and $7,700. The median of this
list is $7,400. Hospital A's median payer-specific negotiated charge
for MS-DRG 123 for payers that are MA organizations would be $7,400.
Our proposed methodology for how each hospital would calculate its
median payer-specific negotiated charge for a given MS-DRG for all
third party payers, including MA organizations, is the same as the
process outlined above.
For purposes of this calculation, we are proposing to define the
term, ``payer-specific negotiated charge'' as the charge that a
hospital has negotiated with a third party payer for an item or
service. We propose to use this definition of the payer-specific
negotiated charge, because it would capture the charges that are
negotiated between hospitals and third party payers, including MA
organizations, and can provide the data needed to evaluate the use of
market-based information for payment purposes within the MS-DRG
relative weight calculation. For consistency, the definition of payer-
specific negotiated charge that we are proposing to use for purposes of
this proposal is the same definition of ``payer-specific negotiated
charge'' that we finalized for purposes of our requirements for
hospitals to make their standard charges available to the public under
the Hospital Price Transparency final rule. We are also proposing to
define, ``items and services'' as all items and services, including
individual items and services and service packages, that could be
provided by a hospital to a patient in connection with an inpatient
admission for which the hospital has established a standard charge. An
MS-DRG, as established by CMS under the MS-DRG classification system,
is a type of service package consisting of items and services based on
patient diagnosis and other characteristics. We propose this definition
of items and services, because we believe it captures the types of
items and services, including service packages, that a hospital would
use to calculate and report the median payer-specific negotiated charge
for each MS-DRG to support the use of market-based rate information by
MS-DRG within the MS-DRG relative weight calculation. This proposed
definition is also the same definition of items and services that we
finalized for purposes of our requirements for hospitals to make their
standard charges available to the public under the Hospital Price
Transparency final rule, except that we have omitted the reference to
outpatient department visits, because we would not require hospitals to
calculate the median of their payer-specific negotiated charges for
items and services provided in the hospital outpatient setting under
our proposal.
For purposes of this calculation, an MA organization is defined in
42 CFR 422.2; namely, an MA organization means a public or private
entity organized and licensed by a State as a risk-bearing entity (with
the exception of provider-sponsored organizations receiving waivers)
that is certified by CMS as meeting the MA contract requirements.
For purposes of this calculation, we propose to define third party
payer as an entity that is, by statute, contract, or agreement, legally
responsible for payment of a claim for a healthcare item or service. As
the reference to ``third party'' suggests, this definition excludes an
individual who pays for a healthcare

[[Page 32795]]

item or service that he or she receives (such as self-pay patients). We
propose to use this definition of third party payer, because these are
the types of entities that contract with hospitals to reimburse for
services on behalf of patients. This definition is also the definition
of third party payer finalized in the Hospital Price Transparency final
rule.
We welcome public comment on the proposed definitions of payer-
specific negotiated charge, items and services, and third party payer.
As discussed previously, we recognize that hospitals may negotiate
rates in several ways and under different circumstances. For example,
hospitals may negotiate rates with third party payers as a percent
discount off chargemaster rates, on a per diem basis, or by MS-DRG or
other similar DRG system. We also recognize that there may be hospitals
that do not negotiate charges for service packages by MS-DRG or for
service packages that may be crosswalked to an MS-DRG. Therefore, we
seek comment on whether hospitals' median payer-specific negotiated
charges across all types of payment methodologies should be included in
the determination of the median payer-specific negotiated charge for
the conditions and procedures that are classified under the MS-DRG
system and if so, how the proposed definitions should be modified to
encompass these other types of negotiation strategies or methodologies.
We also seek comment on the appropriateness of using MS-DRGs or MS-DRG
equivalents for this methodology, as well as whether we should
potentially collect this information for payers that use MS-DRGs
separately from payers that use other DRG systems. Furthermore, we seek
comment on alternatives that would capture market-based information for
the potential use in Medicare FFS payments. We also welcome comments
and suggested refinements to our proposed definitions, as well as
market-based alternatives that we should consider when identifying the
market-based information that reflects the charges that a hospital
negotiates for a specific MS-DRG.
In order to address some of the issues noted previously, as an
alternative, we considered requiring hospitals to submit a median
negotiated reimbursement amount across all MA organizations and across
all third party payers (including MA organizations) by MS-DRG (or by an
MS-DRG equivalent, such as APR-DRG). Under this alternative approach,
we would define the ``negotiated reimbursement amount'' as the amount
the hospital received as payment for the services rendered for a
patient discharge, as classified under the MS-DRG system, and for which
the hospital negotiated payment with a third party payer, including a
MA organization, for hospital cost reporting periods ending on or after
January 1, 2021. Hospitals would be required to determine and submit
the median negotiated reimbursement amount for--(1) MA organizations;
and (2) all third party payers, which includes MA organizations.
For example, a hospital may negotiate a case rate (that is, a
payer-specific negotiated charge) of $30,000 with Payer A for a major
joint replacement paid under the APR-DRG system (equivalent to MS-DRG
470). The hospital and payer have agreed to a stop loss threshold of
$150,000 and that the hospital will be reimbursed at 50 percent off the
gross (chargemaster) rate for each dollar charged over the stop-loss
amount. Additionally, the hospital will be reimbursed for 60 percent of
the cost of the implanted hardware, an amount that, in some cases, may
be variable depending on the type or style of hardware implanted. In
this example, the hospital's payer-specific negotiated charge for a
major joint replacement (MS-DRG 470 equivalent) is $30,000. However,
the resulting payment per discharge will vary, depending upon factors
such as whether the patient's course of treatment exceeded the agreed-
upon stoploss amount and the cost of the hardware implant.
We considered this alternative, because the median of the
``negotiated reimbursement amount'' is an amount that may take into
consideration the actual and final payment amounts received by
hospitals from third party payers, and MA organizations, for care of
individuals, as compared to a standard charge negotiated for a
particular service package identified by MS-DRG. We request comment on
this alternative approach, which we believe may also provide a
reasonable market-based estimate of the relative resources used to
provide services for an MS-DRG, and may take into account the several
ways that hospitals and third party payers negotiate charges.
We also seek comment on the relative burden of calculating and
submitting a median negotiated reimbursement amount for MA
organizations and for all other third party payers as compared to
calculating and submitting the median payer-specific negotiated charge
for MA organizations and median payer-specific negotiated charge for
third party payers by MS-DRG payment system.
We are proposing that subsection (d) hospitals in the 50 states and
DC, as defined at section 1886(d)(1)(B) of the Act, and subsection (d)
Puerto Rico hospitals, as defined under section 1886(d)(9)(A) of the
Act, would be required to report the median payer-specific negotiated
charge information. Hospitals that do not negotiate payment rates and
only receive non-negotiated payments for service would be exempted from
this proposed data collection. We recognize that Critical Access
Hospitals (CAHs) may, in some instances, negotiate payment rates;
however, because CAHs are not subsection (d) hospitals and are not paid
on the basis of MS-DRGs, CAHs would be excluded from this proposed data
collection requirement. We are proposing that hospitals in Maryland,
which are currently paid under the Maryland Total Cost of Care Model,
would be exempt from this data collection requirement during the
performance period of the Model. Examples of subsection (d) hospitals
that only receive non-negotiated payment rates include hospitals
operated by an Indian Health Program as defined in section 4(12) of the
Indian Health Care Improvement Act or federally owned and operated
facilities. We note that this proposed data collection requirement
would apply to a smaller subset of hospitals as compared to the public
reporting requirements under the Hospital Price Transparency final
rule.
We are proposing that for cost reporting periods ending on or after
January 1, 2021, a hospital would report on its cost report the median
payer-specific negotiated charge for each MS-DRG for payers that are MA
organizations, and the median payer-specific negotiated charge for each
MS-DRG for all third party payers, which includes MA organizations. The
required cost report reporting changes to accomplish this will be
proposed in more detail in the Information Collection Request approved
under OMB No. 0938-0050.
We are also proposing to amend 42 CFR 413.20(d)(3) to reflect this
proposed requirement. Specifically, we are amending 42 CFR 413.20(d)(3)
to require hospitals to report the median payer-specific negotiated
charge by MS-DRG for payers that are MA organizations and for all third
party payers on the Medicare cost report. We are proposing to capture
this proposed data collection requirement in regulation at the new
paragraph (d)(3)(i)(B). This proposed requirement would be effective
for cost reporting periods ending on or after January 1, 2021.
As described previously, we are proposing to require hospitals to
report

[[Page 32796]]

on the Medicare cost report both the hospital's median payer specific
negotiated charge by MS-DRG for all MA organizations and the hospital's
median payer-specific negotiated charge by MS-DRG for all third party
payers, which includes MA organizations, for cost reporting periods
ending on or after January 1, 2021. We note that we may also consider
finalizing the collection of alternative market-based data, such as the
median negotiated reimbursement amount as explained previously, or any
refinements to the definition of median payer-specific negotiated
charge, based on review of public comments. We are also considering a
modification to the market based data collection proposal, to require
only the reporting of the median payer-specific negotiated charge for
MA organizations on the Medicare cost report. We are inviting public
comments on our proposed data collection, as well as on these or other
alternative data collections of payer-specific negotiated charges or
other market-based information on the Medicare cost report, which we
may consider finalizing in the FY 2021 IPPS/LTCH PPS final rule for
cost reporting periods ending on or after January 1, 2021, after
consideration of the comments received.
d. Potential Market Based MS-DRG Relative Weight Methodology Beginning
in FY 2024
We are requesting comments on a potential new market-based
methodology for estimating the MS-DRG relative weights, beginning in FY
2024, and which we may consider adopting in the FY 2021 IPPS/LTCH PPS
final rule. This potential new market-based methodology would be based
on the proposed median payer-specific negotiated charge information
collected on the Medicare cost report. Implementing this potential new
market-based methodology beginning in FY 2024 would allow sufficient
time, should we finalize our data collection proposal, to collect and
evaluate the median payer-specific negotiated charge data submitted on
hospital cost reports and provide the public with information regarding
our analysis in future rulemaking. Specifically, we are considering a
methodology for estimating the MS-DRG relative weights using the median
payer-specific negotiated charge for each MS-DRG for payers that are MA
organizations, as described in this section. The MA program provides
efficient and value-based care to patients through choice and private
competition. We believe using the median payer-specific negotiated
charge for payers that are MA organizations within the MS-DRG relative
weight calculation would allow for a more market-based approach to
determining Medicare FFS reimbursement and reduce our reliance on the
hospital chargemaster.
We are also considering alternatives to this approach, such as the
use of the median payer-specific negotiated charge for all third-party
payers (instead of the median payer-specific negotiated charge for all
MA organizations), or other alternative collections of payer-specific
negotiated charges or other market-based information such as a median
negotiated reimbursement amount that a hospital negotiates with its MA
organizations or third party payers (as described further in section
IV.P.2.c of the preamble of this proposed rule), within the MS-DRG
relative weight methodology.
The same relative weight calculation described in this section
would be used if an alternative to the median payer-specific negotiated
charge was finalized to be collected on the Medicare cost report, as
described in section IV.P.2.c. of the preamble of this proposed rule.
We are inviting public comment on this potential change to the relative
weight methodology beginning in FY 2024 to use the median payer-
specific negotiated charge for MA organizations, as well as the other
potential alternative data collections as described in section IV.P.2.c
of the preamble of this proposed rule, which we may consider finalizing
in the FY 2021 IPPS/LTCH PPS final rule. If we were to finalize a
change in the IPPS FY 2021 rulemaking to incorporate payer-specific
negotiated charges within the MS-DRG relative weight methodology,
effective for FY 2024, we are open to adjusting any finalized policy,
through future rulemaking, prior to the FY 2024 effective date. Should
we finalize our data collection proposal, we would conduct further
analysis based on the data received and provide an opportunity for
public comment on that analysis, prior to the FY 2024 effective date.
Step One: Standardize the Median MA Organizations Payer-
Specific Negotiated Charges
In order to make the median MA organization payer-specific
negotiated charges from the cost reports more comparable among
hospitals, we would standardize the median payer-specific negotiated
charges by removing the effects of differences in area wage levels, and
cost-of living adjustments for hospital claims from Alaska and Hawaii,
in the same manner as under the current MS-DRG relative weight
calculation for those effects. We seek comment on the appropriate
standardization for the median MA organization payer-specific
negotiated charges, and any differences that should be taken into
account in standardizing the median payer-specific negotiated charges
for all third party payers.
Step Two: Create a Single Weighted Average Standardized Median
MA Organization Payer-Specific Negotiated Charge by MS-DRG Across
Hospitals
For each MS-DRG, we would create a single weighted average across
hospitals of the standardized median payer-specific negotiated charges.
We would weight the standardized payer-specific negotiated charge for
each MS-DRG for each hospital using that hospital's Medicare transfer-
adjusted case count for that MS-DRG, with transfer adjusted case counts
calculated exactly the same way as under the current MS-DRG relative
weight methodology (84 FR 42621). We believe that using the Medicare
transfer-adjusted case counts would be a reasonable approach to
combining the data across hospitals because it would reflect relative
volume and transfer activity (that is, larger hospitals responsible for
more discharges would be weighted more heavily in the calculation,
hospitals that transfer more often would be weighted less heavily),
however, we may also consider alternative approaches, such as using the
unadjusted Medicare case counts, or other alternative approaches based
on the review of public comments. We seek comment on the most
appropriate weighting factor for purposes of calculating a single
weighted average standardized median MA organization payer-specific
negotiated charge across hospitals.
Step Three: Create a Single National Weighted Average
Standardized Payer-Specific Negotiated Charge Across All MS-DRGs
We would create a single national weighted average across MS-DRGs
of the results of Step Two, where the weights are the national Medicare
transfer adjusted case counts by MS-DRG. If we were to use an
alternative weighting factor to the Medicare transfer adjusted case
counts in Step Two, as described previously, we would use that same
alternative weighting factor here in Step Three.
Step Four: Calculate the Market-Based Relative Weights
For each MS-DRG, the market-based relative weight would be
calculated as the ratio of the single weighted average standardized
median MA organization

[[Page 32797]]

payer-specific negotiated charge for that MS-DRG across hospitals from
Step Two to the single national weighted average standardized median MA
organization payer-specific negotiated charge across all MS-DRGs from
Step Three.
Step Five: Normalize the Market-Based Relative Weights
As under the current cost-based MS-DRG relative weight methodology,
the market-based relative weights would be normalized by an adjustment
factor so that the average case weight after recalibration would be
equal to the average case weight before recalibration. As under the
current cost-based relative weight estimation methodology, the
normalization adjustment is intended to help 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.
We are requesting comments on this potential new market-based
methodology for estimating the MS-DRG relative weights beginning in FY
2024, including comments on any suggested refinements to this potential
methodology or alternative approaches, which we may consider adopting
in the FY 2021 IPPS/LTCH final rule. We note that some stakeholders
have requested that we take a measured approach to any changes to adopt
more market-based methods within Medicare IPPS reimbursements. We are
therefore also interested in comments on whether, if we were to adopt
some form of a market-based approach to the MS-DRG relative weight
calculation, we should, for some period of time, continue to estimate
and publicly provide the MS-DRG relative weights as calculated using
our current cost-based estimation methodology. We are also interested
in comments on whether we should provide a transition to any new
market-based MS-DRG methodology, and, if so, on the appropriate design
of any such transition. When we adopted the cost-based MS-DRG
methodology for FY 2007 IPPS payments, we provided a 3-year transition
from the charge-based MS-DRG relative weight calculation to the cost-
based MS-DRG relative weight calculation (71 FR 47898). For the first
year of the 3-year transition of the relative weights, the relative
weights were based on a blend of 33 percent of the cost-based weights
and 67 percent of the charge weights. In the second year of the
transition, the relative weights were based on a blend of 33 percent of
the charge weights and 67 percent of the cost-based weights. In the
third year of the transition, the relative weights were based on 100
percent of the cost-based weights. We are requesting comments on
whether CMS should provide a similar type of transition from a cost-
based weight methodology to a market-based weight methodology, should
we finalize the use of market-based data within the MS-DRG relative
weight methodology.
Lastly, in future rulemaking, we may consider ways to further
reduce the role of hospital chargemasters in Medicare IPPS payments and
further reflect market-based approaches in Medicare FFS payments. In
particular, we are requesting comments on alternatives to the current
use of hospital charges in determining other inpatient hospital
payments, including outlier payments and new technology add-on
payments, to the extent permitted by law.

V. Proposed Changes to the IPPS for Capital-Related Costs

A. Overview

Section 1886(g) of the Act requires the Secretary to pay for the
capital-related costs of inpatient acute hospital services in
accordance with a prospective payment system established by the
Secretary. Under the statute, the Secretary has broad authority in
establishing and implementing the IPPS for acute care hospital
inpatient capital-related costs. We initially implemented the IPPS for
capital-related costs in the FY 1992 IPPS final rule (56 FR 43358). In
that final rule, we established a 10-year transition period to change
the payment methodology for Medicare hospital inpatient capital-related
costs from a reasonable cost-based payment methodology to a prospective
payment methodology (based fully on the Federal rate).
FY 2001 was the last year of the 10-year transition period that was
established to phase in the IPPS for hospital inpatient capital-related
costs. For cost reporting periods beginning in FY 2002, capital IPPS
payments are based solely on the Federal rate for almost all acute care
hospitals (other than hospitals receiving certain exception payments
and certain new hospitals). (We refer readers to the FY 2002 IPPS final
rule (66 FR 39910 through 39914) for additional information on the
methodology used to determine capital IPPS payments to hospitals both
during and after the transition period.)
The basic methodology for determining capital prospective payments
using the Federal rate is set forth in the regulations at 42 CFR
412.312. For the purpose of calculating capital payments for each
discharge, the standard Federal rate is adjusted as follows: (Standard
Federal Rate) x (DRG Weight) x (Geographic Adjustment Factor (GAF)) x
(COLA for hospitals located in Alaska and Hawaii) x (1 + Capital DSH
Adjustment Factor + Capital IME Adjustment Factor, if applicable).
In addition, under Sec. 412.312(c), hospitals also may receive
outlier payments under the capital IPPS for extraordinarily high-cost
cases that qualify under the thresholds established for each fiscal
year.

B. Additional Provisions

1. Exception Payments
The regulations at 42 CFR 412.348 provide for certain exception
payments under the capital IPPS. The regular exception payments
provided under Sec. 412.348(b) through (e) were available only during
the 10-year transition period. For a certain period after the
transition period, eligible hospitals may have received additional
payments under the special exceptions provisions at Sec. 412.348(g).
However, FY 2012 was the final year hospitals could receive special
exceptions payments. For additional details regarding these exceptions
policies, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76
FR 51725).
Under Sec. 412.348(f), a hospital may request an additional
payment if the hospital incurs unanticipated capital expenditures in
excess of $5 million due to extraordinary circumstances beyond the
hospital's control. Additional information on the exception payment for
extraordinary circumstances in Sec. 412.348(f) can be found in the FY
2005 IPPS final rule (69 FR 49185 and 49186).
2. New Hospitals
Under the capital IPPS, the regulations at 42 CFR 412.300(b) define
a new hospital as a hospital that has operated (under previous or
current ownership) for less than 2 years and lists examples of
hospitals that are not considered new hospitals. In accordance with
Sec. 412.304(c)(2), under the capital IPPS, a new hospital is paid 85
percent of its allowable Medicare inpatient hospital capital-related
costs through its first 2 years of operation, unless the new hospital
elects to receive full prospective payment based on 100 percent of the
Federal rate. We refer readers to the FY 2012 IPPS/LTCH PPS final rule
(76 FR 51725) for additional information on payments to new hospitals
under the capital IPPS.
3. Payments for Hospitals Located in Puerto Rico
In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57061), we revised
the

[[Page 32798]]

regulations at 42 CFR 412.374 relating to the calculation of capital
IPPS payments to hospitals located in Puerto Rico beginning in FY 2017
to parallel the change in the statutory calculation of operating IPPS
payments to hospitals located in Puerto Rico, for discharges occurring
on or after January 1, 2016, made by section 601 of the Consolidated
Appropriations Act, 2016 (Pub. L. 114-113). Section 601 of Public Law
114-113 increased the applicable Federal percentage of the operating
IPPS payment for hospitals located in Puerto Rico from 75 percent to
100 percent and decreased the applicable Puerto Rico percentage of the
operating IPPS payments for hospitals located in Puerto Rico from 25
percent to zero percent, applicable to discharges occurring on or after
January 1, 2016. As such, under revised Sec. 412.374, for discharges
occurring on or after October 1, 2016, capital IPPS payments to
hospitals located in Puerto Rico are based on 100 percent of the
capital Federal rate.

C. Proposed Annual Update for FY 2021

The proposed annual update to the national capital Federal rate, as
provided for in 42 CFR 412.308(c), for FY 2021 is discussed in section
III. of the Addendum to this FY 2021 IPPS/LTCH PPS proposed rule.
In section II.D. of the preamble of this FY 2021 IPPS/LTCH PPS
proposed rule, we present a discussion of the MS-DRG documentation and
coding adjustment, including previously finalized policies and
historical adjustments, as well as the adjustment to the standardized
amount under section 1886(d) of the Act that we are proposing for FY
2021, in accordance with the amendments made to section 7(b)(1)(B) of
Public Law 110-90 by section 414 of the MACRA. Because these provisions
require us to make an adjustment only to the operating IPPS
standardized amount, we are not proposing to make a similar adjustment
to the national capital Federal rate (or to the hospital-specific
rates).
We also note that in section II.D.2.b. of the preamble of this
proposed rule, we are proposing to create new MS-DRG 018 for cases that
include procedures describing CAR T-cell therapies, and in section
II.E.2.b. of this proposed rule, we are proposing to modify our
relative weight methodology for proposed new MS-DRG 018 in order to
develop a relative weight that is reflective of the typical costs of
providing CAR T-cell therapies relative to other IPPS services. In
addition, in section IV.I. of the preamble of this proposed rule, we
discuss our proposal to apply an adjustment to the payment amount for
clinical trial cases that would group to proposed new MS-DRG 018 for
both operating IPPS payments and capital IPPS payments. We refer
readers to section IV.I. of this preamble for additional details on the
proposed payment adjustment for CAR T-cell therapy clinical trial
cases.

VI. Proposed Changes for Hospitals Excluded From the IPPS

A. Proposed Rate-of-Increase in Payments to Excluded Hospitals for FY
2021

Certain hospitals excluded from a prospective payment system,
including children's hospitals, 11 cancer hospitals, and hospitals
located outside the 50 States, the District of Columbia, and Puerto
Rico (that is, hospitals located in the U.S. Virgin Islands, Guam, the
Northern Mariana Islands, and American Samoa) receive payment for
inpatient hospital services they furnish on the basis of reasonable
costs, subject to a rate-of-increase ceiling. A per discharge limit
(the target amount, as defined in Sec. 413.40(a) of the regulations)
is set for each hospital based on the hospital's own cost experience in
its base year, and updated annually by a rate-of-increase percentage.
For each cost reporting period, the updated target amount is multiplied
by total Medicare discharges during that period and applied as an
aggregate upper limit (the ceiling as defined in Sec. 413.40(a)) of
Medicare reimbursement for total inpatient operating costs for a
hospital's cost reporting period. In accordance with Sec. 403.752(a)
of the regulations, religious nonmedical health care institutions
(RNHCIs) also are subject to the rate-of-increase limits established
under Sec. 413.40 of the regulations discussed previously.
Furthermore, in accordance with Sec. 412.526(c)(3) of the regulations,
extended neoplastic disease care hospitals also are subject to the
rate-of-increase limits established under Sec. 413.40 of the
regulations discussed previously.
As explained in the FY 2006 IPPS final rule (70 FR 47396 through
47398), beginning with FY 2006, we have used the percentage increase in
the IPPS operating market basket to update the target amounts for
children's hospitals, cancer hospitals, and RNHCIs. Consistent with the
regulations at Sec. Sec. 412.23(g) and 413.40(a)(2)(ii)(A) and
(c)(3)(viii), we also have used the percentage increase in the IPPS
operating market basket to update target amounts for short-term acute
care hospitals located in the U.S. Virgin Islands, Guam, the Northern
Mariana Islands, and American Samoa. In the FYs 2014 and 2015 IPPS/LTCH
PPS final rules (78 FR 50747 through 50748 and 79 FR 50156 through
50157, respectively), we adopted a policy of using the percentage
increase in the FY 2010-based IPPS operating market basket to update
the target amounts for FY 2014 and subsequent fiscal years for
children's hospitals, cancer hospitals, RNHCIs, and short-term acute
care hospitals located in the U.S. Virgin Islands, Guam, the Northern
Mariana Islands, and American Samoa. However, in the FY 2018 IPPS/LTCH
PPS final rule, we rebased and revised the IPPS operating basket to a
2014 base year, effective for FY 2018 and subsequent years (82 FR 38158
through 38175), and finalized the use of the percentage increase in the
2014-based IPPS operating market basket to update the target amounts
for children's hospitals, the 11 cancer hospitals, RNHCIs, and short-
term acute care hospitals located in the U.S. Virgin Islands, Guam, the
Northern Mariana Islands, and American Samoa for FY 2018 and subsequent
years. Accordingly, for FY 2021, the rate-of-increase percentage to be
applied to the target amount for these hospitals would be the FY 2021
percentage increase in the 2014-based IPPS operating market basket.
For this FY 2021 IPPS/LTCH PPS proposed rule, based on IGI's 2019
fourth quarter forecast, we estimated that the 2014-based IPPS
operating market basket update for FY 2021 would be 3.0 percent (that
is, the estimate of the market basket rate-of-increase). Based on this
estimate, the FY 2021 rate-of-increase percentage that would be applied
to the FY 2020 target amounts in order to calculate the FY 2021 target
amounts for children's hospitals, cancer hospitals, RNCHIs, and short-
term acute care hospitals located in the U.S. Virgin Islands, Guam, the
Northern Mariana Islands, and American Samoa would be 3.0 percent, in
accordance with the applicable regulations at 42 CFR 413.40. However,
we are proposing that if more recent data become available for the
final rule, we would use such data, if appropriate, to calculate the
final IPPS operating market basket update for FY 2021.
In addition, payment for inpatient operating costs for hospitals
classified under section 1886(d)(1)(B)(vi) of the Act (which we refer
to as ``extended neoplastic disease care hospitals'') for cost
reporting periods beginning on or after January 1, 2015, is to be made
as described in 42 CFR 412.526(c)(3), and payment for capital costs for
these hospitals is to be made as described in 42 CFR 412.526(c)(4).
(For additional

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information on these payment regulations, we refer readers to the FY
2018 IPPS/LTCH PPS final rule (82 FR 38321 through 38322).) Section
412.526(c)(3) provides that the hospital's Medicare allowable net
inpatient operating costs for that period are paid on a reasonable cost
basis, subject to that hospital's ceiling, as determined under Sec.
412.526(c)(1), for that period. Under Sec. 412.526(c)(1), for each
cost reporting period, the ceiling was determined by multiplying the
updated target amount, as defined in Sec. 412.526(c)(2), for that
period by the number of Medicare discharges paid during that period.
Section 412.526(c)(2)(i) describes the method for determining the
target amount for cost reporting periods beginning during FY 2015.
Section 412.526(c)(2)(ii) specifies that, for cost reporting periods
beginning during fiscal years after FY 2015, the target amount will
equal the hospital's target amount for the previous cost reporting
period updated by the applicable annual rate-of-increase percentage
specified in Sec. 413.40(c)(3) for the subject cost reporting period
(79 FR 50197).
For FY 2021, in accordance with Sec. Sec. 412.22(i) and
412.526(c)(2)(ii) of the regulations, for cost reporting periods
beginning during FY 2021, the proposed update to the target amount for
extended neoplastic disease care hospitals (that is, hospitals
described under Sec. 412.22(i)) is the applicable annual rate-of-
increase percentage specified in Sec. 413.40(c)(3) for FY 2021, which
would be equal to the percentage increase in the hospital market basket
index, which is estimated to be the percentage increase in the 2014-
based IPPS operating market basket (that is, the estimate of the market
basket rate-of-increase). Accordingly, the proposed update to an
extended neoplastic disease care hospital's target amount for FY 2021
is 3.0 percent, which is based on IGI's 2019 fourth quarter forecast.
Furthermore, we are proposing that if more recent data become available
for the final rule, we would use such data, if appropriate, to
calculate the IPPS operating market basket update for FY 2021.

B. Critical Access Hospitals (CAHs)

1. Background
Section 1820 of the Act provides for the establishment of Medicare
Rural Hospital Flexibility Programs (MRHFPs), under which individual
States may designate certain facilities as critical access hospitals
(CAHs). Facilities that are so designated and meet the CAH conditions
of participation under 42 CFR part 485, subpart F, will be certified as
CAHs by CMS. Regulations governing payments to CAHs for services to
Medicare beneficiaries are located in 42 CFR part 413.
2. Frontier Community Health Integration Project (FCHIP) Demonstration
a. Background and Overview
As discussed in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42044
through 42701), section 123 of the Medicare Improvements for Patients
and Providers Act of 2008 (Pub. L. 110-275), as amended by section 3126
of the Affordable Care Act, authorized a demonstration project to allow
eligible entities to develop and test new models for the delivery of
health care services in eligible counties in order to improve access to
and better integrate the delivery of acute care, extended care and
other health care services to Medicare beneficiaries. The demonstration
was titled ``Demonstration Project on Community Health Integration
Models in Certain Rural Counties,'' and commonly known as the Frontier
Community Health Integration Project (FCHIP) demonstration.
The authorizing statute stated the eligibility criteria for
entities to be able to participate in the demonstration. An eligible
entity, as defined in section 123(d)(1)(B) of Public Law 110-275, as
amended, is an MRHFP grantee under section 1820(g) of the Act (that is,
a CAH); and is located in a State in which at least 65 percent of the
counties in the State are counties that have 6 or less residents per
square mile.
The authorizing statute stipulated several other requirements for
the demonstration. Section 123(d)(2)(B) of Public Law 110-275, as
amended, limited participation in the demonstration to eligible
entities in not more than 4 States. Section 123(f)(1) of Public Law
110-275 required the demonstration project to be conducted for a 3-year
period. In addition, section 123(g)(1)(B) of Public Law 110-275
required that the demonstration be budget neutral. Specifically, this
provision stated that, in conducting the demonstration project, the
Secretary shall ensure that the aggregate payments made by the
Secretary do not exceed the amount which the Secretary estimates would
have been paid if the demonstration project under the section were not
implemented. Furthermore, section 123(i) of Public Law 110-275 stated
that the Secretary may waive such requirements of titles XVIII and XIX
of the Act as may be necessary and appropriate for the purpose of
carrying out the demonstration project, thus allowing the waiver of
Medicare payment rules encompassed in the demonstration.
In January 2014, we released a request for applications (RFA) for
the FCHIP demonstration. Using 2013 data from the U.S. Census Bureau,
CMS identified Alaska, Montana, Nevada, North Dakota, and Wyoming as
meeting the statutory eligibility requirement for participation in the
demonstration. The RFA solicited CAHs in these five States to
participate in the demonstration, stating that participation would be
limited to CAHs in four of the States. To apply, CAHs were required to
meet the eligibility requirements in the authorizing legislation, and,
in addition, to describe a proposal to enhance health-related services
that would complement those currently provided by the CAH and better
serve the community's needs. In addition, in the RFA, CMS interpreted
the eligible entity definition in the statute as meaning a CAH that
receives funding through the MHRFP. The RFA identified four
interventions, under which specific waivers of Medicare payment rules
would allow for enhanced payment for telehealth, skilled nursing
facility/nursing facility beds, ambulance services, and home health
services, respectively. These waivers were formulated with the goal of
increasing access to care with no net increase in costs.
Ten CAHs were selected for participation in the demonstration,
which started on August 1, 2016 and concluded on July 31, 2019. The
selected CAHs were located in Montana, Nevada, and North Dakota, and
participated in three of the four interventions identified in the FY
2017 IPPS/LTCH PPS final rule (81 FR 57064 through 57065), the FY 2018
IPPS/LTCH PPS final rule (82 FR 38294 through 38296), and the FY 2019
IPPS/LTCH PPS final rule (83 FR 41516 through 41517), and the FY 2020
IPPS/LTCH PPS final rule (84 FR 42044 through 42701). Eight CAHs
participated in the telehealth intervention, three CAHs participated in
the skilled nursing facility/nursing facility bed intervention, and two
CAHs participated in the ambulance services intervention. Each CAH was
allowed to participate in more than one of the interventions. None of
the selected CAHs were participants in the home health intervention,
which was the fourth intervention included in the RFA.
In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57064 through
57065), we

[[Page 32800]]

finalized a policy to address the budget neutrality requirement for the
demonstration. We also discussed this policy in the FY 2018 IPPS/LTCH
PPS final rule (82 FR 38294 through 38296), the FY 2019 IPPS/LTCH PPS
final rule (83 FR 41516 through 41517), and the FY 2020 IPPS/LTCH PPS
final rule (84 FR 42044 through 42701), but did not make any changes to
the policy that was adopted in FY 2017. As explained in the FY 2017
IPPS/LTCH PPS final rule, we based our selection of CAHs for
participation in the demonstration with the goal of maintaining the
budget neutrality of the demonstration on its own terms (that is, the
demonstration would produce savings from reduced transfers and
admissions to other health care providers, thus offsetting any increase
in Medicare payments as a result of the demonstration). However,
because of the small size of the demonstration and uncertainty
associated with the projected Medicare utilization and costs, the
policy we adopted in the FY 2017 IPPS/LTCH PPS final rule provides a
contingency plan to ensure that the budget neutrality requirement in
section 123 of Public Law 110-275 is met. If analysis of claims data
for Medicare beneficiaries receiving services at each of the
participating CAHs, as well as from other data sources, including cost
reports for these CAHs, shows that increases in Medicare payments under
the demonstration during the 3-year period are not sufficiently offset
by reductions elsewhere, we will recoup the additional expenditures
attributable to the demonstration through a reduction in payments to
all CAHs nationwide. Because of the small scale of the demonstration,
we indicated that we did not believe it would be feasible to implement
budget neutrality by reducing payments to only the participating CAHs.
Therefore, in the event that this demonstration is found to result in
aggregate payments in excess of the amount that would have been paid if
this demonstration were not implemented, we will comply with the budget
neutrality requirement by reducing payments to all CAHs, not just those
participating in the demonstration. We stated that we believe it is
appropriate to make any payment reductions across all CAHs because the
FCHIP demonstration was specifically designed to test innovations that
affect delivery of services by the CAH provider category. We explained
our belief that the language of the statutory budget neutrality
requirement at section 123(g)(1)(B) of Public Law 110-275 permits the
agency to implement the budget neutrality provision in this manner. The
statutory language merely refers to ensuring that aggregate payments
made by the Secretary do not exceed the amount which the Secretary
estimates would have been paid if the demonstration project was not
implemented, and does not identify the range across which aggregate
payments must be held equal.
Based on actuarial analysis using cost report settlements for FYs
2013 and 2014, the FCHIP demonstration is projected to satisfy the
budget neutrality requirement and likely yield a total net savings. As
we estimated for the FY 2020 IPPS/LTCH PPS final rule, for this FY 2021
IPPS/LTCH PPS proposed rule, we estimate that the total impact of the
payment recoupment (if needed) will be no greater than 0.03 percent of
CAHs' total Medicare payments (that is, Medicare Part A and Part B)
within 1 fiscal year. The final budget neutrality estimates for the
FCHIP demonstration will be based on costs incurred during the entire
demonstration period, which is August 1, 2016 through July 31, 2019.
b. FCHIP Budget Neutrality Methodology and Analytical Approach
As explained in the FY 2020 IPPS/LTCH PPS final rule, our goal was
to maintain the budget neutrality of the demonstration on its own terms
(that is, the demonstration would produce savings from reduced
transfers and admissions to other health care providers, thus
offsetting any increase in payments to the participating CAHs resulting
from the demonstration). The budget neutrality assessment will seek to
determine if this goal has been met by examining expenditures for
beneficiaries who received an intervention-related service(s) at a
demonstration CAH or a comparison CAH. The demonstration and comparison
groups will be identified as Medicare beneficiaries receiving an
intervention-related service (that is, telemedicine, SNF/NF or
ambulance) at participating CAHs and non-participating CAHs,
respectively. To ensure that there is no cross contamination between
the groups, the demonstration and comparison groups will be mutually
exclusive so beneficiaries who received intervention-related services
at both participating and non-participating CAHs will be included in
the demonstration (intervention) group only. The analysis of budget
neutrality will seek to identify both the costs related to providing
the intervention-related services under the demonstration and any
potential downstream effects of these services, including any savings
that may have accrued.
We intend to incorporate two components into the budget neutrality
analytical approach: (1) Medicare cost reports; and (2) Medicare
administrative claims. We propose to estimate the cost of the
demonstration for each fiscal year of the demonstration period using
Medicare cost reports for the participating hospitals, and Medicare
administrative claims and enrollment data for beneficiaries who
received demonstration intervention related services.
First, using Medicare administrative claims and enrollment data, a
difference-in-difference (DID) regression analysis will be used to
compute the impact of the demonstration interventions on Medicare
expenditures, relative to what expenditures would have looked like
without the demonstration. The DID regression analysis will compare the
direct cost and potential downstream effects of intervention services,
including any savings that may have accrued, during the baseline and
performance period for both the demonstration and comparison groups.
Second, the Medicare administrative claims analysis will be
reconciled using data obtained from auditing the participating CAHs'
Medicare cost reports. We will estimate the costs of the demonstration
using ``as submitted'' cost reports for each hospital's financial
fiscal year participation within each demonstration performance year.
While the majority of demonstration participants had cost reporting
years that aligned with the demonstration period start date of July 1,
2016, several participating CAHs did not have cost reporting years that
coincided with the demonstration start date. The cost report is
structured to gather costs, revenues and statistical data on the
provider's financial fiscal period. As a result, when a CAH's cost
reporting year does not align with the timeframes used under the
demonstration, additional calculations are necessary to carve-out data
that relates to the portion of a cost reporting year when the
demonstration was not in effect. We will determine the final budget
neutrality results for the demonstration once complete data is
available for the demonstration period. While this discussion
represents CMS' anticipated approach to assessing the financial impact
of the demonstration based on the data available to date, upon
receiving data for the full demonstration period, CMS may update and/or
modify the FCHIP budget neutrality methodology and analytical approach
to ensure that they

[[Page 32801]]

appropriately capture the full impact of the demonstration.
Under the policy finalized in the FY 2017 IPPS/LTCH PPS final rule,
in the event the demonstration is found not to have been budget
neutral, any excess costs will be recouped over a period of 3 cost
reporting years. The 3-year period for recoupment will allow for a
reasonable timeframe for the payment reduction and minimize any impact
on CAHs' operations. Under the policy adopted in FY 2017 IPPS/LTCH PPS
final rule, in the event the demonstration is found not to have been
budget neutral, any excess costs will be recouped beginning in CY 2020.
Based on the currently available data, the determination of budget
neutrality results is preliminary and the amount of any reduction to
CAH payments that would be needed in order to recoup excess costs under
the demonstration remain uncertain. Therefore, we are proposing to
revise the policy originally adopted in the FY 2017 IPPS/LTCH PPS final
rule, to delay the implementation of any budget neutrality adjustment
and will revisit this policy in rulemaking for FY 2022 when we expect
to have complete data for the demonstration period. Since our data
analysis is incomplete, it is not possible to determine the impact of
this policy for any national payment system for FY 2021.

VII. Changes to the Long-Term Care Hospital Prospective Payment System
(LTCH PPS) for FY 2021

A. Background of the LTCH PPS

1. Legislative and Regulatory Authority
Section 123 of the Medicare, Medicaid, and SCHIP (State Children's
Health Insurance Program) Balanced Budget Refinement Act of 1999 (BBRA)
(Pub. L. 106-113), as amended by section 307(b) of the Medicare,
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000
(BIPA) (Pub. L. 106-554), provides for payment for both the operating
and capital-related costs of hospital inpatient stays in long-term care
hospitals (LTCHs) under Medicare Part A based on prospectively set
rates. The Medicare prospective payment system (PPS) for LTCHs applies
to hospitals that are described in section 1886(d)(1)(B)(iv) of the
Act, effective for cost reporting periods beginning on or after October
1, 2002.
Section 1886(d)(1)(B)(iv)(I) of the Act originally defined an LTCH
as a hospital which has an average inpatient length of stay (as
determined by the Secretary) of greater than 25 days. Section
1886(d)(1)(B)(iv)(II) of the Act (``subclause II'' LTCHs) also provided
an alternative definition of LTCHs. However, section 15008 of the 21st
Century Cures Act (Pub. L. 114-255) amended section 1886 of the Act to
exclude former ``subclause II'' LTCHs from being paid under the LTCH
PPS and created a new category of IPPS-excluded hospitals, which we
refer to as ``extended neoplastic disease care hospitals''), to be paid
as hospitals that were formally classified as ``subclause (II)'' LTCHs
(82 FR 38298).
Section 123 of the BBRA requires the PPS for LTCHs to be a ``per
discharge'' system with a diagnosis-related group (DRG) based patient
classification system that reflects the differences in patient
resources and costs in LTCHs.
Section 307(b)(1) of the BIPA, among other things, mandates that
the Secretary shall examine, and may provide for, adjustments to
payments under the LTCH PPS, including adjustments to DRG weights, area
wage adjustments, geographic reclassification, outliers, updates, and a
disproportionate share adjustment.
In the August 30, 2002 Federal Register, we issued a final rule
that implemented the LTCH PPS authorized under the BBRA and BIPA (67 FR
55954). For the initial implementation of the LTCH PPS (FYs 2003
through FY 2007), the system used information from LTCH patient records
to classify patients into distinct long-term care diagnosis-related
groups (LTC-DRGs) based on clinical characteristics and expected
resource needs. Beginning in FY 2008, we adopted the Medicare severity
long-term care diagnosis-related groups (MS-LTC-DRGs) as the patient
classification system used under the LTCH PPS. Payments are calculated
for each MS-LTC-DRG and provisions are made for appropriate payment
adjustments. Payment rates under the LTCH PPS are updated annually and
published in the Federal Register.
The LTCH PPS replaced the reasonable cost-based payment system
under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA)
(Pub. L. 97-248) for payments for inpatient services provided by an
LTCH with a cost reporting period beginning on or after October 1,
2002. (The regulations implementing the TEFRA reasonable cost-based
payment provisions are located at 42 CFR part 413.) With the
implementation of the PPS for acute care hospitals authorized by the
Social Security Amendments of 1983 (Pub. L. 98-21), which added section
1886(d) to the Act, certain hospitals, including LTCHs, were excluded
from the PPS for acute care hospitals and were paid their reasonable
costs for inpatient services subject to a per discharge limitation or
target amount under the TEFRA system. For each cost reporting period, a
hospital-specific ceiling on payments was determined by multiplying the
hospital's updated target amount by the number of total current year
Medicare discharges. (Generally, in this section of the preamble of
this proposed rule, when we refer to discharges, we describe Medicare
discharges.) The August 30, 2002 final rule further details the payment
policy under the TEFRA system (67 FR 55954).
In the August 30, 2002 final rule, we provided for a 5-year
transition period from payments under the TEFRA system to payments
under the LTCH PPS. During this 5-year transition period, an LTCH's
total payment under the PPS was based on an increasing percentage of
the Federal rate with a corresponding decrease in the percentage of the
LTCH PPS payment that is based on reasonable cost concepts, unless an
LTCH made a one-time election to be paid based on 100 percent of the
Federal rate. Beginning with LTCHs' cost reporting periods beginning on
or after October 1, 2006, total LTCH PPS payments are based on 100
percent of the Federal rate.
In addition, in the August 30, 2002 final rule, we presented an in-
depth discussion of the LTCH PPS, including the patient classification
system, relative weights, payment rates, additional payments, and the
budget neutrality requirements mandated by section 123 of the BBRA. The
same final rule that established regulations for the LTCH PPS under 42
CFR part 412, subpart O, also contained LTCH provisions related to
covered inpatient services, limitation on charges to beneficiaries,
medical review requirements, furnishing of inpatient hospital services
directly or under arrangement, and reporting and recordkeeping
requirements. We refer readers to the August 30, 2002 final rule for a
comprehensive discussion of the research and data that supported the
establishment of the LTCH PPS (67 FR 55954).
In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49601 through
49623), we implemented the provisions of the Pathway for Sustainable
Growth Rate (SGR) Reform Act of 2013 (Pub. L. 113-67), which mandated
the application of the ``site neutral'' payment rate under the LTCH PPS
for discharges that do not meet the statutory criteria for exclusion
beginning in FY 2016. For cost reporting periods beginning on or after
October 1, 2015, discharges that do not meet certain statutory criteria
for exclusion

[[Page 32802]]

are paid based on the site neutral payment rate. Discharges that do
meet the statutory criteria continue to receive payment based on the
LTCH PPS standard Federal payment rate. For more information on the
statutory requirements of the Pathway for SGR Reform Act of 2013, we
refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 FR 49601
through 49623) and the FY 2017 IPPS/LTCH PPS final rule (81 FR 57068
through 57075).
In the FY 2018 IPPS/LTCH PPS final rule, we implemented several
provisions of the 21st Century Cures Act (``the Cures Act'') (Pub. L.
114-255) that affected the LTCH PPS. (For more information on these
provisions, we refer readers to 82 FR 38299.)
In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41529), we made
conforming changes to our regulations to implement the provisions of
section 51005 of the Bipartisan Budget Act of 2018 (Pub. L. 115-123),
which extends the transitional blended payment rate for site neutral
payment rate cases for an additional 2 years. We refer readers to
section VII.C. of the preamble of the FY 2019 IPPS/LTCH PPS final rule
for a discussion of our final policy. In addition, in the FY 2019 IPPS/
LTCH PPS final rule, we removed the 25-percent threshold policy under
42 CFR 412.538.
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42439), we further
revised our regulations to implement the provisions of the Pathway for
SGR Reform Act of 2013 (Pub. L. 113-67) that relate to the payment
adjustment for discharges from LTCHs that do not maintain the requisite
discharge payment percentage and the process by which such LTCHs may
have the payment adjustment discontinued.
2. Criteria for Classification as an LTCH
a. Classification as an LTCH
Under the regulations at Sec. 412.23(e)(1), to qualify to be paid
under the LTCH PPS, a hospital must have a provider agreement with
Medicare. Furthermore, Sec. 412.23(e)(2)(i), which implements section
1886(d)(1)(B)(iv) of the Act, requires that a hospital have an average
Medicare inpatient length of stay of greater than 25 days to be paid
under the LTCH PPS. In accordance with section 1206(a)(3) of the
Pathway for SGR Reform Act of 2013 (Pub. L. 113-67), as amended by
section 15007 of Public Law 114-255, we amended our regulations to
specify that Medicare Advantage plans' and site neutral payment rate
discharges are excluded from the calculation of the average length of
stay for all LTCHs, for discharges occurring in cost reporting period
beginning on or after October 1, 2015.
b. Hospitals Excluded From the LTCH PPS
The following hospitals are paid under special payment provisions,
as described in Sec. 412.22(c) and, therefore, are not subject to the
LTCH PPS rules:
Veterans Administration hospitals.
Hospitals that are reimbursed under State cost control
systems approved under 42 CFR part 403.
Hospitals that are reimbursed in accordance with
demonstration projects authorized under section 402(a) of the Social
Security Amendments of 1967 (Pub. L. 90-248) (42 U.S.C. 1395b-1),
section 222(a) of the Social Security Amendments of 1972 (Pub. L. 92-
603) (42 U.S.C. 1395b-1 (note)) (Statewide all-payer systems, subject
to the rate-of-increase test at section 1814(b) of the Act), or section
3201 of the Patient Protection and Affordable Care Act (Pub. L. 111-
148) (42 U.S.C. 1315a).
Nonparticipating hospitals furnishing emergency services
to Medicare beneficiaries.
3. Limitation on Charges to Beneficiaries
In the August 30, 2002 final rule, we presented an in-depth
discussion of beneficiary liability under the LTCH PPS (67 FR 55974
through 55975). This discussion was further clarified in the RY 2005
LTCH PPS final rule (69 FR 25676). In keeping with those discussions,
if the Medicare payment to the LTCH is the full LTC-DRG payment amount,
consistent with other established hospital prospective payment systems,
Sec. 412.507 currently provides that an LTCH may not bill a Medicare
beneficiary for more than the deductible and coinsurance amounts as
specified under Sec. Sec. 409.82, 409.83, and 409.87, and for items
and services specified under Sec. 489.30(a). However, under the LTCH
PPS, Medicare will only pay for services furnished during the days for
which the beneficiary has coverage until the short-stay outlier (SSO)
threshold is exceeded. If the Medicare payment was for a SSO case (in
accordance with Sec. 412.529), and that payment was less than the full
LTC-DRG payment amount because the beneficiary had insufficient
coverage as a result of the remaining Medicare days, the LTCH also is
currently permitted to charge the beneficiary for services delivered on
those uncovered days (in accordance with Sec. 412.507). In the FY 2016
IPPS/LTCH PPS final rule (80 FR 49623), we amended our regulations to
expressly limit the charges that may be imposed upon beneficiaries
whose LTCHs' discharges are paid at the site neutral payment rate under
the LTCH PPS. In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57102), we
amended the regulations under Sec. 412.507 to clarify our existing
policy that blended payments made to an LTCH during its transitional
period (that is, an LTCH's payment for discharges occurring in cost
reporting periods beginning in FYs 2016 through 2019) are considered to
be site neutral payment rate payments.

B. Proposed Medicare Severity Long-Term Care Diagnosis-Related Group
(MS-LTC-DRG) Classifications and Relative Weights for FY 2021

1. Background
Section 123 of the BBRA required that the Secretary implement a PPS
for LTCHs to replace the cost-based payment system under TEFRA. Section
307(b)(1) of the BIPA modified the requirements of section 123 of the
BBRA by requiring that the Secretary examine the feasibility and the
impact of basing payment under the LTCH PPS on the use of existing (or
refined) hospital DRGs that have been modified to account for different
resource use of LTCH patients.
When the LTCH PPS was implemented for cost reporting periods
beginning on or after October 1, 2002, we adopted the same DRG patient
classification system utilized at that time under the IPPS. As a
component of the LTCH PPS, we refer to this patient classification
system as the ``long-term care diagnosis-related groups (LTC-DRGs).''
Although the patient classification system used under both the LTCH PPS
and the IPPS are the same, the relative weights are different. The
established relative weight methodology and data used under the LTCH
PPS result in relative weights under the LTCH PPS that reflect the
differences in patient resource use of LTCH patients, consistent with
section 123(a)(1) of the BBRA (Pub. L. 106-113).
As part of our efforts to better recognize severity of illness
among patients, in the FY 2008 IPPS final rule with comment period (72
FR 47130), the MS-DRGs and the Medicare severity long-term care
diagnosis-related groups (MS-LTC-DRGs) were adopted under the IPPS and
the LTCH PPS, respectively, effective beginning October 1, 2007 (FY
2008). For a full description of the development, implementation, and
rationale for the use of the MS-DRGs and MS-LTC-DRGs, we refer readers
to the FY 2008 IPPS final rule with comment period (72 FR 47141 through
47175 and 47277 through 47299). (We note that, in that

[[Page 32803]]

same final rule, we revised the regulations at Sec. 412.503 to specify
that for LTCH discharges occurring on or after October 1, 2007, when
applying the provisions of 42 CFR part 412, subpart O applicable to
LTCHs for policy descriptions and payment calculations, all references
to LTC-DRGs would be considered a reference to MS-LTC-DRGs. For the
remainder of this section, we present the discussion in terms of the
current MS-LTC-DRG patient classification system unless specifically
referring to the previous LTC-DRG patient classification system that
was in effect before October 1, 2007.)
The MS-DRGs adopted in FY 2008 represent an increase in the number
of DRGs by 207 (that is, from 538 to 745) (72 FR 47171). The MS-DRG
classifications are updated annually. There are currently 761 MS-DRG
groupings. For FY 2021, there would be 767 MS-DRG groupings based on
the proposed changes, as discussed in section II.E. of the preamble of
this proposed rule. Consistent with section 123 of the BBRA, as amended
by section 307(b)(1) of the BIPA, and Sec. 412.515 of the regulations,
we use information derived from LTCH PPS patient records to classify
LTCH discharges into distinct MS-LTC-DRGs based on clinical
characteristics and estimated resource needs. Then we assign an
appropriate weight to the MS-LTC-DRGs to account for the difference in
resource use by patients exhibiting the case complexity and multiple
medical problems characteristic of LTCHs.
In this section of this proposed rule, we provide a general summary
of our existing methodology for determining the FY 2021 MS-LTC-DRG
relative weights under the LTCH PPS.
In this proposed rule, in general, for FY 2021, we are proposing to
continue to use our existing methodology to determine the MS-LTC-DRG
relative weights (as discussed in greater detail in section VII.B.3. of
the preamble of this proposed rule). As we established when we
implemented the dual rate LTCH PPS payment structure codified under
Sec. 412.522, which began in FY 2016, we are proposing that the annual
recalibration of the MS-LTC-DRG relative weights are determined: (1)
Using only data from available LTCH PPS claims that would have
qualified for payment under the new LTCH PPS standard Federal payment
rate if that rate had been in effect at the time of discharge when
claims data from time periods before the dual rate LTCH PPS payment
structure applies are used to calculate the relative weights; and (2)
using only data from available LTCH PPS claims that qualify for payment
under the new LTCH PPS standard Federal payment rate when claims data
from time periods after the dual rate LTCH PPS payment structure
applies are used to calculate the relative weights (80 FR 49624). That
is, under our current methodology, our MS-LTC-DRG relative weight
calculations do not use data from cases paid at the site neutral
payment rate under Sec. 412.522(c)(1) or data from cases that would
have been paid at the site neutral payment rate if the dual rate LTCH
PPS payment structure had been in effect at the time of that discharge.
For the remainder of this discussion, we use the phrase ``applicable
LTCH cases'' or ``applicable LTCH data'' when referring to the
resulting claims data set used to calculate the relative weights (as
described later in greater detail in section VII.B.3.c. of the preamble
of this proposed rule). In addition, for FY 2021, we are proposing to
continue to exclude the data from all-inclusive rate providers and
LTCHs paid in accordance with demonstration projects, as well as any
Medicare Advantage claims from the MS-LTC-DRG relative weight
calculations for the reasons discussed in section VII.B.3.c. of the
preamble of this proposed rule.
Furthermore, for FY 2021, in using data from applicable LTCH cases
to establish MS-LTC-DRG relative weights, we are proposing to continue
to establish low-volume MS-LTC-DRGs (that is, MS-LTC-DRGs with less
than 25 cases) using our quintile methodology in determining the MS-
LTC-DRG relative weights because LTCHs do not typically treat the full
range of diagnoses as do acute care hospitals. Therefore, for purposes
of determining the relative weights for the large number of low-volume
MS-LTC-DRGs, we grouped all of the low-volume MS-LTC-DRGs into five
quintiles based on average charges per discharge. Then, under our
existing methodology, we accounted for adjustments made to LTCH PPS
standard Federal payments for short-stay outlier (SSO) cases (that is,
cases where the covered length of stay at the LTCH is less than or
equal to five-sixths of the geometric average length of stay for the
MS-LTC-DRG), and we made adjustments to account for nonmonotonically
increasing weights, when necessary. The methodology is premised on more
severe cases under the MS-LTC-DRG system requiring greater expenditure
of medical care resources and higher average charges such that, in the
severity levels within a base MS-LTC-DRG, the relative weights should
increase monotonically with severity from the lowest to highest
severity level. (We discuss each of these components of our MS-LTC-DRG
relative weight methodology in greater detail in section VII.B.3.g. of
the preamble of this proposed rule.)
2. Patient Classifications Into MS-LTC-DRGs
a. Background
The MS-DRGs (used under the IPPS) and the MS-LTC-DRGs (used under
the LTCH PPS) are based on the CMS DRG structure. As noted previously
in this section, we refer to the DRGs under the LTCH PPS as MS-LTC-DRGs
although they are structurally identical to the MS-DRGs used under the
IPPS.
The MS-DRGs are organized into 25 major diagnostic categories
(MDCs), most of which are based on a particular organ system of the
body; the remainder involve multiple organ systems (such as MDC 22,
Burns). Within most MDCs, cases are then divided into surgical DRGs and
medical DRGs. Surgical DRGs are assigned based on a surgical hierarchy
that orders operating room (O.R.) procedures or groups of O.R.
procedures by resource intensity. The GROUPER software program does not
recognize all ICD-10-PCS procedure codes as procedures affecting DRG
assignment. That is, procedures that are not surgical (for example,
EKGs), or minor surgical procedures (for example, a biopsy of skin and
subcutaneous tissue (procedure code 0JBH3ZX)) do not affect the MS-LTC-
DRG assignment based on their presence on the claim.
Generally, under the LTCH PPS, a Medicare payment is made at a
predetermined specific rate for each discharge that varies based on the
MS-LTC-DRG to which a beneficiary's discharge is assigned. Cases are
classified into MS-LTC-DRGs for payment based on the following six data
elements:
Principal diagnosis.
Additional or secondary diagnoses.
Surgical procedures.
Age.
Sex.
Discharge status of the patient.
Currently, for claims submitted using version ASC X12 5010 format,
up to 25 diagnosis codes and 25 procedure codes are considered for an
MS-DRG assignment. This includes one principal diagnosis and up to 24
secondary diagnoses for severity of illness determinations. (For
additional information on the processing of up to 25 diagnosis codes
and 25 procedure codes on hospital inpatient claims, we refer readers
to section II.G.11.c. of the preamble of the FY 2011 IPPS/LTCH PPS
final rule (75 FR 50127).)

[[Page 32804]]

Under the HIPAA transactions and code sets regulations at 45 CFR
parts 160 and 162, covered entities must comply with the adopted
transaction standards and operating rules specified in subparts I
through S of part 162. Among other requirements, on or after January 1,
2012, covered entities were required to use the ASC X12 Standards for
Electronic Data Interchange Technical Report Type 3--Health Care Claim:
Institutional (837), May 2006, ASC X12N/005010X223, and Type 1 Errata
to Health Care Claim: Institutional (837) ASC X12 Standards for
Electronic Data Interchange Technical Report Type 3, October 2007, ASC
X12N/005010X233A1 for the health care claims or equivalent encounter
information transaction (45 CFR 162.1102(c)).
HIPAA requires covered entities to use the applicable medical data
code set requirements when conducting HIPAA transactions (45 CFR
162.1000). Currently, upon the discharge of the patient, the LTCH must
assign appropriate diagnosis and procedure codes from the most current
version of 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,
both of which were required to be implemented October 1, 2015 (45 CFR
162.1002(c)(2) and (3)). For additional information on the
implementation of the ICD-10 coding system, we refer readers to section
II.F.1. of the preamble of the FY 2017 IPPS/LTCH PPS final rule (81 FR
56787 through 56790) and section II.E.1. of the preamble of this
proposed rule. Additional coding instructions and examples are
published in the AHA's Coding Clinic for ICD-10-CM/PCS.
To create the MS-DRGs (and by extension, the MS-LTC-DRGs), base
DRGs were subdivided according to the presence of specific secondary
diagnoses designated as complications or comorbidities (CCs) into one,
two, or three levels of severity, depending on the impact of the CCs on
resources used for those cases. Specifically, there are sets of MS-DRGs
that are split into 2 or 3 subgroups based on the presence or absence
of a CC or a major complication or comorbidity (MCC). We refer readers
to section II.D. of the preamble of the FY 2008 IPPS final rule with
comment period for a detailed discussion about the creation of MS-DRGs
based on severity of illness levels (72 FR 47141 through 47175).
MACs enter the clinical and demographic information submitted by
LTCHs into their claims processing systems and subject this information
to a series of automated screening processes called the Medicare Code
Editor (MCE). These screens are designed to identify cases that require
further review before assignment into a MS-LTC-DRG can be made. During
this process, certain cases are selected for further explanation (74 FR
43949).
After screening through the MCE, each claim is classified into the
appropriate MS-LTC-DRG by the Medicare LTCH GROUPER software on the
basis of diagnosis and procedure codes and other demographic
information (age, sex, and discharge status). The GROUPER software used
under the LTCH PPS is the same GROUPER software program used under the
IPPS. Following the MS-LTC-DRG assignment, the MAC determines the
prospective payment amount by using the Medicare PRICER program, which
accounts for hospital-specific adjustments. Under the LTCH PPS, we
provide an opportunity for LTCHs to review the MS-LTC-DRG assignments
made by the MAC and to submit additional information within a specified
timeframe as provided in Sec. 412.513(c).
The GROUPER software is used both to classify past cases to measure
relative hospital resource consumption to establish the MS-LTC-DRG
relative weights and to classify current cases for purposes of
determining payment. The records for all Medicare hospital inpatient
discharges are maintained in the MedPAR file. The data in this file are
used to evaluate possible MS-DRG and MS-LTC-DRG classification changes
and to recalibrate the MS-DRG and MS-LTC-DRG relative weights during
our annual update under both the IPPS (Sec. 412.60(e)) and the LTCH
PPS (Sec. 412.517), respectively.
b. Proposed Changes to the MS-LTC-DRGs for FY 2021
As specified by our regulations at Sec. 412.517(a), which require
that the MS-LTC-DRG classifications and relative weights be updated
annually, and consistent with our historical practice of using the same
patient classification system under the LTCH PPS as is used under the
IPPS, in this proposed rule, we are proposing to update the MS-LTC-DRG
classifications effective October 1, 2020 through September 30, 2021
(FY 2021), consistent with the proposed changes to specific MS-DRG
classifications presented in section II.F. of the preamble of this
proposed rule. Accordingly, the proposed MS-LTC-DRGs for FY 2021
presented in section II.F. of the preamble of this proposed rule are
the same as the MS-DRGs that are being used under the IPPS for FY 2021.
In addition, because the proposed MS-LTC-DRGs for FY 2021 are the same
as the proposed MS-DRGs for FY 2021, the other proposed changes that
affect MS-DRG (and by extension MS-LTC-DRG) assignments under proposed
GROUPER Version 38 as discussed in section II.E. of the preamble of
this proposed rule, including the proposed changes to the MCE software
and the ICD-10-CM/PCS coding system, also are applicable under the LTCH
PPS for FY 2021.
3. Development of the Proposed FY 2021 MS-LTC-DRG Relative Weights
a. General Overview of the Development of the MS-LTC-DRG Relative
Weights
One of the primary goals for the implementation of the LTCH PPS is
to pay each LTCH an appropriate amount for the efficient delivery of
medical care to Medicare patients. The system must be able to account
adequately for each LTCH's case-mix in order to ensure both fair
distribution of Medicare payments and access to adequate care for those
Medicare patients whose care is costlier (67 FR 55984). To accomplish
these goals, we have annually adjusted the LTCH PPS standard Federal
prospective payment rate by the applicable relative weight in
determining payment to LTCHs for each case. In order to make these
annual adjustments under the dual rate LTCH PPS payment structure,
beginning with FY 2016, we recalibrate the MS-LTC-DRG relative
weighting factors annually using data from applicable LTCH cases (80 FR
49614 through 49617). Under this policy, the resulting MS-LTC-DRG
relative weights would continue to be used to adjust the LTCH PPS
standard Federal payment rate when calculating the payment for LTCH PPS
standard Federal payment rate cases.
The established methodology to develop the MS-LTC-DRG relative
weights is generally consistent with the methodology established when
the LTCH PPS was implemented in the August 30, 2002 LTCH PPS final rule
(67 FR 55989 through 55991). However, there have been some
modifications of our historical procedures for assigning relative
weights in cases of zero volume and/or nonmonotonicity resulting from
the adoption of the MS-LTC-DRGs, along with the change made in
conjunction with the implementation of the dual rate LTCH PPS payment
structure beginning in FY 2016 to use LTCH claims data from only LTCH
PPS

[[Page 32805]]

standard Federal payment rate cases (or LTCH PPS cases that would have
qualified for payment under the LTCH PPS standard Federal payment rate
if the dual rate LTCH PPS payment structure had been in effect at the
time of the discharge). (For details on the modifications to our
historical procedures for assigning relative weights in cases of zero
volume and/or nonmonotonicity, we refer readers to the FY 2008 IPPS
final rule with comment period (72 FR 47289 through 47295) and the FY
2009 IPPS final rule (73 FR 48542 through 48550).) For details on the
change in our historical methodology to use LTCH claims data only from
LTCH PPS standard Federal payment rate cases (or cases that would have
qualified for such payment had the LTCH PPS dual payment rate structure
been in effect at the time) to determine the MS-LTC-DRG relative
weights, we refer readers to the FY 2016 IPPS/LTCH PPS final rule (80
FR 49614 through 49617). Under the LTCH PPS, relative weights for each
MS-LTC-DRG are a primary element used to account for the variations in
cost per discharge and resource utilization among the payment groups
(Sec. 412.515). To ensure that Medicare patients classified to each
MS-LTC-DRG have access to an appropriate level of services and to
encourage efficiency, we calculate a relative weight for each MS-LTC-
DRG that represents the resources needed by an average inpatient LTCH
case in that MS-LTC-DRG. For example, cases in an MS-LTC-DRG with a
relative weight of 2 would, on average, cost twice as much to treat as
cases in an MS-LTC-DRG with a relative weight of 1.
b. Development of the Proposed MS-LTC-DRG Relative Weights for FY 2021
In this proposed rule, we are proposing to continue to use our
current methodology to determine the MS-LTC-DRG relative weights for FY
2021, including the continued application of established policies
related to: The hospital-specific relative value methodology, the
treatment of severity levels in the MS-LTC-DRGs, low-volume and no-
volume MS-LTC-DRGs, adjustments for nonmonotonicity, the steps for
calculating the MS-LTC-DRG relative weights with a budget neutrality
factor, and only using data from applicable LTCH cases (which includes
our policy of only using cases that would meet the criteria for
exclusion from the site neutral payment rate (or, for discharges
occurring prior to the implementation of the dual rate LTCH PPS payment
structure, would have met the criteria for exclusion had those criteria
been in effect at the time of the discharge)).
In this section, we present our proposed application of our
existing methodology for determining the proposed MS-LTC-DRG relative
weights for FY 2021, and we discuss the effects of our proposals
concerning the data used to determine the FY 2021 MS-LTC-DRG relative
weights on the various components of our existing methodology in the
discussion that follows.
We generally provide the low-volume quintiles and no-volume
crosswalk data previously published in Tables 13A and 13B for each
annual proposed and final rule as one of our supplemental IPPS/LTCH PPS
related data files that are made available for public use via the
internet on the CMS website for the respective rule and fiscal year
(that is, FY 2019 and subsequent fiscal years) at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html
to streamline the information made available to the public that is used
in the annual development of IPPS Table 11 and to make it easier for
the public to navigate and find the relevant data and information used
for the development of proposed and final payment rates or factors for
the applicable payment year while continuing to furnish the same
information the tables provided in previous fiscal years (83 FR 41522).
We refer readers to the CMS website for the low-volume quintiles and
no-volume crosswalk data previously furnished via Tables 13A and 13B.
c. Data
For this FY 2021 IPPS/LTCH PPS proposed rule, consistent with our
proposals regarding the calculation of the proposed MS-LTC-DRG relative
weights for FY 2021, we obtained total charges from FY 2019 Medicare
LTCH claims data from the December 2019 update of the FY 2019 MedPAR
file, which are the best available data at this time, and we are
proposing to use Version 38 of the GROUPER to classify LTCH cases.
Consistent with our historical practice, we are proposing that if more
recent data become available, we would use those data and the finalized
Version 38 of the GROUPER in establishing the FY 2021 MS-LTC-DRG
relative weights in the final rule.
To calculate the proposed FY 2021 MS-LTC-DRG relative weights under
the dual rate LTCH PPS payment structure, we are proposing to continue
to use applicable LTCH data, which includes our policy of only using
cases that meet the criteria for exclusion from the site neutral
payment rate (or would have met the criteria had they been in effect at
the time of the discharge) (80 FR 49624). Specifically, we began by
first evaluating the LTCH claims data in the December 2019 update of
the FY 2019 MedPAR file to determine which LTCH cases would meet the
criteria for exclusion from the site neutral payment rate under Sec.
412.522(b) or had the dual rate LTCH PPS payment structure applied to
those cases at the time of discharge. We identified the FY 2019 LTCH
cases that were not assigned to MS-LTC-DRGs 876, 880, 881, 882, 883,
884, 885, 886, 887, 894, 895, 896, 897, 945, and 946, which identify
LTCH cases that do not have a principal diagnosis relating to a
psychiatric diagnosis or to rehabilitation; and that either--
The admission to the LTCH was ``immediately preceded'' by
discharge from a subsection (d) hospital and the immediately preceding
stay in that subsection (d) hospital included at least 3 days in an
ICU, as we define under the ICU criterion; or
The admission to the LTCH was ``immediately preceded'' by
discharge from a subsection (d) hospital and the claim for the LTCH
discharge includes the applicable procedure code that indicates at
least 96 hours of ventilator services were provided during the LTCH
stay, as we define under the ventilator criterion. Claims data from the
FY 2019 MedPAR file that reported ICD-10-PCS procedure code 5A1955Z
were used to identify cases involving at least 96 hours of ventilator
services in accordance with the ventilator criterion. (We note that,
for purposes of developing the MS-LTC-DRG relative weights we have
previously addressed the treatment of cases that would have been
excluded from the site neutral payment rate under the statutory
provisions that provided for temporary exception from the site neutral
payment rate under the LTCH PPS for certain spinal cord specialty
hospitals or for certain severe wound care discharges from certain
LTCHs provided by sections 15009 and 15010 of Public Law 114-255,
respectively. The temporary exception from the site neutral payment
rate for certain spinal cord specialty hospitals is effective for
discharges in cost reporting periods beginning during FYs 2018 and
2019, and the temporary exception from the site neutral payment rate
for certain severe wound care discharges from certain LTCHs was
effective for a discharge in cost reporting period beginning during FY
2018. These statutory provisions will no longer be in effective for any
discharges

[[Page 32806]]

occurring in FY 2021 (that is, an LTCH with a cost reporting period
that begins on the last day of FY 2019, on September 30, 2019, would
end on September 29, 2020, the day prior to the start of FY 2021 on
October 1, 2020). Therefore, we no longer need to address the treatment
of these cases for purposes of developing the MS-LTC-DRG relative
weights for FY 2021 and subsequent years.)
Furthermore, consistent with our historical methodology, we
excluded any claims in the resulting data set that were submitted by
LTCHs that were all-inclusive rate providers and LTCHs that are paid in
accordance with demonstration projects authorized under section 402(a)
of Public Law 90-248 or section 222(a) of Public Law 92-603. In
addition, consistent with our historical practice and our policies, we
excluded any Medicare Advantage (Part C) claims in the resulting data.
Such claims were identified based on the presence of a GHO Paid
indicator value of ``1'' in the MedPAR files. The claims that remained
after these three trims (that is, the applicable LTCH data) were then
used to calculate the MS-LTC-DRG relative weights for FY 2021.
In summary, in general, we identified the claims data used in the
development of the proposed FY 2021 MS-LTC-DRG relative weights in this
proposed rule, by trimming claims data that were paid the site neutral
payment rate or would have been paid the site neutral payment rate had
the dual payment rate structure been in effect. Finally, we propose to
trim the claims data of all-inclusive rate providers reported in the
December 2019 update of the FY 2019 MedPAR file and any Medicare
Advantage claims data. There were no data from any LTCHs that are paid
in accordance with a demonstration project reported in the December
2019 update of the FY 2019 MedPAR file, but, had there been any, we
would have trimmed the claims data from those LTCHs as well, in
accordance with our established policy. We are proposing to use the
remaining data (that is, the applicable LTCH data) to calculate the
relative weights for FY 2021.
d. Hospital-Specific Relative Value (HSRV) Methodology
By nature, LTCHs often specialize in certain areas, such as
ventilator-dependent patients. Some case types (MS-LTC-DRGs) may be
treated, to a large extent, in hospitals that have, from a perspective
of charges, relatively high (or low) charges. This nonrandom
distribution of cases with relatively high (or low) charges in specific
MS-LTC-DRGs has the potential to inappropriately distort the measure of
average charges. To account for the fact that cases may not be randomly
distributed across LTCHs, consistent with the methodology we have used
since the implementation of the LTCH PPS, in this FY 2021 IPPS/LTCH PPS
proposed rule, we are proposing to continue to use a hospital-specific
relative value (HSRV) methodology to calculate the MS-LTC-DRG relative
weights for FY 2021. We believe that this method removes this hospital-
specific source of bias in measuring LTCH average charges (67 FR
55985). Specifically, under this methodology, we reduce the impact of
the variation in charges across providers on any particular MS-LTC-DRG
relative weight by converting each LTCH's charge for an applicable LTCH
case to a relative value based on that LTCH's average charge for such
cases.
Under the HSRV methodology, we standardize charges for each LTCH by
converting its charges for each applicable LTCH case to hospital-
specific relative charge values and then adjusting those values for the
LTCH's case-mix. The adjustment for case-mix is needed to rescale the
hospital-specific relative charge values (which, by definition, average
1.0 for each LTCH). The average relative weight for an LTCH is its
case-mix; therefore, it is reasonable to scale each LTCH's average
relative charge value by its case-mix. In this way, each LTCH's
relative charge value is adjusted by its case-mix to an average that
reflects the complexity of the applicable LTCH cases it treats relative
to the complexity of the applicable LTCH cases treated by all other
LTCHs (the average LTCH PPS case-mix of all applicable LTCH cases
across all LTCHs).
In accordance with our established methodology, for FY 2021, we are
proposing to continue to standardize charges for each applicable LTCH
case by first dividing the adjusted charge for the case (adjusted for
SSOs under Sec. 412.529 as described in section VII.B.3.g. of the
preamble of this proposed rule (Step 3) of the preamble of this
proposed rule) by the average adjusted charge for all applicable LTCH
cases at the LTCH in which the case was treated. SSO cases are cases
with a length of stay that is less than or equal to five-sixths the
average length of stay of the MS-LTC-DRG (Sec. Sec. 412.529 and
412.503). The average adjusted charge reflects the average intensity of
the health care services delivered by a particular LTCH and the average
cost level of that LTCH. The resulting ratio was multiplied by that
LTCH's case-mix index to determine the standardized charge for the
case.
Multiplying the resulting ratio by the LTCH's case-mix index
accounts for the fact that the same relative charges are given greater
weight at an LTCH with higher average costs than they would at an LTCH
with low average costs, which is needed to adjust each LTCH's relative
charge value to reflect its case-mix relative to the average case-mix
for all LTCHs. By standardizing charges in this manner, we count
charges for a Medicare patient at an LTCH with high average charges as
less resource intensive than they would be at an LTCH with low average
charges. For example, a $10,000 charge for a case at an LTCH with an
average adjusted charge of $17,500 reflects a higher level of relative
resource use than a $10,000 charge for a case at an LTCH with the same
case-mix, but an average adjusted charge of $35,000. We believe that
the adjusted charge of an individual case more accurately reflects
actual resource use for an individual LTCH because the variation in
charges due to systematic differences in the markup of charges among
LTCHs is taken into account.
e. Treatment of Severity Levels in Developing the Proposed MS-LTC-DRG
Relative Weights
For purposes of determining the MS-LTC-DRG relative weights, under
our historical methodology, there are three different categories of MS-
DRGs based on volume of cases within specific MS-LTC-DRGs: (1) MS-LTC-
DRGs with at least 25 applicable LTCH cases in the data used to
calculate the relative weight, which are each assigned a unique
relative weight; (2) low-volume MS-LTC-DRGs (that is, MS-LTC-DRGs that
contain between 1 and 24 applicable LTCH cases that are grouped into
quintiles (as described later in this section of this proposed rule)
and assigned the relative weight of the quintile); and (3) no-volume
MS-LTC-DRGs that are cross-walked to other MS-LTC-DRGs based on the
clinical similarities and assigned the relative weight of the cross-
walked MS-LTC-DRG (as described in greater detail in this proposed
rule). For FY 2021, we are proposing to continue to use applicable LTCH
cases to establish the same volume-based categories to calculate the FY
2021 MS-LTC-DRG relative weights.
In determining the proposed FY 2021 MS-LTC-DRG relative weights,
when necessary, as is our longstanding practice, we are proposing to
make adjustments to account for nonmonotonicity, as discussed in
greater detail later in Step 6 of section VII.B.3.g. of the preamble of
this

[[Page 32807]]

proposed rule. We refer readers to the discussion in the FY 2010 IPPS/
RY 2010 LTCH PPS final rule for our rationale for including an
adjustment for nonmonotonicity (74 FR 43953 through 43954).
f. Proposed Low-Volume MS-LTC-DRGs
In order to account for proposed MS-LTC-DRGs with low-volume (that
is, with fewer than 25 applicable LTCH cases), consistent with our
existing methodology, we are proposing to continue to employ the
quintile methodology for low-volume MS-LTC-DRGs, such that we grouped
the ``low-volume MS-LTC-DRGs'' (that is, MS-LTC-DRGs that contain
between 1 and 24 applicable LTCH cases into one of five categories
(quintiles) based on average charges (67 FR 55984 through 55995; 72 FR
47283 through 47288; and 81 FR 25148).) In cases where the initial
assignment of a low-volume MS-LTC-DRG to a quintile results in
nonmonotonicity within a base-DRG, we are proposing to make adjustments
to the resulting low-volume MS-LTC-DRGs to preserve monotonicity, as
discussed in detail in section VII.B.3.g. (Step 6) of the preamble of
this proposed rule.
In this proposed rule, based on the best available data (that is,
the December 2019 update of the FY 2019 MedPAR files), we identified
252 MS-LTC-DRGs that contained between 1 and 24 applicable LTCH cases.
This list of MS-LTC-DRGs was then divided into 1 of the 5 low-volume
quintiles, each containing at least 50 MS-LTC-DRGs (252/5 = 50 with a
remainder of 2). We assigned the low-volume MS-LTC-DRGs to specific
low-volume quintiles by sorting the low-volume MS-LTC-DRGs in ascending
order by average charge in accordance with our established methodology.
Based on the data available for this proposed rule, the number of
proposed MS-LTC-DRGs with less than 25 applicable LTCH cases was not
evenly divisible by 5 and, therefore, we are proposing to employ our
historical methodology for determining which of the low-volume
quintiles would contain the additional low-volume MS-LTC-DRG.
Specifically for this proposed rule, after organizing the proposed MS-
LTC-DRGs by ascending order by average charge, we assigned the first 50
(1st through 50th) of proposed low-volume MS-LTC-DRGs (with the lowest
average charge) into Quintile 1. Because the average charge of the 51
low-volume MS-LTC-DRG in the sorted list was closer to the average
charge of the 50 low-volume MS-LTC-DRG (assigned to Quintile 1) than to
the average charge of the 52 low-volume MS-LTC-DRG (assigned to
Quintile 2), we assigned it to Quintile 1 (such that Quintile 1
contains 51 low-volume MS-LTC-DRGs before any adjustments for
nonmonotonicity, as discussed in this proposed rule). The 50 MS-LTC-
DRGs with the highest average charge were assigned into Quintile 5.
Because the average charge of the 202nd low-volume MS-LTC-DRG in the
sorted list was closer to the average charge of the 203rd low-volume
MS-LTC-DRG (assigned to Quintile 5) than to the average charge of the
201st low-volume MS-LTC-DRG (assigned to Quintile 4), we assigned it to
Quintile 5 (such that Quintile 5 contains 51 low-volume MS-LTC-DRGs
before any adjustments for nonmonotonicity, as discussed in this
proposed rule). This resulted in 3 of the 5 low-volume quintiles
containing 50 MS-LTC-DRGs (Quintiles 2 through 4) and 2 low-volume
quintiles containing 51 MS-LTC-DRGs (Quintiles 1 and 5). As discussed
earlier, for this proposed rule, we are providing the list of the
composition of the proposed low-volume quintiles for proposed low-
volume MS-LTC-DRGs for FY 2021 in a supplemental data file for public
use posted via the internet on the CMS website for this proposed rule
at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html in order to streamline the information
made available to the public that is used in the annual development of
Table 11.
In order to determine the proposed FY 2021 relative weights for the
proposed low-volume MS-LTC-DRGs, consistent with our historical
practice, we are proposing to use the five low-volume quintiles
described previously. We determined a proposed relative weight and
(geometric) average length of stay for each of the five proposed low-
volume quintiles using the methodology described in section VII.B.3.g.
of the preamble of this proposed rule. We are proposing to assign the
same proposed relative weight and average length of stay to each of the
proposed low-volume MS-LTC-DRGs that make up an individual low-volume
quintile. We note that, as this system is dynamic, it is possible that
the number and specific type of MS-LTC-DRGs with a low-volume of
applicable LTCH cases will vary in the future. Furthermore, we note
that we continue to monitor the volume (that is, the number of
applicable LTCH cases) in the low-volume quintiles to ensure that our
quintile assignments used in determining the MS-LTC-DRG relative
weights result in appropriate payment for LTCH cases grouped to
proposed low-volume MS-LTC-DRGs and do not result in an unintended
financial incentive for LTCHs to inappropriately admit these types of
cases.
g. Steps for Determining the Proposed FY 2021 MS-LTC-DRG Relative
Weights
In this proposed rule, we are proposing to continue to use our
current methodology to determine the proposed FY 2021 MS-LTC-DRG
relative weights.
In summary, to determine the proposed FY 2021 MS-LTC-DRG relative
weights, we are proposing to group applicable LTCH cases to the
appropriate proposed MS-LTC-DRG, while taking into account the proposed
low-volume quintiles (as described previously) and cross-walked
proposed no-volume MS-LTC-DRGs (as described later in this section).
After establishing the appropriate proposed MS-LTC-DRG (or proposed
low-volume quintile), we are proposing to calculate the proposed FY
2021 relative weights by first removing cases with a length of stay of
7 days or less and statistical outliers (Steps 1 and 2). Next, we are
proposing to adjust the number of applicable LTCH cases in each
proposed MS-LTC-DRG (or proposed low-volume quintile) for the effect of
SSO cases (Step 3). After removing applicable LTCH cases with a length
of stay of 7 days or less (Step 1) and statistical outliers (Step 2),
which are the SSO-adjusted applicable LTCH cases and corresponding
charges (Step 3), we are proposing to calculate proposed ``relative
adjusted weights'' for each proposed MS-LTC-DRG (or proposed low-volume
quintile) using the HSRV method.
Step 1--Remove cases with a length of stay of 7 days or less.
The first step in our proposed calculation of the proposed FY 2021
MS-LTC-DRG relative weights is to remove cases with a length of stay of
7 days or less. The MS-LTC-DRG relative weights reflect the average of
resources used on representative cases of a specific type. Generally,
cases with a length of stay of 7 days or less do not belong in an LTCH
because these stays do not fully receive or benefit from treatment that
is typical in an LTCH stay, and full resources are often not used in
the earlier stages of admission to an LTCH. If we were to include stays
of 7 days or less in the computation of the FY 2021 MS-LTC-DRG relative
weights, the value of many relative weights would decrease and,
therefore, payments would decrease to a level that may no longer be
appropriate. We do not believe that it would be appropriate to
compromise the integrity of the

[[Page 32808]]

payment determination for those LTCH cases that actually benefit from
and receive a full course of treatment at an LTCH by including data
from these very short stays. Therefore, consistent with our existing
relative weight methodology, in determining the proposed FY 2021 MS-
LTC-DRG relative weights, we are proposing to remove LTCH cases with a
length of stay of 7 days or less from applicable LTCH cases. (For
additional information on what is removed in this step of the relative
weight methodology, we refer readers to 67 FR 55989 and 74 FR 43959.)
Step 2--Remove statistical outliers.
The next step in our proposed calculation of the proposed FY 2021
MS-LTC-DRG relative weights is to remove statistical outlier cases from
the LTCH cases with a length of stay of at least 8 days. Consistent
with our existing relative weight methodology, we are proposing to
continue to define statistical outliers as cases that are outside of
3.0 standard deviations from the mean of the log distribution of both
charges per case and the charges per day for each MS-LTC-DRG. These
statistical outliers are removed prior to calculating the proposed
relative weights because we believe that they may represent aberrations
in the data that distort the measure of average resource use. Including
those LTCH cases in the calculation of the proposed relative weights
could result in an inaccurate relative weight that does not truly
reflect relative resource use among those MS-LTC-DRGs. (For additional
information on what is removed in this step of the proposed relative
weight methodology, we refer readers to 67 FR 55989 and 74 FR 43959.)
After removing cases with a length of stay of 7 days or less and
statistical outliers, we were left with applicable LTCH cases that have
a length of stay greater than or equal to 8 days. In this proposed
rule, we refer to these cases as ``trimmed applicable LTCH cases.''
Step 3--Adjust charges for the effects of SSOs.
As the next step in the calculation of the proposed FY 2021 MS-LTC-
DRG relative weights, consistent with our historical approach, we are
proposing to adjust each LTCH's charges per discharge for those
remaining cases (that is, trimmed applicable LTCH cases) for the
effects of SSOs (as defined in Sec. 412.529(a) in conjunction with
Sec. 412.503). Specifically, we are proposing to make this adjustment
by counting an SSO case as a fraction of a discharge based on the ratio
of the length of stay of the case to the average length of stay for the
MS-LTC-DRG for non-SSO cases. This has the effect of proportionately
reducing the impact of the lower charges for the SSO cases in
calculating the average charge for the MS-LTC-DRG. This process
produces the same result as if the actual charges per discharge of an
SSO case were adjusted to what they would have been had the patient's
length of stay been equal to the average length of stay of the MS-LTC-
DRG.
Counting SSO cases as full LTCH cases with no adjustment in
determining the proposed FY 2021 MS-LTC-DRG relative weights would
lower the proposed FY 2021 MS-LTC-DRG relative weight for affected MS-
LTC-DRGs because the relatively lower charges of the SSO cases would
bring down the average charge for all cases within a MS-LTC-DRG. This
would result in an ``underpayment'' for non-SSO cases and an
``overpayment'' for SSO cases. Therefore, we are proposing to continue
to adjust for SSO cases under Sec. 412.529 in this manner because it
would result in more appropriate payments for all LTCH PPS standard
Federal payment rate cases. (For additional information on this step of
the relative weight methodology, we refer readers to 67 FR 55989 and 74
FR 43959.)
Step 4--Calculate the proposed FY 2021 MS-LTC-DRG relative weights
on an iterative basis.
Consistent with our historical relative weight methodology, we are
proposing to calculate the proposed FY 2021 MS-LTC-DRG relative weights
using the HSRV methodology, which is an iterative process. First, for
each SSO-adjusted trimmed applicable LTCH case, we calculated a
hospital-specific relative charge value by dividing the charge per
discharge after adjusting for SSOs of the LTCH case (from Step 3) by
the average charge per SSO-adjusted discharge for the LTCH in which the
case occurred. The resulting ratio is then multiplied by the LTCH's
case-mix index to produce an adjusted hospital-specific relative charge
value for the case. We used an initial case-mix index value of 1.0 for
each LTCH.
For each proposed MS-LTC-DRG, we calculated the proposed FY 2021
relative weight by dividing the SSO-adjusted average of the hospital-
specific relative charge values for applicable LTCH cases for the
proposed MS-LTC-DRG (that is, the sum of the hospital-specific relative
charge value from above divided by the sum of equivalent cases from
Step 3 for each proposed MS-LTC-DRG) by the overall SSO-adjusted
average hospital-specific relative charge value across all applicable
LTCH cases for all LTCHs (that is, the sum of the hospital-specific
relative charge value from above divided by the sum of equivalent
applicable LTCH cases from Step 3 for each proposed MS-LTC-DRG). Using
these recalculated MS-LTC-DRG relative weights, each LTCH's average
relative weight for all of its SSO-adjusted trimmed applicable LTCH
cases (that is, its case-mix) was calculated by dividing the sum of all
the LTCH's MS-LTC-DRG relative weights by its total number of SSO-
adjusted trimmed applicable LTCH cases. The LTCHs' hospital-specific
relative charge values (from previous) are then multiplied by the
hospital-specific case-mix indexes. The hospital-specific case-mix
adjusted relative charge values are then used to calculate a new set of
proposed MS-LTC-DRG relative weights across all LTCHs. This iterative
process continued until there was convergence between the relative
weights produced at adjacent steps, for example, when the maximum
difference was less than 0.0001.
Step 5--Determine a proposed FY 2021 relative weight for MS-LTC-
DRGs with no applicable LTCH cases.
Using the trimmed applicable LTCH cases, consistent with our
historical methodology, we identified the proposed MS-LTC-DRGs for
which there were no claims in the December 2019 update of the FY 2019
MedPAR file and, therefore, for which no charge data was available for
these MS-LTC-DRGs. Because patients with a number of the diagnoses
under these MS-LTC-DRGs may be treated at LTCHs, consistent with our
historical methodology, we generally assign a relative weight to each
of the no-volume MS-LTC-DRGs based on clinical similarity and relative
costliness (with the exception of ``transplant'' MS-LTC-DRGs, ``error''
MS-LTC-DRGs, and MS-LTC-DRGs that indicate a principal diagnosis
related to a psychiatric diagnosis or rehabilitation (referred to as
the ``psychiatric or rehabilitation'' MS-LTC-DRGs), as discussed later
in this section of this proposed rule). (For additional information on
this step of the relative weight methodology, we refer readers to 67 FR
55991 and 74 FR 43959 through 43960.)
Consistent with our existing methodology, we are proposing to
cross-walk each no-volume proposed MS-LTC-DRG to another proposed MS-
LTC-DRG for which we calculated a proposed relative weight (determined
in accordance with the methodology as previously described). Then, the
``no-volume'' proposed MS-LTC-DRG is assigned the same proposed
relative weight (and average length of stay) of

[[Page 32809]]

the proposed MS-LTC-DRG to which it was cross-walked (as described in
greater detail in this section of this proposed rule).
Of the 767 proposed MS-LTC-DRGs for FY 2021, we identified 375 MS-
LTC-DRGs for which there were no trimmed applicable LTCH cases. This
number includes the 11 ``transplant'' MS-LTC-DRGs, the 2 ``error'' MS-
LTC-DRGs, and the 15 ``psychiatric or rehabilitation'' MS-LTC-DRGs,
which are discussed in this section of this rule, such that we
identified 347 MS-LTC-DRGs that for which we would propose to assign a
relative weight using our existing ``no-volume'' proposed MS-LTC-DRG
methodology (that is, 375-11-2-15 = 347). We are proposing to assign
proposed relative weights to each of the 347 no-volume proposed MS-LTC-
DRGs based on clinical similarity and relative costliness to 1 of the
remaining 392 (767-375 = 392) proposed MS-LTC-DRGs for which we
calculated proposed relative weights based on the trimmed applicable
LTCH cases in the FY 2019 MedPAR file data using the steps described
previously. (For the remainder of this discussion, we refer to the
``cross-walked'' proposed MS-LTC-DRGs as one of the 392 proposed MS-
LTC-DRGs to which we cross-walked each of the 347 ``no-volume''
proposed MS-LTC-DRGs.) Then, we are generally proposing to assign the
347 no-volume proposed MS-LTC-DRGs the proposed relative weight of the
cross-walked proposed MS-LTC-DRG. (As explained in Step 6, when
necessary, we made adjustments to account for nonmonotonicity.)
We cross-walked the no-volume proposed MS-LTC-DRG to a proposed MS-
LTC-DRG for which we calculated proposed relative weights based on the
December 2019 update of the FY 2019 MedPAR file, and to which it is
similar clinically in intensity of use of resources and relative
costliness as determined by criteria such as care provided during the
period of time surrounding surgery, surgical approach (if applicable),
length of time of surgical procedure, postoperative care, and length of
stay. (For more details on our process for evaluating relative
costliness, we refer readers to the FY 2010 IPPS/RY 2010 LTCH PPS final
rule (73 FR 48543).) We believe in the rare event that there would be a
few LTCH cases grouped to one of the no-volume proposed MS-LTC-DRGs in
FY 2021, the proposed relative weights assigned based on the cross-
walked proposed MS-LTC-DRGs would result in an appropriate LTCH PPS
payment because the crosswalks, which are based on clinical similarity
and relative costliness, would be expected to generally require
equivalent relative resource use.
Then we assigned the proposed relative weight of the cross-walked
proposed MS-LTC-DRG as the proposed relative weight for the no-volume
proposed MS-LTC-DRG such that both of these proposed MS-LTC-DRGs (that
is, the no-volume proposed MS-LTC-DRG and the cross-walked proposed MS-
LTC-DRG) have the same proposed relative weight (and average length of
stay) for FY 2021. We note that, if the cross-walked proposed MS-LTC-
DRG had 25 applicable LTCH cases or more, its proposed relative weight
(calculated using the methodology as previously described in Steps 1
through 4) is assigned to the no-volume proposed MS-LTC-DRG as well.
Similarly, if the proposed MS-LTC-DRG to which the no-volume proposed
MS-LTC-DRG was cross-walked had 24 or less cases and, therefore, was
designated to 1 of the proposed low-volume quintiles for purposes of
determining the proposed relative weights, we assigned the proposed
relative weight of the applicable proposed low-volume quintile to the
no-volume proposed MS-LTC-DRG such that both of these proposed MS-LTC-
DRGs (that is, the no-volume proposed MS-LTC-DRG and the cross-walked
proposed MS-LTC-DRG) have the same proposed relative weight for FY
2021. (As we noted previously, in the infrequent case where
nonmonotonicity involving a no-volume proposed MS-LTC-DRG resulted,
additional adjustments as described in Step 6 are required in order to
maintain monotonically increasing proposed relative weights.)
As discussed earlier, for this proposed rule, we are providing the
list of the no-volume proposed MS-LTC-DRGs and the proposed MS-LTC-DRGs
to which each was cross-walked (that is, the cross-walked proposed MS-
LTC-DRGs) for FY 2021 in a supplemental data file for public use posted
via the internet on the CMS website for this proposed rule at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html in order to streamline the information
made available to the public that is used in the annual development of
Table 11.
To illustrate this methodology for determining the proposed
relative weights for the proposed FY 2021 MS-LTC-DRGs with no
applicable LTCH cases, we are providing the following example, which
refers to the no-volume proposed MS-LTC-DRGs crosswalk information for
FY 2021 (which, as previously stated, we are providing in a
supplemental data file posted via the internet on the CMS website for
this proposed rule).
Example: There were no trimmed applicable LTCH cases in the FY 2019
MedPAR file that we are using for this proposed rule for proposed MS-
LTC-DRG 061 (Acute Ischemic Stroke with Use of Thrombolytic Agent with
MCC). We determined that proposed MS-LTC-DRG 070 (Nonspecific
Cerebrovascular Disorders with MCC) is similar clinically and based on
resource use to proposed MS-LTC-DRG 061. Therefore, we assigned the
same proposed relative weight (and average length of stay) of proposed
MS-LTC-DRG 70 of 0.6954 for FY 2021 to proposed MS-LTC-DRG 061 (we
refer readers to Table 11, which is listed in section VI. of the
Addendum to this proposed rule and is available via the internet on the
CMS website).
Again, we note that, as this system is dynamic, it is entirely
possible that the number of proposed MS-LTC-DRGs with no volume will
vary in the future. Consistent with our historical practice, we are
proposing to use the most recent available claims data to identify the
trimmed applicable LTCH cases from which we determine the relative
weights in the final rule.
For FY 2021, consistent with our historical relative weight
methodology, we are proposing to establish a proposed relative weight
of 0.0000 for the following transplant proposed MS-LTC-DRGs: Heart
Transplant or Implant of Heart Assist System with MCC (MS-LTC-DRG 001);
Heart Transplant or Implant of Heart Assist System without MCC (MS-LTC-
DRG 002); Liver Transplant with MCC or Intestinal Transplant (MS-LTC-
DRG 005); Liver Transplant without MCC (MS-LTC-DRG 006); Lung
Transplant (MS-LTC-DRG 007); Simultaneous Pancreas/Kidney Transplant
(MS-LTC-DRG 008); Simultaneous Pancreas/Kidney Transplant with
Hemodialysis (proposed MS-LTC-DRG 019); Pancreas Transplant (MS-LTC-DRG
010); Kidney Transplant (MS-LTC-DRG 652); Kidney Transplant with
Hemodialysis with MCC (proposed MS-LTC-DRG 650), and Kidney Transplant
with Hemodialysis without MCC (proposed MS LTC DRG 651). This is
because Medicare only covers these procedures if they are performed at
a hospital that has been certified for the specific procedures by
Medicare and presently no LTCH has been so certified. At the present
time, we include these 11 proposed transplant MS-LTC-DRGs in the
GROUPER program for administrative purposes only. Because we use the
same GROUPER program for LTCHs as is used under the IPPS,

[[Page 32810]]

removing these MS-LTC-DRGs would be administratively burdensome. (For
additional information regarding our treatment of transplant MS-LTC-
DRGs, we refer readers to the RY 2010 LTCH PPS final rule (74 FR
43964).) In addition, consistent with our historical policy, we are
proposing to establish a relative weight of 0.0000 for the 2 ``error''
MS-LTC-DRGs (that is, MS-LTC-DRG 998 (Principal Diagnosis Invalid as
Discharge Diagnosis) and MS-LTC-DRG 999 (Ungroupable)) because
applicable LTCH cases grouped to these MS-LTC-DRGs cannot be properly
assigned to an MS-LTC-DRG according to the grouping logic.
Additionally, we are proposing to establish a relative weight of
0.0000 for the following ``psychiatric or rehabilitation'' MS-LTC-DRGs:
MS-LTC-DRG 876 (O.R. Procedure with Principal Diagnoses of Mental
Illness); MS-LTC-DRG 880 (Acute Adjustment Reaction & Psychosocial
Dysfunction); MS-LTC-DRG 881 (Depressive Neuroses); MS-LTC-DRG 882
(Neuroses Except Depressive); MS-LTC-DRG 883 (Disorders of Personality
& Impulse Control); MS-LTC-DRG 884 (Organic Disturbances & Mental
Retardation); MS-LTC-DRG 885 (Psychoses); MS-LTC-DRG 886 (Behavioral &
Developmental Disorders); MS-LTC-DRG 887 (Other Mental Disorder
Diagnoses); MS-LTC-DRG 894 (Alcohol/Drug Abuse or Dependence, Left
Ama); MS-LTC-DRG 895 (Alcohol/Drug Abuse or Dependence, with
Rehabilitation Therapy); MS-LTC-DRG 896 (Alcohol/Drug Abuse or
Dependence, without Rehabilitation Therapy with MCC); MS-LTC-DRG 897
(Alcohol/Drug Abuse or Dependence, without Rehabilitation Therapy
without MCC); MS-LTC-DRG 945 (Rehabilitation with CC/MCC); and MS-LTC-
DRG 946 (Rehabilitation without CC/MCC). We are proposing a relative
weight 0.0000 for these 15 ``psychiatric or rehabilitation'' MS LTC
DRGs because the blended payment rate and temporary exceptions to the
site neutral payment rate will not be applicable for any LTCH
discharges occurring in FY 2021, and as such payment under the LTCH PPS
will be no longer be made in part based on the LTCH PPS standard
Federal payment rate for any discharges assigned to those MS-DRGs.
Step 6--Adjust the proposed FY 2021 MS-LTC-DRG relative weights to
account for nonmonotonically increasing relative weights.
The MS-DRGs contain base DRGs that have been subdivided into one,
two, or three severity of illness levels. Where there are three
severity levels, the most severe level has at least one secondary
diagnosis code that is referred to as an MCC (that is, major
complication or comorbidity). The next lower severity level contains
cases with at least one secondary diagnosis code that is a CC (that is,
complication or comorbidity). Those cases without an MCC or a CC are
referred to as ``without CC/MCC.'' When data do not support the
creation of three severity levels, the base MS-DRG is subdivided into
either two levels or the base MS-DRG is not subdivided. The two-level
subdivisions may consist of the MS-DRG with CC/MCC and the MS-DRG
without CC/MCC. Alternatively, the other type of two-level subdivision
may consist of the MS-DRG with MCC and the MS-DRG without MCC.
In those base MS-LTC-DRGs that are split into either two or three
severity levels, cases classified into the ``without CC/MCC'' MS-LTC-
DRG are expected to have a lower resource use (and lower costs) than
the ``with CC/MCC'' MS-LTC-DRG (in the case of a two-level split) or
both the ``with CC'' and the ``with MCC'' MS-LTC-DRGs (in the case of a
three-level split). That is, theoretically, cases that are more severe
typically require greater expenditure of medical care resources and
would result in higher average charges. Therefore, in the three
severity levels, relative weights should increase by severity, from
lowest to highest. If the relative weights decrease as severity
increases (that is, if within a base MS-LTC-DRG, an MS-LTC-DRG with CC
has a higher relative weight than one with MCC, or the MS-LTC-DRG
``without CC/MCC'' has a higher relative weight than either of the
others), they are nonmonotonic. We continue to believe that utilizing
nonmonotonic relative weights to adjust Medicare payments would result
in inappropriate payments because the payment for the cases in the
higher severity level in a base MS-LTC-DRG (which are generally
expected to have higher resource use and costs) would be lower than the
payment for cases in a lower severity level within the same base MS-
LTC-DRG (which are generally expected to have lower resource use and
costs). Therefore, in determining the proposed FY 2021 MS-LTC-DRG
relative weights, consistent with our historical methodology, we are
proposing to continue to combine MS-LTC-DRG severity levels within a
base MS-LTC-DRG for the purpose of computing a relative weight when
necessary to ensure that monotonicity is maintained. For a
comprehensive description of our existing methodology to adjust for
nonmonotonicity, we refer readers to the FY 2010 IPPS/RY 2010 LTCH PPS
final rule (74 FR 43964 through 43966). Any adjustments for
nonmonotonicity that were made in determining the proposed FY 2021 MS-
LTC-DRG relative weights in this proposed rule by applying this
methodology are denoted in Table 11, which is listed in section VI. of
the Addendum to this proposed rule and is available via the internet on
the CMS website.
Step 7-- Calculate the proposed FY 2021 MS-LTC-DRG reclassification
and recalibration budget neutrality factor.
In accordance with the regulations at Sec. 412.517(b) (in
conjunction with Sec. 412.503), the annual update to the MS-LTC-DRG
classifications and relative weights is done in a budget neutral manner
such that estimated aggregate LTCH PPS payments would be unaffected,
that is, would be neither greater than nor less than the estimated
aggregate LTCH PPS payments that would have been made without the MS-
LTC-DRG classification and relative weight changes. (For a detailed
discussion on the establishment of the budget neutrality requirement
for the annual update of the MS-LTC-DRG classifications and relative
weights, we refer readers to the RY 2008 LTCH PPS final rule (72 FR
26881 and 26882).)
The MS-LTC-DRG classifications and relative weights are updated
annually based on the most recent available LTCH claims data to reflect
changes in relative LTCH resource use (Sec. 412.517(a) in conjunction
with Sec. 412.503). To achieve the budget neutrality requirement at
Sec. 412.517(b), under our established methodology, for each annual
update, the MS-LTC-DRG relative weights are uniformly adjusted to
ensure that estimated aggregate payments under the LTCH PPS would not
be affected (that is, decreased or increased). Consistent with that
provision, we are proposing to update the MS-LTC-DRG classifications
and relative weights for FY 2021 based on the most recent available
LTCH data for applicable LTCH cases, and continue to apply a budget
neutrality adjustment in determining the FY 2021 MS-LTC-DRG relative
weights.
In this proposed rule, to ensure budget neutrality in the update to
the MS-LTC-DRG classifications and relative weights under Sec.
412.517(b), we are proposing to continue to use our established two-
step budget neutrality methodology.
To calculate the proposed normalization factor for FY 2021, we are
proposing to group applicable LTCH cases using the proposed FY 2021
Version 38 GROUPER, and the recalibrated proposed FY 2021 MS-

[[Page 32811]]

LTC-DRG relative weights to calculate the average case-mix index (CMI);
we grouped the same applicable LTCH cases using the FY 2020 GROUPER
Version 37 and MS-LTC-DRG relative weights and calculated the average
CMI; and computed the ratio by dividing the average CMI for FY 2020 by
the average CMI for proposed FY 2021. That ratio is the proposed
normalization factor. Because the calculation of the proposed
normalization factor involves the proposed relative weights for the
proposed MS-LTC-DRGs that contained applicable LTCH cases to calculate
the average CMIs, any low-volume proposed MS-LTC-DRGs are included in
the calculation (and the proposed MS-LTC-DRGs with no applicable LTCH
cases are not included in the calculation).
To calculate the proposed budget neutrality adjustment factor, we
simulated estimated total FY 2021 LTCH PPS standard Federal payment
rate payments for applicable LTCH cases using the proposed FY 2021
normalized relative weights and proposed GROUPER Version 38; simulated
estimated total FY 2021 LTCH PPS standard Federal payment rate payments
for applicable LTCH cases using the FY 2020 MS-LTC-DRG relative weights
and the FY 2020 GROUPER Version 37; and calculated the ratio of these
estimated total payments by dividing the simulated estimated total LTCH
PPS standard Federal payment rate payments using the FY 2020 MS-LTC-DRG
relative weights and the GROUPER Version 37 by the simulated estimated
total LTCH PPS standard Federal payment rate payments using the
proposed FY 2021 MS-LTC-DRG relative weights and the proposed GROUPER
Version 38. The resulting ratio is the proposed budget neutrality
adjustment factor. The calculation of the proposed budget neutrality
factor involves the proposed relative weights for the LTCH cases used
in the payment simulation, which includes any cases grouped to low-
volume proposed MS-LTC-DRGs or to proposed MS-LTC-DRGs with no
applicable LTCH cases, and generally does not include payments for
cases grouped to a proposed MS-LTC-DRG with no applicable LTCH cases.
(Occasionally, a few LTCH cases (that is, those with a covered length
of stay of 7 days or less), which are removed from the proposed
relative weight calculation in step 2 that are grouped to a proposed
MS-LTC-DRG with no applicable LTCH cases are included in the payment
simulations used to calculate the proposed budget neutrality factor.
However, the number and payment amount of such cases have a negligible
impact on the proposed budget neutrality factor calculation).
In this proposed rule, to ensure budget neutrality in the update to
the MS-LTC-DRG classifications and relative weights under Sec.
412.517(b), we are proposing to continue to use our established two-
step budget neutrality methodology. Therefore, in this proposed rule,
in the first step of our MS-LTC-DRG budget neutrality methodology, for
FY 2021, we are proposing to calculate and apply a proposed
normalization factor to the recalibrated proposed relative weights (the
result of Steps 1 through 6 discussed previously) to ensure that
estimated payments are not affected by changes in the composition of
case types or the proposed changes to the classification system. That
is, the proposed normalization adjustment is intended to ensure that
the recalibration of the proposed MS-LTC-DRG relative weights (that is,
the process itself) neither increases nor decreases the average case-
mix index.
To calculate the proposed normalization factor for FY 2021 (the
first step of our budget neutrality methodology), we used the following
three steps: (1.a.) Use the most recent available applicable LTCH cases
from the most recent available data (that is, LTCH discharges from the
FY 2019 MedPAR file) and grouped them using the proposed FY 2021
GROUPER (that is, proposed Version 38 for FY 2021) and the recalibrated
proposed FY 2021 MS-LTC-DRG relative weights (determined in Steps 1
through 6 discussed previously) to calculate the average case-mix
index; (1.b.) group the same applicable LTCH cases (as are used in Step
1.a.) using the FY 2020 GROUPER (Version 37) and FY 2020 MS-LTC-DRG
relative weights and calculated the average case-mix index; and (1.c.)
compute the ratio of these average case-mix indexes by dividing the
average CMI for FY 2021 (determined in Step 1.a.) by the average case-
mix index for FY 2020 (determined in Step 1.b.). As a result, in
determining the proposed MS-LTC-DRG relative weights for FY 2021, each
recalibrated proposed MS-LTC-DRG relative weight is multiplied by the
proposed normalization factor of 1.25878 (determined in Step 1.c.) in
the first step of the proposed budget neutrality methodology, which
produced ``normalized relative weights.''
In the second step of our MS-LTC-DRG budget neutrality methodology,
we calculated a second budget neutrality factor consisting of the ratio
of estimated aggregate FY 2021 LTCH PPS standard Federal payment rate
payments for applicable LTCH cases (the sum of all calculations under
Step 1.a. mentioned previously) after reclassification and
recalibration to estimated aggregate payments for FY 2021 LTCH PPS
standard Federal payment rate payments for applicable LTCH cases before
reclassification and recalibration (that is, the sum of all
calculations under Step 1.b. mentioned previously).
That is, for this proposed rule, for FY 2021, under the second step
of the budget neutrality methodology, we are proposing to determine the
proposed budget neutrality adjustment factor using the following three
steps: (2.a.) Simulate estimated total FY 2021 LTCH PPS standard
Federal payment rate payments for applicable LTCH cases using the
proposed normalized relative weights for FY 2021 and proposed GROUPER
Version 38 (as described previously); (2.b.) simulate estimated total
FY 2021 LTCH PPS standard Federal payment rate payments for applicable
LTCH cases using the FY 2020 GROUPER (Version 37) and the FY 2020 MS-
LTC-DRG relative weights in Table 11 of the FY 2020 IPPS/LTCH PPS final
rule available on the internet, as described in section VI. of the
Addendum of that final rule; and (2.c.) calculate the ratio of these
estimated total payments by dividing the value determined in Step 2.b.
by the value determined in Step 2.a. In determining the proposed FY
2021 MS-LTC-DRG relative weights, each normalized proposed relative
weight is then multiplied by a budget neutrality factor of 0.9993445
(the value determined in Step 2.c.) in the second step of the budget
neutrality methodology to achieve the budget neutrality requirement at
Sec. 412.517(b).
Accordingly, in determining the proposed FY 2021 MS-LTC-DRG
relative weights in this proposed rule, consistent with our existing
methodology, we are proposing to apply a normalization factor of
1.25878 and a budget neutrality factor of 0.9993445. Table 11, which is
listed in section VI. of the Addendum to this proposed rule and is
available via the internet on the CMS website, lists the proposed MS-
LTC-DRGs and their respective proposed relative weights, geometric mean
length of stay, and five-sixths of the geometric mean length of stay
(used to identify SSO cases under Sec. 412.529(a)) for FY 2021.

[[Page 32812]]

C. Proposed Changes to the LTCH PPS Payment Rates and Other Changes to
the LTCH PPS for FY 2021

1. Overview of Development of the LTCH PPS Standard Federal Payment
Rates
The basic methodology for determining LTCH PPS standard Federal
payment rates is currently set forth at 42 CFR 412.515 through 412.533
and 412.535. In this section, we discuss the factors that we are
proposing to use to update the LTCH PPS standard Federal payment rate
for FY 2021, that is, effective for LTCH discharges occurring on or
after October 1, 2020 through September 30, 2021. Under the dual rate
LTCH PPS payment structure required by statute, beginning with
discharges in cost reporting periods beginning in FY 2016, only LTCH
discharges that meet the criteria for exclusion from the site neutral
payment rate are paid based on the LTCH PPS standard Federal payment
rate specified at Sec. 412.523. (For additional details on our
finalized policies related to the dual rate LTCH PPS payment structure
required by statute, we refer readers to the FY 2016 IPPS/LTCH PPS
final rule (80 FR 49601 through 49623).)
Prior to the implementation of the dual payment rate system in FY
2016, all LTCH discharges were paid similarly to those now exempt from
the site neutral payment rate. That legacy payment rate was called the
standard Federal rate. For details on the development of the initial
standard Federal rate for FY 2003, we refer readers to the August 30,
2002 LTCH PPS final rule (67 FR 56027 through 56037). For subsequent
updates to the standard Federal rate (FYs 2003 through 2015)/LTCH PPS
standard Federal payment rate (FY 2016 through present) as implemented
under Sec. 412.523(c)(3), we refer readers to the FY 2020IPPS/LTCH PPS
final rule (84 FR 42445 through 42446).
In this FY 2021 IPPS/LTCH PPS proposed rule, we present our
proposals related to the annual update to the LTCH PPS standard Federal
payment rate for FY 2021.
The proposed update to the LTCH PPS standard Federal payment rate
for FY 2021 is presented in section V.A. of the Addendum to this
proposed rule. The components of the proposed annual update to the LTCH
PPS standard Federal payment rate for FY 2021 are discussed in this
section, including the statutory reduction to the annual update for
LTCHs that fail to submit quality reporting data for FY 2021 as
required by the statute (as discussed in section VII.C.2.c. of the
preamble of this proposed rule). We are also proposing to make an
adjustment to the LTCH PPS standard Federal payment rate to account for
the estimated effect of the changes to the area wage level for FY 2021
on estimated aggregate LTCH PPS payments, in accordance with Sec.
412.523(d)(4) (as discussed in section V.B. of the Addendum to this
proposed rule).
In addition, as discussed in the FY 2019 IPPS/LTCH PPS final rule
(83 FR 41532 through 41537), we eliminated the 25-percent threshold
policy in a budget neutral manner. The budget neutrality requirements
are codified in the regulations at Sec. 412.523(d)(6). Under these
regulations, a temporary, one-time factor is applied to the standard
Federal payment rate in FY 2019 and FY 2020, and a permanent, one-time
factor in FY 2021. These factors as established in the correction to
the FY 2019 IPPS/LTCH PPS final rule (83 FR 41536) are--
For FY 2019, a temporary, one-time factor of 0.990878;
For FY 2020, a temporary, one-time factor of 0.990737; and
For FY 2021 and subsequent years, a permanent, one-time
factor of 0.991249.
Therefore, in determining the FY 2021 LTCH PPS standard Federal
payment rate, we are proposing to--
Remove the temporary, one-time factor of 0.990737 for the
estimated cost of the elimination of the 25-percent threshold policy in
FY 2020 by applying a factor of (1/0.990737);
Apply a permanent, one-time factor of 0.991249 for the
estimated cost of the elimination of the 25-percent threshold policy in
FY 2021;
2. Proposed FY 2021 LTCH PPS Standard Federal Payment Rate Annual
Market Basket Update
a. Overview
Historically, the Medicare program has used a market basket to
account for input price increases in the services furnished by
providers. The market basket used for the LTCH PPS includes both
operating and capital related costs of LTCHs because the LTCH PPS uses
a single payment rate for both operating and capital-related costs. We
adopted the 2013-based LTCH market basket for use under the LTCH PPS
beginning in FY 2017 (81 FR 57100 through 57102). As discussed in
section VII.D. of the preamble of this proposed rule, we are proposing
to rebase and revise the 2013-based LTCH market basket to reflect a
2017 base year. For additional details on the historical development of
the market basket used under the LTCH PPS, we refer readers to the FY
2013 IPPS/LTCH PPS final rule (77 FR 53467 through 53476), and for a
complete discussion of the LTCH market basket and a description of the
methodologies used to determine the operating and capital-related
portions of the 2013-based LTCH market basket, we refer readers to
section VII.D. of the preamble of the FY 2017 IPPS/LTCH PPS proposed
and final rules (81 FR 25153 through 25167 and 81 FR 57086 through
57099, respectively).
Section 3401(c) of the Affordable Care Act provides for certain
adjustments to any annual update to the LTCH PPS standard Federal
payment rate and refers to the timeframes associated with such
adjustments as a ``rate year.'' We note that, because the annual update
to the LTCH PPS policies, rates, and factors now occurs on October 1,
we adopted the term ``fiscal year'' (FY) rather than ``rate year'' (RY)
under the LTCH PPS beginning October 1, 2010, to conform with the
standard definition of the Federal fiscal year (October 1 through
September 30) used by other PPSs, such as the IPPS (75 FR 50396 through
50397). Although the language of sections 3004(a), 3401(c), 10319, and
1105(b) of the Affordable Care Act refers to years 2010 and thereafter
under the LTCH PPS as ``rate year,'' consistent with our change in the
terminology used under the LTCH PPS from ``rate year'' to ``fiscal
year,'' for purposes of clarity, when discussing the annual update for
the LTCH PPS standard Federal payment rate, including the provisions of
the Affordable Care Act, we use ``fiscal year'' rather than ``rate
year'' for 2011 and subsequent years.
b. Proposed Annual Update to the LTCH PPS Standard Federal Payment Rate
for FY 2021
CMS has used an estimated market basket increase to update the LTCH
PPS. As previously noted, for FY 2021 we are proposing to rebase and
revise the 2013-based LTCH market basket to reflect a 2017 base year.
The proposed 2017-based LTCH market basket is primarily based on the
Medicare cost report data submitted by LTCHs and, therefore,
specifically reflects the cost structures of only LTCHs. We are
proposing to use data from cost reports beginning in FY 2017 because
these data are the latest available complete data at the time of
rulemaking for purposes of calculating cost weights for the market
basket. We believe that the proposed 2017-based LTCH market basket
appropriately reflects the cost structure of LTCHs, as discussed in
greater detail in section VII.D. of the preamble of this proposed rule.
In this proposed rule, we are proposing to use the proposed 2017-

[[Page 32813]]

based LTCH market basket to update the LTCH PPS standard Federal
payment rate for FY 2021.
Section 1886(m)(3)(A) of the Act provides that, beginning in FY
2010, any annual update to the LTCH PPS standard Federal payment rate
is reduced by the adjustments specified in clauses (i) and (ii) of
subparagraph (A). Clause (i) of section 1886(m)(3)(A) of the Act
provides for a reduction, for FY 2012 and each subsequent rate year, by
the productivity adjustment described in section 1886(b)(3)(B)(xi)(II)
of the Act (that is, ``the multifactor productivity (MFP)
adjustment''). Clause (ii) of section 1886(m)(3)(A) of the Act provided
for a reduction, for each of FYs 2010 through 2019, by the ``other
adjustment'' described in section 1886(m)(4)(F) of the Act; therefore,
it is not applicable for FY 2021.
Section 1886(m)(3)(B) of the Act provides that the application of
paragraph (3) of section 1886(m) of the Act may result in the annual
update being less than zero for a rate year, and may result in payment
rates for a rate year being less than such payment rates for the
preceding rate year.
c. Proposed Adjustment to the LTCH PPS Standard Federal Payment Rate
Under the Long-Term Care Hospital Quality Reporting Program (LTCH QRP)
In accordance with section 1886(m)(5) of the Act, the Secretary
established the Long-Term Care Hospital Quality Reporting Program (LTCH
QRP). The reduction in the annual update to the LTCH PPS standard
Federal payment rate for failure to report quality data under the LTCH
QRP for FY 2014 and subsequent fiscal years is codified under 42 CFR
412.523(c)(4). The LTCH QRP, as required for FY 2014 and subsequent
fiscal years by section 1886(m)(5)(A)(i) of the Act, applies a 2.0
percentage point reduction to any update under Sec. 412.523(c)(3) for
an LTCH that does not submit quality reporting data to the Secretary in
accordance with section 1886(m)(5)(C) of the Act with respect to such a
year (that is, in the form and manner and at the time specified by the
Secretary under the LTCH QRP) (Sec. 412.523(c)(4)(i)). Section
1886(m)(5)(A)(ii) of the Act provides that the application of the 2.0
percentage points reduction may result in an annual update that is less
than 0.0 for a year, and may result in LTCH PPS payment rates for a
year being less than such LTCH PPS payment rates for the preceding
year. Furthermore, section 1886(m)(5)(B) of the Act specifies that the
2.0 percentage points reduction is applied in a noncumulative manner,
such that any reduction made under section 1886(m)(5)(A) of the Act
shall apply only with respect to the year involved, and shall not be
taken into account in computing the LTCH PPS payment amount for a
subsequent year. These requirements are codified in the regulations at
Sec. 412.523(c)(4). (For additional information on the history of the
LTCH QRP, including the statutory authority and the selected measures,
we refer readers to section VIII.C. of the preamble of this proposed
rule.)
d. Proposed Annual Market Basket Update Under the LTCH PPS for FY 2021
Consistent with our historical practice and our proposal, we
estimate the market basket increase and the MFP adjustment based on
IGI's forecast using the most recent available data. Based on IGI's
fourth quarter 2019 forecast, the FY 2021 full market basket estimate
for the LTCH PPS using the proposed 2017-based LTCH market basket is
2.9 percent. The current estimate of the MFP adjustment for FY 2021
based on IGI's fourth quarter 2019 forecast is 0.4 percent.
For FY 2021, section 1886(m)(3)(A)(i) of the Act requires that any
annual update to the LTCH PPS standard Federal payment rate be reduced
by the productivity adjustment (``the MFP adjustment'') described in
section 1886(b)(3)(B)(xi)(II) of the Act. Consistent with the statute,
we are proposing to reduce the full estimated FY 2021 market basket
increase by the FY 2021 MFP adjustment. To determine the proposed
market basket increase for LTCHs for FY 2021, as reduced by the
proposed MFP adjustment, consistent with our established methodology,
we are subtracting the proposed FY 2021 MFP adjustment from the
estimated FY 2021 market basket increase. (We note that sections
1886(m)(3)(A)(ii) and 1886(m)(4)(F) of the Act required an additional
reduction each year only for FYs 2010 through 2019.) (For additional
details on our established methodology for adjusting the market basket
increase by the MFP adjustment, we refer readers to the FY 2012 IPPS/
LTCH PPS final rule (76 FR 51771).)
For FY 2021, section 1886(m)(5) of the Act requires that, for LTCHs
that do not submit quality reporting data as required under the LTCH
QRP, any annual update to an LTCH PPS standard Federal payment rate,
after application of the adjustments required by section 1886(m)(3) of
the Act, shall be further reduced by 2.0 percentage points. Therefore,
for LTCHs that fail to submit quality reporting data under the LTCH
QRP, the proposed 2.9 percent update to the LTCH PPS standard Federal
payment rate for FY 2021 would be reduced by the 0.4 percentage point
MFP adjustment as required under section 1886(m)(3)(A)(i) of the Act
and the additional 2.0 percentage points reduction required by section
1886(m)(5) of the Act.
In this FY 2021 IPPS/LTCH PPS proposed rule, in accordance with the
statute, we are proposing to reduce the proposed FY 2021 full market
basket estimate of 2.9 percent (based on IGI's fourth quarter 2019
forecast of the proposed 2017-based LTCH market basket) by the proposed
FY 2021 MFP adjustment of 0.4 percentage point (based on IGI's fourth
quarter 2019 forecast). Therefore, under the authority of section 123
of the BBRA as amended by section 307(b) of the BIPA, we are proposing
to establish an annual market basket update to the LTCH PPS standard
Federal payment rate for FY 2021 of 2.5 percent (that is, the most
recent estimate of the LTCH PPS market basket increase of 2.9 percent
less the MFP adjustment of 0.4 percentage point). While we have
historically implemented the payment updates to the LTCH PPS in
individual amendments to the regulations, given existing statutory
provisions affecting the LTCH update are constant going forward, we are
proposing to revise Sec. 412.523(c)(3) by adding a new paragraph
(xvii), which would specify that the LTCH PPS standard Federal payment
rate for FY 2021 and subsequent fiscal years is the LTCH PPS standard
Federal payment rate for the previous LTCH PPS payment year updated by
the market basket (as determined by CMS), less a multifactor
productivity adjustment (as determined by CMS), and further adjusted,
as appropriate, as described in Sec. 412.523(d) (including the
application of the adjustment factor for the cost of the elimination of
the 25-percent threshold policy under Sec. 412.523(d)(6) as previously
discussed) rather than codifying specific numerical updates annually as
was our historical practice. For LTCHs that fail to submit quality
reporting data under the LTCH QRP, under Sec. 412.523(c)(3)(xvi) in
conjunction with Sec. 412.523(c)(4), we are proposing to further
reduce the annual update to the LTCH PPS standard Federal payment rate
by 2.0 percentage points, in accordance with section 1886(m)(5) of the
Act. Accordingly, we are proposing to establish an annual update to the
LTCH PPS standard Federal payment rate of 0.5 percent (that is, 2.5
percent minus 2.0 percentage points) for FY 2021 for LTCHs that fail to
submit quality reporting data as required under the LTCH QRP.

[[Page 32814]]

Consistent with our historical practice, we are proposing to use a more
recent estimate of the market basket and the MFP adjustment, if
appropriate, in the final rule to establish an annual update to the
LTCH PPS standard Federal payment rate for FY 2021 under proposed Sec.
412.523(c)(3)(xvii). (We note that, consistent with historical
practice, we are also proposing to adjust the FY 2021 LTCH PPS standard
Federal payment rate by an area wage level budget neutrality factor in
accordance with Sec. 412.523(d)(4) (as discussed in section V.B.5. of
the Addendum to this proposed rule).)

D. Proposed Rebasing of the LTCH Market Basket

1. Background
The input price index (that is, the market basket) that was used to
develop the LTCH PPS for FY 2003 was the ``excluded hospital with
capital'' market basket. That market basket was based on 1997 Medicare
cost report data and included data for Medicare-participating IRFs,
IPFs, LTCHs, cancer hospitals, and children's hospitals. Although the
term ``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 mix. Accordingly, the
term ``market basket,'' as used in this section, refers to an input
price index.
Beginning with rate year (RY) 2007, LTCH PPS payments were updated
using a 2002-based market basket reflecting the operating and capital
cost structures for IRFs, IPFs, and LTCHs (hereafter referred to as the
rehabilitation, psychiatric, and long-term care (RPL) market basket).
We excluded cancer and children's hospitals from the RPL market basket
because their payments are based entirely on reasonable costs subject
to rate-of-increase limits established under the authority of section
1886(b) of the Act, which are implemented in regulations at 42 CFR
413.40. Those types of hospitals are not paid under a PPS. Also, the
2002 cost structures for cancer and children's hospitals are noticeably
different from the cost structures for freestanding IRFs, freestanding
IPFs, and LTCHs. A complete discussion of the 2002-based RPL market
basket can be found in the RY 2007 LTCH PPS final rule (71 FR 27810
through 27817).
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51756), we finalized
the rebasing and revising of the 2002-based RPL market basket by
creating and implementing a 2008-based RPL market basket. We also
discussed the creation of a stand-alone LTCH market basket and received
several public comments, all of which supported deriving a standalone
LTCH market basket (76 FR 51756 through 51757). In the FY 2013 IPPS/
LTCH PPS final rule, we finalized the adoption of a stand-alone 2009-
based LTCH-specific market basket that reflects the cost structures of
LTCHs only (77 FR 53467 through 53479). In the FY 2017 IPPS/LTCH PPS
final rule (81 FR 57085 through 57099), we finalized the rebasing and
revising of the 2009-based LTCH market basket to reflect a 2013 base
year (the 2013-based LTCH market basket).
For this FY 2021 IPPS/LTCH PPS proposed rule, we propose to rebase
and revise the 2013-based LTCH market basket to reflect a 2017 base
year. The proposed 2017-based LTCH market basket is primarily based on
Medicare cost report data for LTCHs for 2017, which are for cost
reporting periods beginning on and after October 1, 2016, and prior to
October 1, 2017. We propose to use data from cost reports beginning in
FY 2017 because these data are the latest available complete data for
purposes of calculating cost weights for the market basket at the time
of rulemaking.
In the following discussion, we provide an overview of the proposed
LTCH market basket, describe the proposed methodologies for developing
the operating and capital portions of the 2017-based LTCH market
basket, and provide information on the proposed price proxies. Then, we
present the FY 2021 market basket update and labor-related share based
on the proposed 2017-based LTCH market basket.
2. Overview of the Proposed 2017-Based LTCH Market Basket
Similar to the 2013-based LTCH market basket, the proposed 2017-
based LTCH market basket is a fixed-weight, Laspeyres-type price index.
A Laspeyres price index measures the change in price, over time, of the
same mix of goods and services purchased in the base period. Any
changes in the quantity or mix (that is, intensity) of goods and
services purchased over time are not measured. The index itself is
constructed using three steps. First, a base period is selected (in
this proposed rule, we propose to use 2017 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 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 previously
noted, 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 furnish 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 a recent mix of goods and services that
hospitals purchase (hospital inputs) to furnish inpatient care.
3. Development of the Proposed 2017-Based LTCH Market Basket Cost
Categories and Weights
We are inviting public comments on our proposed methodology,
discussed in this section of this rule, for deriving the proposed 2017-
based LTCH market basket.
a. Use of Medicare Cost Report Data
We are proposing a 2017-based LTCH market basket that consists of
seven major cost categories and a residual derived from the 2017
Medicare cost reports (CMS Form 2552-10, OMB Control Number 0938-0050)
for LTCHs. The seven cost categories are Wages and Salaries, Employee
Benefits, Contract Labor, Pharmaceuticals, Professional

[[Page 32815]]

Liability Insurance (PLI), Home Office/Related Organization Contract
Labor, and Capital. The residual category reflects all remaining costs
not captured in the seven cost categories. The 2013-based LTCH market
basket did not use the Medicare cost reports to calculate the Home
Office/Related Organization Contract Labor cost weight.
Medicare cost report data include costs for all patients, including
Medicare, Medicaid, and private payer. Because our goal is to measure
cost shares for facilities that serve Medicare beneficiaries, and are
reflective of case mix and practice patterns associated with providing
services to Medicare beneficiaries in LTCHs, we propose to limit our
selection of Medicare cost reports to those from LTCHs that have a
Medicare average length of stay (LOS) that is within a comparable range
of their total facility average LOS. We define the Medicare average LOS
based on data reported on the Medicare cost report (CMS Form 2552-10,
OMB Control Number 0938-0050) Worksheet S-3, Part I, line 14. We
believe that applying the LOS edit results in a more accurate
reflection of the structure of costs for Medicare covered days as our
proposed edit excludes those LTCHs that had an average total facility
LOS that was much different than the average Medicare LOS. For the
2013-based LTCH market basket, we used the cost reports submitted by
LTCHs with Medicare average LOS within 25 percent (that is, 25 percent
higher or lower) of the total facility average LOS for the hospital.
Based on our analysis of the 2017 Medicare cost reports, for the
proposed 2017-based LTCH market basket, we propose to again use the
cost reports submitted by LTCHs with Medicare average LOS within 25
percent (that is, 25 percent higher or lower) of the total facility
average LOS for the hospital. The universe of LTCHs had an average
Medicare LOS of 26 days, an average total facility LOS of 31 days, and
aggregate Medicare utilization (as measured by Medicare inpatient LTCH
days as a percentage of total facility inpatient LTCH days) of 49
percent in 2017. Applying the proposed trim excludes 9 percent of LTCH
providers and results in a subset of LTCH Medicare cost reports with an
average Medicare LOS of 25 days, average facility LOS of 27 days, and
aggregate Medicare utilization (based on days) of 58 percent. The 9
percent of providers that are excluded from the proposed 2017-based
LTCH market basket had an average Medicare LOS of 27 days, average
facility LOS of 70 days, and aggregate Medicare utilization of 15
percent.
We are proposing to use the cost reports for LTCHs that meet this
requirement to calculate the costs for the seven major cost categories
(Wages and Salaries, Employee Benefits, Contract Labor, Professional
Liability Insurance, Pharmaceuticals, Home Office/Related Organization
Contract Labor, and Capital) for the market basket. For comparison, the
2013-based LTCH market basket utilized the Bureau of Economic Analysis
Benchmark Input-Output data rather than Medicare cost report data to
derive the Home Office/Related Organization Contract Labor cost weight.
A more detailed discussion of this methodological change is provided in
section VII.D.3.a.(6). of the preamble of this proposed rule.
(1) Wages and Salaries Costs
We propose to derive Wages and Salaries costs as the sum of routine
inpatient salaries, ancillary salaries, and a proportion of overhead
(or general service cost center) salaries as reported on Worksheet A,
column 1. Because overhead salary costs are attributable to the entire
LTCH, we propose to only include the proportion attributable to the
Medicare allowable cost centers. For the 2017-based LTCH market basket,
we propose that routine and ancillary Wages and Salaries costs would be
equal to salary costs as reported on Worksheet A, column 1, lines 30
through 35, 50 through 76 (excluding 52, 61, and 75), 90 through 91,
and 93. Then, we are proposing to estimate the proportion of overhead
salaries that are attributed to Medicare allowable costs centers by
multiplying the ratio of these routine and ancillary Wages and Salaries
to total salaries (Worksheet A, column 1, line 200) times total
overhead salaries (Worksheet A, column 1, lines 4 through 18). A
similar methodology was used to derive Wages and Salaries costs in the
2013-based LTCH market basket.
(2) Employee Benefits Costs
Similar to the 2013-based LTCH market basket, we propose to
calculate Employee Benefits costs using Worksheet S-3, part II data.
Specifically, we propose to use data from Worksheet S-3, part II,
column 4, lines 17, 18, 20, and 22, to derive Employee Benefits costs.
The completion of Worksheet S-3, part II is only required for IPPS
hospitals. For 2017, we found that approximately 20 percent of LTCHs
voluntarily reported these data, which has fallen from the roughly 35
percent that reported these data for 2013. Our analysis of the
Worksheet S-3, part II data submitted by these LTCHs indicates that we
continue to have a large enough sample to enable us to produce a
reasonable Employee Benefits cost weight. Specifically, we found that
when we recalculated the cost weight after weighting to reflect the
characteristics of the universe of LTCHs (type of control (nonprofit,
for-profit, and government) and by region), the recalculation did not
have a material effect on the resulting cost weight. Therefore, we
propose to use Worksheet S-3, part II data (as was done for the 2013-
based LTCH market basket) to calculate the Employee Benefits cost
weight in the proposed 2017-based LTCH market basket.
We note that, effective with the implementation of CMS Form 2552-
10, OMB Control Number 0938-0050, we began collecting Employee Benefits
and Contract Labor data on Worksheet S-3, part V, which is applicable
to LTCHs. However, approximately 17 percent of LTCHs reported data on
Worksheet S-3, part V for 2017, with most of these providers also
reporting data on Worksheet S-3, part II. Because a greater percentage
of LTCHs continue to report data on Worksheet S-3, part II than
Worksheet S-3, part V for 2017, we are not proposing to use the
Employee Benefits and Contract Labor data reported on Worksheet S-3,
part V to calculate the Employee Benefits cost weight in the proposed
2017-based LTCH market basket. We continue to encourage all providers
to report these data on Worksheet S-3, Part V.
(3) Contract Labor Costs
Contract Labor costs are primarily associated with direct patient
care services. Contract Labor costs for services such as accounting,
billing, and legal are estimated using other government data sources as
described in this section of this proposed rule. Approximately 44
percent of LTCHs voluntarily reported Contract Labor costs on Worksheet
S-3, part II, which was similar to the percentage obtained from 2013
Medicare cost reports. Only about 18 percent of LTCHs reported Contract
Labor costs data on Worksheet S-3, part V.
As was done for the 2013-based LTCH market basket, we propose to
derive the Contract Labor costs for the proposed 2017-based LTCH market
basket using voluntarily reported data from Worksheet S-3, part II. Our
analysis of these data indicates that we have a large enough sample to
enable us to produce a reasonable Contract Labor cost weight.
Specifically, we found that when we recalculated the cost weight after
weighting to reflect the characteristics of

[[Page 32816]]

the universe of LTCHs (type of control (nonprofit, for-profit, and
government) and by region), the recalculation did not have a material
effect on the resulting cost weight. Therefore, we propose to use data
from Worksheet S-3, part II, column 4, lines 11 and 13 to calculate the
Contract Labor cost weight in the proposed 2017-based LTCH market
basket.
(4) Pharmaceuticals Costs
We propose to calculate Pharmaceuticals costs using nonsalary costs
for the pharmacy cost center (line 15) and drugs charged to patients
cost center (line 73). We propose to estimate these costs using total
pharmaceutical costs reported on Worksheet B, part I, column 0, lines
15 and 73 and then removing a portion of these costs attributable to
salaries. We are proposing to estimate the proportion of costs for
removal as Worksheet A, column 1, lines 15 and 73 divided by the sum of
Worksheet A, columns 1 and 2, lines 15 and 73. A similar methodology
was used for the 2013-based LTCH market basket.
(5) Professional Liability Insurance Costs
We propose that Professional Liability Insurance (PLI) costs (often
referred to as malpractice costs) be equal to premiums, paid losses and
self-insurance costs reported on Worksheet S-2, part I, columns 1
through 3, line 118. A similar methodology was used for the 2013-based
LTCH market basket.
(6) Home Office/Related Organization Contract Labor Costs
For the 2017-based LTCH market basket, we propose to determine the
Home Office/Related Organization Contract Labor costs using Medicare
cost report data. Specifically, we propose to calculate the Home
Office/Related Organization Contract Labor costs using data reported on
Worksheet S-3, part II, column 4, lines 14, 1401, 1402, 2550, and 2551
for those LTCH providers reporting total salaries on Worksheet S-3,
part II, line 1.
The 2013-based LTCH market basket used the 2007 Benchmark Input-
Output (I-O) expense data published by the Bureau of Economic Analysis
(BEA) to derive these costs (81 FR 57089). A more detailed explanation
of the general methodology using the BEA I-O data is provided in
section VII.D.3.c. of the preamble of this proposed rule. We calculated
the Home Office/Related Organization Contract Labor cost weight using
expense data for North American Industry Classification System (NAICS)
code 55, Management of Companies and Enterprises (81 FR 57098). We
believe the proposed methodology for the 2017-based LTCH market basket
is a technical improvement over the prior methodology because it
represents more recent data that is representative compositionally and
geographically of LTCHs.
(7) Capital Costs
We propose that Capital costs be equal to Medicare allowable
capital costs as reported on Worksheet B, part II, column 26, lines 30
through 35, 50 through 76 (excluding 52, 61, and 75), 90 through 91 and
93. A similar methodology was used for the 2013-based LTCH market
basket.
b. Final Major Cost Category Computation
After we derive costs for the major cost categories for each
provider using the Medicare cost report data as previously described,
we propose to trim the data for outliers. For each of the seven major
cost categories, we first are proposing to divide the calculated costs
for the category by total Medicare allowable costs calculated for the
provider to obtain cost weights for the universe of LTCH providers. For
the 2017-based LTCH market basket (similar to the 2013-based LTCH
market basket), we propose that total Medicare allowable costs would be
equal to the total costs as reported on Worksheet B, part I, column 26,
lines 30 through 35, 50 through 76 (excluding 52, 61 and 75), 90
through 91, and 93.
For the Wages and Salaries, Employee Benefits, Contract Labor,
Pharmaceuticals, Professional Liability Insurance, and Capital cost
weights, after excluding cost weights that are less than or equal to
zero, we propose to then remove those providers whose derived cost
weights fall in the top and bottom 5 percent of provider specific
derived cost weights to ensure the exclusion of outliers. After the
outliers have been excluded, we sum the costs for each category across
all remaining providers. We are proposing to divide this by the sum of
total Medicare allowable costs across all remaining providers to obtain
a cost weight for the 2017-based LTCH market basket for the given
category. This trimming process is done for each cost weight
separately.
For the Home Office/Related Organization Contract Labor cost
weight, we propose to apply a 1-percent top only trimming methodology.
This allows all providers' Medicare allowable costs to be included,
even if their Home Office/Related Organization Contract Labor costs
were zero. We believe, as the Medicare cost report data (Worksheet S-2,
part I, line 140) indicate, that not all LTCHs have a home office.
LTCHs without a home office can incur these expenses directly by having
their own staff, for which the costs would be included in the Wages and
Salaries and Employee Benefits cost weights. Alternatively, LTCHs
without a home office could also purchase related services from
external contractors for which these expenses would be captured in the
residual ``All Other'' cost weight. We believe this 1-percent top-only
trimming methodology is appropriate as it addresses outliers while
allowing providers with zero Home Office/Related Organization Contract
Labor costs to be included in the Home Office/Related Organization
Contract Labor cost weight calculation. If we applied both the top and
bottom 5 percent trimming methodology, we would exclude providers who
have zero Home Office/Related Organization Contract Labor costs.
Finally, we propose to calculate the residual ``All Other'' cost
weight that reflects all remaining costs that are not captured in the
seven cost categories listed. We refer readers to Table E1 for the
resulting proposed cost weights for these major cost categories.

[[Page 32817]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.193

The Wages and Salaries cost weight calculated from the Medicare
cost reports for the proposed 2017-based LTCH market basket is
approximately 1 percentage point higher than the Wages and Salaries
cost weight for the 2013-based LTCH market basket, while the Contract
Labor cost weight is 1.5 percentage point lower. The proposed 2017-
based Pharmaceuticals cost weight also is roughly 1.5 percentage point
lower than the cost weight for the 2013-based LTCH market basket.
As we did for the 2013-based LTCH market basket, we propose to
allocate the Contract Labor cost weight to the Wages and Salaries and
Employee Benefits cost weights based on their relative proportions
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. This rounded percentage
is 87 percent. Therefore, we propose to allocate 87 percent of the
Contract Labor cost weight to the Wages and Salaries cost weight and 13
percent to the Employee Benefits cost weight. We refer readers to Table
E2 that shows the proposed Wages and Salaries and Employee Benefits
cost weights after Contract Labor cost weight allocation for both the
proposed 2017-based LTCH market basket and the 2013-based LTCH market
basket.
[GRAPHIC] [TIFF OMITTED] TP29MY20.194

After the allocation of the Contract Labor cost weight, the
proposed 2017-based Wages and Salaries cost weight is 0.2 percentage
point lower and the Employee Benefits cost weight is 0.5 percentage
point lower, relative to the respective cost weights for the 2013-based
LTCH market basket. As a result, in the proposed 2017-based LTCH market
basket, the compensation cost weight is 0.7 percentage point lower than
the Compensation cost weight for the 2013-based LTCH market basket.
c. Derivation of the Detailed Operating Cost Weights
To further divide the residual ``All Other'' cost weight estimated
from the 2017 Medicare cost report data into more detailed cost
categories, we propose to use the 2012 Benchmark I-O ``Use Tables/
Before Redefinitions/Purchaser Value'' for NAICS 622000, Hospitals,
published by the Bureau of Economic Analysis (BEA). These data are
publicly available at the following website: https://www.bea.gov/industry/input-output-accounts-data. For the 2013-based LTCH market
basket, we used the 2007 Benchmark I-O data, the most recent data
available at the time (81 FR 57089).
The BEA Benchmark I-O data are scheduled for publication every 5
years with the most recent data available for 2012. The 2012 Benchmark
I-O data are derived from the 2012 Economic Census and are the building
blocks for BEA's economic accounts. Therefore, they represent the most
comprehensive and complete set of data on the economic processes or
mechanisms by which output is produced and distributed.\471\ BEA also
produces Annual I-O estimates. However, while based on a similar
methodology, these estimates reflect less comprehensive and less
detailed data sources and are subject to revision when benchmark data
becomes available. Instead of using the less detailed Annual I-O data,
we propose to

[[Page 32818]]

inflate the 2012 Benchmark I-O data forward to 2017 by applying the
annual price changes from the respective price proxies to the
appropriate market basket cost categories that are obtained from the
2012 Benchmark I-O data. We repeated this practice for each year. Then,
we calculated the cost shares that each cost category represents of the
2012 data inflated to 2017. These resulting 2017 cost shares were
applied to the residual ``All Other'' cost weight to obtain the
detailed cost weights for the proposed 2017-based LTCH market basket.
For example, the cost for Food: Direct Purchases represents 4.9 percent
of the sum of the residual ``All Other'' 2012 Benchmark I-O Hospital
Expenditures inflated to 2017. Therefore, the Food: Direct Purchases
cost weight represents 4.9 percent of the proposed 2017-based LTCH
market basket's residual ``All Other'' cost category (28.3 percent),
yielding a ``final'' Food: Direct Purchases proposed cost weight of 1.4
percent in the proposed 2017-based LTCH market basket (0.049 x 28.3
percent = 1.4 percent).
---------------------------------------------------------------------------

\471\ http://www.bea.gov/papers/pdf/IOmanual_092906.pdf.
---------------------------------------------------------------------------

Using this methodology, we propose to derive 17 detailed LTCH
market basket cost category weights from the proposed 2017-based LTCH
market basket residual ``All Other'' cost weight (28.3 percent). These
categories are: (1) Electricity; (2) Fuel, Oil, and Gasoline; (3) Food:
Direct Purchases; (4) Food: Contract Services; (5) Chemicals; (6)
Medical Instruments; (7) Rubber and Plastics; (8) Paper and Printing
Products; (9) Miscellaneous Products; (10) Professional Fees: Labor-
Related; (11) Administrative and Facilities Support Services; (12)
Installation, Maintenance, and Repair Services; (13) All Other Labor-
Related Services; (14) Professional Fees: Nonlabor-Related; (15)
Financial Services; (16) Telephone Services; and (17) All Other
Nonlabor-Related Services. We note that for the 2013-based LTCH market
basket, we had a Water and Sewerage cost weight. For the proposed 2017-
based LTCH market basket, we propose to include Water and Sewerage
costs in the Electricity cost weight due to the small amount of costs
in this category.
For the 2013-based LTCH market basket, we used the I-O data for
NAICS 55 Management of Companies to derive the Home Office/Related
Organization Contract Labor cost weight, which were classified in the
Professional Fees: Labor-related and Professional Fees: Nonlabor-
related cost weights. As previously discussed, we propose to use the
Medicare cost report data to derive the Home Office/Related
Organization Contract Labor cost weight, which we would further
classify into the Professional Fees: Labor-related or Professional
Fees: Nonlabor-related categories which we discuss in section VII.D.6.
of the preamble of this proposed rule.
d. Derivation of the Detailed Capital Cost Weights
As described in section VII.D.3.b. of the preamble of this proposed
rule, we are proposing a Capital-related cost weight of 9.9 percent as
calculated from the 2017 Medicare cost reports for LTCHs after applying
the proposed trims as previously described. We propose to then separate
this total Capital-related cost weight into more detailed cost
categories. Using 2017 Medicare cost reports, we are able to group
Capital-related costs into the following categories: Depreciation,
Interest, Lease, and Other Capital-Related costs, as shown in Table E3.
For each of these categories, we propose to determine what proportion
of total Capital-related costs the category represents using the data
reported by the LTCH on Worksheet A-7, which is the same methodology
used for the 2013-based LTCH market basket.
We also are proposing to allocate lease costs across each of the
remaining detailed Capital-related cost categories as was done in the
2013-based LTCH market basket. This would result in three primary
Capital-related cost categories in the proposed 2017-based LTCH market
basket: Depreciation, Interest, and Other Capital-Related costs. Lease
costs are unique in that they are not broken out as a separate cost
category in the proposed 2017-based LTCH market basket. Rather we
propose to proportionally distribute these costs among the cost
categories of Depreciation, Interest, and Other Capital-Related,
reflecting the assumption that the underlying cost structure of leases
is similar to that of Capital-related costs in general. As was done for
the 2013-based LTCH market basket, we propose to assume that 10 percent
of the lease costs as a proportion of total Capital-related costs (63.0
percent) represents overhead and to assign those costs to the Other
Capital-Related cost category accordingly. Therefore, we are assuming
that approximately 6.3 percent (63.0 percent x 0.1) of total Capital-
related costs represent lease costs attributable to overhead, and we
propose to add this 6.3 percentage points to the 6.7 percent Other
Capital-Related cost category weight. We are also proposing to
distribute the remaining lease costs (56.7 percent, or 63.0 percent
less 6.3 percentage points) proportionally across the three cost
categories (Depreciation, Interest, and Other Capital-Related) based on
the proportion that these categories comprise of the sum of the
Depreciation, Interest, and Other Capital-Related cost categories
(excluding lease expenses). For example, the Other Capital-Related cost
category represented 18.2 percent of all three cost categories
(Depreciation, Interest, and Other Capital-Related) prior to any lease
expenses being allocated. This 18.2 percent is applied to the 56.7
percent of remaining lease expenses so that another 10.3 percentage
points of lease expenses as a percent of total Capital-related costs is
allocated to the Other Capital-Related cost category. Therefore, the
resulting proposed Other Capital-Related cost weight is 23.3 percent
(6.7 percent + 6.3 percent + 10.3 percent). This is the same
methodology used for the 2013-based LTCH market basket. The proposed
allocation of these lease expenses are shown in Table E3.
Finally, we propose to further divide the Depreciation and Interest
cost categories. We propose to separate Depreciation cost category into
the following two categories: (1) Building and Fixed Equipment and (2)
Movable Equipment. We also propose to separate the Interest cost
category into the following two categories: (1) Government/Nonprofit;
and (2) For profit.
To disaggregate the Depreciation cost weight, we needed to
determine the percent of total depreciation costs for LTCHs (after the
allocation of lease costs) that are attributable to Building and Fixed
equipment, which we hereafter refer to as the ``fixed percentage.'' We
propose to use depreciation and lease data from Worksheet A-7 of the
2017 Medicare cost reports, which is the same methodology used for the
2013-based LTCH market basket. Based on the 2017 LTCH Medicare cost
report data, we have determined that depreciation costs for building
and fixed equipment account for 44 percent of total depreciation costs,
while depreciation costs for movable equipment account for 56 percent
of total depreciation costs. As previously mentioned, we propose to
allocate lease expenses among the Depreciation, Interest, and Other
Capital-Related cost categories. We determined that leasing building
and fixed equipment expenses account for 88 percent of total leasing
expenses, while leasing movable equipment expenses account for 12
percent of total leasing expenses. We propose to sum the depreciation
and leasing expenses for building and fixed equipment, as

[[Page 32819]]

well as sum the depreciation and leasing expenses for movable
equipment. This results in the proposed Building and Fixed Equipment
Depreciation cost weight (after leasing costs are included)
representing 76 percent of total depreciation costs and the Movable
Equipment Depreciation cost weight (after leasing costs are included)
representing 24 percent of total depreciation costs.
To disaggregate the Interest cost weight, we determine the percent
of total interest costs for LTCHs that are attributable to government
and nonprofit facilities, which we hereafter refer to as the
``nonprofit percentage,'' because price pressures associated with these
types of interest costs tend to differ from those for for-profit
facilities. We propose to use interest costs data from Worksheet A-7 of
the 2017 Medicare cost reports for LTCHs, which is the same methodology
used for the 2013-based LTCH market basket. The nonprofit percentage
determined using this method is 21 percent.
Table E3 provides the proposed detailed capital cost shares
obtained from the Medicare cost reports. Ultimately, if finalized,
these detailed capital cost shares would be applied to the total
Capital-related cost weight determined in section VII.D.3.b. of the
preamble of this proposed rule to separate the total Capital-related
cost weight of 9.9 percent into more detailed cost categories and
weights.
[GRAPHIC] [TIFF OMITTED] TP29MY20.195

e. Proposed 2017-Based LTCH Market Basket Cost Categories and Weights
Table E4 shows the proposed cost categories and weights for the
proposed 2017-based LTCH market basket compared to the 2013-based LTCH
market basket.
BILLING CODE 4120-01-P

[[Page 32820]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.196

BILLING CODE 4120-01-C
4. Selection of Proposed Price Proxies
After developing the proposed cost weights for the 2017-based LTCH
market basket, we selected the most appropriate wage and price proxies
currently available to represent the rate of price change for each
expenditure category. For the majority of the cost weights, we base the
price proxies on U.S. Bureau of Labor Statistics (BLS) data and group
them into one of the following BLS categories:
Employment Cost Indexes. Employment Cost Indexes (ECIs)
measure the rate of change in employment 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. ECIs are superior to Average Hourly Earnings (AHE)
as price proxies for input price indexes because they are

[[Page 32821]]

not affected by shifts in occupation or industry mix, and because they
measure pure price change and are available by both occupational group
and by industry. The industry ECIs are based on the NAICS and the
occupational ECIs are based on the Standard Occupational Classification
System (SOC).
Producer Price Indexes. Producer Price Indexes (PPIs)
measure the average change over time in the selling prices received by
domestic producers for their output. The prices included in the PPI are
from the first commercial transaction for many products and some
services (https://www.bls.gov/ppi/).
Consumer Price Indexes. Consumer Price Indexes (CPIs)
measure the average change over time in the prices paid by urban
consumers for a market basket of consumer goods and services (https://www.bls.gov/cpi/). CPIs are only used when the purchases are similar to
those of retail consumers rather than purchases at the producer level,
or if no appropriate PPIs are available.
We evaluate the price proxies using the criteria of reliability,
timeliness, availability, and relevance:
Reliability. Reliability indicates that the index is based
on valid statistical methods and has low sampling variability. Widely
accepted statistical methods ensure that the data were collected and
aggregated in a way that can be replicated. Low sampling variability is
desirable because it indicates that the sample reflects the typical
members of the population. (Sampling variability is variation that
occurs by chance because only a sample was surveyed rather than the
entire population.)
Timeliness. Timeliness implies that the proxy is published
regularly, preferably at least once a quarter. The market baskets are
updated quarterly, and therefore, it is important for the underlying
price proxies to be up-to-date, reflecting the most recent data
available. We believe that using proxies that are published regularly
(at least quarterly, whenever possible) helps to ensure that we are
using the most recent data available to update the market basket. We
strive to use publications that are disseminated frequently, because we
believe that this is an optimal way to stay abreast of the most current
data available.
Availability. Availability means that the proxy is
publicly available. We prefer that our proxies are publicly available
because this will help ensure that our market basket updates are as
transparent to the public as possible. In addition, this enables the
public to be able to obtain the price proxy data on a regular basis.
Relevance. Relevance means that the proxy is applicable
and representative of the cost category weight to which it is applied.
We believe that the CPIs, PPIs, and ECIs that we have selected meet
these criteria. Therefore, we believe that they continue to be the best
measure of price changes for the cost categories to which they would be
applied.
Table E7 lists all price proxies that we propose to use for the
2017-based LTCH market basket. In this section of this rule is a
detailed explanation of the price proxies we are proposing for each
cost category weight.
a. Price Proxies for the Operating Portion of the Proposed 2017-Based
LTCH Market Basket
(1) Wages and Salaries
We propose to continue to use the ECI for Wages and Salaries for
All Civilian workers in Hospitals (BLS series code CIU1026220000000I)
to measure the wage rate growth of this cost category. This is the same
price proxy used in the 2013-based LTCH market basket (81 FR 57092).
(2) Employee Benefits
We propose to continue to use the ECI for Total Benefits for All
Civilian workers in Hospitals to measure price growth of this category.
This ECI is calculated using the ECI for Total Compensation for All
Civilian workers in Hospitals (BLS series code CIU1016220000000I) and
the relative importance of wages and salaries within total
compensation. This is the same price proxy used in the 2013-based LTCH
market basket (81 FR 57092).
(3) Electricity
We propose to continue to use the PPI Commodity Index for
Commercial Electric Power (BLS series code WPU0542) to measure the
price growth of this cost category. This is the same price proxy used
in the 2013-based LTCH market basket (81 FR 57092).
(4) Fuel, Oil, and Gasoline
Similar to the 2013-based LTCH market basket, for the 2017-based
LTCH market basket, we propose to use a blend of the PPI Industry for
Petroleum Refineries and the PPI Commodity for Natural Gas. Our
analysis of the Bureau of Economic Analysis' 2012 Benchmark I-O data
(use table before redefinitions, purchaser's value for NAICS 622000
[Hospitals]), shows that Petroleum Refineries expenses account for
approximately 90 percent and Natural Gas expenses account for
approximately 10 percent of Hospitals' (NAICS 622000) total Fuel, Oil,
and Gasoline expenses. Therefore, we propose to use a blend of 90
percent of the PPI Industry for Petroleum Refineries (BLS series code
PCU324110324110) and 10 percent of the PPI Commodity Index for Natural
Gas (BLS series code WPU0531) as the price proxy for this cost
category. The 2013-based LTCH market basket used a 70/30 blend of these
price proxies, reflecting the 2007 I-O data (81 FR 57092). We believe
that these two price proxies continue to be the most technically
appropriate indices available to measure the price growth of the Fuel,
Oil, and Gasoline cost category in the 2017-based LTCH market basket.
(5) Professional Liability Insurance
We propose to continue to use the CMS Hospital Professional
Liability Index as the price proxy for PLI costs in the proposed 2017-
based LTCH market basket. To generate this index, we collect commercial
insurance medical liability premiums for a fixed level of coverage
while holding non-price factors constant (such as a change in the level
of coverage). This is the same proxy used in the 2013-based LTCH market
basket (81 FR 57092).
(6) Pharmaceuticals
We propose to continue to use the PPI Commodity for Pharmaceuticals
for Human Use, Prescription (BLS series code WPUSI07003) to measure the
price growth of this cost category. This is the same proxy used in the
2013-based LTCH market basket (81 FR 57092).
(7) Food: Direct Purchases
We propose to continue to use the PPI Commodity for Processed Foods
and Feeds (BLS series code WPU02) to measure the price growth of this
cost category. This is the same price proxy used in the 2013-based LTCH
market basket (81 FR 57092).
(8) Food: Contract Purchases
We propose to continue to use the CPI for Food Away From Home (BLS
series code CUUR0000SEFV) to measure the price growth of this cost
category. This is the same proxy used in the 2013-based LTCH market
basket (81 FR 57092).
(9) Chemicals
Similar to the 2013-based LTCH market basket, we propose to use a
four-part blended PPI as the proxy for the chemical cost category in
the 2017-based LTCH market basket. The proposed blend is composed of
the PPI Industry for Industrial Gas Manufacturing, Primary Products
(BLS series code PCU325120325120P), the PPI Industry for Other Basic
Inorganic

[[Page 32822]]

Chemical Manufacturing (BLS series code PCU32518-32518-), the PPI
Industry for Other Basic Organic Chemical Manufacturing (BLS series
code PCU32519-32519-), and the PPI Industry for Other Miscellaneous
Chemical Product Manufacturing (BLS series code PCU325998325998). We
note that the four part blended PPI used in the 2013-based LTCH market
basket is composed of the PPI Industry for Industrial Gas Manufacturing
(BLS series code PCU325120325120P), the PPI Industry for Other Basic
Inorganic Chemical Manufacturing (BLS series code PCU32518-32518-), the
PPI Industry for Other Basic Organic Chemical Manufacturing (BLS series
code PCU32519-32519-), and the PPI Industry for Soap and Cleaning
Compound Manufacturing (BLS series code PCU32561-32561-). For the 2017-
based LTCH market basket, we propose to derive the weights for the PPIs
using the 2012 Benchmark I-O data. The 2013-based LTCH market basket
used the 2007 Benchmark I-O data to derive the weights for the four
PPIs (81 FR 57092). Table E5 shows the weights for each of the four
PPIs used to create the proposed blended Chemical proxy for the 2017-
based LTCH market basket compared to the 2013-based blended Chemical
proxy. We note that in the 2012 I-O data, the share of total chemicals
expenses that the Soap and Cleaning Compound Manufacturing (NAICS
325610) represents decreased relative to the 2007 I-O data (from 5
percent to 2 percent), while the share of the total chemicals expenses
that the All Other Chemical Product and Preparation manufacturing
(NAICS 3259A0) categories represents increased (from 5 percent to 7
percent). As a result, we are proposing to remove the PPI Industry for
Soap and Cleaning Compound Manufacturing from the proposed blend for
the 2017-based LTCH market basket and replace it with the PPI Industry
for Other Miscellaneous Chemical Product Manufacturing.
[GRAPHIC] [TIFF OMITTED] TP29MY20.197

(10) Medical Instruments
We propose to continue to use a blend of two PPIs for the Medical
Instruments cost category. The 2012 Benchmark I-O data shows an
approximate 57/43 split between Surgical and Medical Instruments and
Medical and Surgical Appliances and Supplies for this cost category.
Therefore, we propose a blend composed of 57 percent of the commodity-
based PPI Commodity for Surgical and Medical Instruments (BLS series
code WPU1562) and 43 percent of the PPI Commodity for Medical and
Surgical Appliances and Supplies (BLS series code WPU1563). The 2013-
based LTCH market basket used a 50/50 blend of these PPIs based on the
2007 Benchmark I-O data (81 FR 57093).
(11) Rubber and Plastics
We propose to continue to use the PPI Commodity for Rubber and
Plastic Products (BLS series code WPU07) to measure price growth of
this cost category. This is the same proxy used in the 2013-based LTCH
market basket (81 FR 57093).
(12) Paper and Printing Products
We propose to continue to use the PPI Commodity for Converted Paper
and Paperboard Products (BLS series code WPU0915) to measure the price
growth of this cost category. This is the same proxy used in the 2013-
based LTCH market basket (81 FR 57093).
(13) Miscellaneous Products
We propose to continue to use the PPI Commodity for Finished Goods
Less Food and Energy (BLS series code WPUFD4131) to measure the price
growth of this cost category. This is the same proxy used in the 2013-
based LTCH market basket (81 FR 57093).
(14) Professional Fees: Labor-Related
We propose to continue to use the ECI for Total Compensation for
Private Industry workers in Professional and Related (BLS series code
CIU2010000120000I) to measure the price growth of this category. This
is the same proxy used in the 2013-based LTCH market basket (81 FR
57093).
(15) Administrative and Facilities Support Services
We propose to continue to use the ECI for Total Compensation for
Private Industry workers in Office and Administrative Support (BLS
series code CIU2010000220000I) to measure the price growth of this
category. This is the same proxy used in the 2013-based LTCH market
basket (81 FR 57093).
(16) Installation, Maintenance, and Repair Services
We propose to continue to use the ECI for Total Compensation for
All Civilian workers in Installation, Maintenance, and Repair (BLS
series code CIU1010000430000I) to measure the price growth of this cost
category. This is the same proxy used in the 2013-based LTCH market
basket (81 FR 57093).
(17) All Other: Labor-Related Services
We propose to continue to use the ECI for Total Compensation for
Private Industry workers in Service Occupations (BLS series code
CIU2010000300000I) to measure the price growth of this cost category.
This is the same proxy used in the 2013-based LTCH market basket (81 FR
57093).
(18) Professional Fees: Nonlabor-Related
We propose to continue to use the ECI for Total Compensation for
Private Industry workers in Professional and Related (BLS series code
CIU2010000120000I) to measure the price growth of this category. This
is the same proxy used in the 2013-based LTCH market basket (81 FR
57093).

[[Page 32823]]

(19) Financial Services
We propose to continue to use the ECI for Total Compensation for
Private Industry workers in Financial Activities (BLS series code
CIU201520A000000I) to measure the price growth of this cost category.
This is the same proxy used in the 2013-based LTCH market basket (81 FR
57093).
(20) Telephone Services
We propose to continue to use the CPI for Telephone Services (BLS
series code CUUR0000SEED) to measure the price growth of this cost
category. This is the same proxy used in the 2013-based LTCH market
basket (81 FR 57093).
(21) All Other: Nonlabor-Related Services
We propose to continue to use the CPI for All Items Less Food and
Energy (BLS series code CUUR0000SA0L1E) to measure the price growth of
this cost category. This is the same proxy used in the 2013-based LTCH
market basket (81 FR 57093).
b. Price Proxies for the Capital Portion of the Proposed 2017-Based
LTCH Market Basket
(1) Capital Price Proxies Prior to Vintage Weighting
We propose to continue to use the same price proxies for the
capital-related cost categories as were applied in the 2013-based LTCH
market basket, which are provided in Table E7 and described in this
section of this rule. Specifically, we propose to proxy:
Depreciation: Building and Fixed Equipment cost category
by BEA's Chained Price Index for Nonresidential Construction for
Hospitals and Special Care Facilities (BEA Table 5.4.4. Price Indexes
for Private Fixed Investment in Structures by Type).
Depreciation: Movable Equipment cost category by the PPI
Commodity for Machinery and Equipment (BLS series code WPU11).
Nonprofit Interest cost category by the average yield on
domestic municipal bonds (Bond Buyer 20-bond index).
For-profit Interest cost category by the average yield on
Moody's Aaa bonds (Federal Reserve).
Other Capital-Related cost category by the CPI-U for Rent
of Primary Residence (BLS series code CUUS0000SEHA).
We believe these are the most appropriate proxies for LTCH capital-
related costs that meet our selection criteria of relevance,
timeliness, availability, and reliability. We are also proposing to
continue to vintage weight the capital price proxies for Depreciation
and Interest in order to capture the long-term consumption of capital.
This vintage weighting method is similar to the method used for the
2013-based LTCH market basket and is described in section
VII.D.4.b.(2). of the preamble of this proposed rule.
(2) Vintage Weights for Price Proxies
Because capital is acquired and paid for over time, capital-related
expenses in any given year are determined by both past and present
purchases of physical and financial capital. The vintage-weighted
capital-related portion of the proposed 2017-based LTCH market basket
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-related purchases attributable to each year of the expected
life of building and fixed equipment, movable equipment, and interest.
We propose to use vintage weights to compute vintage-weighted price
changes associated with depreciation and interest expenses.
Capital-related costs are inherently complicated and are determined
by complex capital-related purchasing decisions, over time, based on
such factors as interest rates and debt financing. In addition, capital
is depreciated over time instead of being consumed in the same period
it is purchased. By accounting for the vintage nature of capital, we
are able to provide an accurate and stable annual measure of price
changes. Annual nonvintage price changes for capital are unstable due
to the volatility of interest rate changes and, therefore, do not
reflect the actual annual price changes for LTCH capital-related costs.
The capital-related component of the proposed 2017-based LTCH market
basket reflects the underlying stability of the capital-related
acquisition process.
The methodology used to calculate the vintage weights for the
proposed 2017-based LTCH market basket is the same as that used for the
2013-based LTCH market basket with the only difference being the
inclusion of more recent data. To calculate the vintage weights for
depreciation and interest expenses, we first need a time series of
capital-related purchases for building and fixed equipment and movable
equipment. We found no single source that provides an appropriate time
series of capital-related purchases by hospitals for all of the
previously mentioned components of capital purchases. The early
Medicare cost reports did not have sufficient capital-related data to
meet this need. Data we obtained from the American Hospital Association
(AHA) do not include annual capital-related purchases. However, the AHA
does provide a consistent database of total expenses back to 1963.
Consequently, we propose to use data from the AHA Panel Survey and the
AHA Annual Survey to obtain a time series of total expenses for
hospitals. We are also proposing to use data from the AHA Panel Survey
supplemented with the ratio of depreciation to total hospital expenses
obtained from the Medicare cost reports to derive a trend of annual
depreciation expenses for 1963 through 2017. We propose to separate
these depreciation expenses into annual amounts of building and fixed
equipment depreciation and movable equipment depreciation as previously
determined. From these annual depreciation amounts we derive annual
end-of-year book values for building and fixed equipment and movable
equipment using the expected life for each type of asset category.
While data are not available that are specific to LTCHs, we believe
this information for all hospitals serves as a reasonable proxy for the
pattern of depreciation for LTCHs.
To continue to calculate the vintage weights for depreciation and
interest expenses, we also needed to account for the expected lives for
building and fixed equipment, movable equipment, and interest for the
proposed 2017-based LTCH market basket. We propose to calculate the
expected lives using Medicare cost report data for LTCHs. The expected
life of any asset can be determined by dividing the value of the asset
(excluding fully depreciated assets) by its current year depreciation
amount. This calculation yields the estimated expected life of an asset
if the rates of depreciation were to continue at current year levels,
assuming straight-line depreciation. Using this proposed method, we
determined the average expected life of building and fixed equipment to
be equal to 18 years, and the average expected life of movable
equipment to be equal to 9 years. For the expected life of interest, we
believe that vintage weights for interest should represent the average
expected life of building and fixed equipment because, based on
previous research described in the FY 1997 IPPS final rule (61 FR
46198), the expected life of hospital debt instruments and the expected
life of buildings and fixed equipment are similar. We note that for the
2013-based LTCH-specific market basket, we derived an expected average
life of building and fixed equipment of 18

[[Page 32824]]

years and an expected average life of movable equipment of 8 years (81
FR 57094).
Multiplying these expected lives by the annual depreciation amounts
results in annual year-end asset costs for building and fixed equipment
and movable equipment. Then we calculated a time series, beginning in
1964, of annual capital purchases by subtracting the previous year's
asset costs from the current year's asset costs.
For the building and fixed equipment and movable equipment vintage
weights, we propose to use the real annual capital-related purchase
amounts for each asset type to capture the actual amount of the
physical acquisition, net of the effect of price inflation. These real
annual capital-related purchase amounts are produced by deflating the
nominal annual purchase amount by the associated price proxy as
previously provided. For the interest vintage weights, we propose to
use the total nominal annual capital-related purchase amounts to
capture the value of the debt instrument (including, but not limited
to, mortgages and bonds). Using these capital-related purchase time
series specific to each asset type, we propose to calculate the vintage
weights for building and fixed equipment, for movable equipment, and
for interest.
The vintage weights for each asset type are deemed to represent the
average purchase pattern of the asset over its expected life (in the
case of building and fixed equipment and interest, 18 years, and in the
case of movable equipment, 9 years). For each asset type, we used the
time series of annual capital-related purchase amounts available from
2017 back to 1964. These data allow us to derive thirty-seven 18-year
periods of capital-related purchases for building and fixed equipment
and interest, and forty-six 9-year periods of capital-related purchases
for movable equipment. For each 18-year period for building and fixed
equipment and interest, or 9-year period for movable equipment, we
propose to calculate annual vintage weights by dividing the capital-
related purchase amount in any given year by the total amount of
purchases over the entire 18-year or 9-year period. This calculation is
done for each year in the 18-year or 9-year period and for each of the
periods for which we have data. Then we are proposing to calculate the
average vintage weight for a given year of the expected life by taking
the average of these vintage weights across the multiple periods of
data.
The vintage weights for the capital-related portion of the proposed
2017-based LTCH market basket and the 2013-based LTCH market basket are
presented in Table E6.
[GRAPHIC] [TIFF OMITTED] TP29MY20.198

The process of creating vintage-weighted price proxies requires
applying the vintage weights to the price proxy index where the last
applied vintage weight in Table E6 is applied to the most recent data
point. We have provided on the CMS website an example of how the
vintage weighting price proxies are calculated, using example vintage
weights and example price indices. The example can be found at the
following link: http://

[[Page 32825]]

www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html in the zip
file titled ``Weight Calculations as described in the IPPS FY 2010
Proposed Rule.''
c. Summary of Price Proxies of the Proposed 2017-Based LTCH Market
Basket
Table E7 shows both the operating and capital price proxies for the
proposed 2017-based LTCH market basket.
BILLING CODE 4120-01-P

[[Page 32826]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.199

[[Page 32827]]

BILLING CODE 4120-01-C
5. Proposed FY 2021 Market Basket Update for LTCHs
For FY 2021 (that is, October 1, 2020 through September 30, 2021),
we propose to use an estimate of the proposed 2017-based LTCH market
basket to update payments to LTCHs based on the best available data.
Consistent with historical practice, we estimate the LTCH market basket
update for the LTCH PPS based on IHS Global, Inc.'s (IGI's) forecast
using the most recent available data. IGI is a nationally recognized
economic and financial forecasting firm with which we contract to
forecast the components of the market baskets and multifactor
productivity (MFP).
Based on IGI's fourth quarter 2019 forecast with history through
the third quarter of 2019, the projected market basket update for FY
2021 is 2.9 percent. Therefore, consistent with our historical practice
of estimating market basket increases based on the best available data,
we are proposing a market basket update of 2.9 percent for FY 2021.
Furthermore, because the proposed FY 2021 annual update is based on the
most recent market basket estimate for the 12-month period (currently
2.9 percent), we also are proposing that if more recent data become
subsequently available (for example, a more recent estimate of the
market basket), we would use such data, if appropriate, to determine
the FY 2021 annual update in the final rule. (The proposed annual
update to the LTCH PPS standard payment rate for FY 2021 is discussed
in greater detail in section V.A.2. of the Addendum to this proposed
rule.)
Using the current 2013-based LTCH market basket and IGI's fourth
quarter 2019 forecast for the market basket components, the FY 2021
market basket update would be 3.0 percent (before taking into account
any statutory adjustment). Therefore, the update based on the proposed
2017-based LTCH market basket is currently 0.1 percentage point lower.
This lower update is primarily due to the lower Pharmaceuticals cost
weight in the proposed 2017-based market basket (6.2 percent) compared
to the 2013-based LTCH market basket (7.6 percent). This is partially
offset by the higher cost weights associated with All Other Services
(such as Professional Fees and Installation, Maintenance, and Repair
Services) for the proposed 2017-based LTCH market basket relative to
the 2013-based LTCH market basket. Table E8 compares the proposed 2017-
based LTCH market basket and the 2013-based LTCH market basket percent
changes.
[GRAPHIC] [TIFF OMITTED] TP29MY20.200

Over the time period covering FY 2016 through FY 2019, the average
growth rate of the proposed 2017-based LTCH market basket is roughly
0.1 percentage point lower than the 2013-based LTCH market basket. The
lower growth rate is primarily a result of the lower Pharmaceuticals
cost weight in the proposed 2017-based market basket compared to the
2013-based LTCH market basket. Historically, the price growth of
pharmaceutical costs has exceeded the price growth rates for most of
the other market basket cost categories. Therefore, a lower
Pharmaceuticals cost weight would, all else equal, result in a lower
market basket update. As previously stated, the Pharmaceuticals cost
weights for the proposed 2017-based LTCH market basket and the 2013-
based LTCH market basket are based on the 2017 and 2013 Medicare cost
report data for LTCHs, respectively.
6. Proposed FY 2021 Labor-Related Share
As discussed in section V.B. of the Addendum to this proposed rule,
under the authority of section 123 of the BBRA as amended by section
307(b) of the BIPA, we established an adjustment to the LTCH PPS
payments to account for differences in LTCH area wage levels (Sec.
412.525(c)). The labor-related portion of the LTCH PPS standard Federal
payment rate, hereafter referred to as the

[[Page 32828]]

labor-related share, is adjusted to account for geographic differences
in area wage levels by applying the applicable LTCH PPS wage index. The
labor-related share is determined by identifying the national average
proportion of total costs that are related to, influenced by, or vary
with the local labor market. As discussed in more detail in this
section of this rule and similar to the 2013-based LTCH market basket,
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. As stated in
the FY 2020 IPPS/LTCH PPS final rule (84 FR 42642), the labor-related
share for FY 2020 was defined as the sum of the FY 2020 relative
importance of Wages and Salaries; Employee Benefits; Professional Fees:
Labor-Related Services; Administrative and Facilities Support Services;
Installation, Maintenance, and Repair Services; All Other: Labor-
related Services; and a portion of the Capital-Related Costs from the
2013-based LTCH market basket.
We propose to continue to classify a cost category as labor-related
if the costs are labor-intensive and vary with the local labor market.
Given this, based on our definition of the labor-related share and the
cost categories in the proposed 2017-based LTCH market basket, we
propose to include in the labor-related share for FY 2021 the sum of
the FY 2021 relative importance of Wages and Salaries; Employee
Benefits; Professional Fees: Labor-Related; Administrative and
Facilities Support Services; Installation, Maintenance, and Repair
Services; All Other: Labor-related Services; and a portion of the
Capital-Related cost weight from the proposed 2017-based LTCH market
basket.
Similar to the 2013-based LTCH market basket, the proposed 2017-
based LTCH market basket includes two cost categories for nonmedical
Professional fees (including but not limited to, expenses for legal,
accounting, and engineering services). These are Professional Fees:
Labor-related and Professional Fees: Nonlabor-related. For the proposed
2017-based LTCH market basket, we propose to estimate the labor-related
percentage of non-medical professional fees (and assign these expenses
to the Professional Fees: Labor-related services cost category) based
on the same method that was used to determine the labor-related
percentage of professional fees in the 2013-based LTCH market basket.
As was done for the 2013-based LTCH market basket, we propose 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 did not
receive any public comments in response to the notice (71 FR 8588). A
discussion of the composition of the survey and post-stratification can
be found in the FY 2010 IPPS/LTCH PPS final rule (74 FR 43850 through
43856). Based on the weighted results of the survey, we determined that
hospitals purchase, on average, the following portions of contracted
professional services outside of their local labor market:
34 percent of accounting and auditing services.
30 percent of engineering services.
33 percent of legal services.
42 percent of management consulting services.
For the proposed 2017-based LTCH market basket, we propose to apply
each of these percentages to the respective 2012 Benchmark I-O cost
category underlying the professional fees cost category to determine
the Professional Fees: Nonlabor-related costs. The Professional Fees:
Labor-related costs were determined to be the difference between the
total costs for each Benchmark I-O category and the Professional Fees:
Nonlabor-related costs. This is the same methodology that we used to
separate the 2013-based LTCH market basket professional fees category
into Professional Fees: Labor-related and Professional Fees: Nonlabor-
related cost categories.
In the proposed 2017-based LTCH market basket, nonmedical
professional fees that were subject to allocation based on these survey
results represent approximately 5.6 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 propose to apportion approximately 3.6 percentage points of
the 5.6 percentage point figure into the Professional Fees: Labor-
related share cost category and designate the remaining approximately
2.0 percentage points into the Professional Fees: Nonlabor-related cost
category.
In addition to the professional services as previously listed, for
the 2017-based LTCH market basket, we propose to allocate a proportion
of the Home Office/Related Organization Contract Labor cost weight,
calculated using the Medicare cost reports as previously stated, into
the Professional Fees: Labor-related and Professional Fees: Nonlabor-
related cost categories. We propose to classify these expenses as
labor-related and nonlabor-related as many facilities are not located
in the same geographic area as their home office and, therefore, do not
meet our definition for the labor-related share that requires the
services to be purchased in the local labor market.
Similar to the 2013-based LTCH market basket, we propose for the
2017-based LTCH market basket to use the Medicare cost reports for
LTCHs to determine the home office labor-related percentages. The
Medicare cost report requires a hospital to report information
regarding their home office provider. Using information on the Medicare
cost report, we compare the location of the LTCH with the location of
the LTCH's home office. We propose to classify a LTCH with a home
office located in their respective labor market if the LTCH and its
home office are located in the same Metropolitan Statistical Area
(MSA). Then we determine the proportion of the Home Office/Related
Organization Contract Labor cost weight that should be allocated to the
labor-related share based on the percent of total Home Office/Related
Organization Contract Labor costs for those LTCHs that had home offices
located in their respective local labor markets of total Home Office/
Related Organization Contract Labor costs for LTCHs with a home office.
We determined a LTCH's and its home office's MSA using their zip code
information from the Medicare cost report. Using this methodology, we
determined that 4 percent of LTCHs' Home Office/Related Organization
Contract Labor costs were for home offices located in their respective
local labor markets. Therefore, we are allocating 4 percent of the Home
Office/Related Organization Contract Labor cost weight (0.1 percentage
point = 1.9 percent x 4 percent) to the Professional Fees: Labor-
related cost weight and 96 percent of the Home Office/Related
Organization Contract Labor cost weight to the Professional Fees:
Nonlabor-related cost weight (1.8 percentage points = 1.9 percent x 96
percent). For the 2013-based LTCH market basket, we used a similar
methodology but we relied on provider counts rather than Home Office/
Related Organization Contract Labor costs to determine the labor-
related percentage.
In summary, based on the two allocations mentioned earlier, we
apportioned 3.7 percentage points of the professional fees and Home
Office/Related Organization Contract Labor cost weights into the
Professional Fees: Labor-Related cost category. This amount was added
to the portion of

[[Page 32829]]

professional fees that we already identified as labor-related using the
I-O data such as contracted advertising and marketing costs
(approximately 0.8 percentage point of total costs) resulting in a
Professional Fees: Labor-Related cost weight of 4.5 percent.
As previously stated, we propose to include in the labor-related
share the sum of the relative importance of Wages and Salaries;
Employee Benefits; Professional Fees: Labor-Related; Administrative and
Facilities Support Services; Installation, Maintenance, and Repair
Services; All Other: Labor-related Services; and a portion of the
Capital-Related cost weight from the proposed 2017-based LTCH market
basket. The relative importance reflects the different rates of price
change for these cost categories between the base year (2017) and FY
2021. Based on IGI's fourth quarter 2019 forecast of the proposed 2017-
based LTCH market basket, the sum of the FY 2021 relative importance
for Wages and Salaries, Employee Benefits, Professional Fees: Labor-
related, Administrative and Facilities Support Services, Installation
Maintenance & Repair Services, and All Other: Labor-related Services is
63.6 percent. The portion of Capital costs that is influenced by the
local labor market is estimated to be 46 percent, which is the same
percentage applied to the 2013-based LTCH market basket. Since the
relative importance for Capital is 9.5 percent of the proposed 2017-
based LTCH market basket in FY 2021, we took 46 percent of 9.5 percent
to determine the proposed labor-related share of Capital for FY 2021 of
4.4 percent. Therefore, we are proposing a total labor-related share
for FY 2021 of 68.0 percent (the sum of 63.6 percent for the operating
cost and 4.4 percent for the labor-related share of Capital). Table E9
shows the FY 2021 labor-related share using the proposed 2017-based
LTCH market basket relative importance and the FY 2020 labor-related
share using the 2013-based LTCH market basket.
[GRAPHIC] [TIFF OMITTED] TP29MY20.201

The total difference between the FY 2021 labor-related share using
the 2017-based LTCH market basket and the FY 2020 labor-related share
using the 2013-based LTCH market basket is 1.7 percentage points (68.0
percent and 66.3 percent, respectively). This difference is
attributable to: (1) Revision to the base year cost weights (0.8
percentage point); (2) revision to starting point of calculation of
relative importance (base year) from 2013 to 2017 (0.6 percentage
point); and (3) using an updated IGI forecast and reflecting an
additional year of inflation (0.3 percentage point). The 0.8-percentage
point difference in the base year cost weights is primarily due to the
incorporation of the 2012 I-O data which shows an increase in the
Professional Fees: Labor-Related services.
We note that the use of the Medicare cost report to derive the Home
Office/Related Organization Contract Labor cost weight has -0.1
percentage point impact, meaning if we were to use the I-O data to
derive the Home Office/Related Organization Contract Labor cost weight,
the labor-related share would be 0.1 percentage point higher. The
impact of using the Medicare cost report data to calculate the Home
Office/Related Organization Contract Labor cost weight is minimal
because if we were to instead use the I-O data to derive this weight,
it would also increase the residual ``All Other'' cost weight from 28.3
percent (using the Medicare cost report data to calculate the Home
Office/Related Organization Contract Labor cost weight) to 30.2 percent
(using the I-O data to calculate the Home Office/Related Organization
Contract labor cost weight). The higher residual ``All Other'' cost
weight then leads to relatively higher cost weight for Administrative
and Facilities Support Services which is also reflected in the labor-
related share.

[[Page 32830]]

VIII. Quality Data Reporting Requirements for Specific Providers and
Suppliers

In section VIII. of the preamble of this proposed rule, we discuss
the following Medicare quality reporting systems:
In section VIII.A., the Hospital IQR Program;
In section VIII.B., the PCHQR Program; and
In section VIII.C., the LTCH QRP.
In addition, in section VIII.D. of the preamble of this proposed
rule, we are proposing changes to the Medicare and Medicaid Promoting
Interoperability Programs (previously known as the Medicare and
Medicaid EHR Incentive Programs) for eligible hospitals and critical
access hospitals (CAHs).

A. Hospital Inpatient Quality Reporting (IQR) Program

1. Background and History of the Hospital IQR Program
The Hospital IQR Program strives to put patients first by ensuring
they are empowered to make decisions about their own healthcare along
with their clinicians using information from data-driven insights that
are increasingly aligned with meaningful quality measures. We support
technology that reduces burden and allows clinicians to focus on
providing high quality healthcare for their patients. We also support
innovative approaches to improve quality, accessibility, and
affordability of care, while paying particular attention to improving
clinicians' and beneficiaries' experiences when interacting with CMS
programs. In combination with other efforts across the Department of
Health and Human Services, we believe the Hospital IQR Program
incentivizes hospitals to improve healthcare quality and value, while
giving patients the tools and information needed to make the best
decisions for themselves.
We seek to promote higher quality and more efficient healthcare for
Medicare beneficiaries. This effort is supported by the adoption of
widely-agreed upon quality and cost measures. We have worked with
relevant stakeholders to define measures in almost every care setting
and currently measure some aspect of care for almost all Medicare
beneficiaries. These measures assess clinical processes, patient safety
and adverse events, patient experiences with care, care coordination,
and clinical outcomes, as well as cost of care. We have implemented
quality measure reporting programs for multiple settings of care. To
measure the quality of hospital inpatient services, we implemented the
Hospital IQR Program, previously referred to as the Reporting Hospital
Quality Data for Annual Payment Update (RHQDAPU) Program. We refer
readers to the FY 2010 IPPS/LTCH PPS final rule (74 FR 43860 through
43861) and the FY 2011 IPPS/LTCH PPS final rule (75 FR 50180 through
50181) for detailed discussions of the history of the Hospital IQR
Program, including the statutory history, and to the FY 2015 IPPS/LTCH
PPS final rule (79 FR 50217 through 50249), the FY 2016 IPPS/LTCH PPS
final rule (80 FR 49660 through 49692), the FY 2017 IPPS/LTCH PPS final
rule (81 FR 57148 through 57150), the FY 2018 IPPS/LTCH PPS final rule
(82 FR 38326 through 38328 and 82 FR 38348), the FY 2019 IPPS/LTCH PPS
final rule (83 FR 41538 through 41609), and the FY 2020 IPPS/LTCH PPS
final rule (84 FR 42448 through 42509) for the measures we have
previously adopted for the Hospital IQR Program measure set for the FY
2022 payment determination and subsequent years. We also refer readers
to 42 CFR 412.140 for Hospital IQR Program regulations.
2. Retention of Previously Adopted Hospital IQR Program Measures for
Subsequent Payment Determinations
We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR
53512 through 53513) for our finalized measure retention policy. We are
not proposing any changes to this policy in this proposed rule.
3. Removal Factors for Hospital IQR Program Measures
We refer readers to the FY 2019 IPPS/LTCH PPS final rule (83 FR
41540 through 41544) for a summary of the Hospital IQR Program's
removal factors.
We are not proposing any changes to our policies regarding measure
removal in this proposed rule.
4. Considerations in Expanding and Updating Quality Measures
We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR
53510 through 53512) for a discussion of the previous considerations we
have used to expand and update quality measures under the Hospital IQR
Program. We also refer readers to the FY 2019 IPPS/LTCH PPS final rule
(83 FR 41147 through 41148), in which we describe the Meaningful
Measures Initiative, our objectives under this framework for quality
measurement, and the quality topics that we have identified as high
impact measurement areas that are relevant and meaningful to both
patients and providers. We are not proposing any changes to these
policies in this proposed rule.
5. Proposed New Measures for the Hospital IQR Program Measure Set
We are not proposing to adopt any new measures in this proposed
rule.
6. Summary of Previously Finalized Hospital IQR Program Measures for
the FY 2022 Payment Determination
This table summarizes the previously finalized Hospital IQR Program
Measures for the FY 2022 Payment Determination:
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BILLING CODE 4120-01-C
7. Summary of Previously Finalized Hospital IQR Program Measures for
the FY 2023 Payment Determination
This table summarizes the previously finalized Hospital IQR Program
measure set for the FY 2023 Payment Determination:
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BILLING CODE 4120-01-C
8. Summary of Previously Finalized Hospital IQR Program Measures for
the FY 2024 Payment Determination and Subsequent Years
This table summarizes the previously finalized Hospital IQR Program
measure set for the FY 2024 Payment Determination and Subsequent Years:
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BILLING CODE 4120-01-C
9. Form, Manner, and Timing of Quality Data Submission
a. Background
Sections 1886(b)(3)(B)(viii)(I) and (b)(3)(B)(viii)(II) of the Act
state that the applicable percentage increase for FY 2015 and each
subsequent year shall be reduced by one-quarter of such applicable
percentage increase (determined without regard to sections
1886(b)(3)(B)(ix), (xi), or (xii) of the Act) for any subsection (d)
hospital that does not submit data required to be submitted on measures
specified by the Secretary in a form and manner, and at a time,
specified by the Secretary. In order to successfully participate in the
Hospital IQR Program, hospitals must meet specific procedural, data
collection, submission, and validation requirements. Previously, the
applicable percentage increase for FY 2007 and each subsequent fiscal
year until FY 2015 was reduced by 2.0 percentage points for subsection
(d) hospitals failing to submit data in accordance with the previously
discussed description. In accordance with the statute, the FY 2021
payment determination will begin the seventh year that the Hospital IQR
Program will reduce the applicable percentage increase by one-quarter
of such applicable percentage increase.
b. Maintenance of Technical Specifications for Quality Measures
For each Hospital IQR Program payment determination, we require
that hospitals submit data on each specified measure in accordance with
the measure's specifications for a particular period of time. We refer
readers to the FY 2019 IPPS/LTCH PPS final rule (83 FR 41538) in which
we summarized how the Hospital IQR Program maintains the technical
measure specifications for quality measures and the subregulatory
process for incorporation of nonsubstantive updates to the measure
specifications to ensure that measures remain up-to-date. We are not
proposing any changes to these policies in this proposed rule.
The data submission requirements, Specifications Manual, and
submission deadlines are posted on the QualityNet website at: http://www.QualityNet.org/ (and any other successor CMS-designated websites).
The technical specifications used for electronic clinical quality
measures (eCQMs) are contained in the CMS Annual Update for the
Hospital Quality Reporting Programs (Annual Update). We generally
update the measure specifications on an annual basis through the Annual
Update, which includes code updates, logic corrections, alignment with
current clinical guidelines, and additional guidance for hospitals and
electronic health record (EHR) vendors to use in order to collect and
submit data on eCQMs from hospital EHRs. The Annual Update and
implementation guidance documents are available on the Electronic
Clinical Quality Improvement (eCQI) Resource Center website at: https://ecqi.healthit.gov/. For example, for the CY 2020 reporting period/FY
2022 payment determination, hospitals submitted eCQM data using the May
2019 Annual Update and any applicable addenda.
Hospitals must register and submit quality data through the
QualityNet Secure Portal (also referred to as the Hospital Quality
Reporting (HQR) System). There are safeguards in place in accordance
with the HIPAA Privacy and Security Rules to protect patient
information submitted through this website. See 45 CFR parts 160 and
164, subparts A, C, and E.
c. Procedural Requirements
The Hospital IQR Program's procedural requirements are codified in
regulation at 42 CFR 412.140. We refer readers to these codified
regulations for participation requirements, as further explained by the
FY 2014 IPPS/LTCH PPS final rule (78 FR 50810 through 50811) and the FY
2017 IPPS/LTCH PPS final rule (81 FR 57168). We are not proposing any
changes to these procedural requirements in this proposed rule.
d. Data Submission Requirements for Chart-Abstracted Measures
We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR
51640 through 51641), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53536
through 53537), and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50811)
for details on the Hospital IQR Program data submission requirements
for chart-abstracted measures. We are not proposing any changes to the
data submission requirements for chart-abstracted measures in this
proposed rule.
e. Reporting and Submission Requirements for eCQMs
(1) Background
For a discussion of our previously finalized reporting and
submission requirements for eCQMs, we refer readers to the FY 2014
IPPS/LTCH PPS final rule (78 FR 50807 through 50810; 50811 through
50819), the FY 2015 IPPS/LTCH PPS final rule (79 FR 50241 through
50253; 50256 through 50259; and 50273 through 50276), the FY 2016 IPPS/
LTCH PPS final rule (80 FR 49692 through 49698; and 49704 through
49709), the FY 2017 IPPS/LTCH PPS final rule (81 FR 57150 through
57161; and 57169 through 57172), the FY 2018 IPPS/LTCH PPS final rule
(82 FR 38355 through 38361; 38386 through 38394; 38474 through 38485;
and 38487 through 38493), the FY 2019 IPPS/LTCH PPS final rule (83 FR
41567 through 41575; 83 FR 41602 through 41607), and the FY 2020 IPPS/
LTCH PPS final rule (84 FR 42501 through 42506).
Current reporting and submission requirements were established in
the FY 2018 IPPS/LTCH PPS final rule. In that final rule (82 FR 38368
through 38361), we finalized eCQM reporting and submission requirements
such that hospitals were required to report only one, self-selected
calendar quarter of data for four self-selected eCQMs for the CY 2018
reporting period/FY 2020 payment determination. Those reporting
requirements were extended to the CY 2019 reporting period/FY 2021
payment determination in the FY 2019 IPPS/LTCH PPS final rule (83 FR
41603 through 41604), as well as to the CY 2020 reporting period/FY
2022 payment determination and the CY 2021 reporting period/FY 2023
payment determination in the FY 2020 IPPS/LTCH PPS final rule (84 FR
42501 through 42503).
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42503 through
42505), we also finalized that for the CY 2022 reporting period/FY 2024
payment determination, hospitals would be required to report one, self-
selected calendar quarter of data for: (a) Three self-selected eCQMs,
and (b) the Safe Use of Opioids--Concurrent Prescribing eCQM (Safe Use
eCQM), for a total of four eCQMs.
In this proposed rule, we are proposing to progressively increase,
over a 3-year period, the number of quarters for which hospitals are
required to report eCQM data, from the current requirement of one self-
selected quarter of data to four quarters of data. We believe that
increasing the number of quarters for which hospitals are required to
report eCQM data will produce more comprehensive and reliable quality
measure data for patients and providers. Increasing the number of
reported quarters to be reported has several benefits. Primarily, a
single quarter of data is not enough to capture trends in performance
over time. Evaluating multiple quarters of data would provide a more
reliable and accurate picture of overall performance. Further,
reporting multiple quarters of

[[Page 32837]]

data would provide hospitals with a more continuous information stream
to monitor their levels of performance. Ongoing, timely data analysis
can better identify a change in performance that may necessitate
investigation and potentially corrective action.
The current policy requiring more limited reporting was established
due to stakeholder feedback about challenges in reporting data, and to
give hospitals more time to gain experience with reporting (including
upgrading systems and training to support e-CQM reporting) (82 FR 78355
through 78361). That policy, as well as the changes we propose in this
proposed rule, are consistent with CMS's stated goal to create a
gradual shift to more robust e-CQM reporting (82 FR 38356). Taking an
incremental approach over a 3-year period would give hospitals and
their vendors time to plan in advance and build upon and utilize
investments already made in their EHR infrastructure. We refer readers
to section XI.B.7. of the preamble of this proposed rule for a
discussion of the increased collection of information burden associated
with this proposal. We also refer readers to section VIII.D. of the
preamble of this proposed rule for similar proposals under the
Promoting Interoperability Program.
(2) Proposed Reporting and Submission Requirements for eCQMs for the CY
2021 Reporting Period/FY 2023 Payment Determination
For the CY 2021 reporting period/FY 2023 payment determination, we
propose to increase the amount of data required while keeping the
number of eCQMs required the same. Specifically, in this proposed rule,
we are proposing that hospitals report two self-selected calendar
quarters of data for each of the four self-selected eCQMs for the CY
2021 reporting period/FY 2023 payment determination.
(3) Proposed Reporting and Submission Requirements for eCQMs for the CY
2022 Reporting Period/FY 2024 Payment Determination
For the CY 2022 reporting period/FY 2024 payment determination, we
propose to increase the amount of data required while keeping the
number and type of eCQMs required the same. Specifically, in this
proposed rule, we are proposing to require that hospitals report three
self-selected calendar quarters of data for the CY 2022 reporting
period/FY 2024 payment determination for each required eCQM: (a) Three
self-selected eCQMs; and (b) the Safe Use of Opioids eCQM.
(4) Proposed Reporting and Submission Requirements for eCQMs for the CY
2023 Reporting Period/FY 2025 Payment Determination and Subsequent
Years
For the CY 2023 reporting period/FY 2025 payment determination and
beyond, we propose to further increase the amount of data required
while keeping the number and type of eCQMs required the same.
Specifically, in this proposed rule, we are proposing to require that
hospitals report four calendar quarters of data beginning with the CY
2023 reporting period/FY 2025 payment determination and for subsequent
years for each required eCQM: (a) Three self-selected eCQMs; and (b)
the Safe Use of Opioids eCQM.
(5) Continuation of Certification Requirements for eCQM Reporting
(a) Requiring Use of 2015 Edition Certification Criteria
In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41604 through
41607), to align the Hospital IQR Program with the Promoting
Interoperability Program, we finalized a policy to require hospitals to
use the 2015 Edition certification criteria for certified EHR
technology (CEHRT) for the CY 2019 reporting period/FY 2021 payment
determination and subsequent years. We are not proposing any changes to
this policy in this proposed rule.
(b) Requiring EHR Technology To Be Certified to All Available eCQMs
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42505 through
42506), we finalized the requirement that EHRs be certified to all
available eCQMs used in the Hospital IQR Program for the CY 2020
reporting period/FY 2022 payment determination and subsequent years. We
are not proposing any changes to this policy in this proposed rule.
(6) File Format for EHR Data, Zero Denominator Declarations, and Case
Threshold Exemptions
We refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 FR
49705 through 49708) and the FY 2017 IPPS/LTCH PPS final rule (81 FR
57169 through 57170) for our previously adopted eCQM file format
requirements. Under these requirements, hospitals: (1) Must submit eCQM
data via the Quality Reporting Document Architecture Category I (QRDA
I) file format as was previously required; (2) may use third parties to
submit QRDA I files on their behalf; and (3) may either use abstraction
or pull the data from non-certified sources in order to then input
these data into CEHRT for capture and reporting QRDA I files. Hospitals
can continue to meet the reporting requirements by submitting data via
QRDA I files, zero denominator declaration, or case threshold exemption
(82 FR 38387).
More specifically regarding the use of QRDA I files, in the FY 2017
IPPS/LTCH PPS final rule (81 FR 57169 through 57170), we stated that we
expect QRDA I files to reflect data for one patient per file per
quarter, and that they contain the following four key elements that are
utilized to identify the file:
CMS Certification Number (CCN).
CMS Program Name.
EHR Patient ID.
Reporting period specified in the Reporting Parameters
Section per the CMS Implementation Guide for the applicable reporting
year, which is published on the eCQI Resource Center website at https://ecqi.healthit.gov/QRDA.
In this proposed rule, we are proposing to add EHR Submitter ID to
the four key elements listed, as previously discussed, as a fifth key
element for file identification beginning with the CY 2021 reporting
period/FY 2023 payment determination. An EHR Submitter ID is the ID
that is assigned by QualityNet to submitter entities upon registering
into the system and will be used to upload QRDA I files. For vendors,
the EHR Submitter ID is the Vendor ID; for hospitals, the EHR,
Submitter ID is the hospital's CCN. Particularly for situations when a
hospital uses one or more vendors to submit QRDA I files via the
QualityNet Secure Portal (also referred to as the Hospital Quality
Reporting (HQR) System), this additional element would prevent the risk
of a previously submitted file by a different vendor unintentionally
being overwritten. Therefore, hospitals would be required to submit the
following elements to identify the QRDA 1 file:
CMS Certification Number (CCN).
CMS Program Name.
EHR Patient ID.
Reporting period specified in the Reporting Parameters
Section.
EHR Submitter ID.
(7) Submission Deadlines for eCQM Data
We refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR
50256 through 50259), the FY 2016 IPPS/LTCH PPS final rule (80 FR 49705
through 49709), and the FY 2017 IPPS/LTCH PPS final rule (81 FR 57169
through 57172) for our previously adopted policies to align eCQM data
reporting periods and submission deadlines for both the Hospital IQR
and Medicare

[[Page 32838]]

Promoting Interoperability Programs. In the FY 2017 IPPS/LTCH PPS final
rule (81 FR 57172), we finalized the alignment of the Hospital IQR
Program eCQM submission deadline with that of the Medicare Promoting
Interoperability Program--the end of 2 months following the close of
the calendar year--for the CY 2017 reporting period/FY 2019 payment
determination and subsequent years. We note the submission deadline may
be moved to the next business day if it falls on a weekend or federal
holiday. We are not proposing any changes to the eCQM submission
deadlines in this proposed rule.
f. Data Submission and Reporting Requirements for Hybrid Measures
(1) Background
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38350 through
38355), we finalized voluntary reporting of the Hybrid Hospital-Wide
Readmission (HWR) measure for the CY 2018 reporting period. For data
submission and reporting requirements under the 2018 Voluntary
Reporting Period, we finalized that the 13 core clinical data elements
and six linking variables for the Hybrid HWR measure be submitted using
the QRDA I file format, and that hospitals voluntarily reporting data
for the Hybrid HWR measure could use EHR technology certified to the
2014 Edition, the 2015 Edition, or a combination thereof (82 FR 38394
through 38397). In the FY 2020 IPPS/LTCH PPS final rule, we finalized
the adoption of the Hybrid HWR measure for the Hospital IQR Program (84
FR 42465 through 42481) as well as a number of requirements related to
data submission and reporting requirements for hybrid measures under
the Hospital IQR Program (84 FR 42506 through 42508). We adopted the
Hybrid HWR measure into the Hospital IQR Program in a stepwise fashion,
first accepting data submissions for the Hybrid HWR measure during two
voluntary reporting periods (84 FR 42479). Beginning with the FY 2026
payment determination, hospitals are required to report on this measure
(84 FR 42479).
(2) Certification and File Format Requirements
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42507), we finalized
a requirement that hospitals use EHR technology certified to the 2015
Edition to submit data on the Hybrid HWR measure. In addition, we
finalized that the core clinical data elements and linking variables
identified in hybrid measure specifications must be submitted using the
QRDA I file format. In order to ensure that the data have been
appropriately connected to the encounter, the core clinical data
elements specified for risk adjustment need to be captured in relation
to the start of an inpatient encounter. The QRDA I file standard
enables the creation of an individual patient-level quality report that
contains quality data for one patient for one or more quality measures.
In this proposed rule, we are proposing to continue the policy that
requires hospitals to use EHR technology certified to the 2015 Edition
to submit data on the Hybrid HWR measure and expand this requirement to
apply to any future hybrid measure adopted into the Hospital IQR
Program's measure set. We are also clarifying that core clinical data
elements and linking variables must be submitted using the QRDA I file
format for future hybrid measures in the program. We are inviting
public comment on our proposals.
(3) Additional Submission Requirements
In the FY 2020 IPPS/LTCH PPS final rule, we finalized allowing
hospitals to meet the hybrid measure reporting and submission
requirements by submitting any combination of data via QRDA I files,
zero denominator declarations, and/or case threshold exemptions (84 FR
42507). We also finalized applying similar zero denominator declaration
and case threshold exemption policies to hybrid measure reporting as we
allow for eCQM reporting (84 FR 42507 through 42508). We are not
proposing any changes to the hybrid measure reporting and submission
requirement supporting any combination of data via QRDA I files, zero
denominator declaration, and/or case threshold exemptions in this
proposed rule.
As with eCQM reporting, we encourage all hospitals and their health
IT vendors to submit QRDA I files early, and to use one of the pre-
submission testing tools for electronic reporting, such as the CMS Pre-
Submission Validation Application (PSVA) tool (81 FR 57113), to allow
additional time for testing and to make sure all required data files
are successfully submitted by the deadline.
(4) Submission Deadlines for Hybrid Measures
We refer readers to the FY 2020 IPPS/LTCH PPS final rule (84 FR
42508), where we finalized submission deadlines for hybrid measures. We
are not proposing any changes to these policies in this proposed rule.
g. Sampling and Case Thresholds for Chart-Abstracted Measures
We refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR
50221), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51641), the FY 2013
IPPS/LTCH PPS final rule (77 FR 53537), the FY 2014 IPPS/LTCH PPS final
rule (78 FR 50819), and the FY 2016 IPPS/LTCH PPS final rule (80 FR
49709) for details on our sampling and case thresholds for the FY 2016
payment determination and subsequent years. We are not proposing any
changes to this policy in this proposed rule.
h. HCAHPS Administration and Submission Requirements
We refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR
50220), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51641 through
51643), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53537 through
53538), and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50819 through
50820) for details on previously-adopted HCAHPS submission
requirements. We also refer hospitals and HCAHPS Survey vendors to the
official HCAHPS website at: http://www.hcahpsonline.org for new
information and program updates regarding the HCAHPS Survey, its
administration, oversight, and data adjustments. We are not proposing
any changes to these policies in this proposed rule.
i. Data Submission Requirements for Structural Measures
There are no remaining structural measures in the Hospital IQR
Program.
j. Data Submission and Reporting Requirements for CDC NHSN HAI Measures
For details on the data submission and reporting requirements for
Healthcare-Associated Infection (HAI) measures reported via the CDC's
National Healthcare Safety Network (NHSN), we refer readers to the FY
2012 IPPS/LTCH PPS final rule (76 FR 51629 through 51633; 51644 through
51645), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53539), the FY 2014
IPPS/LTCH PPS final rule (78 FR 50821 through 50822), and the FY 2015
IPPS/LTCH PPS final rule (79 FR 50259 through 50262). The data
submission deadlines are posted on the QualityNet website.
We refer readers to the FY 2019 IPPS/LTCH PPS final rule (83 FR
41547 through 41553), in which we finalized the removal of five of
these measures (CLABSI, CAUTI, Colon and Abdominal Hysterectomy SSI,
MRSA Bacteremia, and CDI) from the Hospital IQR Program. As a result,
hospitals will not

[[Page 32839]]

be required to submit any data for those measures under the Hospital
IQR Program following their removal beginning with the CY 2020
reporting period/FY 2022 payment determination. However, the five CDC
NHSN HAI measures are included in the HAC Reduction and Hospital VBP
Programs and reported via the CDC NHSN portal (83 FR 41474 through
41477; 83 FR 41449 through 41452). We further note that the HCP measure
remains in the Hospital IQR Program and will continue to be reported
via NHSN. We are not proposing any changes to these policies in this
proposed rule.
10. Validation of Hospital IQR Program Data
a. Background
We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR
53539 through 53553), the FY 2014 IPPS/LTCH PPS final rule (78 FR 50822
through 50835), the FY 2015 IPPS/LTCH PPS final rule (79 FR 50262
through 50273), the FY 2016 IPPS/LTCH PPS final rule (80 FR 49710
through 49712), the FY 2017 IPPS/LTCH PPS final rule (81 FR 57173
through 57181), the FY 2018 IPPS/LTCH PPS final rule (82 FR 38398
through 38403), and the FY 2019 IPPS/LTCH PPS final rule (83 FR 41607
through 41608) for detailed information on validation processes for
chart-abstracted measures and eCQMs, and previous updates to these
processes for the Hospital IQR Program.
Validation for chart-abstracted measures has been updated over
recent years as the number of chart-abstracted measures has been
reduced. In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41562 through
41567), we removed four clinical process of care measures,\472\ and
noted that for the CY 2021 reporting period/FY 2023 payment
determination and subsequent years, only one clinical process of care
measure (SEP-1) remains in the program for chart-abstracted validation
(83 FR 41608).
---------------------------------------------------------------------------

\472\ In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41562
through 41567), we removed three clinical process-of-care measures
(IMM-2, ED-1, and VTE-6) for the CY 2019 reporting period/FY 2021
payment determination and subsequent years, and one clinical process
of care measure (ED-2) for the CY 2020 reporting period/FY 2022
payment determination and subsequent years.
---------------------------------------------------------------------------

We adopted the process for validating eCQM data in the FY 2017
IPPS/LTCH PPS final rule (81 FR 57173 through 57181). Validation of
eCQM data was finalized for the FY 2020 payment determination and
subsequent years (starting with the validation of CY 2017 eCQM data
that would impact FY 2020 payment determinations). We refer readers to
the FY 2018 IPPS/LTCH PPS final rule (82 FR 38398 through 38403), in
which we finalized several updates to the processes and procedures for
validation of CY 2017 eCQM data for the FY 2020 payment determination,
validation of CY 2018 eCQM data for the FY 2021 payment determination,
and eCQM data validation for subsequent years.
In this proposed rule, we are proposing to incrementally combine
the validation processes for chart-abstracted measure data and eCQM
data and related policies in a stepwise process. To accomplish this, we
are proposing to: (1) Update the quarters of data required for
validation for both chart-abstracted measures and eCQMs; (2) expand
targeting criteria to include hospital selection for eCQMs; (3) change
the validation pool from 800 hospitals to 400 hospitals; (4) remove the
current exclusions for eCQM validation selection, (5) require
electronic file submissions for chart-abstracted measure data; (6)
align the eCQM and chart-abstracted measure scoring processes; and (7)
update the educational review process to address eCQM validation
results. We believe these proposals will ultimately streamline the
validation process and reduce the total number of hospitals selected
for validation. These are discussed in detail in the following
sections.
b. Submission Quarters
(1) Current Policy
Currently, we require hospitals selected for chart-abstracted
measures to submit data from the Q3 and Q4 of the calendar year, 3
years before the payment determination and the Q1 and Q2 of the
calendar year, 2 years before the payment determination (FY 2014 IPPS/
LTCH final rule (78 FR 50822 through 50823). This is because there is a
lag associated with validation. In general, validation is a year
behind. Validation results affecting a certain FY payment determination
are based on measures submitted for the prior payment determination.
For example, validation results affecting the FY 2024 payment
determination are based on measures submitted for the FY 2023 payment
determination (CY 2021 discharge period with data submission completing
in CY 2022).
For validation affecting the FY 2023 payment determination,
hospitals must submit data to validate chart abstracted measures from
the Q3 and Q4 of CY 2020 and the Q1 and Q2 of CY 2021. These are data
originally submitted for the FY 2022 program payment determination.
Depending on whether a hospital is selected as a random or targeted
hospital, CMS requests data between 1 and 5 months following the data
reporting submission deadline for a given reporting quarter. Following
this request, hospitals have 30 days to submit randomly selected
medical records to the Clinical Data Abstraction Center (CDAC), and
after submission, CMS validates the data in preparation to make the
associated payment determination. Under the current policy, hospitals
selected for eCQM validation for a given payment determination year are
required to provide medical records for a sample of cases occurring
during one of the self-selected calendar quarters of the year 3 years
before that payment determination (82 FR 38399 through 38400). For
example, for validation affecting the FY 2023 payment determination
period, hospitals selected during CY 2021 for eCQM validation are
required to submit data from one self-selected quarter out of the 4
calendar quarters of 2020, that is Q1 through Q4 of CY 2020 (82 FR
38398 through 38403). These requirements are illustrated in the
following table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.205

[[Page 32840]]

To support the transition to a combined validation process for both
chart-abstracted measures and eCQMs, we are proposing to shift the
quarters of data used for both chart-abstracted measure validation and
eCQM validation in an incremental manner in order to align the two over
time.
(2) Proposed Quarters Required for Validation Affecting the FY 2023
Payment Determination
In order to align the quarters used for chart-abstracted measure
validation and eCQM validation, we are proposing to first change the
period for validation affecting the FY 2023 payment determination.
Instead of validating chart-abstracted measure data from Q3 2020-Q2
2021, we are proposing to validate measure data only from the Q3 and Q4
of CY 2020 for validation affecting the FY 2023 payment determination
for chart-abstracted measures (illustrated in Table: 2 that follows) as
a transition year. Specifically, this means that we would not require
facilities to submit data for chart-abstracted measure validation for
the Q1 and Q2 of CY 2021 for validation affecting the FY 2023 payment
determination. We would use measure data from only two quarters (Q3 and
Q4 of CY 2020) for hospitals selected under both the random and
targeted chart-abstracted measure validations. We note that this
proposal only affects chart-abstracted measure validation; we would
continue to validate the self-selected quarter of eCQM data submitted
during 2020 for validation affecting the FY 2023 payment determination
as previously finalized.
[GRAPHIC] [TIFF OMITTED] TP29MY20.206

(3) Proposed Quarters Required for Validation Affecting the FY 2024
Payment Determination and Subsequent Years
For validation affecting the FY 2024 payment determination and
subsequent years, we propose to use Q1-Q4 data of the applicable
calendar year for validation of both chart-abstracted measures and
eCQMs. For example, the quarters required for validation affecting the
FY 2024 payment determination would occur as displayed in the following
table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.207

We believe aligning the quarters of submission data used for both
chart-abstracted measures and eCQM validation will allow hospitals
selected for validation to more easily track and meet validation
requirements, such as medical records requests from the CDAC.
We invite the public to comment on our proposal to incrementally
align the quarters used for chart-abstracted measure and eCQM
validation as previously discussed.
c. Proposed Combination of Chart-Abstracted Measure and eCQM Validation
Beginning With Validation Affecting the FY 2024 Payment Determination
As noted previously, in the FY 2017 IPPS/LTCH PPS final rule (81 FR
57173), we finalized a separate validation process for eCQMs in the
Hospital IQR Program. In addition to validating the chart-abstracted
measures, we began validating an additional pool of up to 200 randomly
selected hospitals for eCQMs (81 FR 57173).
Upon alignment of validation quarters as proposed in section
VIII.A.10.b.(2). the preamble of this proposed rule, we wish to combine
the validation process for both chart-abstracted measures and eCQMs.
Therefore, in this proposed rule, we are proposing to remove the
separate process for eCQM validation, beginning with the validation
affecting the FY 2024 payment determination (for validation commencing
in CY 2022 using data from the CY 2021 reporting period). Instead,
beginning with validation affecting the FY 2024 payment determination
and subsequent years, we are proposing to incorporate eCQMs into the
existing validation process for chart-abstracted measures such that
there would be one pool of hospitals selected through random selection
and one pool of hospitals selected using targeting criteria, for both
chart-abstracted measures and eCQMs. Under the aligned validation
process, a single hospital would be selected for validation of both
eCQMs and chart-abstracted measures and would be expected to submit
data for both chart-abstracted measures and eCQMs. For specific data
submission requirements, we refer readers to section VIII.A.10.e of the
preamble of this proposed rule ``Number of Cases Required for
Validation.''

[[Page 32841]]

(1) Targeted Selection of Hospitals for Validation
We refer readers to the FY 2013 IPPS/LTCH PPS Final Rule (77 FR
53552 through 53553) and the FY 2014 IPPS/LTCH PPS Final Rule (78 FR
50834) where we finalized targeted chart abstracted measure validation
for a supplemental sample of hospitals in addition to random
validation. The supplemental sample of hospitals includes all hospitals
that failed validation in the previous year and a random sample of
hospitals meeting certain targeting criteria. These criteria are as
follows:
Any hospital with abnormal or conflicting data patterns.
One example of an abnormal data pattern would be if a hospital has
extremely high or extremely low values for a particular measure. As
described in the FY 2013 IPPS/LTCH PPS final rule, we define an
extremely high or low value as one that falls more than 3 standard
deviations from the mean which is consistent with the Hospital OQR
Program (76 FR 74485). An example of a conflicting data pattern would
be if two records were identified for the same patient episode of care
but the data elements were mismatched for primary diagnosis. Primary
diagnosis is just one of many fields that should remain constant across
measure sets for an episode of care. Other examples of fields that
should remain constant across measure sets are patient age and sex. Any
hospital not included in the base validation annual sample and with
statistically significantly more abnormal or conflicting data patterns
per record than would be expected based on chance alone (p <.05), would
be included in the population of hospitals targeted in the supplemental
sample.
Any hospital with rapidly changing data patterns. For this
targeting criterion, we define a rapidly changing data pattern as a
hospital which improves its quality for one or more measure sets by
more than 2 standard deviations from 1 year to the next, and also has a
statistically significant difference in improvement (one-tailed p <.05)
(77 FR 53553).
Any hospital that submits data to NHSN after the Hospital
IQR Program data submission deadline has passed.
Any hospital that joined the Hospital IQR Program within
the previous 3 years, and which has not been previously validated.
Any hospital that has not been randomly selected for
validation in any of the previous 3 years.
Any hospital that passed validation in the previous year,
but had a two-tailed confidence interval that included 75 percent.
Any hospital which failed to report to NHSN at least half
of actual HAI events detected as determined during the previous year's
validation effort.
In this proposed rule, we are proposing that beginning with
validation affecting the FY 2024 payment determination, the existing
targeting criteria would apply to all applicable hospitals, capturing
both measure types (that is, chart-abstracted measures and eCQMs). In
other words, we are proposing to expand targeted validation to include
eCQMs, not just chart-abstracted measures. Doing so will facilitate the
proposed combination of chart-abstracted and eCQM validation such that
hospitals selected under this combined targeting approach would be
validated for both chart-abstracted and eCQMs.
Additionally, we are clarifying that a hospital that has been
granted an Extraordinary Circumstances Exception could still be
selected for validation (chart-abstracted measures and eCQMs) under the
targeting criteria. We invite public comment on our proposal.
(2) Number of Hospitals
In the FYs 2013 and 2014 IPPS/LTCH PPS final rules (77 FR 53551
through 53554, 78 FR 50833), we finalized that for chart-abstracted
measure validation, we take an annual sample from 400 randomly selected
hospitals and from up to 200 hospitals selected using targeting
criteria. In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57173 through
57178), we finalized that for eCQMs, we take an annual sample of up to
200 randomly selected hospitals that have not been selected for chart-
abstracted measure validation. Under these existing policies, we may
validate data from up to a total of 800 hospitals for a given year for
both chart-abstracted measures and eCQMs.
In this proposed rule, we are proposing to change the hospital
selection policies to reduce the total number of hospitals selected for
validation from up to 800 hospitals to up to 400 hospitals, beginning
with validation affecting the FY 2024 payment determination. We are
proposing that up to 200 hospitals would be selected randomly and up to
200 would be selected using targeted criteria. Detailed descriptions on
proposals to effectuate that reduction follow.
(a) Proposed Number of Hospitals Under Random Selection
Instead of taking an annual sample from 400 randomly selected
hospitals as previously finalized, we are proposing to reduce the
number of hospitals selected at random for validation to up to 200
hospitals, beginning with validation affecting the FY 2024 payment
determination (measure data collected during CY 2021 and submitted
during CY 2022 for the FY 2023 payment determination). We are proposing
these changes in conjunction with the HAC Reduction Program and refer
readers to section IV.M. of this proposed rule for those proposals. We
believe that reducing the total number of hospitals selected for chart-
abstracted measure validation each year to ``up to 200'' would maintain
a sufficient sample size for a statistically meaningful estimate of
hospitals' reporting accuracy and help streamline the process for both
programs.
One of our goals for the annual random sample is to estimate the
total percentage of hospitals in the Hospital IQR Program that have
been reporting unreliable data. The basic premise behind random
sampling is that one can learn something about all hospitals by
gathering data on just a subset of hospitals (77 FR 53552). The minimum
sample size required to assess the percentage of hospitals in the
Hospital IQR Program that have been reporting unreliable data depends
on the expected percentage of hospitals that fail validation. Because a
very high percentage of Hospital IQR Program hospitals pass validation
(96.4 percent for the FY 2018 payment determination, 95.8 percent for
the FY 2019 payment determination, and 96.2 percent for the FY 2020
payment determination), we believe that we can reduce burden on
hospitals by selecting fewer hospitals for the base annual random
sample without adversely affecting our estimate of this percentage.
Using an estimated passing rate of 96 percent, our power calculations
indicate that with a pool of up to 200 hospitals, we can be highly
confident that at least 94.8 percent of all hospitals in the Hospital
IQR Program population are achieving the requisite reliability score.
In addition, in the FY 2019 IPPS/LTCH PPS final rule, we finalized
removal of five healthcare associated infection measures \473\ from the
Hospital IQR Program and incorporated the same measures into the HAC
Reduction Program (83 FR 41547 through 41553). Because of this, in the
FY 2019 IPPS/LTCH PPS final rule, we also created validation policies
under the HAC Reduction Program (83 FR 41479 through 41483). Following
the transfer

[[Page 32842]]

of NHSN HAI measure validation to the HAC Reduction Program, in this
proposed rule, we are proposing that both the Hospital IQR Program and
the HAC Reduction Program use a single random hospital sample of up to
200 hospitals beginning with validation affecting the FY 2024 payment
determination. In other words, hospitals would be randomly selected and
this pool of up to 200 hospitals would be validated under both
programs.
---------------------------------------------------------------------------

\473\ CAUTI, CDI, CLABSI, Colon and Abdominal Hysterectomy SSI,
and MRSA Bacteremia.
---------------------------------------------------------------------------

We are proposing to change the Hospital IQR Program policy from an
exact number of hospitals selected for random validation (that is, 400)
to a range (that is, up to 200). This is because there are some
hospitals that are eligible for the HAC Reduction Program, but which do
not also participate in the Hospital IQR Program. Over 95 percent of
hospitals that are eligible for the HAC Reduction Program also
participate in the Hospital IQR Program. The small proportion of
hospitals that do not participate in the Hospital IQR Program would be
included in the single pool from which hospitals could be randomly
selected; however, if such a hospital were selected for validation, it
would not be required to submit data for validation under the Hospital
IQR Program. Therefore, selecting a single sample for both programs
could potentially result in a number totaling less than 200 hospitals
for validation of Hospital IQR Program chart-abstracted data because
hospitals that are eligible for the HAC Reduction Program, but do not
participate in the Hospital IQR Program would not be validated in the
Hospital IQR Program. This is consistent with the previously finalized
Hospital IQR Program chart-abstracted validation process, for which
hospitals were subject to both chart-abstracted measure validation as
well as HAI measure validation (83 FR 41608). The only difference is
that HAI measure validation has since moved to the HAC Reduction
Program and, hence, the HAI validation performance will be accounted
for under the HAC Reduction Program.
We believe that this proposed approach would simplify validation
for hospitals under both programs. This proposal enables us to continue
validating Hospital IQR Program chart-abstracted data without
increasing the total number of hospitals selected for validation across
both programs. We also refer readers to section IV.M. of the preamble
of this proposed rule for more detail on the validation proposals for
the HAC Reduction Program. Again, we note that this proposal is being
made in conjunction with that in the HAC Reduction Program, and
finalization of this proposal in the Hospital IQR Program would be
contingent on the HAC Reduction Program proposal also being finalized.
We invite public comment on this proposal.
(B) Exclusion Criteria
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38399), we finalized
exclusion criteria, applied before the random selection of up to 200
hospitals for eCQM validation. The exclusion criteria include any
hospital--
Selected for chart-abstracted measure validation;
That has been granted an Extraordinary Circumstances
Exception (ECE); and
That does not have at least five discharges for at least
one reported eCQM included among their QRDA I file submissions. (81 FR
57174, 82 FR 38399). Hospitals meeting one or more of these exclusion
criteria are not eligible for selection for eCQM validation each year
(82 FR 38399).
In this proposed rule, in conjunction with our proposal to combine
chart-abstracted measure and eCQM validation, we are proposing to
remove all of the previously finalized exclusion criteria (as
previously referenced) beginning with validation affecting the FY 2024
payment determination and for subsequent years. Since a separate sample
of hospitals for eCQM validation will no longer need to be identified,
the previously finalized exclusion criteria for eCQM validation
hospital selection will no longer be needed. We invite public comment
on our proposal to remove the previously finalized exclusion criteria.
Finalization of this proposal would be contingent on finalization of
our proposal to combine chart-abstracted measure and eCQM validation.
(c) Number of Hospitals Selected Under Targeted Selection
We refer readers to FY 2013 IPPS/LTCH PPS final rule (77 FR 53552
through 53553) where we previously established that we would select up
to 200 hospitals for chart abstracted measures data validation using
the targeting criteria described in section VIII.A.11.c. of the
preamble of this proposed rule. The Hospital IQR Program does not
currently have a policy for targeted selection of hospitals for eCQM
validation.
In this proposed rule, while we are not proposing any changes to
the number of hospitals selected using targeting criteria, in sections
VIII.A.3.c.(1) and VIII.A.10.a of this proposed rule, we are proposing
to combine chart-abstracted measure and eCQM validation and to decrease
the number of randomly selected hospitals. If these proposals are both
finalized, the total number of hospitals selected for validation (for
both chart abstracted measures and eCQMs) would be at maximum 400 (up
to 200 hospitals randomly selected + up to 200 hospitals using
targeting criteria). The current and proposed validation hospital
numbers and measure types are illustrated in the tables that follow:

[[Page 32843]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.208

Under the proposed aligned validation process, the Hospital IQR
Program would validate a pool of up to 400 hospitals (up to 200
randomly selected and up to 200 selected using the targeting criteria),
across both measure types.
d. Proposed Use of Electronic File Submissions for Chart-Abstracted
Measure Medical Records Requests Beginning With Validation Affecting
the FY 2024 Payment Determination
Currently, hospitals may choose to submit paper copies of medical
records for chart-abstracted measure validation (75 FR 50226), or they
may submit copies of medical records for validation by securely
transmitting electronic versions of medical information (78 FR 50834,
79 FR 50269). Submission of electronic versions can either entail
downloading or copying the digital image of the medical record onto CD,
DVD, or flash drive (78 FR 50835), or submission of PDFs using a secure
file transmission process after logging into the QualityNet Secure
Portal (also referred to as the Hospital Quality Reporting (HQR)
System) (79 FR 50269). We reimburse hospitals at $3.00 per chart (78 FR
50956). Neither paper copies nor submission of CD, DVD, or flash drive
is applicable for eCQMs since that data is required to be submitted
electronically via Secure File Transfer (81 FR 57174 through 57178).
In this proposed rule, we are proposing to discontinue the option
for hospitals to send paper copies of, or CDs, DVDs, or flash drives
containing medical records for validation affecting the FY 2024 payment
determination (i.e., beginning with data submission for Q1 of CY 2021).
We are proposing to require hospitals to instead submit only electronic
files when submitting copies of medical records for validation of
chart-abstracted measures, beginning with validation affecting the FY
2024 payment determination (i.e., Q1 of CY 2021) and for subsequent
years. Under this proposal, hospitals would be required to submit PDF
copies of medical records using direct electronic file submission via a
CMS-approved secure file transmission process. We would continue to
reimburse hospitals at $3.00 per chart, consistent with the current
reimbursement amount for electronic submissions of charts.
We strive to provide the public with accurate quality data while
maintaining alignment with hospital recordkeeping practices. We
appreciate that hospitals have rapidly adopted EHR systems as their
primary source of information about patient care, which can facilitate
the process of producing electronic copies of medical records (78 FR
50834). Additionally, we monitor the medical records submissions to the
CMS Clinical Data Abstraction Center (CDAC) contractor, and have found
that almost two-thirds of hospitals already use the option to submit
PDF copies of medical records as electronic files. In our assessment
based on this monitoring, we believe requiring electronic file
submissions can be a more effective and efficient process for hospitals
selected for validation. Requiring electronic file submissions reduces
the burden of not only coordinating numerous paper-based pages of
medical records, but also of having to then ship the papers or physical
digital media storage to the CDAC. Therefore, we believe it is
appropriate to require that hospitals use electronic file submissions
via a CMS-approved secure file transmission process. We invite public
comment on our proposal.
e. Number of Cases Required for Validation
(1) Chart-Abstracted Measures
We refer readers to the FY 2017 IPPS/LTCH PPS final rule (81 FR
57179 through 57180) where we established a process in which the CDAC
contractor requests selected hospitals to submit eight randomly
selected medical records on a quarterly basis from which data are
abstracted (for a total of 32 records per year). Once the CDAC
contractor receives the data, it re-abstracts the measures which were
submitted by the hospitals for the Hospital IQR Program and calculates
the percentage of matching measure numerators and denominators for each
measure within each chart submitted by the hospital. Each selected case
may have multiple measures included in the validation. We are not
proposing any changes to the number of cases required from each
selected hospital for chart-abstracted measure validation.
(2) eCQMs
In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38398 through
38399), we finalized that selected hospitals must submit eight cases
per reported quarter to complete eCQM data validation. We consider a
sample of eight cases per quarter to be the minimum sample size needed
to accurately ascertain the quality of the reported data (82 FR 38399).
Each selected case may have multiple measures included in the
validation.
In this proposed rule, we are not proposing any changes to this
policy. However, we refer readers to section VIII.A.10.e of the
preamble (Reporting and Submission Requirements for eCQMs) of this
proposed rule for more details on our proposal to increase the

[[Page 32844]]

number of quarters for which hospitals are required to report eCQM
data: From one self-selected quarter of data to four quarters of data
progressively over several years. If those proposals are finalized,
hospitals selected for validation would be required to submit: (1) A
total of 16 requested cases from 2 calendar quarters of data (8 cases x
2 quarters) for validation affecting the FY 2024 payment determination;
(2) a total of 24 requested cases from 3 quarters of data (8 cases x 3
quarters) for validation affecting the FY 2025 payment determination;
and (3) a total of 32 requested cases over 4 quarters of data (8 cases
x 4 quarters) for validation affecting the FY 2026 payment
determination and for subsequent years. This means that for eCQM
validation, hospitals will have to submit validation data for each
quarter of their self-selected eCQM submission quarters.
f. Scoring Processes
(1) Current Scoring Process
Currently, there are two separate processes for payment
determinations related to validation requirements--one for chart-
abstracted measure validation and another for eCQM validation.
For chart-abstracted measure validation scoring, under the current
process, the CDAC contractor requests that hospitals submit eight
randomly selected medical records on a quarterly basis from which data
are abstracted and submitted by the hospital to the Clinical Data
Warehouse (for a total of 32 records per year per hospital). Once the
CDAC contractor receives the data, it re-abstracts the same data
submitted by the hospitals and calculates the percentage of matching
measure numerators and denominators for each measure within each chart
submitted by the hospital (81 FR 57179 through 57180). Each selected
case may have multiple measures included in the validation score.
Specifically, one patient may meet the numerator and denominator
criteria for multiple measures, and therefore, would generate multiple
measures in the validation score. Consistent with previous years, each
quarter and clinical topic is treated as a stratum for variance
estimation purposes. Approximately 4 months after each quarter's
validation submission deadline, validation results for chart-abstracted
measures for the quarter are posted on the QualityNet Secure Portal
(also referred to as the Hospital Quality Reporting (HQR) System). At
the end of the year, the validation score is calculated by combining
the data from all four quarters into one agreement rate for each
hospital. At this point, CMS calculates a confidence interval around
the agreement rate for each hospital using a normal distribution
assumption. The upper bound of the confidence interval is calculated as
the final validation score. A hospital must attain at least a 75
percent validation score based upon all four quarters of chart-
abstracted data validation to pass the validation requirement. The
overall validation score from the chart-abstracted measure is used to
determine whether a hospital has met the validation requirement under
the Hospital IQR Program for purposes of the annual payment update.
Specifically, if a hospital fails chart-abstracted validation (because
the validation score was below 75 percent), it would receive an
applicable annual reduction to the hospital's IPPS market basket update
(APU) for failing to meeting all Hospital IQR Program requirements.
eCQM validation is different, because the accuracy of eCQM data
submitted for validation (as measured by the agreement rate) does not
currently affect a hospital's payment determination as described in the
FY 2017 IPPS/LTCH PPS final rule (81 FR 57181). As finalized in the FY
2018 IPPS/LTCH PPS final rule (82 FR 38398 through 38399), selected
hospitals must submit eight cases, per self-selected quarter to
complete eCQM data validation. Because the reporting quarter is self-
selected, validation occurs on an annual basis using all 8 cases that
are submitted. For hospitals to receive their full APU, they must
provide 75 percent of requested eCQM medical records in a timely and
complete manner (82 FR 38398 through 82 FR 38401). Hospitals receive
eCQM validation results through email communications on an annual
basis.\474\
---------------------------------------------------------------------------

\474\ https://qualitynet.org/inpatient/data-management/ecqm-data-validation.
---------------------------------------------------------------------------

(2) Proposed Weighted Scoring
To support the transition to a combined validation process for both
chart-abstracted measures and eCQMs, we are proposing to provide one
combined validation score starting with validation affecting the FY
2024 payment determination and for subsequent years. Specifically, this
single score would reflect a weighted combination of a hospital's
validation performance for chart-abstracted measures and eCQMs. Since
eCQMs are not currently validated for accuracy, we propose that the
eCQM portion of the combined agreement rate would be multiplied by a
weight of zero percent and chart abstracted measure agreement rate
would be weighted at 100 percent for validation affecting the FY 2024
payment determination and subsequent years (i.e., starting with the CY
2021 discharge data submitted for FY 2023 payment determination and
validation affecting the FY 2024 payment determination). The agreement
rate and associated confidence interval would be calculated based on
the validation data collected from each hospital for each fiscal year.
The validation score associated with the combined agreement rate would
be the upper bound of the calculated confidence interval. For more
detailed information on the confidence interval, please refer to the
Chart-Abstracted Data validation page of QualityNet: https://www.qualitynet.org/inpatient/data-management/chart-abstracted-data-validation. Under this proposal however, in the absence of an eCQM
score that reflects reporting accuracy, hospitals would continue to be
required to successfully submit at least 75 percent of the requested
medical records for eCQM validation. Submission of requested medical
records at or in excess of this threshold would meet the eCQM
validation requirements. Under this proposal, hospitals would continue
to receive their total validation score annually.
As we move forward, we will determine when eCQM measure data are
ready for accuracy scoring for validation. In this proposed rule, we
are proposing to progressively increase the number of eCQM validation
cases (from 8 cases for validation affecting FY 2023 payment
determination, to 16 cases for validation affecting FY 2024 payment
determination, to 24 cases for validation affecting FY 2025 payment
determination, and to 32 cases for validation affecting FY 2026 payment
determination and beyond). The additional cases collected and validated
under the proposal will support the calculation of a statistically
robust validation score. We anticipate increasing the eCQM validation
score weighting in the future to include eCQM measures accuracy as part
of the overall validation score. Any adjustments in the weighting and
scoring would be proposed through future rulemaking. We invite public
comments on our proposal.
g. Summary
Our validation proposals are summarized in the following table:

[[Page 32845]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.209

h. Educational Review Process
(1) Chart-Abstracted Measures
In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50260), we
established an educational review process for validation of chart-
abstracted measures. The process was subsequently updated in the FY
2018 IPPS/LTCH PPS final rule (82 FR 38402 through 38403). In this
process, hospitals may request an educational review if they believe
they have been scored incorrectly or if they have questions about their
validation results. As noted above, approximately 4 months after each
quarter's validation submission deadline, validation results for chart-
abstracted measures for the quarter are posted on the QualityNet Secure
Portal (also referred to as the Hospital Quality Reporting (HQR)
System). Hospitals have 30 calendar days following the date validation
results are posted to identify any potential CDAC or CMS errors for the
first three quarters of validation results and contact the Validation
Support Contractor (VSC) to request an educational review. Upon receipt
of an educational review request, we review the data elements
identified in the request, as well as the written justifications
provided by the hospital. We provide the results of an educational
review, outlining the findings of whether the scores were correct or
incorrect, to the requesting hospital through a CMS-approved secure
file transmission process (82 FR 38402). We note that at the end of the
year, the validation score is calculated by combining the data from all
four quarters into one agreement rate for each hospital.
If an educational review yields incorrect CMS validation results
for chart-abstracted measures, we use the corrected quarterly score, as
recalculated during the educational review process to compute the final
confidence interval (82 FR 38402). We use the revised score identified
through an educational review when determining whether or not a
hospital failed validation (82 FR 38402). Corrected scores, however,
are only used if they indicate that the hospital performed more
favorably than previously determined (82 FR 38402).\475\ We note that
corrections only occur to calculations, not to the underlying measure
data (82 FR 38402). A detailed description of the educational review
process for validation of chart-abstracted measures is also available
on the QualityNet website. We are not proposing any changes to our
educational review process for chart-abstracted measures.
---------------------------------------------------------------------------

\475\ Hospitals may still request reconsideration even if an
educational review determined that a hospital was scored correctly.
Hospitals that fail Hospital IQR Program requirements, including
validation, may request reconsideration after receiving notification
of their payment determination for the applicable fiscal year.
---------------------------------------------------------------------------

(2) Proposed Educational Review Process for eCQMs for Validation
Affecting the FY 2023 Payment Determination and Subsequent Years
In this proposed rule, we are proposing to extend a similar process
established for chart-abstracted measure validation educational reviews
to eCQM validation beginning with validation affecting the FY 2023
payment determination and subsequent years (that is, starting with data
from CY 2020). While we are proposing to combine the hospital pool and
generate a single score for both eCQM and chart-abstracted measure data
validation, these underlying processes would still remain distinct
because the underlying data being validated is distinct. We believe
that expanding the educational review process to incorporate eCQMs
would allow hospitals to better understand the processes and data for
eCQM validation. Under our proposal, hospitals may request an
educational review if they believe they have been scored incorrectly or
if they have questions about their validation of eCQMs. Specifically, a
hospital would have 30 calendar days to contact the VSC to solicit a
written explanation of the validation performance following the date
that the validation results were provided to the hospital. Because
hospitals receive eCQM validation results on an annual basis, however,
they would have the opportunity to request an educational review once
annually following receipt of their results. Upon receipt of an
educational review request, we would review the requested data elements
and written justifications provided by the hospital. We are also
proposing to provide the results of the eCQM validation educational
review to the requesting hospital, outlining the findings of whether
the scores were correct or incorrect, through a CMS-approved secure
file transmission process.
We invite public comment on our proposal.
11. Data Accuracy and Completeness Acknowledgement (DACA) Requirements
We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR
53554) for previously adopted details on DACA requirements. We are not
proposing any changes to this policy in this proposed rule.
12. Public Display Requirements
a. Background
Section 1886(b)(3)(B)(viii)(VII) of the Act requires the Secretary
to report quality measures of process, structure, outcome, patients'
perspectives on care, efficiency, and costs of care that relate

[[Page 32846]]

to services furnished in inpatient settings in hospitals on the
internet website of CMS. Section 1886(b)(3)(B)(viii)(VII) of the Act
also requires that the Secretary establish procedures for making
information regarding measures available to the public after ensuring
that a hospital has the opportunity to review its data before they are
made public. Our current policy is to report data from the Hospital IQR
Program as soon as it is feasible on CMS websites such as the Hospital
Compare and/or its successor website after a 30-day preview period (78
FR 50776 through 50778). We refer readers to the FY 2008 IPPS/LTCH PPS
final rule (72 FR 47364), the FY 2011 IPPS/LTCH PPS final rule (75 FR
50230), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51650), the FY 2013
IPPS/LTCH PPS final rule (77 FR 53554), the FY 2014 IPPS/LTCH PPS final
rule (78 FR 50836), the FY 2015 IPPS/LTCH PPS final rule (79 FR 50277),
the FY 2016 IPPS/LTCH PPS final rule (80 FR 49712 through 49713), the
FY 2018 IPPS/LTCH PPS final rule (82 FR 38403 through 38409), and the
FY 2019 IPPS/LTCH PPS final rule (83 FR 41538 through 41539) for
details on public display requirements. The Hospital IQR Program
quality measures are typically reported on the Hospital Compare website
at: http://www.medicare.gov/hospitalcompare, or its successor website,
and on occasion are reported on other CMS websites such as: https://
data.medicare.gov, or its successor website.
b. Proposed Public Reporting of eCQM Data
(1) Background
The Hospital IQR Program initiated voluntary reporting of eCQM data
in the FY 2014 IPPS/LTCH PPS final rule, for the CY 2014 reporting
period/FY 2016 payment determination (78 FR 50807 through 50810). At
that time, we noted our belief that electronic collection and reporting
of quality data using health IT would ultimately simplify and
streamline quality reporting (78 FR 50807). Based on our ongoing
experience with eCQMs, we continue to believe this. We also believe
that electronic reporting furthers CMS and HHS policy goals to promote
quality through performance measurement and, in the long-term, will
both improve the accuracy of the data and reduce reporting burden for
providers. We expect that over time, hospitals will continue to
leverage EHRs to capture, calculate, and electronically submit quality
data, build and refine their EHR systems, and gain more familiarity
with reporting eCQM data (78 FR 50807).
Since the FY 2014 IPPS/LTCH PPS final rule, the Hospital IQR
Program's eCQM reporting requirements have evolved. In the FY 2016
IPPS/LTCH PPS final rule, the reporting of eCQM data became required
(rather than voluntary) under the Hospital IQR Program, beginning with
the CY 2016 reporting period/FY 2018 payment determination (80 FR 49693
through 49698). At the time of publication of this proposed rule,
hospitals will have completed the reporting of eCQM data for the CY
2019 reporting period/FY 2021 payment determination by the March 2,
2020 submission deadline, the fourth year of required eCQM reporting.
Most recently, in the FY 2020 IPPS/PPS LTCH final rule, we
finalized the Hospital IQR Program's reporting requirements for the CY
2022 reporting period/FY 2024 payment determination, to require that
hospitals report one self-selected calendar quarter of data for: (a)
Three self-selected eCQMs; and (b) the Safe Use of Opioids--Concurrent
Prescribing eCQM (Safe Use eCQM), for a total of four eCQMs (84 FR
42503). We refer readers to section VIII.A.10.e of the preamble of this
proposed rule where we discuss our proposal to progressively increase
the quarters of eCQM data, beginning with the CY 2022 reporting period/
FY 2024 payment determination.
As eCQM reporting for the Hospital IQR Program continues to advance
and hospitals have gained several years of experience with successfully
collecting and reporting eCQM data, we believe it is important to
further our policy goals of leveraging EHR-based quality measure
reporting in order to incentivize data accuracy, promote
interoperability, increase transparency, and reduce long-term provider
burden by providing public access to the reported eCQM data.
Originally, as we incorporated eCQMs into the Hospital IQR Program on a
voluntary basis, we stated that we would need time to assess the data
submitted by hospitals to determine the optimal timing and transition
strategy for publicly reporting eCQM data (78 FR 50813). We finalized
that eCQM data reported for the Hospital IQR Program would only be
publicly reported if we determine the data are accurate enough to be
reported (78 FR 50818). In the FY 2016 IPPS/LTCH PPS final rule when we
made the reporting of eCQMs required rather than voluntary, we stated
that any data submitted electronically would not be posted on the
Hospital Compare website at that time, and that we would address public
reporting in future rulemaking, after the conclusion and assessment of
the validation pilot (80 FR 49698).
The eCQM validation pilot was completed in 2015 and was addressed
in the FY 2017 IPPS/LTCH PPS final rule (81 FR 57173 through 57174).
Building upon the validation pilot, we adopted procedures to begin the
required validation of eCQM data under the Hospital IQR Program in the
FY 2017 IPPS/LTCH PPS final rule, and stated that the first validation
of eCQM data would occur in spring 2018 to validate data from the CY
2017 reporting period. As finalized in the FY 2017 IPPS/LTCH PPS final
rule (81 FR 57180 through 57181), the validation process for eCQMs was
established as an incremental process to ensure hospitals are able to
successfully report the medical records that correspond to the data
used for eCQM measure reporting. eCQM validation scoring is different,
because the accuracy of eCQM data submitted for validation currently
does not currently affect a hospital's payment determination. The eCQM
validation process was established as an incremental process to ensure
hospitals are able to successfully report the medical records that
correspond to the data used for eCQM measure reporting.
Our validation of eCQM data submitted from CY 2017 and CY 2018 has
demonstrated that hospitals are capable of reporting eCQM measure data.
Since the eCQM validation pilot, we have completed eCQM data validation
from the CY 2017 reporting period and the CY 2018 reporting period, and
worked with stakeholders to develop a more fulsome understanding of the
eCQM data submitted. Our review of the CY 2017 and CY 2018 eCQM data
submitted for validation included an analysis of over 1,200 patient
episodes of care submitted by over 190 hospitals per reporting period.
The majority of hospitals successfully submitted validation records
within the timeline requested. The results demonstrate that hospitals
report the majority of eCQM data with agreement rates of 80 percent or
better. Agreement rates are the ratios which reflect the frequency at
which a hospital's electronically reported medical record data matches
results adjudicated by the Clinical Data Abstraction Center (CDAC). CMS
calculates an agreement rate for each hospital. Our analysis
demonstrates that hospitals continue to improve the accuracy of
identifying patients appropriate for measure denominator inclusion, and
tend to accurately report a wide variety of data types, including
diagnoses, medications, and laboratory values. [Based on our review of
the CY 2017 and CY 2018 eCQM data submitted

[[Page 32847]]

for validation, and on the finding that the majority of eCQM data was
reported with agreement rates of 80 percent or better, we believe eCQM
data are accurate enough to be publically reported in aggregate.
Because eCQM validation examines eCQMs on a chart-by-chart basis (as
opposed to in aggregate) and affects payment, in section VIII.A.10.f.
above, we propose that eCQM validation continue to be based on
successful submission of at least 75 percent of the requested medical
records for eCQM validation instead of reporting accuracy. In the
interests of providing data to the public as quickly as possible, and
as expressed in more detail below, we are proposing to begin public
reporting of eCQM data.
(2) Proposal To Begin Publicly Reporting eCQM Data Beginning With the
eCQM Data Reported by Hospitals for the CY 2021 Reporting Period/FY
2023 Payment Determination
Based on our validation of eCQM data submitted from CY 2017 and CY
2018, and in alignment with our goal to encourage data accuracy and
transparency, in this proposed rule, we are proposing to begin publicly
reporting eCQM data beginning with the eCQM data reported by hospitals
for the CY 2021 reporting period/FY 2023 payment determination and for
subsequent years. These data could be made available to the public as
early as the fall of 2022. We refer readers to section VIII.A.10.f.(2)
of the preamble to this proposed rule for a discussion of proposed
chart-abstracted measure and eCQM validation weighted scoring.
As with other Hospital IQR Program measures, hospitals would have
the opportunity to review their data before they are made public, as
required by section 1886(b)(3)(B)(viii)(VII) of the Act, during a 30-
day preview period in accordance with previously finalized policies (76
FR 51608). Measure data, including eCQM data, are published on the
Hospital Compare and/or https://data.medicare.gov websites or successor
websites.
We plan to continue assessing the eCQM data submitted in future
years and will continue working to ensure that hospitals receive
feedback on their validation results aimed at improving transparency
and reporting accuracy. We are committed to providing data to patients,
consumers, and providers as quickly as possible so they are empowered
to make informed decisions about their own, and their patients'
healthcare.
Understanding that it will be important for hospitals and
stakeholders alike to know how to find the eCQM data once they are
publicly posted, we would convey any updates to the posting locations
through routine communication channels to hospitals, vendors, and QIOs,
including, but not limited to, issuing memos, emails, and notices on
the QualityNet and eCQI Resource Center websites.
We also refer readers to section VIII.D. of the preamble of this
proposed rule for a similar proposal in the Medicare Promoting
Interoperability Program. We are soliciting public comment on this
proposal.
13. Reconsideration and Appeal Procedures
We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR
51650 through 51651), the FY 2014 IPPS/LTCH PPS final rule (78 FR
50836), and 42 CFR 412.140(e) for details on reconsideration and appeal
procedures for the FY 2017 payment determination and subsequent years.
We are not proposing any changes to this policy in this proposed rule.
14. Hospital IQR Program Extraordinary Circumstances Exceptions (ECE)
Policy
We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR
51651 through 51652), the FY 2014 IPPS/LTCH PPS final rule (78 FR 50836
through 50837), the FY 2015 IPPS/LTCH PPS final rule (79 FR 50277), the
FY 2016 IPPS/LTCH PPS final rule (80 FR 49713), the FY 2017 IPPS/LTCH
PPS final rule (81 FR 57181 through 57182), the FY 2018 IPPS/LTCH PPS
final rule (82 FR 38409 through 38411), and 42 CFR 412.140(c)(2) for
details on the current Hospital IQR Program ECE policy. We also refer
readers to the QualityNet website at: http://www.QualityNet.org/ for
our current requirements for submission of a request for an exception.
We are not proposing any changes to this policy in this proposed rule.

B. Proposed Changes to the PPS-Exempt Cancer Hospital Quality Reporting
(PCHQR) Program

1. Background
The PPS-Exempt-Cancer Hospital Quality Reporting (PCHQR) Program is
authorized by section 1866(k) of the Act, and it applies to hospitals
described in section 1866(d)(1)(B)(v) (referred to as ``PPS-Exempt
Cancer Hospitals'' or ``PCHs''). Under the PCHQR Program, PCHs must
submit to the Secretary data on quality measures with respect to a
program year in a form and manner, and at a time, specified by the
Secretary.
For additional background information, including previously
finalized measures and other policies for the PCHQR Program, we refer
readers to the following final rules: The FY 2013 IPPS/LTCH PPS final
rule (77 FR 53556 through 53561); the FY 2014 IPPS/LTCH PPS final rule
(78 FR 50838 through 50846); the FY 2015 IPPS/LTCH PPS final rule (79
FR 50277 through 50288); the FY 2016 IPPS/LTCH PPS final rule (80 FR
49713 through 49723); the FY 2017 IPPS/LTCH PPS final rule (81 FR 57182
through 57193); the FY 2018 IPPS/LTCH PPS final rule (82 FR 38411
through 38425); the FY 2019 IPPS/LTCH PPS final rule (83 FR 41609
through 41624); CY 2019 OPPS/ASC final rule with comment period (83 FR
59149 through 59154); and the FY 2020 IPPS/LTCH PPS final rule (84 FR
42509 through 42524).
In this proposed rule, we are proposing to incorporate refinements
to two existing measures in the PCHQR Program measure set--the
Catheter-Associated Urinary Tract Infection (CAUTI) Outcome Measure
(NQF #0138) and the Central Line-Associated Bloodstream Infection
(CLABSI) Outcome Measure (NQF #0139). While we are not proposing to add
any new measures or remove any existing measures, we continue to assess
the PCHQR Program measure set's alignment with the Meaningful Measures
Initiative, which is discussed in more detail in I.A.2. of the preamble
of the FY 2019 IPPS/LTCH PPS final rule (83 FR 41147 through 41148).
2. Summary of PCHQR Program Measures for the FY 2023 Program Year
The table in this section of this rule summarizes the PCHQR Program
measure set for the FY 2023 program year.

[[Page 32848]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.210

3. Proposed Refinements to the Catheter-Associated Urinary Tract
Infection (CAUTI) Outcome Measure (NQF #0138) and the Central Line-
Associated Bloodstream Infection (CLABSI) Outcome Measure (NQF #0139)
Beginning With the FY 2023 Program Year
a. Background
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53556 through
53559), we adopted the Catheter-associated Urinary Tract Infection
(CAUTI) (NQF #0138) and Central line-associated Bloodstream Infection
(CLABSI) (NQF #0139) measures for use in the PCHQR Program beginning
with the FY 2014 program year, and we refer readers to this rule for a
detailed discussion of these measures. In the FY 2019 IPPS/LTCH PPS
proposed rule (83 FR 20503), we proposed to remove both measures from
the program because we believed that removing the measures would reduce
program costs and complexities associated with the use of these data by
patients in decision-making. We stated that we believed the costs,
coupled with the high technical and administrative burden on PCHs
associated with collecting and reporting the measure data, outweighed
the benefits of their continued use. We further stated that it had
become difficult for CMS to publicly report data on these measures due
to the low volume of data produced and reported by the small number of
PCHs that participate in the PCHQR

[[Page 32849]]

Program, and that we lacked an appropriate methodology to publicly
report these data. For these reasons, we believed that the measures
should be removed beginning with the FY 2021 program year under measure
removal Factor 8: The costs associated with the measures outweighed the
benefit of their continued use in the program.
However, after considering the comments we had received on this
proposal and other updated information, in the CY 2019 OPPS/ASC final
rule (83 FR 59150), we decided to retain both the CAUTI and CLABSI
measures in the PCHQR Program. We stated that since the time we made
our proposal, we had conducted our own analyses regarding the continued
use of the CAUTI and CLABSI measures using updated CDC data. We also
stated that although the CDC had previously believed that oncology unit
locations, including those in PCHs, had a higher incidence of
infections than other types of units in acute care hospitals, the CDC
now believes, after controlling for location type, that oncology unit
locations in PCHs do not have a higher incidence of infection than
oncology units within other acute care hospitals. We stated that the
CDC's updated analysis also produced a consistent finding that cancer
hospital status was not a significant risk factor in any of the device-
associated HAI risk models, including those used for CAUTI and CLABSI.
Lastly, we stated that we believe these results indicate that reporting
PCH CAUTI and CLABSI performance measure data is just as important as
reporting acute care hospital CAUTI and CLABSI performance measure data
(83 FR 59151). Based on this updated information, as well as the public
comments, we concluded that the importance of emphasizing patient
safety in quality care delivery justified retaining the CAUTI and
CLABSI measures in the PCHQR Program (83 FR 59151).
We also noted in the CY 2019 OPPS/ASC PPS final rule that the CAUTI
and CLABSI measure specifications had been recently updated to use new
standard infection ratio (SIR) calculations that can be applied to
cancer hospitals, including PCHs. We noted that this updated SIR
calculation methodology is different than the methodology we are
currently using to calculate the CAUTI and CLABSI measures.
Additionally, the use of raw location-stratified rates in the current
methodology had created a concern that the CAUTI and CLABSI data
calculated under the current methodology might appear to inaccurately
show lower performance among PCHs than the performance reported by
acute care hospitals that are reporting CAUTI and CLABSI data using the
updated methodology (83 FR 59151). We stated that we believed the
updated methodology addresses this concern because the updates include
rates that are stratified by patient care locations within PCHs,
without the use of predictive models or comparisons in the rate
calculations. We also stated that we intended to propose to adopt these
updated versions of the CAUTI and CLABSI measures, and that we would
work closely with the CDC to assess the updated risk adjusted versions
of these measures (83 FR 59151).
b. Proposed Updates to the CAUTI and CLABSI Measures
In this proposed rule, we are proposing to refine the CAUTI and
CLABSI measures by adopting the updated SIR calculation methodology
developed by the CDC that calculates rates that are stratified by
patient care locations within PCHs, without the use of predictive
models or comparisons in the rate calculations.
(1) Description of the CDC Re-Baselining Efforts
The CDC's National Healthcare Safety Network (NHSN) uses
healthcare-associated infection (HAI) incidence data from a prior time
period and a standard population of facilities that report data to the
NHSN (such as all healthcare facilities of a specified type) to
establish a HAI baseline for those facilities, including a HAI baseline
for CAUTI and CLABSI.\476\ The NHSN then uses that baseline to
calculate the SIR. For both of these measures, the SIR is calculated as
a comparison of the actual number of HAIs reported by a facility with
the number that would be predicted by the HAI baseline.\477\
---------------------------------------------------------------------------

\476\ Centers for Disease Control and Prevention. ``Paving Path
Forward: 2015 Rebase line.'' Available at: https://www.cdc.gov/nhsn/2015rebaseline/index.html.
\477\ Ibid.
---------------------------------------------------------------------------

In 2016, the CDC used 2015 HAI incidence data to update both the
source of aggregate data and the risk adjustment methodology used to
create the HAI baselines. As a result, the CDC established new HAI
baselines for purposes of calculating the SIRs used to calculate HAI
measures, including the CAUTI and CLABSI measures.\478\ The CDC's
decision to use 2015 data was multifactorial and relied partially on
its implementation of updated surveillance protocols and definitions as
well as increased reporting of certain HAI types by additional
healthcare facility types.\479\
---------------------------------------------------------------------------

\478\ Ibid.
\479\ Summary of CDC's Rebaseline Analysis of NHSN HAI Data.
Updated September 7, 2018.
---------------------------------------------------------------------------

During its re-baselining effort, the CDC determined that it could
generate HAI baselines that produce more accurate SIR calculations for
the 17 hospitals that enroll in NHSN as facility type ``HOSP-ONC'' (11
PCHs and 6 other hospitals that classify themselves as cancer hospitals
but are not PCHs for purposes of Medicare) by standardizing the new HAI
baselines across infection type and facility type.\480\ Therefore, the
CDC created a risk adjustment model for acute care hospitals and
determined that it could include the 17 cancer hospitals that in that
risk adjustment model because it found that cancer hospital status was
not a significant risk factor that would preclude their inclusion.\481\
---------------------------------------------------------------------------

\480\ Ibid.
\481\ Ibid.
---------------------------------------------------------------------------

The CDC also evaluated what additional oncology-specific patient
locations (for example, hematology/oncology ward, medical oncology ICU)
should be adjusted for when deriving SIR calculations for hospitals in
the acute care risk adjustment model. The CDC considered this because
examining patient care location allows for the assessment of which
patient populations are at higher risk for CAUTI and CLABSI incidences.
Further, stakeholders had previously raised concerns that the omission
of a risk adjustment for oncology-specific patient care locations in
the SIR calculations could inaccurately appear to show lower
performance on the HAI measures, including CLABSI and CAUTI, by PCHs
and other cancer hospitals than other acute care hospitals; adjusting
for oncology-specific patient locations as a part of the new risk model
mitigates this concern. When the CDC stratified by location within the
acute care hospital risk adjustment model, it found that in comparison
to non-oncology-specific patient locations, the oncology-specific
locations, particularly those designated as oncology units,\482\
produced statistically significant differences in HAI measure
performance. As a result, the CDC further updated the acute care risk
adjustment model to stratify the HAI baselines by oncology-specific
location types.\483\
---------------------------------------------------------------------------

\482\ A ward is a floor or section of a hospital or outpatient
clinic where cancer patients are treated.
\483\ Summary of CDC's Rebaseline Analysis of NHSN HAI Data.
Updated September 7, 2018.

---------------------------------------------------------------------------

[[Page 32850]]

(2) CAUTI and CLABSI Results Using the Updated HAI Baselines That
Incorporate New Risk-Adjustment
The CDC tested the CAUTI and CLABSI measures based on the updated
HAI baselines that incorporate the new risk adjustment described above.
According to the CDC's calculation methodology, when assessing the
performance results for the CAUTI or CLABSI measure, a p-value of 0.05
or less was noted to be statistically significant.\484\ They noted that
when assessed based on the adjustment for oncology unit, both the CAUTI
and CLABSI measures yielded p-values of <0.0001.\485\ This means that
within the acute care hospital risk adjustment model, the
categorization of a patient care location as an oncology unit is a
statistically significant predictor of CAUTI and CLABSI incidence.
Given that the majority of reporting locations within PCHs would be
classified as oncology units, the application of this additional risk
adjustment by location within the acute care hospital risk adjustment
model will result in a more accurate assessment of the incidence of
CAUTIs and CLABSIs within PCHs.
---------------------------------------------------------------------------

\484\ NHSN's Guide to the SIR-Updated March 2019. Available at:
https://www.cdc.gov/nhsn/2015rebaseline/index.html.
\485\ Ibid.
---------------------------------------------------------------------------

(3) Measure Applications Partnership Analysis of the Refinements to the
CAUTI and CLABSI Measures
In compliance with section 1890A(a)(2) of the Act, we included the
updated versions of the CAUTI and CLABSI outcome measures in a publicly
available document entitled ``2019 Measures Under Consideration
Spreadsheet.'' \486\ This is a list of quality and efficiency measures
under consideration for use in various Medicare programs, which the
Measure Applications Partnership (MAP) reviews. The MAP supported the
use of both refined measures in the PCHQR Program for rulemaking.\487\
---------------------------------------------------------------------------

\486\ 2019 Measures Under Consideration. Information available
at: http://www.qualityforum.org/Project_Pages/MAP_Hospital_Workgroup.aspx.
\487\ 2020 Considerations for Implementing Measures Draft
Report--Hospitals. Available at: http://www.qualityforum.org/map/.
---------------------------------------------------------------------------

Regarding the CAUTI measure, the MAP indicated that because CAUTIs
are the most common HAI, hospitals should continue working to reducing
their incidence and prevalence across all inpatient settings. The MAP
also determined that even though CAUTI is a chart-abstracted measure
that is burdensome to collect, the benefit of collecting data on this
measure outweighs that cost.\488\ In addition, the MAP acknowledged it
is imperative to evaluate CAUTI incidence in all inpatient settings,
including cancer hospitals. The revised version of this measure was
endorsed by the National Quality Forum on October 23, 2019.\489\ We
refer readers to NQF's Final Report--Spring 2019 Cycle \490\ for a more
detailed discussion of this measure.
---------------------------------------------------------------------------

\488\ Ibid.
\489\ Memo CSAC Meeting--Spring 2019 Cycle, available at: http://www.qualityforum.org/ProjectMaterials.aspx?projectID=86057.
\490\ Final Report--Spring 2019 Cycle, available at: http://www.qualityforum.org/ProjectMaterials.aspx?projectID=86057.
---------------------------------------------------------------------------

For the CLABSI measure, the MAP also determined that even though
the measure is chart-abstracted and burdensome to collect, the benefit
of collecting data on this measure outweighs the cost.\491\ The MAP
further noted that this measure is pertinent in the healthcare domain
of patient safety and suggested that the CDC consider the differences
in types of cancer and/or differences in types of cancer treatments
when assessing the measure's performance in the future.\492\ Like the
CAUTI measure, we note that the revised version of this measure was
endorsed by the NQF on October 23, 2019.\493\ We refer readers to NQF's
Final Report--Spring 2019 Cycle \494\ for a more detailed discussion of
this measure.
---------------------------------------------------------------------------

\491\ 2020 Considerations for Implementing Measures Draft
Report--Hospitals. Available at: http://www.qualityforum.org/map/.
\492\ Ibid.
\493\ Memo CSAC Meeting--Spring 2019 Cycle, available at: http://www.qualityforum.org/ProjectMaterials.aspx?projectID=86057.
\494\ Final Report--Spring 2019 Cycle, available at: http://www.qualityforum.org/ProjectMaterials.aspx?projectID=86057.
---------------------------------------------------------------------------

c. Summary
We are proposing to refine the CAUTI and CLABSI measures by
adopting the updated measures specifications that use the new SIR
calculation methodology, which calculates measure rates that are
stratified by patient care locations within PCHs. We believe that it is
important to continue to measure CAUTI and CLABSI incidence because of
the implications these two measures have in the patient safety domain
of healthcare. We also believe it is important to provide stratified
performance results where appropriate for the cohort of patients with
cancer which is why we believe that applying the CDC's update of the
risk-adjustment model (which will ultimately yield more precise SIR
results) is appropriate for the CAUTI and CLABSI measures.
Implementation of the refined, stratified measures will make the
measures more representative of the quality of care provided at PCHs,
particularly when performance rates are compared to other acute care
hospitals. Further, stratified performance results will more accurately
demonstrate the incidence of CAUTI and CLABSI for comparison among
PCHs. In addition, implementation of the refined versions would also
address previous stakeholder requests that a statistically significant
method for public reporting of these measures be utilized. Lastly,
implementing the refined versions of these measures means that the
PCHQR Program would be utilizing the most recently NQF-endorsed
versions of these measures.
We are inviting public comment on our proposal to refine the
Catheter-associated Urinary Tract Infection (CAUTI) (NQF #0138) and
Central line-associated Bloodstream Infection (CLABSI) (NQF #0139)
measures to utilize the updated HAI baselines that incorporate an
updated risk adjustment approach, as developed by the CDC, for the FY
2023 program year and subsequent years.
4. Maintenance of Technical Specifications for Quality Measures
We maintain and periodically update technical specifications for
the PCHQR Program measures. The specifications may be found on the
QualityNet website at https://www.qualitynet.org/pch. We also refer
readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 50281), where we
adopted a policy under which we use a subregulatory process to make
nonsubstantive updates to measures used for the PCHQR Program. We are
not proposing any changes to our processes for maintaining technical
specifications for PCHQR Program measures in this proposed rule.
5. Public Display Requirements
a. Background
Under section 1866(k)(4) of the Act, we are required to establish
procedures for making the data submitted under the PCHQR Program
available to the public. Such procedures must ensure that a PCH has the
opportunity to review the data that are going to be made public with
respect to that PCH, prior to such data being made public. Section
1866(k)(4) of the Act also provides that the Secretary must report
quality measures of process, structure, outcome, patients' perspectives
on care, efficiency, and costs of care that relate to services
furnished in such hospitals on the CMS website.

[[Page 32851]]

In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57191 through
57192), we finalized that although we would continue to use rulemaking
to establish what year we would first publicly report data on each
measure, we would publish the data as soon as feasible during that
year. We also stated that our intent is to make the data available on
at least a yearly basis, and that the time period for PCHs to review
their data before the data are made public would be approximately 30
days in length. We announce the exact data review and public reporting
timeframes on a CMS website and/or on our applicable listservs.
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42520 through
42523), we finalized that we would begin to publicly display data on a
number of PCH measures as soon as is practicable due to planned website
improvements that we stated could delay our ability to begin the public
display. In October 2019, we began to publicly report data on the
following four HAI measures: (1) Specific Surgical Site Infection (SSI)
Outcome Measure (NQF #0753); (2) NHSN Facility-wide Inpatient Hospital-
onset Methicillin resistant Staphylococcus aureus Bacteremia Outcome
Measure (NQF #1716); (3) NHSN Facility-wide Inpatient Hospital-onset
Clostridium difficile Infection (CDI) Outcome Measure (NQF #1717); and
(4) NHSN Influenza Vaccination Coverage Among Healthcare Personnel (NQF
#0431).
In the table that follows, we summarize our current public display
requirements for the PCHQR Program measures.
[GRAPHIC] [TIFF OMITTED] TP29MY20.211

b. Proposal To Publicly Display the Refined Versions of the CAUTI and
CLABSI Measures
As described in section VIII.B.3.b. of the preamble of this
proposed rule, we are proposing to adopt refined versions of the CAUTI
and CLABSI measures in the PCQHR Program beginning with the FY 2023
program year. Should this proposal be finalized as proposed, we propose
to begin publicly reporting the refined versions of the CAUTI and
CLABSI measures in the fall of 2022 using CY 2021 data. We will not
publicly report the current versions of those measures because as
described above, the refined versions of the measures more accurately
capture the quality of care furnished at PCHs. We welcome comment on
this proposal.
6. Form, Manner, and Timing of Data Submission
Data submission requirements and deadlines for the PCHQR Program
are posted on the QualityNet website. We are not proposing any updates
to our previously finalized data submission requirements and deadlines
in this proposed rule.
7. Extraordinary Circumstances Exceptions (ECE) Policy Under the PCHQR
Program
We refer readers to the FY 2019 IPPS/LTCH PPS final rule (83 FR
41623 through 41624), for a discussion of the Extraordinary
Circumstances Exceptions (ECE) policy under the PCHQR Program. We are
not proposing any changes to this policy in this proposed rule.

C. Long-Term Care Hospital Quality Reporting Program (LTCH QRP)

1. Background
The Long-Term Care Hospital Quality Reporting Program (LTCH QRP) is
authorized by section 1886(m)(5) of the Act, and it applies to all
hospitals certified by Medicare as long-term care hospitals (LTCHs).
Under the LTCH QRP, the Secretary must reduce by 2 percentage points
the annual update to the LTCH PPS standard Federal rate for discharges
for an LTCH during a fiscal year if the LTCH has not complied with the
LTCH QRP requirements specified for that fiscal year. For more
information on the requirements we have adopted for the LTCH QRP, we
refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51743
through 51744), the FY 2013 IPPS/LTCH PPS

[[Page 32852]]

final rule (77 FR 53614), the FY 2014 IPPS/LTCH PPS final rule (78 FR
50853), the FY 2015 IPPS/LTCH PPS final rule (79 FR 50286), the FY 2016
IPPS/LTCH PPS final rule (80 FR 49723 through 49725), the FY 2017 IPPS/
LTCH PPS final rule (81 FR 57193), the FY 2018 IPPS/LTCH PPS final rule
(82 FR 38425 through 38426), the FY 2019 IPPS/LTCH PPS final rule (83
FR 41624 through 41634), and the FY 2020 IPPS/LTCH PPS final rule (84
FR 42524 through 42591).
2. Quality Measures Currently Adopted for the FY 2022 LTCH QRP
The LTCH QRP currently has 17 measures for the FY 2022 LTCH QRP,
which are set out in the following table:
[GRAPHIC] [TIFF OMITTED] TP29MY20.212

Furthermore, LTCHs are required to report additional standardized
patient assessment data beginning with the FY 2022 LTCH QRP. For more
information on the reporting of this additional standardized patient
assessment data, we refer readers to the FY 2020 IPPS/LTCH PPS final
rule (84 FR 42536 through 42590).
There are no proposals or updates in this proposed rule for the
LTCH Quality Reporting Program.
3. Form, Manner, and Timing of Data Submission Under the LTCH QRP
We refer readers to the regulations at Sec. 412.560(b) for
information regarding the current policies for reporting LTCH QRP data.
For more details about the required reporting periods of measures
or standardized patient assessment data during the first and subsequent
years upon adoption, please refer to the FY 2020 IPPS/LTCH PPS final
rule (84 FR 24588 through 24590).
5. Policies Regarding Public Display of Measure Data for the LTCH QRP
We are not proposing any new policies regarding the public display
of measure data at this time.

D. Proposed Changes to the Medicare and Medicaid Promoting
Interoperability Programs

1. Background
a. Statutory Authority for the Medicare and Medicaid Promoting
Interoperability Programs
The HITECH Act (Title IV of Division B of the ARRA, together with
Title XIII of Division A of the ARRA) authorizes incentive payments
under Medicare and Medicaid for the adoption and meaningful use of
certified electronic health record technology (CEHRT). Incentive
payments under Medicare were available to eligible hospitals and CAHs
for certain payment years (as authorized under sections 1886(n) and
1814(l) of the Act, respectively) if they successfully demonstrated
meaningful use of CEHRT, which included reporting on eCQMs using CEHRT.
Incentive payments were available to Medicare Advantage (MA)
organizations under section 1853(m)(3) of the Act for certain
affiliated hospitals that successfully demonstrate meaningful use of
CEHRT. In accordance with the timeframe set forth in the statute, these
incentive payments under Medicare generally are no longer available,
except for Puerto Rico eligible hospitals. For more information on the
Medicare incentive payments available to Puerto Rico eligible
hospitals, we refer readers to the FY 2019 IPPS/LTCH PPS final rule (83
FR 41672 through 41675).
Sections 1886(b)(3)(B)(ix) and 1814(l)(4) of the Act also establish
downward payment adjustments under Medicare, beginning with FY 2015,
for eligible hospitals and CAHs that do not successfully demonstrate
meaningful use of CEHRT for certain associated EHR reporting periods.
Section 1853(m)(4) of the Act establishes a negative payment adjustment
to the monthly prospective payments of a qualifying MA organization if
its

[[Page 32853]]

affiliated eligible hospitals are not meaningful users of CEHRT,
beginning in 2015.
Section 1903(a)(3)(F)(i) of the Act establishes 100 percent Federal
financial participation (FFP) to States for providing incentive
payments to eligible Medicaid providers (described in section
1903(t)(2) of the Act) to adopt, implement, upgrade, and meaningfully
use CEHRT. We previously established, however, that in accordance with
section 1903(t)(5)(D) of the Act, in no case may any Medicaid eligible
hospital receive an incentive after 2021 (Sec. 495.310(f), 75 FR
44319). Therefore, December 31, 2021 is the last date that States could
make Medicaid Promoting Interoperability Program payments to Medicaid
eligible hospitals (other than pursuant to a successful appeal related
to 2021 or a prior year) (84 FR 42591 through 42592). For additional
discussion or context around the discontinuation of the Medicaid
Promoting Interoperability Program, we refer readers to the FY 2019
IPPS/LTCH PPS final rule (83 FR 41676 through 41677) or the CY 2019
PFS/QPP final rule (83 FR 59704 through 59706).
2. EHR Reporting Period
a. Proposed EHR Reporting Period in CY 2022 for Eligible Hospitals and
CAHs
Under the definitions of ``EHR reporting period'' and ``EHR
reporting period for a payment adjustment year'' at 42 CFR 495.4, the
EHR reporting period in CY 2021 is a minimum of a continuous 90-day
period in CY 2021 for new and returning participants in the Promoting
Interoperability Programs. Eligible hospitals and CAHs may select an
EHR reporting period of a minimum of any continuous 90-day period in CY
2021 (from January 1, 2021 through December 31, 2021).
For CY 2022, we are proposing an EHR reporting period of a minimum
of any continuous 90-day period in CY 2022 for new and returning
participants (eligible hospitals and CAHs) in the Medicare Promoting
Interoperability Program. We believe that adopting a 90-day EHR
reporting period in CY 2022 as in CY 2021 would be appropriate because
it would provide programmatic consistency for hospital reporting. We
are proposing corresponding changes to the definition of ``EHR
reporting period for a payment adjustment year'' at 42 CFR 495.4. We
are not proposing to define an EHR reporting period in CY 2022 for the
Medicaid Promoting Interoperability Program because the program will
end with CY 2021 in accordance with section 1903(t)(5)(D) of the Act
(42 CFR 495.310(f)). For additional discussion or context around the
discontinuation of the Medicaid Promoting Interoperability Program, we
refer readers to the FY 2019 IPPS/LTCH PPS final rule (83 FR 41676
through 41677) or the CY 2019 PFS/QPP final rule (83 FR 59704 through
59706).
3. Proposed Changes to the Query of Prescription Drug Monitoring
Program Measure Under the Electronic Prescribing Objective
a. Background
In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41648 through
41656), we adopted two new opioid measures for the Electronic
Prescribing objective, however, we changed certain policies related to
those measures in the subsequent FY 2020 IPPS/LTCH PPS final rule (84
FR 42593 through 42596): (1) Query of Prescription Drug Monitoring
Program (PDMP), which is optional in CY 2019 and CY 2020 and worth 5
bonus points each year; and (2) Verify Opioid Treatment Agreement,
which was optional in CY 2019 but removed entirely from the program
starting in CY 2020.
b. Query of PDMP Measure
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42595), we finalized
that the Query of PDMP measure is optional and eligible for 5 bonus
points in CY 2020. We have continued to receive substantial feedback
from health IT vendors and hospitals that the flexibility currently
included in the measure presents unintended challenges such as
significant burden associated with IT system design and additional
development needed to accommodate the measure and any future changes to
it. Since publication of the FY 2020 IPPS/LTCH PPS final rule,
stakeholders have continued to express concern that it is still too
premature to require the Query of PDMP measure and score it based on
performance in CY 2021.
We agree with stakeholders that PDMPs are still maturing in their
development and use. As stated by the Substance Abuse and Mental Health
Services Administration (SAMHSA) in 2018, ``PDMPs operate independently
within states and are not currently linked into a larger system;
therefore, no comprehensive national PDMP prescription data are
available. Moreover, there is no uniform way of accessing PDMP data
across states, as data platforms differ by state.'' \495\
---------------------------------------------------------------------------

\495\ https://www.edc.org/sites/default/files/uploads/pdmp-overview.pdf.
---------------------------------------------------------------------------

Stakeholders also mentioned the challenge posed by the current lack
of integration of PDMPs into the EHR workflow. Historically, health
care providers have had to go outside of the EHR workflow in order to
separately log in to and access the State PDMP. In addition,
stakeholders noted the wide variation in whether PDMP data can be
stored in the EHR. By integrating PDMP data into the health record,
health care providers can improve clinical decision making by utilizing
this information to identify potential opioid use disorders, inform the
development of care plans, and develop effective interventions.
ONC recently engaged in an assessment to better understand the
current state of policy and technical factors impacting PDMP
integration across States. This assessment explored factors like PDMP
data integration, standards and hubs used to facilitate interstate PMDP
data exchange, access permissions, and laws and regulations governing
PDMP data storage. The assessment revealed ambiguous or non-existent
policies regarding PDMP placement in health IT systems, interpretation
of PDMP data, and PDMP access roles. Less than half of hospitals have
reported integration of PDMP queries within their EHR workflows.\496\
In addition, variability in standards and hubs used to facilitate
interstate PMDP data exchange, as well as to store and report PDMP
data, contribute to the complexity of PDMPs.
---------------------------------------------------------------------------

\496\ See also ONC analysis of 2017 AHA survey data at: https://www.healthit.gov/buzz-blog/health-it/new-data-show-nearly-one-third-of-hospitals-can-access-pdmp-data-within-their-ehr.
---------------------------------------------------------------------------

The SUPPORT for Patients and Communities Act, enacted in 2018, is
an important investment in combating the opioid epidemic. Several of
the provisions of the SUPPORT for Patients and Communities Act address
opioid use disorder prevention, recovery, and treatment, including
increased access to evidence-based treatment and follow-up care,
through legislative changes specific to the Medicare and Medicaid
programs. Specifically, with respect to PDMPs, the SUPPORT for Patients
and Communities Act included new requirements and federal funding for
PDMP enhancement, integration, and interoperability, and established
mandatory use of PDMPs by certain Medicaid providers to help reduce
opioid misuse and overprescribing and to help promote the overall
effective prevention and treatment of opioid use disorder.
Section 5042(a) of the SUPPORT for Patients and Communities Act
added section 1944 to the Act, titled ``Requirements relating to
qualified prescription drug monitoring programs and prescribing certain
controlled

[[Page 32854]]

substances.'' Subsection (f) of section 1944 of the Act increased
Medicaid FFP during FY 2019 and FY 2020 for certain state expenditures
to design, develop, or implement a qualified PDMP (and to make
subsequent connections to such program). As a condition of this
enhanced FFP, states must meet the conditions described in section
1944(f)(2) regarding agreements with contiguous states. There are
currently a number of states that have used or are seeking to use, this
enhanced FFP.
Under section 1944(b)(1) of the Act, to be a qualified PDMP, a PDMP
must facilitate access by a covered provider to the following
information (at a minimum) about a covered individual, in as close to
real-time as possible: Information regarding the prescription drug
history of a covered individual with respect to controlled substances;
the number and type of controlled substances prescribed to and filled
for the covered individual during at least the most recent 12-month
period; and the name, location, and contact information of each covered
provider who prescribed a controlled substance to the covered
individual during at the least the most recent 12-month period. Under
section 1944(b)(2) of the Act, a qualified PDMP must also facilitate
the integration of the information described in section 1944(b)(1) of
the Act into the workflow of a covered provider, which may include the
electronic system used by the covered provider for prescribing
controlled substances. CMS issued additional guidance to states about
the enhanced FFP authorized by the SUPPORT for Patients and Communities
Act, which can be found at https://www.medicaid.gov/sites/default/files/Federal-Policy-Guidance/Downloads/faq051519.pdf.
We additionally note that section 7162 of the SUPPORT for Patients
and Communities Act supports PDMP integration as part of the CDC's
grant programs aimed at efficiency and enhancement by states, including
improvement in the intrastate and interstate interoperability of PDMPs.
In support of efforts to expand the use of PDMPs, there are
currently a number of federally supported activities underway aimed at
developing a more robust and standardized approach to EHR-PDMP
integration. Partners including CMS, CDC, ONC, and private sector
stakeholders are focused on developing and refining standard-based
approaches to enable effective integration into clinical workflows,
exploring emerging technical solutions to enhance access and use of
PDMP data, and providing technical resources to a variety of
stakeholders to advance and scale the interoperability of health IT
systems and PDMPs. For instance, stakeholders are working to map the
NCPDP SCRIPT standard version 2017071 and the 2015 ASAP Prescription
Monitoring Program Web Service standard version 2.1A to the HL7[supreg]
FHIR[supreg] standard version R4.\497\ These mapping efforts are
currently targeting completion by June 2020 after which the standard
would be balloted. Moreover, a number of enhancements to PDMPs are
occurring across the country, including enhancements to RxCheck which
is a federally supported interstate exchange hub for PDMP data.\498\ In
addition, the ONC Interoperability Standards Advisory includes
monitoring of current and emerging standards related to PDMP and OUD
data capture and exchange that would allow a provider to request a
patient's medication history from a State PMDP.\499\ We believe these
standards and technical approaches are likely to rapidly reach maturity
and to support adoption across health care system stakeholders.
---------------------------------------------------------------------------

\497\ http://hl7.org/fhir/us/meds/pdmp.html.
\498\ https://www.pdmpassist.org/RxCheck.
\499\ https://www.healthit.gov/isa/allows-a-provider-request-a-patients-medication-history-a-state-prescription-drug-monitoring.
---------------------------------------------------------------------------

In addition to monitoring activities which can provide a stronger
technical foundation for a measure focused on PDMP use, we also
requested comments in the FY 2020 IPPS/LTCH PPS proposed rule on
alternative measures designed to advance clinical goals related to the
opioid crisis (84 FR 19568 and additional comment responses in the FY
2020 IPPS/LTCH PPS final rule in 84 FR 42593 through 42595).
Specifically, we sought public comment on the development of potential
measures for consideration for the Promoting Interoperability Program
that are based on existing efforts to measure clinical and process
improvements specifically related to the opioid epidemic, including
opioid quality measures endorsed by the National Quality Forum (NQF)
and CDC Quality Improvement (QI) opioid measures based on CDC
guidelines around prescribing practices. The latter of these includes
the use of electronically specific CDS to support OUD prevention and
treatment best practices and the integration of a PDMP query as a part
of specific clinical workflows. We stated that these measures relate to
a range of activities that hold promise in combatting the opioid
epidemic as part of OUD prevention and treatment best practices, that
they can be supported using CEHRT, and that they may include the use of
PDMP queries as a tool within the broader clinical workflows. We
continue to evaluate the comments received in response to this request,
and will explore how measures such as those discussed may help
participants to better understand the relationship between the measure
description and the use of health IT to support the actions of the
measures related to opioid use.
We understand that there is wide variation across the country in
how health care providers are implementing and integrating PDMP queries
into health IT and clinical workflows, and that it could be burdensome
for health care providers if we were to narrow the measure to specify a
single approach to PDMP-EHR integration at this time. At the same time,
we have heard extensive feedback from EHR developers that effectively
incorporating the ability to count the number of PDMP queries in the
EHR would require more robust certification specifications and
standards. These stakeholders stated that health IT developers may face
significant cost burdens under the current flexibility allowed for
health care providers if they either fully develop numerator and
denominator calculations for all the potential use cases and are
required to change the specification at a later date. Stakeholders have
noted that the costs of additional development will likely be passed on
to health care providers without additional benefit as this development
would be solely for the purpose of calculating the measure rather than
furthering the clinical goal of the measure (for public comments
discussed in last year's final rule, we refer readers to (84 FR 42593
through 42595), continued from last year's proposed rule in (84 FR
19556 through 19558)).
Given current efforts to improve the technical foundation for EHR-
PDMP integration, the continued implementation of the SUPPORT for
Patients and Communities Act (in particular, its provisions specific to
Medicaid providers and qualified PDMPs), our ongoing review of
alternative measure approaches, and stakeholder concerns as previously
discussed about the current readiness across states for implementation
of the existing measure, we believe that additional time is needed
prior to requiring a Query of PDMP measure for performance-based
scoring. While we appreciate the concerns that stakeholders have
shared, CMS believes that this measure can play an important role in
helping to address the opioid crisis. Maintaining it as an optional

[[Page 32855]]

measure with bonus points signals to the hospital and vendor community
that this is an important measure which addresses a current gap that
can help to spur development and innovation to reduce the barriers and
challenges expressed to CMS.
Therefore, we are proposing for CY 2021 to maintain the Electronic
Prescribing Objective's Query of PDMP measure as optional and worth 5
bonus points, as well as proposing corresponding changes to the
regulation at Sec. 495.24(e)(5)(iii)(B). Continuing to include the
measure as optional in CY 2021 would allow time for further progress
around EHR-PDMP efforts minimizing the burden on eligible hospitals and
CAHs reporting while still providing an opportunity for capable
implementers to report on and earn 5 bonus points for the optional
measure. We seek comments on our proposal to maintain the Query of PDMP
measure in CY 2021 as optional and worth 5 bonus points.
4. Health Information Exchange Objective: Support Electronic Referral
Loops by Receiving and Incorporating Health Information Measure
In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41659 through
41661), we established a new Support Electronic Referral Loops by
Receiving and Incorporating Health Information measure by combining the
Request/Accept Summary of Care measure and the Clinical Information
Reconciliation measure. In establishing the new measure, we did not
change the specifications or actions associated with the two combined
measures, which address receiving an electronic summary of care record
and conducting reconciliation of the summary of care record. However,
the name of the measure includes the word ``incorporating,'' which is
not always required to increment the numerator of the measure. Instead,
clinical information reconciliation must be completed using CEHRT for
the following three clinical information sets: (1) Medication; (2)
Medication Allergy; and (3) Current Problem List. In addition, we
established that for cases in which the eligible hospital or CAH
determines no update or modification is necessary within the patient
record based on the electronic clinical information received, the
eligible hospital or CAH may count the reconciliation in the numerator
without completing a redundant or duplicate update to the record (83 FR
41661). Thus, we are proposing to modify the name of the Support
Electronic Referral Loops by Receiving and Incorporating Health
Information measure to better reflect the actions required by the
numerator and denominator. We are proposing to replace the word
``incorporating'' with the word ``reconciling''. The new proposed name
would read: Support Electronic Referral Loops by Receiving and
Reconciling Health Information measure. We are proposing corresponding
changes to Sec. 495.24(e)(6)(ii)(B).
5. Scoring Methodology for Eligible Hospitals and CAHs Attesting to CMS
under the Medicare Promoting Interoperability Program for an EHR
Reporting Period in CY 2021
The following table reflects the objectives and measures for CY
2021 if the proposed changes discussed previously are adopted as final,
including the proposed name change to the Support Electronic Referral
Loops by Receiving and Incorporating Health Information measure and the
continuation of the optional Query of PDMP measure worth 5 bonus points
for CY 2021.
[GRAPHIC] [TIFF OMITTED] TP29MY20.213

[[Page 32856]]

5. Clinical Quality Measurement for Eligible Hospitals and CAHs
Participating in the Medicare and Medicaid Promoting Interoperability
Programs
a. Background and Current Clinical Quality Measures
Under sections 1814(l)(3)(A), 1886(n)(3)(A), and
1903(t)(6)(C)(i)(II) of the Act and the definition of ``meaningful EHR
user'' under 42 CFR 495.4, eligible hospitals and CAHs must report on
clinical quality measures (CQMs; also referred to as electronic CQMs,
or eCQMs) selected by CMS using CEHRT, as part of being a meaningful
EHR user under the Medicare and Medicaid Promoting Interoperability
Programs. We previously established, however, that in accordance with
section 1903(t)(5)(D) of the Act, in no case may any Medicaid eligible
hospital receive an incentive after 2021 (Sec. 495.310(f), 75 FR
44319). Therefore, December 31, 2021 is the last date that States could
make Medicaid Promoting Interoperability Program payments to Medicaid
eligible hospitals (other than pursuant to a successful appeal related
to 2021 or a prior year) (84 FR 42591 through 42592).
The following table lists the previously finalized eCQMs available
for eligible hospitals and CAHs to report under the Medicare and
Medicaid Promoting Interoperability Programs (84 FR 42597 through
42599) for the reporting period in CY 2021 and in subsequent years,
including the Safe Use of Opioids--Concurrent Prescribing measure (NQF
#3316e), which we finalized as mandatory for reporting beginning with
CY 2022.
[GRAPHIC] [TIFF OMITTED] TP29MY20.214

b. Proposed eCQM Reporting Periods and Criteria for the Medicare and
Medicaid Promoting Interoperability Programs in CYs 2021, 2022, and
2023
Consistent with our proposal for the Hospital IQR Program elsewhere
in this proposed rule, we are proposing to progressively increase the
number of quarters for which hospitals are required to report eCQM
data, from the current requirement of one self-selected calendar
quarter of data, to four calendar quarters of data, over a three-year
period. Specifically, we propose to require 2 self-selected calendar
quarters of data from 2021, 3 self-selected calendar quarters of data
from 2022, and 4 calendar quarters of data beginning with2023. We
believe that increasing the number of quarters for which hospitals are
required to report eCQM data would produce more comprehensive and
reliable quality measure data for patients and providers. Taking an
incremental approach over a three-year period would give hospitals and
their vendors time to plan in advance and build upon and utilize
investments already made in their EHR infrastructure. We refer readers
to section VIII.A.10.e. of the preamble of this proposed rule for
similar proposals under the Hospital IQR Program.
(1) Proposed Changes to the eCQM Reporting Period in CY 2021
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42599 through
42600), we established the eCQM reporting periods, reporting criteria,
and submission periods for CY 2021. We refer readers to that final rule
for a more detailed discussion of our previously established final
policies. Consistent with our proposal for the Hospital IQR Program
elsewhere in this rule, we are proposing to modify the CQM reporting
period in CY 2021 under the Medicare and Medicaid Promoting
Interoperability Programs for eligible hospitals and CAHs that report
CQMs electronically. Specifically, we are proposing to require eligible
hospitals and CAHs to report two self-selected calendar quarters of
eCQM data from CY 2021, for four self-selected eCQMs from the set of
available eCQMs for CY 2021 as previously established (84 FR 42599
through 42600). We are inviting public comment on this proposal.
(2) Proposed Changes to the eCQM Reporting Period in CY 2022
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42600), we
established the eCQM reporting periods, reporting criteria, and
submission periods for CY 2022. We refer readers to that final rule for
a more detailed discussion of our previously established final
policies. Consistent with our proposal for the Hospital IQR Program
elsewhere in this rule, we are proposing to modify the eCQM reporting
period in CY 2022 under the Medicare Promoting Interoperability Program
for eligible hospitals and CAHs that report eCQMs electronically.
Specifically, we are proposing to require eligible hospitals and CAHs
to report three self-selected calendar quarters of eCQM data from CY
2022, for each required eCQM as previously established (84 FR 42600):
(a) Three self-selected eCQMs from the set of available CQMs for CY
2022, and (b) the Safe Use of Opioids--Concurrent Prescribing eCQM. We
are inviting public comment on this proposal.
(3) Proposed Reporting and Submission Requirements for eCQMs for CY
2023 and Subsequent Years
For CY 2023 and each subsequent year, we are proposing to require

[[Page 32857]]

eligible hospitals and CAHs reporting CQMs for the Medicare Promoting
Interoperability Program to report four calendar quarters of data from
CY 2023 and each subsequent year for: (a) Three self-selected eCQMs
from the set of available eCQMs for CY 2023 and each subsequent year;
and (b) the Safe Use of Opioids--Concurrent Prescribing eCQM (NQF
#3316e), for a total of four eCQMs. As finalized in the FY 2020 IPPS/
LTCH PPS final rule (84 FR 42601 through 42602), attestation is no
longer a method for reporting CQMs for the Medicare Promoting
Interoperability Program beginning with the reporting period in CY
2023, and instead, all eligible hospitals and CAHs are required to
submit their eCQM data electronically through the reporting methods
available for the Hospital IQR Program. Additionally, we are proposing
that the submission period for the Medicare Promoting Interoperability
Program would be the 2 months following the close of the respective
calendar year. For example, the submission period would be the 2 months
following the close of CY 2023, ending February 28, 2024. We are
inviting public comment on these proposals.
b. Proposed Public Reporting of eCQM Data
Electronic reporting serves to further the CMS and HHS policy goals
to promote quality through performance measurement and, in the long-
term, improve the accuracy of the data and reduce reporting burden for
providers. It also promotes the continued effort to align the Promoting
Interoperability Program with the Hospital IQR Program. We expect that
over time, hospitals will continue to leverage EHRs to capture,
calculate, and electronically submit quality data, build and refine
their EHR systems, and gain more familiarity with reporting eCQM data.
As eCQM reporting continues to advance, and hospitals have gained
several years of experience with successfully collecting and reporting
eCQM data, it is important to further our policy goals of leveraging
EHR-based quality measure reporting in order to incentivize data
accuracy, promote interoperability, increase transparency, and reduce
long-term provider burden by providing public access to the reported
eCQM data. Originally, eCQMs were integrated on a voluntary basis under
the Hospital IQR Program in the FY 2014 IPPS/LTCH PPS final rule, where
it was stated that additional time was required to assess the data
submitted by hospitals to determine the optimal timing and transition
strategy for publicly reporting eCQM data (78 FR 50813). Additionally,
it was previously finalized that eCQM data would only be publicly
reported if it was determined that the data was accurate enough to be
reported (78 FR 50818). In the FY 2016 IPPS/LTCH PPS final rule, when
the reporting of eCQMs was changed from voluntary to required, it was
finalized that any data submitted electronically at that time would not
be posted on the Hospital Compare website, and that public reporting
would be addressed in future rulemaking, after the conclusion and
assessment of the Hospital IQR Program's validation pilot (80 FR
49698).
Section 1886(b)(3)(B)(viii)(VII) of the Act requires the Secretary
to report quality measures of process, structure, outcome, patients'
perspectives on care, efficiency, and costs of care that relate to
services furnished in inpatient settings in hospitals on the internet
website of CMS. Section 1886(b)(3)(B)(viii)(VII) of the Act also
requires that the Secretary establish procedures for making information
regarding measures available to the public after ensuring that a
hospital has the opportunity to review its data before they are made
public. The current Hospital IQR Program policy is to report data as
soon as it is feasible on CMS websites such as the Hospital Compare
and/or its successor website after a 30-day preview period (78 FR 50776
through 50778). For additional information, please reference VIII.12.a.
of this proposed rule, the Hospital IQR Program's Public Display
Requirements.
Section 1886(n)(4)(B) of the Act requires the Secretary to post on
the CMS website, in an easily understandable format, a list of the
names of the eligible hospitals and CAHs that are meaningful EHR users,
and other relevant data as determined appropriate by the Secretary. We
believe other relevant data could include clinical quality measure
performance rates, and data intended to improve transparency and
reporting accuracy, because such data would enable patients, consumers,
and health care providers to make informed decisions about their own,
and their patients', healthcare. Section 1886(n)(4)(B) of the Act also
requires the Secretary to ensure that an eligible hospital or CAH has
the opportunity to review the other relevant data that are to be made
public with respect to the eligible hospital or CAH prior to such data
being made public. By publicly reporting clinical quality measure data,
this demonstrates our commitment to providing data to patients,
consumers, and providers as quickly as possible to assist them in their
decision-making, and the effort of continual alignment with the
Hospital IQR Program.
Therefore, in alignment with our goal to encourage data accuracy
and transparency, we are proposing to align with the Hospital IQR
Program in publicly reporting eCQM data submitted by eligible hospitals
and CAHs for the Promoting Interoperability Program from the CY 2021
reporting period and subsequent years. This data could be made
available to the public as early as the fall of 2022.
We are requesting public comments on these proposals, specifically,
we are interested in comments that provide information on how these
proposals might affect existing incentives and burdens under the
Promoting Interoperability Program, as well as the benefit and utility
of such data being publically available.
6. Proposed Technical Corrections to Regulation Text
a. Proposed Corrections to Regulations for Puerto Rico Eligible
Hospitals Participating in the Medicare Promoting Interoperability
Program
In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41673 and 41674), we
amended Sec. 495.104(c)(5) to specify transition factors under section
1886(n)(2)(E)(i) of the Act for the incentive payments for Puerto Rico
eligible hospitals. Although our preamble discussion of the transition
factors was accurate (83 FR 41673 and 41674), our amendments to the
regulation text included inadvertent technical errors. Specifically,
under Sec. 495.104(c)(5)(viii), we inadvertently included FY 2018
twice and omitted FY 2021 (83 FR 41710 and 41711). We are proposing to
correct these errors by revising in future rulemaking, after the
conclusion and assessment of the Hospital IQR Program's validation
pilot (80 FR 49698).
Sec. 495.104(c)(5)(viii) to specify the correct transition factors
for FYs 2018 through 2021 as follows:
1 for FY 2018.
\3/4\ for FY 2019.
\1/2\ for FY 2020.
\1/4\ for FY 2021.
b. Proposed Corrections to Regulatory Citations
In prior rulemaking, we adopted regulatory text at Sec. 495.20
which cross-references ONC's certification criteria under 45 CFR
170.314. We recently identified two typographical errors in Sec.
495.20: Specifically, paragraphs (e)(5)(iii) and (l)(11)(ii)(C)(1)
should have cross-referenced provisions of 45 CFR 170.314, but instead
certain

[[Page 32858]]

numbers were inadvertently transposed in the cross-references.
Therefore, we are proposing to revise Sec. 495.20(e)(5)(iii) and
(l)(11)(ii)(C)(1) to correct these errors.
7. Future Direction of the Medicare Promoting Interoperability Program
In future years, we will continue to consider changes which support
a variety of HHS goals as previously stated (83 FR 20537), including:
Reducing administrative burden, supporting alignment with the Quality
Payment Program, supporting alignment with the 21st Century Cures Act,
advancing interoperability and the exchange of health information, and
promoting innovative uses of health IT. More specifically, with regard
to the 21st Century Cures Act final rule (available at https://www.federalregister.gov/documents/2020/05/01/2020-07419/21st-century-cures-act-interoperability-information-blocking-and-the-onc-health-it-certification), we will take under consideration potential areas of
overlap which could include: Information blocking, transitioning from
the Common Clinical Data Set (CCDS) to the United States Core Data for
Interoperability (USCDI), finalization of a new certification criterion
for a standards-based API using FHIR, and other updates to 2015 Edition
health IT certification criteria and the ONC Health IT Certification
Program. We believe maintaining our focus on promoting
interoperability, alignment, and simplification will reduce health care
provider burden while allowing flexibility to pursue innovative
applications that improve care delivery.
We solicit comment on how Medicare can best support these areas of
overlap. For more detailed information on the updates discussed above,
including updates made to 2015 Edition certification criteria, we refer
readers to the 21st Century Cures Act final rule (available at https://www.federalregister.gov/documents/2020/05/01/2020-07419/21st-century-cures-act-interoperability-information-blocking-and-the-onc-health-it-certification).

IX. Proposed Changes for Hospitals and Other Providers

A. Proposed Changes in the Submission of Electronic Patient Records to
Beneficiary and Family Centered Care Quality Improvement Organizations
(BFCC-QIOs)

1. Background
CMS' Quality Improvement Organization (QIO) Program is part of the
HHS' national quality strategy for providing quality and patient
centered care to Medicare beneficiaries. The mission of the QIO Program
is to improve the effectiveness, efficiency, economy, and quality of
services delivered to Medicare beneficiaries. We identify the core
functions of the QIO Program as: (1) Improving quality of care for
beneficiaries; (2) protecting the integrity of the Medicare Trust Fund
by ensuring that Medicare pays only for services and goods that are
reasonable and necessary and that are provided in the most appropriate
setting; and (3) protecting beneficiaries by expeditiously addressing
individual concerns (such as beneficiary complaints, provider-based
notice appeals, violations of the Emergency Medical Treatment and Labor
Act (EMTALA), and other related responsibilities). The QIO Program is
an important resource in our effort to improve quality and efficiency
of care for Medicare beneficiaries.
A QIO is an organization comprised of health quality experts,
clinicians, and consumers organized to improve the quality of care
delivered to people with Medicare. QIOs work under the direction of
CMS, to improve the quality of healthcare for all Medicare
beneficiaries, and to support the Medicare program.
Current law authorizes the QIOs to have access to the records of
providers, suppliers, and practitioners under Medicare in order to
perform their functions. For example, section 1154(a)(7)(C) of the Act
requires QIOs, to the extent necessary and appropriate, to examine the
pertinent records of any practitioner or provider of health care
services that is providing services for which payment may be made under
the Medicare program. Section 1156(a)(3) of the Act requires that any
person who provides health care services payable under Medicare assure
that services or items ordered or provided are supported by evidence of
the medical necessity and quality as may reasonably be required by a
reviewing QIO in the exercise of its responsibilities. Our regulations
at 42 CFR 476.78(b) provide that health care providers that submit
Medicare claims must cooperate in the assumption and conduct of QIO
reviews. Under 42 CFR 476.78(b)(2), providers (defined broadly to
include any health care facility, institution, or organization involved
in the delivery of Medicare-covered services) and practitioners
(defined broadly to include an individual credentialed within a
recognized health care discipline and involved in providing the
services of that discipline to patients) must provide patient care data
and other pertinent data to the QIO when the QIO is collecting review
information. In practice, this typically includes providing the QIO
with copies of medical records for Medicare beneficiaries. In addition,
under 42 CFR 480.111, QIOs are authorized to have access to and obtain
records and information pertinent to the health care services furnished
to Medicare patients, held by any institution or practitioner in the
QIO area; QIOs may require the institution or practitioner to provide
copies of such records or information to the QIO. In some cases, this
access to information may include information from the records of non-
Medicare patients.
While Sec. 480.111 does not explicitly require submission of
electronic patient records, the current regulation at Sec.
476.78(b)(2)(ii) requires providers and practitioners to send patient
records in electronic format, if available, and subject to the QIO's
ability to support receipt and transmission of the electronic version
of patient records. The proposed regulation change would make
electronic submission the default method of submission, mandating all
providers and practitioners who provide patient records to the QIO to
submit them in electronic format unless they have an approved waiver.
Under the proposed regulation, providers and practitioners would be
required to deliver patient records within 14 calendar days of a
request. We believe the QIOs have developed the capability to securely
receive and transmit medical patient records in electronic format, such
that requiring submission of requested patient records in electronic
format by providers and practitioners who has the capability is now
reasonable. This is demonstrated by the fact that QIOs currently submit
case files and patient records to the Departmental Appeals Board (DAB)
and the Office of Medicare Hearings and Appeals (OMHA) electronically.
Based on these facts, it is now evident that all QIOs are able and
capable of receiving and sending patient records in electronic format.
In 2011, we established the Medicare and Medicaid EHR Incentive
Programs (now known as the Promoting Interoperability programs) to
encourage eligible professionals, eligible hospitals, and critical
access hospitals (CAHs) to adopt, implement, upgrade, and demonstrate
meaningful use of certified electronic health record technology
(CEHRT). Beginning in 2019, all eligible professionals, eligible
hospitals, and CAHs are required to use CEHRT to meet the requirements
of the Medicare and Medicaid Promoting Interoperability Programs.
Requirements

[[Page 32859]]

for eligible hospitals, and CAHs that submit an attestation to CMS
under the Medicare Promoting Interoperability Program were updated in
the FY 2019 IPPS/LTCH PPS final rule (83 FR 41634 through 41677). Based
on the National Center for Health Statistics' 2017 National Electronic
Health Records Survey, 97 percent of hospitals and 80 percent of office
based physicians have adopted certified EHRs, which would enable
electronic submission of records to QIOs. See: https://www.cdc.gov/nchs/fastats/electronic-medical-records.htm.
In Sec. 476.1, ``provider'' is defined as a health care facility,
institution, or organization, including but not limited to a hospital,
involved in the delivery of health care services for which payment may
be made in whole or in part under Title XVIII of the Act. The term
``practitioner'' means an individual credentialed within a recognized
health care discipline and involved in providing the services of that
discipline to patients. The regulations define ``QIO review'' as a
review performed in fulfillment of a contract with CMS, either by the
QIO or its subcontractors. The definitions specific to 42 CFR part 480
do not explicitly define the terms institution or practitioner but the
context makes it clear that these terms are references to health care
providers that are facilities and individual practitioners. Our
proposal would address submissions of patient records by all these
types of health care providers to QIOs and reimbursement for those
submissions.
2. Proposed Changes
We are proposing to amend Sec. Sec. 412.115, 413.355, 476.78,
480.111, and 484.265 to mandate providers and practitioners submit
patient records to Beneficiary and Family Centered Care Quality
Improvement Organizations (BFCC-QIOs) in an electronic format. This
proposal would also update the procedures and reimbursement rates for
patient records providers and practitioners furnish to QIOs. In our
proposal, we use and would define the term ``patient record''. We
propose to define ``patient record'' at Sec. 476.78(e)(1) as all
patient care data and other pertinent data or information relating to
care or services provided to an individual patient, in the possession
of the provider or practitioner, as requested by a BFCC-QIO for the
purpose of performing one or more QIO functions. Providers in this
context would include an institution. As discussed in more detail later
in this section, we understand that QIOs request and receive primarily
(if not only) records and information that is about or related to the
health care provided to specific individuals. This broad definition
would include any information relevant or pertinent to a particular
individual (or services or Medicare-covered benefits provided to an
individual) that is requested by a QIO is part of the patient record
for that individual, even if the information is not necessarily part of
what is traditionally understood as a medical record. We solicit
comment on this definition and how we use patient record (defined this
way) as the basis for reimbursement for submission of electronic
patient records.
Under section 1866(a)(1)(F) of the Act, CMS is required to
reimburse hospitals for the cost of providing patient records to the
QIOs for QIO functions as discussed in this proposed rule. Based on
similar requirements applicable to other providers and the history of
litigation related to this provision, we subsequently applied this
requirement to additional providers and suppliers under Medicare. The
provisions governing reimbursement for sending patient records to the
QIOs is codified at 42 CFR 476.78 and 42 CFR 480.111. Specifically, we
are proposing the following changes to the reimbursement requirements:
Patient records that are required to be provided to a QIO
under Sec. 476.78(b)(2) would need to be delivered in electronic
format, unless a QIO approves a waiver. Providers and practitioners who
lack the capability to submit patient records in an electronic format
could submit patient records by facsimile or photocopying and mailing,
after the QIO approves a waiver. Initial waiver requests by those
providers that are required to execute a written agreement with a QIO
would be expected to be made at the time the provider executes a
written agreement with the QIO. Other providers and practitioners who
are not required to execute a written agreement with a QIO would
request a waiver by giving the QIO notice of their lack of capability
to submit patient records in electronic format.
Establish reimbursement rates of $3.00 per patient record
that is submitted to the QIO in electronic format and $0.15 per page
for requested patient records submitted by facsimile or by photocopying
and mailing (plus the cost of first class postage for mailed
photocopies), after a waiver is approved by the QIO.
Apply those reimbursement rates to patient records
submitted to a QIO in accordance with Sec. Sec. 412.115, 413.355,
476.78, 480.111, and 484.265.
We believe these proposals would bring the procedures and
associated reimbursement rates for submission of patient records to a
QIO up to date with CMS policies for promoting use of electronic health
records and burden reduction.
These proposed changes would be applicable to all providers and
practitioners providing patient records to QIOs for purpose of QIO
reviews under Sec. 476.78. In addition, we are proposing to revise the
requirements applicable to institutions and practitioners submitting
records and information to the QIOs in accordance with Sec. 480.111.
Specifically, we are proposing to require such institutions and
practitioners to conform with the requirement applicable to providers
and practitioners under Sec. 476.78(c) and (d). By the cross-
references in the proposed regulation text, we are proposing to permit
reimbursement by the QIOs to institutions and practitioners for
providing records and information to the QIOs under Sec. 480.111 in
the same manner and rates as would apply to providers and practitioners
under proposed Sec. 476.78(e). To align with these and other changes,
we are proposing also to amend other regulations that address
submitting patient records for QIO reviews, specifically: Sec. Sec.
412.115, 413.355, and 484.265. We address each of these proposed
changes individually.
We are proposing in Sec. Sec. 412.115(c), 413.355, and 484.265 to
revise the current text which provides for an additional payment to be
made, respectively, to hospitals, skilled nursing facilities and home
health agencies in accordance with Sec. 476.78 for the costs of
photocopying and mailing medical records requested by a QIO.
Specifically, we are proposing to revise these provisions to permit an
additional payment to a hospital, skilled nursing facility, or home
health agency in accordance with Sec. 476.78 for the costs of sending
requested patient records to the QIO in electronic format, by
facsimile, or by photocopying and mailing. These changes would ensure
that reimbursement is permitted for all healthcare providers and
practitioners, on the same basis and at the same rates as authorized
for the submission of requested patient records to the QIO under our
proposed revisions to Sec. 476.78.
The current regulation at Sec. 476.78(c) describes the existing
photocopying reimbursement methodology for prospective payment system
providers and includes a step-by-step analysis of how to calculate cost
of photocopying. This step-by-step analysis of how to

[[Page 32860]]

calculate provider's cost for photocopying records was a tool or
methodology for determining or increasing reimbursement rates; we
believe that specific methodology is no longer necessary in light of
changes in technology and procedure. We are proposing to remove the
step-by-step analysis for calculating the photocopying reimbursement
rate from Sec. 476.78(c), because we expect that 20 percent of
providers would submit patient records by facsimile or photocopying and
mailing if CMS authorizes reimbursement for the submission of patient
records in an electronic format, and that that number would decrease
further over time. The assumed 20 percent estimate of waiver requests
is based on the 2017 Office of National Coordinator (ONC) and Center
for Disease Control (CDC) provider and practitioner survey of EHR
adoption and use of Certified EHR technology. This assumption is
further supported by the number of providers that currently have access
to CMS's MD portal. Therefore, we expect that future updates to the
calculation of photocopying reimbursement rate would be of decreasing
concern to the majority of stakeholders.
At Sec. 476.78(c), we are proposing that information that is
required to be delivered to a QIO by a provider or a practitioner under
Sec. 476.78 must be delivered in an electronic format using a
mechanism specified by the requesting QIO. We propose that in the
absence of a mechanism specified by the requesting QIO, the requested
records may be submitted using any CMS approved secure mechanism. This
includes mechanisms such as: Secure file transfer (SFT), managed file
transfer (MTF), Electronic Submission of Medical Documentation System
(esMD), or CMS-approved internet portal, or CMS-approved physical
medium for submitting electronic records. Under our proposal, CMS would
provide a list of approved mechanisms for submission of records and
information to the QIO in an electronic format when the QIO contacts
the provider to conduct a review, or when a written agreement between
the QIO and provider is executed. We are proposing to address the
amount of reimbursement in new paragraph (e) of Sec. 476.78, as
discussed later in this section. CMS would not permit the QIOs to
reimburse for any patient record submitted by facsimile or by
photocopying and mailing, if the provider or practitioner in question
does not have an approved waiver.
We are proposing to redesignate existing Sec. 476.78(d) as Sec.
476.78(f), with revisions to be consistent with our proposed
reimbursement rates. We propose to create a new provision at Sec.
476.78(d) to establish a process for practitioners and providers to
request waivers of the requirements for the electronic submission of
requested patient records to the QIOs under proposed Sec. 476.78(c). A
QIO-approved waiver would afford a provider or practitioner who is not
capable of submitting patient records to its QIO in an electronic
format the opportunity to continue submitting patient records using
facsimile or by photocopying and mailing. We are proposing that
providers who are required to execute a written agreement with a QIO,
but which lack the capability to submit requested patient records in
electronic format to the requesting QIO, must request a waiver of the
requirement to submit records in an electronic format to the QIO. A
request for a waiver by providers who are required to execute a written
agreement with the QIO, must generally be made to the QIO when
executing a written agreement with the QIO. However, where such a
provider's lack of capability arises after the written agreement is
executed, we are proposing that the provider could request a waiver by
notifying the QIO, that they lack the capability to submit patient
records in electronic format. We are also proposing, at Sec.
476.78(d)(2)(ii), that the waiver would become part of the written
agreement between the QIO and the provider. Upon approval of a waiver,
a provider or practitioner may submit requested patient records by
facsimile or photocopying and mailing. We note that the current
regulations do not specifically provide for reimbursement for patient
records submitted to the QIO by facsimile, but CMS in order to
encourage efficiency in patient record transmission, has historically
interpreted the provisions governing reimbursement for patient records
submitted to the QIOs through photocopying and mailing to also
authorize reimbursement for the submission of patient records by
facsimile. We are now proposing to specifically incorporate our
historic interpretation into the regulatory framework. We are
soliciting comment on these proposals, including the requirement that
the request for a waiver must generally be made during execution of the
written agreement.
Similarly, we are proposing that providers, practitioners and
institutions subject to Sec. 476.78 or Sec. 480.111 that are not
required to execute a written agreement with the QIO, may also request
a waiver of the requirement to submit records in electronic format to
the QIO, by notifying the QIO that they lack the capability to submit
patient records in an electronic format. Upon approval of the waiver, a
provider or practitioner may submit requested patient records and
information by photocopying and mailing. We solicit comment on this
proposal, including whether the regulation should require a written
record of the waiver.
We are proposing to establish these waiver processes because we
recognize that some practitioners and providers may lack the capacity
to submit records to the QIOs in an electronic format. However, these
providers and practitioners are still required to comply with QIO
requests for records. We believe the waiver request process would not
add extra burden on the providers and practitioners because they can
request a waiver simply by notifying the QIO that they lack the
capability to submit patient records in an electronic format, either
when executing a written agreement with the QIO in accordance with
Sec. 476.78(a) or when they are contacted by the QIO to request
patient records. Under our proposal, such waiver requests could be made
by whatever means the provider or practitioner uses to communicate with
the QIO. We invite comment on these proposals.
We are also proposing to add a new paragraph (e) to Sec. 476.78 to
authorize QIOs to reimburse providers and practitioners for the cost of
submitting patient records, requested by a QIO for the purpose of
carrying out QIO functions, with rates of reimbursement based on the
mode of submission. The QIOs could not reimburse for any patient record
submitted by facsimile or by photocopying and mailing without an
approved waiver. Each of these reimbursement rates were calculated to
reflect the costs associated with submitting a patient record,
including labor and supplies. Proposed Sec. 476.78(e)(2) would provide
that a QIO could reimburse a provider or practitioner for requested
patient records submitted in an electronic format, at the rate of $3.00
per record. We are proposing that Sec. 476.78(e)(3) would provide that
a QIO may reimburse a provider or practitioner, with an approved waiver
in place, for requested patient records submitted by facsimile or
photocopying and mailing at the rate of $0.15 per page, plus the cost
of first class postage for patient records submitted via photocopying
and mailing. We discuss the methodology, we are proposing to use to
calculate these payment rates in section IX.A.2.b. of the preamble of
this proposed rule.

[[Page 32861]]

For purposes of QIO reimbursement under Sec. 476.78(e), we are
proposing to define a ``patient record'' at Sec. 476.78(e)(1) as all
patient care data and any other pertinent data or information relating
to care or services provided to an individual patient in the possession
of the provider or practitioner, as requested by a QIO, for the purpose
of performing one or more QIO functions. We are proposing to interpret
and use this definition of patient record broadly. For example, this
definition of ``patient record'' would include the policies and
established operating procedures of a health care provider, to the
extent that that information is pertinent to an individual patient or
the services or Medicare-covered benefits provided to an individual
patient, and the QIO requests that information. We are also proposing
at Sec. 476.78(e)(4) that the QIOs would only be permitted to
reimburse a practitioner or providers once for each patient record
submitted, for each request made by a QIO. Each request from a QIO
would be reimbursed separately at the rates specified in Sec.
476.78(e), including for records that had already been provided in
response to a previous request. However, only one reimbursement would
be provided by the QIO for each patient record submitted, per request,
even if a particular patient record is submitted to the QIO using
multiple different formats, in fragments, or more than once in response
to a particular request.
We are proposing to revise the requirements applicable to
institutions and practitioners submitting records and information to
the QIOs in accordance with Sec. 480.111. Specifically, we are
proposing to require such institutions and practitioners to conform
with the requirement applicable to providers and practitioners under
Sec. 476.78(c) and (d). By the cross-references in the proposed
regulation text, we are proposing to permit reimbursement by the QIOs
to institutions and practitioners for providing records and information
to the QIOs under Sec. 480.111 in the same manner and rates as would
apply to providers and practitioners under proposed Sec. 476.78(e). In
our proposal, the reimbursement rates proposed under Sec. 476.78(e)
would also apply to institutions and practitioners subject to Sec.
480.111. We are proposing to replace the current language in Sec.
480.111(d) governing the reimbursement by the QIO for requested patient
records with a provision that provides referring to the reimbursement
rates in Sec. 476.78(e). Therefore, if these changes are finalized,
reimbursement for patient records submitted under Sec. 480.111 would
be consistent with reimbursement under Sec. 476.78. This proposal
would provide a consistent level of reimbursement from submission of
patient records to the QIOs, across all health care providers and
practitioners, that submit patient records to the QIO under Sec. Sec.
476.78 and 480.111. The goal of our proposal is to put all QIO
reimbursement for patient records in the same section of the
regulations, so that QIOs, providers, and practitioners know where to
find the relevant provisions. This proposal would also help to reduce
the risk of inconsistencies in policy application due to duplication of
related QIO regulations in multiple sections.
a. Required Submission of Patient Records in Electronic Format to the
QIO
Currently Sec. 476.78 requires providers and practitioners who are
subject to QIO review activities under 42 CFR part 476 to submit
requested patient care data and other pertinent data and information to
the QIO. We are proposing to require those submissions be made in
electronic format. We are proposing to require electronic submission
because it is more efficient, cost effective, and timely. Our
comparison of patient records submission in electronic format and
submission by facsimile and mail indicate a savings of about $71.8
million to CMS over 5 years. These savings is an estimated combination
of $37.6 million cost savings from reimbursement to providers for
sending patient records via facsimile, photocopying and mailing, and
$34.2 million cost saving from payment to QIOs to cover the costs for
scanning and uploading paper based patient records.
Currently, Sec. 476.78(b)(2)(ii) requires providers and
practitioners send secure transmission of an electronic version of
medical information to the QIO, if available, and subject to the QIO's
ability to support receipt and transmission of the electronic version
of patient records. Because most providers and all QIOs have
demonstrated ability to send and receive patient records in electronic
format, we are proposing to mandate providers and practitioners to
submit requested patient records and information to the QIO in
electronic format.
Our interoperability programs, quality reporting programs, and
other programs are now requiring electronic submission of patient care
data and information to CMS and its contractors. The Promoting
Interoperability program is successful in encouraging widespread
adoption of EHRs by providers and practitioners. In addition, about 79
percent of hospitals use the eSMD to send medical records
electronically. By participation in these CMS data transfer programs,
providers, practitioners, and QIOs have demonstrated the capability to
collect, store, and safely transmit EHR data electronically. Based on
our years of experience administering the Medicare and Medicaid EHR
Incentive and Promoting Interoperability programs, we believe that most
providers and practitioners are now able to safely communicate
patient's medical records electronically to QIOs. This is evidenced by
the increased number of providers, practitioners, and QIOs that
currently participate in the use of esMD, MFT, and other related
electronic data communication methods.
On September 15, 2011, we implemented the esMD system for programs
requiring the review of medical documentation and patient records such
as: Medicare Fee for service payment appeals, prior authorization
requests, and durable medical equipment requests. The esMD system is
used by providers on a voluntary basis to transmit medical
documentation to review contractors electronically. This medical
documentation (including patient records) is used by CMS contractors to
review claims and to verify providers' compliance with Medicare rules
for documentation and payment. Medicare providers and review
contractors believe that using the esMD system results in cost savings
and increased efficiencies, as well as improve payment turnaround time,
and reduce the administrative burden associated with medical
documentation requests and responses. By 2017, there are about 60,579
providers has access and used esMD to send medical records, and up to
2.5 million medical records were transmitted from providers to Medicare
contractors. See 2017 esMD Annual Report: https://www.cms.gov/Research-Statistics-Data-and-Systems/Computer-Data-and-Systems/ESMD/Downloads/2017-esMD-Annual-Program-Report-10-01-2016-09-30-2017.pdf.
The MFT refers to a software or a service that manages the secure
transfer of data from one computer to another through a network (for
example, the internet). MFT software is marketed to corporate
enterprises as an alternative to using ad-hoc file transfer solutions.
MFT is currently available to providers and practitioners, and QIOs
currently use MFT to transmit data to its clinical peer reviewers. The
MFT provides another good option for providers and practitioners to
submit records and information securely to QIOs.

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Given numerous improvements in electronic data communication
capabilities among both providers and QIOs, and the expansion in access
to electronic data communication technology, we believe it is in the
best interest of the Medicare program for CMS to support electronic
data communication between the QIOs and providers and practitioners. We
propose to require providers and practitioners to provide patient
records to the QIO electronically beginning in FY 2021 and for
subsequent years. Our proposal provides for a waiver for providers and
practitioners that lack the capability to submit patient records in
electronic format. Lacking the capability to submit patient records in
electronic format may have a number of causes, such as the records not
being in an electronic format or readily convertible to an electronic
format or the provider or practitioner suffering a loss of the
necessary resources to submit records through the QIO-approved or CMS-
approved mechanism (such as because of a power outage). The intent of
this policy change is to incentivize health care providers and
practitioners subject to Sec. 476.78 to use the most efficient
mechanisms available to submit required data to the QIOs for review
activities, in order to minimize the time and expense required to
satisfy their responsibilities under Sec. 476.78(b), and thereby
minimize the expense CMS incurs in the administering the QIO program. A
complete discussion of the anticipated impact of these proposals can be
found section I.H.13. of Appendix A to this proposed rule.
b. Reimbursement for Submission of Patient Records to the QIOs in
Electronic Format
We are proposing at Sec. 476.78(e)(2) to authorize the QIOs to
reimburse providers and practitioners, for submitting requested patient
records to the QIO in an electronic format, starting in FY 2021. The
current regulation does not authorize or set a rate for reimbursement
when providers submit patient records to the QIOs in an electronic
format. We believe the lack of reimbursement for the submission of
requested patient records in an electronic format discourages providers
and practitioners from sending patient records in an electronic format,
which is a more efficient and cost effective method for transmitting
patient records than facsimile or photocopying and mailing. This lack
of reimbursement for electronic submission of patient records does not
align with other CMS programs and policies that seek to incentivize the
use of electronic records and the electronic transmission of
information such as the Promoting Interoperability Program. We believe
this proposal would encourage more practitioners and providers to
submit patient records in electronic format to the QIOs.
In calculating the rate of reimbursement for submission of patient
records in an electronic format, we took into consideration the labor
rate and materials cost associated with submitting patient records in
an electronic format. We are proposing to follow steps similar to those
used in CMS' methodology for calculating reimbursement for photocopying
patient records for the QIOs. We calculated the proposed reimbursement
rate for patient records submitted in electronic format as follows:
Step 1--Calculate total salary of a medical records clerk,
including fringe benefits, using the salary level for an experienced
midlevel (GS-5 step 5) secretary in the Federal government as
representative of that of a medical records clerk.
Step 2--Calculate labor costs associated with searching
for, downloading, and submitting electronic records.
Step 3--Determine the number of patient records that can
be searched, retrieved, processed, and submitted per hour.
Step 4--Calculate the cost of active productive
time of a medical record clerk by dividing annual salary with total
productive hours, taking into account time spent at rest, and away from
work.
Step 5--Calculate total reimbursement for
submitting patient records to the QIOs in electronic format by dividing
the total productive hour cost by the total number of patient records
we estimate a medical records clerk can process in 1 hour.
Using this methodology, we calculated the reimbursement for
submitting records electronically to QIO as follows:
(1) The Labor Costs Associated With Searching for, Downloading, and
Submitting Patient Records
Labor costs were calculated by adding the annual salary of a
medical records clerk with the costs of fringe benefits, and dividing
that sum with the number of patient records that can reasonably be
expected to be processed in a year.
In this proposed rule, we would continue to use the salary of a
Federal GS-5 midlevel secretary as representative of a medical records
clerk's salary. We would take into account increases in the payment
rate for a midlevel secretary in the federal government for the CY
2020. Using the salary level for an experienced midlevel (GS-5 step 5)
secretary in the Federal government as representative of that of a
medical records clerk, the annual salary of the medical records clerk
is estimated to be $39,573 according to the Office of Personnel
Management's 2020 General Schedule pay scale, with locality adjustment
for the rest of the United States. In calculating the fringe benefits
applicable to a medical records clerk, we used OMB Circular A-76 to
calculate the annual fringe benefit cost, based on 36.25 percent of the
GS-5 salary. The estimated annual fringe benefit cost is therefore
$14,345 ($39,573 * 36.25 percent). Adding the fringe benefit cost, the
estimated total annual salary of a medical records clerk is $53,918.
Assuming a full time equivalent of 2080 hours per year and divide the
annual salary by the number of hours worked ($53,918/2080 hours) in a
year, the total salary per hour of a medical records clerk would be $26
per hour.
(2) Labor Costs Associated With Searching for, Downloading, and
Submitting Patient Records
We assume that an average patient record request by QIO will be
contained in a single electronic file that can be classified as one
electronic record. This assumption is based on CMS' experience with
current QIO transfer of electronic patient records to OMHA and the DAB.
We estimate that it will take a medical record clerk an average of 5
minutes to search, retrieve, process, and submit a requested patient
record in electronic format. Using this estimate we calculate that a
medical records clerk could search for, retrieve, process, and
submitted a total of 12 medical records per hour.
(3) Active Productive Time of a Medical Record Clerk
We estimate a medical records clerk is active and productive for a
total of 1,430 hours per year (about 5.5 productive hours per day). We
took into account the time spent by the medical records clerk at rest
and lunch, and time away from work on annual vacation, sick, and
holiday leave. To calculate the cost of one active productive hour we
divide the estimated cost for annual salary and fringe benefits by the
total number of active productive hours per year. We estimate the cost
of one active productive hour at $38 per hour ($53,918/1430 hours).
(4) Cost of Supplies
We estimate that there would be no cost for supplies directly
attributable to

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searching, downloading, and submitting patient records to the QIO.
(5) Total Reimbursement Rate for Submitting Patient Records to the QIOs
in an Electronic Format
We estimated total cost for submitting a patient record to the QIO
at $3 per record. This calculation was derived by dividing the total
productive hour cost of $38 by the number of patient records that can
processed in an hour, which is 12 records ($38/12 records = 3.17).
Consistent with our policy and generally accepted mathematics
principles, we chose to round our calculations to nearest decimal. We
believe this decision is both reasonable and supportable.
We invite public comment on this proposed methodology for
calculating the rate of reimbursement for processing patient records in
an electronic format. In addition, we invite public comment on
alternative methodologies for determining more appropriate
reimbursement rate for the submission of patient records to the QIOs in
an electronic format, and we intend to seek to finalize our policy in
the final rule based upon the public comments we received.
c. Waiver Process for Exemption From Requirement To Submit Patient
Records in Electronic Format to the QIO
We propose to permit providers and practitioners who cannot submit
requested patient records and information in electronic format to
request a waiver. Any provider or practitioner that lacks the
capability to submit patient records and information to the QIO in
electronic format must obtain a waiver to be exempted from the
requirement of submitting patient records and information in electronic
format. Upon approval of the waiver, the provider or practitioner can
submit requested patient records and information to QIO by facsimile or
first class mail. We propose that requests for waivers by providers
that are required to execute a written agreement with the QIO must
generally be made to the QIO when executing the written agreement.
After the waiver is approved, a provider or practitioner may send
requested patient records and information by facsimile or first class
mail. Providers and practitioners that are not required to execute a
written agreement with the QIO may request a waiver to be exempted from
submitting patient records in electronic format by notifying the QIO
that they lack the capability to submit patient records in electronic
format. The QIOs may reimburse providers and practitioners with
approved waivers for requested patient records submitted by facsimile
or by photocopying and mailing, as proposed in Sec. 476.78(e)(3).
Under our proposal, reimbursement would not be permitted for any
patient record submitted to the QIO by facsimile or by photocopying and
mailing, when the provider or practitioner does not have an approved
waiver. We propose that a waiver would be approved by the QIO after the
provider or practitioner has demonstrated that it lacks the capability
to submit patient records in an electronic format. Under our proposal,
only providers and practitioners that have an approved wavier may
receive reimbursement for submitting patient records by facsimile or by
photocopying and mailing.
d. Reimbursement Rate for Providers Submitting Patient Records by
Photocopying and Mailing
We are proposing that the QIOs would reimburse providers with
approved waivers for submitting patient record by photocopying and
mailing. We are proposing at Sec. 476.78(e)(3) to increase the
reimbursement rate for submitting patient records by photocopying and
mailing from $0.12 per page to $0.15 per page. We are updating this
payment rate in accordance with CMS's commitment to periodically revise
the photocopying reimbursement rate. This rate adjustment is fair,
reasonable, and meets the current labor and material cost articulated
in the established formula for calculating photocopying reimbursement
rate. We propose to use the following formula for updating the rate of
reimbursement for photocopying and mailing records to QIO as follows:
Step 1. CMS adds the annual salary of a photocopy machine
operator and the costs of fringe benefits as determined in accordance
with the principles set forth in OMB circular A-76, to establish a
total annual salary for the photocopy machine operator.
Step 2. CMS divides the total annual salary of the
photocopy machine operator by the number of pages that can be
reasonably expected to be made annually by the photocopy machine
operator to establish the labor cost per page.
Step 3. CMS adds to the per-page labor cost as previously
determined in step two to the per-page costs of photocopying supplies.
We used this methodology to determine what specific rate to propose
for the reimbursement for sending patient records by photocopying and
mailing patient records. We are proposing to increase the per-page
reimbursement rate to $0.15 for photocopying patient records. We
calculated the proposed photocopying reimbursement rate by updating the
salary, fringe benefits, and supply figures associated with
photocopying and submitting patient records to the QIO. In accordance
with this methodology we considered the following factors in
calculating the proposed new rate:
(1) Labor Costs Associated With Photocopying and Submitting Patient
Records
Labor costs for photocopying patient records were calculated by
adding the annual salary of a photocopy machine operator with the costs
of fringe benefits, and dividing that sum by the number of pages that
can reasonably be expected to be photocopied in 1 year. In this
proposed rule, we would continue to rely upon the salary of a Federal
GS-5 midlevel secretary as representative of a photocopy machine
operator's salary. Using the salary level for an experienced (GS-5)
midlevel secretary in the Federal government as representative of that
of a photocopy machine operator, the annual salary of the photocopy
machine operator is estimated to be $39,573, according to the Office of
Personnel Management's 2020 General Schedule pay scale. This estimate
include the locality pay adjustment for the rest of the United States.
In calculating the fringe benefit of we used OMB Circular A-76 to
calculate the annual fringe benefit cost, based on 36.25 percent of the
GS-5 salary. The annual fringe benefit cost is $14,345 ($39,573 * 36.25
percent). Adding the fringe benefit, the estimated total annual salary
of the photocopying operator is estimated at: $53,918. To determine the
per-page labor cost, the total of salary ($39,573) and fringe benefits
($14,345) costs, which amount to $53,918, was divided by 624,000 pages,
the number of photocopies a photocopy machine operator can make in 1
year. The estimated labor cost for photocopying 1 page of patient
records is $0.08 ($53,918/624,000 pages).
(2) Number of Pages a Photocopy Machine Operator Can Photocopy Annually
We estimate the total number of pages that a photocopy machine
operator can photocopy per year based on hand feeding of documents into
a photocopying machine. We recognize that modern technologies exist
which support faster photocopying, such as through automatic paper
feeds. We are aware that using an automatic paper feeds can greatly
increase the number of pages that can be photocopied per

[[Page 32864]]

minutes, and as a result, greatly decrease the cost of photocopying per
page. We assume that not all providers and practitioners has access to
modern technology or uses modern photocopier capable of automatic paper
feed. Therefore, we would calculate the number of page a photocopy
machine operator can photocopy, using the manual paper feed estimate.
In calculating the number of pages that can be photocopied per hour
using a manual feed, we take into consideration that recent
improvements in photocopying machine technology has improved the speed
of photocopier up to 8 pages per minute. In order to account for time
spent by the photocopy machine operator in search and retrieval tasks,
and time away from work on annual vacation, sick, and holiday leave,
the total number of work hours per year is estimated at 1,300 (average
of 5 productive hours per day), resulting in a total of 624,000 (1,300
hour x 60 minutes x 8 pages) pages per year.
(3) Costs of Photocopying Materials and Supplies
We are proposing a total estimated supply cost of 7 cents per page,
based on a per-page paper cost of 6 cents and a per-page toner and
developer cost of 1 cent per page. The supply cost include the cost of
photocopying paper and toner cartridge. Using the market survey cost
for these materials we estimated the average cost, using the average
price and quality at the GSA material supplies rate, we estimated that
copier paper cost 6 cents per page for paper and 1 cent per page for
photocopy machine toner. The paper cost was based on a cost of $32.49
per case for recycled white photocopier paper of 5,000 sheets in a
case. The costs of photocopier toner that yield 37,000 copies was
estimated at $54.99 per toner cartridge. We calculated these costs
using estimates of the costs for recycled photocopier paper and toner
cartridges contained in the GSA supply catalogue.
(4) Total Reimbursement Rate for Photocopying Patient Records
We estimate total cost of photocopying at 15 cents per page. This
calculation was derived by adding the total estimated labor cost of 8
cents per page and total cost of photocopying supplies of (7 cents per
page. Consistent with our policy and generally accepted mathematics
principles, we chose to round our calculations to nearest decimal. We
believe this decision is both reasonable and supportable. We invite
public comment on this proposed methodology for calculation of the rate
for reimbursement for sending patient records and information by
photocopying. In addition, we invite public comment on alternative
methodologies for determining a more appropriate photocopying
reimbursement rate and intend to finalize a policy based upon the
public comments we receive.
e. Reimbursement Rate for Providers Submitting Patient Records by
Facsimile
We are proposing at Sec. 476.78(e)(3) to reimburse providers and
practitioners with approved waivers that submit patient records to the
QIO by facsimile at the rate of $0.15 per page. The current regulations
do not specifically provide for reimbursement for patient records
submitted to the QIO by facsimile, but CMS's has historically
interpreted the provisions governing reimbursement for patient records
submitted to the QIOs through photocopying and mailing to also
authorize reimbursement for the submission of patient records by
facsimile. We are now proposing to specifically incorporate our
historic interpretation into the regulatory framework. Pursuant to this
proposal the QIOs would continue to provide for reimbursement for
patient records submitted to the QIO via facsimile, using a rate
estimated based on the associated with submitting patient records to
the QIO by facsimile. We believe the rate we are proposing is fair,
reasonable, and reflects current labor and material costs associated
with sending patient records to the QIOs by facsimile. We calculated
the reimbursement for submitting patient records by facsimile to the
QIO as follows:
Step 1. CMS adds the annual salary of a facsimile machine
operator and the costs of fringe benefits as determined in accordance
with the principles set forth in OMB circular A-76, to establish a
total annual salary for the facsimile machine operator.
Step 2. CMS divides the total annual salary of the
facsimile machine operator by the number of pages of patient records
that can be reasonably expected to be sent annually by facsimile. This
calculation establishes the labor cost per page of patient records
submitted by facsimile.
Step 3. CMS adds to the per-page labor cost as determined
in step two to the average cost of maintaining a dedicated phone line
for facsimile service.
We used this methodology to determine the specific rate of
reimbursement we are proposing for submitting patient records to the
QIO by facsimile. Similar to our methodology for calculating a fair and
appropriate reimbursement rate for submitting records to the QIO via
photocopying and mailing, we calculated the proposed reimbursement rate
for sending patient records to the QIO by facsimile as follows:
(1) Labor Costs Associated With Submitting Patient Records by Facsimile
Labor costs were calculated by adding the annual salary of a
facsimile machine operator with the costs of fringe benefits, and
dividing that sum by the number of pages that a single facsimile
operator can reasonably be expected to submit in a year. We are
proposing to rely upon the salary of a Federal GS-5 midlevel secretary
as representative of a facsimile machine operator's salary. Using the
salary level for an experienced (GS-5) midlevel secretary in the
Federal government as representative of that of a facsimile machine
operator, the annual salary of the facsimile operator is estimated to
be $39,573 according to the Office of Personnel Management's 2020
General Schedule pay scale, including the locality adjustment for the
rest of the United States. In calculating the cost of fringe benefits
we used OMB Circular A-76 to calculate the annual fringe benefit cost,
based on 36.25 percent of the GS-5 salary. The annual estimated fringe
benefit cost is $14,345 ($39,573 * 36.25 percent). With fringe
benefits, we estimated total annual salary of the facsimile operator at
$53,918.
(2) Number of Pages a Facsimile Operator Can Submit Annually
We estimate the total number of pages that a facsimile machine
operator could submit per year based on hand feeding of documents into
facsimile machine. We recognize that several modern technologies exist
which support faster faxing, such as through automatic paper feeds or
faxing over the internet. These technologies greatly increase the
number of pages that can be submitted by facsimile on an hourly basis,
and as a result, greatly decrease per page cost of submitting patient
records by facsimile. However, we took into consideration the fact that
not all providers and practitioners have access to the internet or
modernized facsimile machines. Therefore, we are proposing to calculate
the per page reimbursement rate using the manual paper feed as our
guide. We estimated that a facsimile machine operator using a manual
feed can submit 5 pages of patient records to the QIO in 1 minute. This
estimate does not account for any delay in transmission due to poor
connectivity or machine fault. In order to account for time spent by
the facsimile machine

[[Page 32865]]

operator in search and retrieval tasks, and time away from work on
annual vacation, sick, and holiday leave, we estimated the total number
of work hours per year at 1,300 (an average of 5 productive hours per
day), resulting in a total of 390,000 (1,300 hours x 60 minutes x 5
pages) pages of patient records, which a facsimile operator can submit
to the QIO in 1 year.
To determine the per-page labor cost for submitting patient records
to the QIO via facsimile, we divided the total salary ($39,573) and
fringe benefits ($14,345) costs, $53,918, by 390,000, the number of
copies a facsimile operator can submit in a year, resulting in an
estimated labor cost of 14 cents per page ($53,918/390,000 pages).
(3) Other Costs Associated With Sending Patient Records by Facsimile
We are proposing to reimburse the cost of a dedicated telephone
line used for a facsimile machine at the rate of $29.99 per month, for
an estimated total cost of $359.88 per year. Our estimate does not take
into consideration that multiple facsimile machines can use on
telephone line, and that a telephone line can be used for other
purposes than transmitting records via facsimile. We estimated that 1
cent per page ($359.88/390,000 pages) would reflect the cost of a
dedicated telephone line used for facsimile service, based on estimated
the estimated 390,000 pages of patient records we expect a facsimile
machine operator could submit in a year. We estimated the cost of
telephone line using the average per month cost for a single business
telephone line per month based on an average drawn from comparison of
major telecommunications service provider rates. We estimate that there
is no reimbursable paper or material cost associated with sending
patient records to the QIO by facsimile, as CMS does not reimburse
providers and suppliers for the cost of machinery and overhead costs
for submitting patient records to the QIOs.
(4) Reimbursement Rate for Sending Patient Records by Facsimile
We estimate total cost of or submitting patient records by
facsimile to the QIO at 15 cents per page. This estimate was calculated
by adding the total estimated labor cost of 14 cents per page, and
total cost of a dedicated telephone line at 1 cent per page. Consistent
with our policy and generally accepted mathematics principles, we chose
to round our calculations to nearest decimal. We believe this decision
is both reasonable and supportable. We invite public comment on this
proposed methodology for calculating the rate for reimbursement for
submitting patient records by facsimile. In addition, we invite public
comment on alternative methodologies for determining an appropriate
facsimile reimbursement rate and intend to finalize our policy based
upon the public comments we receive.

B. Revised Regulations To Account for, and Mandate, PRRB Electronic
Filing (42 CFR Part 405, Subpart R)

1. Background
Congress created the Provider Reimbursement Review Board (PRRB or
Board) in 1972 to furnish providers with an independent forum for
resolving payment disputes typically arising from certain Medicare Part
A final determinations (usually cost report audit appeals). (See 42
U.S.C. 1395oo and 42 CFR 405.1801 and 405.1840 through 405.1873.) The
Board has the full power and authority to make rules and establish
procedures, not inconsistent with the law, regulations, and CMS
Rulings, that are necessary or appropriate to carry out its function.
(See 42 U.S.C. 1395oo(e) and 42 CFR 405.1868(a).)
On average, the PRRB receives approximately 3,000 new appeals
annually. The PRRB's docket is unique and complex, so it is imperative
that the Board manage its docket in the most efficient manner possible.
For example, an individual provider appeal may involve one or more
issues; in contrast, a group appeal involves multiple providers
appealing a common issue. (See 42 U.S.C. 1395oo(b) and 42 CFR
405.1837.) In addition, many providers or issues may be transferred
between the cases to create a complex web of interrelated appeals. In
light of these complexities, it is imperative that the Board continue
to improve the efficiencies of its processes.
Until mid-2018, appeal documents (including documents such as
appeal requests, transfer requests, and position papers) could only be
filed with the PRRB on paper. Over the past decade, CMS and the Board
have received feedback from its stakeholders requesting an electronic
filing system. On August 16, 2018, the CMS Office of Hearings (OH) and
the Board released the OH Case and Document Management System (OH
CDMS). OH CDMS is a web-based portal where providers can file appeals
and all parties can manage their cases. Besides instantaneously
accepting submissions electronically, OH CDMS releases outgoing
electronic correspondence and Board decisions as well. OH CDMS enables
providers and their representatives to manage their cases in real time,
and it allows parties to view all documents officially filed through
the system (including viewing opposing parties' submissions). When a
party makes a submission, whether submitting a new appeal or taking an
action on an existing case, there is an immediate system notification
that confirms the submission was made. All parties on the case will
then receive an email confirming the date and time of delivery.
Internally, the system also serves as a daily workflow management
system for the PRRB and its staff and aids the PRRB in strategically
managing its docket in a more efficient manner.
The feedback we have received from active users of OH CDMS has been
largely positive. We have also incorporated user suggestions to refine
the system. OH CDMS offers a Help Desk, available each business day, to
assist users with technical questions that may arise.
2. Technical Changes To Support Electronic Filing
To support the use of the electronic filing system, we are
proposing to make technical changes throughout the regulations at 42
CFR part 405, subpart R. First, we propose to update the definitions of
``date of receipt'' and ``reviewing entity'' at 42 CFR 405.1801(a) to
indicate that submissions to an electronic filing system are considered
received on the date of electronic delivery. We are also proposing to
add a new definition of ``in writing or written'' that indicates either
of these terms means a hard copy or electronic submission. We believe
these are common sense technical changes that reflect current practice
and understanding. We note that we are not proposing to revise the
requirement in Sec. 405.1801(a) that the date of receipt by a party or
affected nonparty of documents involved in proceedings before a
reviewing entity, including the Board, is presumed to be 5 days after
the date of issuance. Therefore, regardless of whether the Board issues
a decision electronically or by some other means, the 5-day presumption
regarding receipt by a party would continue to apply. We also propose
to make technical changes throughout the subpart to replace references
related to hard copy documents such as ``mail'' and ``hand delivery''
with terms that apply to both hard copy and electronic submissions. We
seek comments on these changes.
We are also proposing to update 42 CFR 405.1857, related to
subpoenas, so that it generally conforms to the technical changes we
are proposing.

[[Page 32866]]

However, we are proposing to add the following statement to this
section, ``If the subpoena request is being sent to a nonparty subject
to the subpoena, then the subpoena must be sent by certified mail.''
This change is to ensure that the subpoena rule is in accordance with
section 205(d) of the Act (Issuance of subpoenas in administrative
proceedings).
3. Intention To Revise Board Instructions To Require Mandatory
Electronic Submissions
As stated earlier in this preamble, the Board has the full power
and authority to make rules and establish procedures, not inconsistent
with the law, regulations, and CMS Rulings, that are necessary or
appropriate to carry out its function. (See 42 U.S.C. 1395oo(e) and 42
CFR 405.1868(a).) It is critically important that the PRRB docket
records be fully populated within OH CDMS so that the Board and its
stakeholders can optimally realize the technological benefits and
efficiencies of OH CDMS. Therefore, we are proposing to amend the
regulations at 42 CFR 405.1843 (Parties to proceedings in a Board
appeal) to make clear that parties to a Board appeal shall familiarize
themselves with the instructions for handling a PRRB appeal, including
any and all requirements related to the electronic or online filing of
documents for future mandatory filing. This change to require
electronic submissions would transform the PRRB's docket to a more
efficient and less costly paperless environment, and will support a
better continuity of operations posture. Accordingly, no earlier than
FY 2021, the PRRB may require that all new submissions (in new and
pending appeals) be filed electronically using OH CDMS. This
requirement would be reflected in updated Board instructions, which are
currently published at https://www.cms.gov/Regulations-and-Guidance/Review-Boards/PRRBReview/Downloads/PRRB-Rules-August-29-2018.pdf.
Because the Board plans to wait until at least FY 2021 to
potentially require electronic filings, we believe that stakeholders
would have ample time necessary to register and start using the system
to the extent they have not already done so on a voluntary basis.
Stakeholders can access the Electronic Filing web page located at
https://www.cms.gov/Regulations-and-Guidance/Review-Boards/PRRBReview/Electronic-Filing to find instructions on accessing and using OH CDMS.
We recommend that parties to PRRB appeals, who have not already, sign
up for and begin using OH CDMS as soon as possible to allow time to
become familiar with the system and to avoid any issues that may arise
if signing up for the system is delayed until after use of the system
becomes mandatory.
It has already been approximately 21 months since the system became
operational and available to stakeholders. In this regard, we note the
following:
Many providers started using the system immediately after
OH CDMS was launched.
OH CDMS now has over 700 registered users, and continues
to grow. We believe that this number of users is largely representative
of the cohort of stakeholders that will use OH CDMS.
Over 65 percent of all new appeals have been filed
electronically by providers using the system.
All government contractors that participate in PRRB
appeals (including Medicare Administrative Contractors (MACs), the Cost
Report Audit and Appeals contractor (CRAA), and the Appeals Support
Contractor (ASC)) use the system.
Nevertheless, to provide additional notice to stakeholders, the
PRRB would provide at least 60 calendar days' notice (through its
instructions) before the exact date that electronic filing would become
mandatory. Thus, under the proposed rule, the earliest the PRRB could
publish such instructions would be October 1, 2020 and, as a result,
the earliest effective date for mandatory usage of the system for PRRB
appeals submissions would be November 30, 2020.
We note that making use of OH CDMS mandatory for PRRB appeals is
consistent with recent revisions updating the Medicare Geographic
Classification Review Board (MGCRB) regulations that similarly permit
the MGCRB to require the use of OH CDMS through its instructions. The
MGCRB regulatory change was published in the FY 2017 IPPS/LTCH PPS
final rule (81 FR 56928 (August 22, 2016)) and the requirement to file
electronically was effective for the 2020 reclassification cycle. The
transition to mandatory electronic filing of MGCRB applications went
smoothly, and we received positive feedback regarding OH CDMS from the
user community.
Finally, we note that the provisions governing contractor hearing
officer appeals, Administrative and Judicial Review and reopenings are
also found in part 405 subpart R. However, we are not proposing changes
to the submission procedures for these processes at this time.

B. Proposed Revisions of Medicare Bad Debt Policy

1. Background
Under the Medicare program, beneficiaries may be responsible for
payments of premiums, copayments, deductibles (including blood
deductibles), and coinsurance amounts that are related to covered
services (42 CFR 409.80 through 409.89). The Medicare program
recognizes that a beneficiary's failure to pay a deductible or
coinsurance amount could lead to non-Medicare patients bearing the
related costs of covered Medicare services, a result that is barred by
the prohibition of cross-subsidization detailed in 1861(v)(1)(A)(i) of
the Act (see also 42 CFR 413.89(d)).
Reimbursement to providers is allowable under Medicare for
beneficiaries' unpaid deductible and coinsurance amounts for covered
services reimbursed by the program on the basis of reasonable cost or
paid under a cost-based prospective payment system. Thus, the following
amounts are not included as allowable bad debts under Medicare:
Unpaid Medicare deductible and coinsurance amounts
associated with furnishing non-covered services and services furnished
to non-Medicare patients.
Unpaid Medicare premiums and Medicare copayments \500\
associated with any covered service.
---------------------------------------------------------------------------

\500\ While copayments and coinsurance amounts are both amounts
of Medicare beneficiary cost sharing, a copayment is usually a fixed
amount a beneficiary may be required to pay as their share of cost
for a medical service or supply (for example, a doctor's visit,
hospital outpatient visit, or prescription drug). Unpaid copayments
are excluded from bad debt reimbursement. Conversely, a coinsurance
amount is usually an amount a beneficiary may be required to pay as
a percentage share of cost with the Medicare plan for services after
the payment of any applicable deductible.
---------------------------------------------------------------------------

Unpaid Medicare deductible and coinsurance amounts
associated with any covered services paid by the Program under a fee
schedule or under a reasonable charge-based methodology including
Program fee schedule payments made to physicians (including payments to
providers on behalf of provider-based physicians) for professional
services and fee schedule payments made to other practitioners.
Unpaid Medicare deductible and coinsurance amounts
associated with covered services paid for under a contractual capitated
rate-based plan, such as but not limited to, a Medicare Advantage plan.
Unpaid Medicare deductible and coinsurance amounts written
off to charity care.

[[Page 32867]]

Unpaid Medicare deductible and coinsurance amounts written
off to a contractual allowance account.
In accordance with section 1861(v)(1) of the Act and regulations at
Sec. 413.89, Medicare pays some of the uncollectible deductible and
coinsurance amounts to certain providers, suppliers and other entities
(hereinafter collectively referred to as ``providers'') eligible to
receive reimbursement for bad debt of Medicare beneficiaries. To
determine if bad debt amounts are allowable, providers must meet the
requirements at Sec. 413.89, and Chapter 3, Bad Debts, Charity and
Courtesy Allowances, of the Provider Reimbursement Manual (PRM) (CMS
Pub. 15-1) (hereinafter referred to as PRM), which provides further
explanation and instruction regarding the requirements for Medicare bad
debt reimbursement.
The reimbursement of Medicare bad debt was not originally
statutorily mandated; rather, it was first promulgated by CMS \501\ in
1966 \502\ shortly after the Medicare Program's inception and was
thereafter set forth in the regulations.\503\ Congress later
statutorily created reimbursement limits on allowable Medicare bad debt
under section 1861(v)(1)(T), (V) and (W) of the Act. The regulations at
Sec. 413.89(b)(1) define ``bad debts'' as amounts considered to be
uncollectible from accounts and notes receivable that were created or
acquired in providing services. Accounts receivable and notes
receivable are designations for claims arising from the furnishing of
services, and are collectible in money in the relatively near future.
Similar language is set forth in the PRM, Chapter 3, Section 302.1. To
be an allowable Medicare bad debt, the debt must meet all of the
following criteria (see Sec. 413.89(e) and PRM, Chapter 3, Section
308):
---------------------------------------------------------------------------

\501\ To implement the Medicare statute, the Social Security
Administration (SSA) was reorganized and the Bureau of Health
Insurance (BHI) was established on July 30, 1965. The BHI then
became responsible for the development of health insurance policy
before the creation of the Health Care Financing Administration
(HCFA), later renamed CMS. CMS Milestones 1937-2015 (July 2015).
\502\ November 22, 1966 (31 FR 14813).
\503\ The current Medicare bad debt regulations were originally
proposed and finalized in 1966 and codified at Sec. 405.420.
---------------------------------------------------------------------------

The debt must be related to covered services and derived
from deductible and coinsurance amounts.
The provider must be able to establish that reasonable
collection efforts were made.
The debt was actually uncollectible when claimed as
worthless.
Sound business judgment established that there was no
likelihood of recovery at any time in the future.
In 1987, Congress enacted legislation that implemented a moratorium
prohibiting the Secretary and contractors from making changes to
Medicare bad debt reimbursement policies that were in effect on August
1, 1987 for hospitals. This is typically referred to as the ``Bad Debt
Moratorium.'' (See section 4008(c) of the Omnibus Budget Reconciliation
Act of 1987 (Pub. L. 100-203)). In section 3201 of the Middle Class Tax
Relief and Job Creation Act of 2012 (Pub. L. 112-96), the Bad Debt
Moratorium was repealed by Congress, effective for cost reporting
periods beginning on or after October 1, 2012.
Because the bad debt moratorium is no longer in existence, we
believe it is appropriate to clarify certain Medicare bad debt policies
that have been the subject of litigation, and generated interest and
questions from stakeholders over the past several years. Hence, this
proposed rule proposes to clarify, update and codify certain
longstanding Medicare bad debt principles into the regulations by
revising Sec. 413.89, ``Bad debts, charity, and courtesy allowances.''
Additionally, in this proposed rule, we would recognize the new
Accounting Standards Update--Topic 606 for revenue recognition and
classification of Medicare bad debts. We are also proposing technical
corrections to the incorrect cross references in 42 CFR 412.622 and
417.536 to refer to the Medicare bad debt reimbursement regulation at
Sec. 413.89.
We are proposing that the clarification and codification of our
longstanding Medicare bad debt policies, where indicated herein, be
effective for cost reporting periods beginning before, on, and after
the effective date of this rule, because of the important public
interest it would serve to do so as set forth in section
1871(e)(1)(A)(ii) of the Act. These longstanding bad debt policies have
existed in Medicare guidance, including the PRM, for several decades
and providers and beneficiaries are familiar with and rely upon them.
The clarification and codification of longstanding Medicare bad debt
policies into the regulations with a retroactive effective date does
not affect prior transactions or impose additional duties or adverse
consequences upon providers or beneficiaries, nor does it diminish
rights of providers or beneficiaries. The clarification and
codification of longstanding Medicare bad debt policies into the
regulations with a retroactive effective date also serves an important
public interest to assist providers and beneficiaries by avoiding
confusion as to which longstanding policy should be applied for which
cost reporting period, as might arise if the effective date was instead
proposed for cost reporting periods beginning on or after the effective
date of this rule. Failing to adopt the clarification and codification
of longstanding Medicare bad debt policies with a retroactive effective
date might lead some providers to believe that those policies did not
apply to earlier cost reporting periods, and thus might cause those
providers to resubmit previously submitted cost reports. The
clarification and codification of longstanding Medicare bad debt
policies into the regulations with a retroactive effective date serves
the important public interest of promoting fairness and economy to
providers by saving them the time and resources required for such
resubmissions, and by saving government resources and funds from the
taxpayer-funded Medicare Trust Fund that would be expended in review of
cost report resubmissions. Our specific proposals for revising our
regulations are discussed in this section of this rule.
2. Proposed Revisions to Regulations
a. Reasonable Collection Effort, Non-Indigent Beneficiaries
Providers are permitted to collect unpaid Medicare cost sharing
amounts from beneficiaries, unless beneficiaries have been determined
to be categorically or medically needy by State Medicaid Agencies to
receive medical assistance from Medicaid, or determined to be indigent
by the provider for Medicare bad debt purposes. If a beneficiary's
Medicare cost sharing remains unpaid, in order to claim reimbursement
from Medicare for the bad debt, providers must demonstrate that they
have first made a reasonable effort to collect the beneficiary's unpaid
deductible and/or coinsurance amounts. (See Sec. 413.89(e)(2) and the
PRM, Chapter 3, Section 310.) This reasonable effort to collect the
unpaid deductible and coinsurance amounts is, in part, based on the
provider applying sound business judgment and has been a longstanding
Medicare bad debt policy requirement articulated in the PRM since 1968.
The PRM section 310 describes a ``reasonable collection effort'' and
sets forth how providers must effectuate the reasonable collection
effort, as a precondition to reimbursement of a provider's bad debt. We
note that the provider's required collection efforts set forth in PRM
section 310 apply only to non-indigent

[[Page 32868]]

beneficiaries; the provider's required collection efforts are different
for beneficiaries who have been determined by the provider to be
indigent, including medically indigent, or beneficiaries enrolled in
Medicaid. In this proposed rule, we are proposing to clarify and codify
the distinction between non-indigent beneficiaries and indigent
beneficiaries for Medicare bad debt purposes.
Specifically, we are proposing to amend Sec. 413.89(e)(2) by
adding a new paragraph (e)(2)(i) to define, for Medicare bad debt
purposes, a non-indigent beneficiary as a beneficiary who has not been
determined to be categorically or medically needy by a State Medicaid
Agency to receive medical assistance from Medicaid, and has not been
determined to be indigent by the provider for Medicare bad debt
purposes.
These proposals would be effective for cost reporting periods
beginning before, on, and after the effective date of this rule because
the difference in collection efforts required by a provider for
indigent and non-indigent beneficiaries has existed since the
promulgation of Medicare bad debt policy and the definition of a non-
indigent beneficiary codifies the existing meaning of the term.
(1) Issuance of a Bill, PRM Section 310
Under Medicare bad debt policy, a provider is required to
demonstrate that it has made a reasonable effort to collect
beneficiaries' unpaid deductibles and coinsurance amounts. PRM section
310 sets forth that to be considered a reasonable collection effort, a
provider's effort to collect Medicare deductible and coinsurance
amounts must be similar to the effort the provider puts forth to
collect comparable amounts from non-Medicare patients. It must involve
the issuance of a bill on or shortly after discharge or death of the
beneficiary to the party responsible for the patient's personal
financial obligations. It also includes other actions such as
subsequent billings, collection letters and telephone calls or personal
contacts with this party which constitute a genuine, rather than a
token, collection effort. The provider's collection effort may include
using or threatening to use court action to obtain payment.
Generally, providers will have financial incentives to issue bills
to patients as soon as possible to collect the outstanding debt and
remove it from their financial records, or present beneficiaries'
unpaid deductible and coinsurance amounts to Medicare after a
reasonable collection effort period for reimbursement of the Medicare
reimbursable amount.
Over the past several years, we have received feedback from
stakeholders indicating that ``shortly after'' in PRM section 310 is
too vague, as well as inquiries as to what timeframe ``shortly after''
means for providers to comply with the reasonable collection effort.
Stakeholders have suggested that ``shortly after'' could be anywhere
from 30 days to a year following the discharge or death of the
beneficiary. The Merriam Webster definition of ``short(ly)'' \504\ is
``not extended in time,'' ``brief,'' ``expeditious,'' or ``quick.''
Although the timeframe ``shortly after'' was drafted in the PRM section
310 decades ago with an eye toward affording flexibility to providers,
inquiries from stakeholders and variances in the application of
``shortly after'' over the years have led us to believe that a more
definitive timeframe should be considered while still maintaining the
greatest flexibility for providers.
---------------------------------------------------------------------------

\504\ https://www.merriam-webster.com/dictionary/short.
---------------------------------------------------------------------------

We believe that a timeframe of 30 or 60 days would be too short
because it may not allow providers with varying billing practices the
ability to issue the bill within that timeframe. A timeframe of 90 or
120 days would afford greater flexibility, as we have found this to be
in the upper parameters of most providers' billing practices for the
issuances of bills to patients.
In addition to the queries over the definition of ``shortly
after,'' stakeholders have questioned whether the benchmark event for
the issuance of the bill should be the ``discharge or death of the
beneficiary,'' or some other event. Generally, Medicare fee for service
claims must be filed with the appropriate Medicare claims processing
contractor no later than 12 months, or 1 calendar year, after the date
the services were furnished.
42 CFR 424.44. For institutional providers that have a span of
dates of services (that is, from X date through X date), the
``through'' date (that is, the last day of service) is used as the date
of service for the 12 month (or 1 calendar year) timeframe for a
provider to timely submit a bill (CMS Pub. 100-04, section 70.4).
Following the processing of the claim, the provider receives a Medicare
remittance advice evidencing the claim processing. Because providers
have 12 months from the date of service to timely submit a bill to
Medicare, we believe that requiring a provider to issue a bill for the
beneficiary's unpaid cost sharing following the ``discharge or death of
the beneficiary'' is a much shorter timeframe and does not afford
flexibility to the provider when the provider has a much longer
timeframe of 12 months from the date a service was provided to bill
Medicare in accordance with the billing requirements. We note that
providers usually issue a bill to a beneficiary, or the party who is
financially responsible for the beneficiary's personal financial
obligations, within 120 days of death or discharge. We believe that a
more flexible option could be to require the provider to issue a bill
for Medicare cost sharing no later than 120 days following the
provider's receipt of the Medicare remittance advice for the processed
claim, because this is similar to providers' usual billing timeframes,
or some other event as discussed herein.
We have received suggestions from stakeholders that the benchmark
event for the provider to issue a bill to the beneficiary for Medicare
cost sharing should be after the provider's receipt of payment from the
beneficiary's secondary payer,\505\ if any. In this instance, a
beneficiary may have other insurance, secondary to Medicare that may
also have a coverage liability to pay for the service provided to the
beneficiary. Secondary insurance may pay some or all of the costs left
after the primary insurer, Medicare, has paid (for example, deductibles
and/or coinsurance amounts). In this regard, the provider must bill
Medicare and the secondary payer in order to determine the
beneficiary's accurate and outstanding Medicare cost sharing liability.
Because there is no minimum date by which a provider must issue a bill
to the party responsible for the beneficiary's cost sharing, and
providers can claim Medicare bad debt in the cost reporting period in
which the debt was deemed worthless, there is no disadvantage to the
provider for us to adopt one or all of the aforementioned benchmark
scenarios upon which a provider must issue a bill.
---------------------------------------------------------------------------

\505\ This secondary payer is other than Medicaid for a dual
eligible beneficiary.
---------------------------------------------------------------------------

Longstanding Medicare bad debt policy also requires that a
provider's reasonable collection effort include other actions such as
subsequent billings, collection letters and telephone calls or personal
contacts with this party which constitute a genuine, rather than token,
collection effort.'' Additionally, providers must furnish documentation
to its contractor that includes the provider's bad debt collection
policy which describes the collection process for Medicare and non-
Medicare

[[Page 32869]]

patients; the beneficiary's account history documents which show the
dates of various collection actions such as the issuance of bills to
the beneficiary, follow-up collection letters, reports of telephone
calls and personal contact, etc.; and the beneficiary's file with
copies of the bill(s) and follow-up notices.
Therefore, we are proposing to amend Sec. 413.89(e)(2) by adding a
new paragraph (e)(2)(i)(A) to specify the reasonable collection effort
requirement for a non-indigent beneficiary must be similar to the
effort the provider, and/or the collection agency acting on the
provider's behalf, puts forth to collect comparable amounts from non-
Medicare patients. It must involve the issuance of a bill to the
beneficiary or the party responsible for the beneficiary's personal
financial obligations on or before 120 days after: (1) The date of the
Medicare remittance advice; or (2) the date of the remittance advice
from the beneficiary's secondary payer, if any; whichever is latest. A
provider's reasonable collection effort also includes other actions
such as subsequent billings, collection letters and telephone calls or
personal contacts with this party which constitute a genuine, rather
than token, collection effort. Additionally, a provider must maintain
and, upon request, furnish documentation to its contractor that
includes the provider's bad debt collection policy which describes the
collection process for Medicare and non-Medicare patients; the
beneficiary's account history documents which show the dates of various
collection actions such as the issuance of bills to the beneficiary,
follow-up collection letters, reports of telephone calls and personal
contact, etc.; and the beneficiary's file with copies of the bill(s)
and follow-up notices.
In this proposed rule, we are proposing that these revisions,
except for Sec. 413.89(e)(2)(i)(A)(2) and (3), would be effective for
cost reporting periods beginning before, on and after the effective
date of this rule. The provisions proposed in Sec.
413.89(e)(2)(i)(A)(3), regarding the requirement to issue a bill to the
beneficiary or the party responsible for the beneficiary's personal
financial obligations based on the remittance advice date from Medicare
or the beneficiary's secondary payer, if any, would be effective for
cost reporting periods beginning on or after the effective date of this
rule.
In this proposed rule, we are also proposing that the proposals for
Sec. 413.89(e)(2)(i)(A)(2) regarding the prior longstanding Medicare
bad debt policy requiring the issuance of a bill to the beneficiary or
the party responsible for the beneficiary's personal financial
obligations on or shortly after discharge or death of the beneficiary
would be effective for cost reporting periods beginning before the
effective date of this rule.
(2) 120-Day Collection Effort and Reporting Period for Writing Off Bad
Debts
Under Medicare bad debt policy, PRM section 310.2 sets forth a
``presumption of noncollectibility,'' which provides that if after
reasonable and customary attempts to collect a bill, the debt remains
unpaid more than 120 days from the date the first bill is mailed to the
beneficiary, the debt may be deemed uncollectible.
This means that a provider must make reasonable and customary
attempts to collect a bill for at least 120 days from (and including)
the date the first bill is mailed to the beneficiary (or the party
responsible for the beneficiary's personal financial obligations),
including when a provider uses a collection agency to collect a bill.
If the debt remains unpaid on the 121st day from the date the first
bill is mailed to the beneficiary, the provider can cease collection
efforts and presume that the account is non-collectible, and designate
the unpaid deductible and coinsurance amounts as an uncollectible bad
debt.
Over the past several years, questions have arisen from
stakeholders with regard to the effect on the collection effort when a
provider receives partial payments during the 120-day collection effort
time period. We have always intended that when a partial payment is
received within the required 120-day collection effort period, the
collection effort is not completed and the 120-day time period restarts
on the day the partial payment is received. The language in the PRM
section 310.2 supports this reasoning as it sets forth ``if, after 120
days, a payment is not received, the unpaid amount can be written
off.'' The corollary is that if, within the 120 days, a partial payment
is received, the remaining uncollected amount cannot be written off to
Medicare bad debt because the collection effort is active and ongoing
by way of the response from the beneficiary submitting a payment. The
partial payment received evidences the beneficiary's willingness to pay
the debt, at least in part, and the provider must further engage with
the beneficiary and follow up, by way of continuing the collection
effort and sending additional collection letters or bills to the
beneficiary for another 120-day collection effort time period. The
purpose of Medicare bad debt is to reimburse providers for
beneficiaries' unpaid deductibles and/or coinsurance amounts. It is
reasonable to place a date of finality on the collection effort time
period; hence, the 120-day minimum collection time period. However,
when partial payments are received within the 120-day time period, it
is reasonable to presume the remaining unpaid amount is collectible and
expect the provider to continue the collection effort instead of
presuming it to be non-collectible and requesting Medicare to reimburse
the provider for what the beneficiary is actively engaging to pay. This
rationale constitutes a reasonable collection effort as required by
Sec. 413.89(e)(2).
Requiring the 120-day collection effort timeframe to start anew
when a partial payment is received during the 120 days is not
burdensome to the provider and requires little additional resources
from the provider because the account is still open on the provider's
accounting books, and has not yet been written off as a bad debt.
Additionally, because ``uncollectible deductibles and coinsurance
amounts are recognized as allowable bad debts in the reporting period
in which the debts are determined to be worthless,'' (PRM, Chapter 3,
Section 314), the provider can claim the unpaid amounts as a Medicare
bad debt after the additional 120-day collection effort time period,
provided that no additional payment is received that would require an
extension of the 120-day collection effort time period again.
We are proposing to amend Sec. 413.89(e)(2) by adding a new
paragraph (e)(2)(i)(A)(5)(ii) to specify that when the provider
receives a partial payment within the minimum 120-day required
collection effort period, the provider must continue the collection
effort and the day the partial payment is received is day one of the
new collection period. For each subsequent partial payment received
during a 120-day collection effort period, the provider must continue
the collection effort and the day the subsequent partial payment is
received is day one of the new collection period. The provider is
permitted to end the collection effort at the end of a 120-day
collection effort period when no payments have been received during
those consecutive 120 days. These revisions would be effective for cost
reporting periods beginning before, on and after the effective date of
this rule because we are proposing to clarify and codify our
longstanding policy pertaining to the required 120-day collection
effort.

[[Page 32870]]

In this proposed rule, we are also proposing to codify into the
regulations our longstanding policy as set forth in PRM section 316,
Recovery of Bad Debts, which specifies required procedures for when a
provider receives a payment, or recovery, for an amount that was
previously claimed as a Medicare bad debt, and paid, in a prior cost
reporting period. Consistent with this proposal, we are proposing to
amend Sec. 413.89(f) by adding language to specify that, effective for
cost reporting periods beginning before, on and after October 1, 2020,
the deductible and coinsurance amounts uncollected from beneficiaries
are to be written off and recognized as allowable bad debts in the cost
reporting period in which the accounts are deemed to be worthless. Any
payment on the account made by the beneficiary, or a responsible party,
after the write-off date but before the end of the cost reporting
period, must be used to reduce the final bad debt for the account
claimed in that cost report.
In some cases an amount written off as a bad debt and reimbursed by
the program in a prior cost reporting period may be recovered in a
subsequent accounting period; in such situations, the recovered amount
must be used to reduce the provider's reimbursable costs in the period
in which the amount is recovered. However, the amount of such reduction
in the period of recovery must not exceed the actual amount reimbursed
by the program for the related bad debt in the applicable prior cost
reporting period. Because this is has been our longstanding policy as
set forth in the PRM for several decades, we are codifying this policy
into the regulations to also apply to cost reporting periods beginning
before, on and after the effective date of this rule.
(3) Similar Collection Effort Required, Including Collection Agency
Use, PRM Section 310
Under Medicare bad debt policy, Medicare regulations at Sec.
413.89(e)(2) require that providers engage in reasonable collection
efforts. Our manual guidance currently states that, ``[t]o be
considered a reasonable collection effort, a provider's effort to
collect Medicare deductible and coinsurance amounts must be similar to
the effort the provider puts forth to collect comparable amounts from
non-Medicare patients.'' PRM section 310. As such, a provider's
dissimilar debt collection practices for Medicare and non-Medicare
patient accounts do not constitute a provider's ``reasonable collection
effort'' to claim reimbursement from Medicare for a bad debt, whether
the collection effort from the provider is an in-house collection
effort or if the provider elects to refer bad debt accounts to a
collection agency for an outside collection effort. This policy has
been the subject of dispute by stakeholders in the past and we believe
that a clarification of the policy is necessary with incorporation of
the PRM guidance into the regulations.
If a provider elects to refer its non-Medicare accounts to a
collection agency, the provider must similarly refer its Medicare
accounts of ``like amount.'' The PRM section 310.A states that where a
collection agency is used, Medicare expects the provider to refer all
uncollected patient charges of like amount to the agency without regard
to class of patient. The ``like amount'' requirement may include
uncollected charges above a specified minimum amount. Therefore, if a
provider refers to a collection agency its uncollected non-Medicare
patient charges which in amount are comparable to the individual
Medicare deductible and coinsurance amounts due the provider from its
Medicare patient, Medicare requires the provider to also refer its
uncollected Medicare deductible and coinsurance amounts to the
collection agency.
When the provider uses a collection agency to perform a reasonable
collection effort on its behalf, the provider must ensure that the
collection agency's collection effort is similar to the effort the
collection agency puts forth to collect comparable amounts from non-
Medicare patients. This means that for similar, comparable amounts of
the collection accounts, the collection agency must use similar
collection practices for both accounts.
The collection agency's collection effort can include subsequent
billings, collection letters, and telephone calls or personal contacts
with the party who is financially responsible for the beneficiary's
personal financial obligation which constitute a genuine, rather than a
token, collection effort. The collection agency's collection effort may
also include using or threatening to use court action to obtain
payment. Where the collection agency does not follow the reasonable
collection effort requirement, Medicare does not recognize the fees as
an allowable administrative cost. Collection accounts that remain at a
collection agency, for whatever reason, including accounts that are
monitored passively by the collection agency, cannot be claimed by the
provider as a Medicare bad debt. This is because during the period the
unpaid account remains at the collection agency, the provider cannot
meet the fourth regulatory requirement in Sec. 413.89(e)(4) that
``sound business judgment established that there was no likelihood of
recovery at any time in the future.'' While an account remains at a
collection agency, there is always a likelihood of at least some
recovery on the account. The purpose of having an account at a
collection agency is to collect on the account, even if the account is
in a passive collection status. Hence, the very act of having an
account at a collection agency is deemed to be a collection effort
undertaken by the provider. As such, the provider cannot establish that
there is ``no likelihood of recovery at any time in the future'' for
the account and the provider is unable to claim the account as an
allowable Medicare bad debt.
The fee charged by the collection agency is its charge for
providing the collection service and is not considered a Medicare bad
debt. Where a provider uses the services of a collection agency and the
collection agency performs a reasonable collection effort, Medicare
recognizes the fees the collection agency charges the provider as an
allowable administrative cost. When a collection agency obtains payment
of an account receivable, the gross amount collected reduces the
patient's account receivable by the same amount and must be credited to
the patient's account. The collection fee deducted by the agency is
charged to administrative costs.
Example 1--Collection Agency Charges Percent Fee
The provider sends a beneficiary's account of $400 to the
collection agency and the collection agency's fee for its service is 30
percent of the collected amount. If the collection agency collects $220
from the beneficiary, the collection agency keeps $66 (30 percent of
$220) as its fee for the collection services and remits $154 ($220 less
$66) to the provider. The provider records the full amount collected by
the collection agency ($220) in the beneficiary's account receivable
and records the collection fee ($66) in administrative costs. Once the
collection agency completes the required collection efforts on this
account, returns the account back to the provider and the provider
deems the account worthless, the provider can claim on its cost report
the amount of $180 ($400 less $220) as a Medicare bad debt (subject to
further statutorily mandated reductions as set forth in Sec.
413.89(h)). The provider cannot claim the $66 collection agency fee as
a Medicare bad debt.

[[Page 32871]]

Example 2--Collection Agency Charges Flat Fee
The provider sends a beneficiary's account of $400 to the
collection agency and the collection agency's flat fee is $100 per
account for its services. If the collection agency collects $250 from
the beneficiary, the collection agency keeps $100 as its fee for the
collection services and remits $150 ($250 less $100) to the provider.
The provider records the full amount collected by the collection agency
($250) in the beneficiary's account receivable and records the
collection fee ($100) in administrative costs. Once the collection
agency completes the required collection effort on this account,
returns the account back to the provider and the provider deems the
account worthless, the provider can claim on its cost report the amount
of $150 ($400 less $250) as a Medicare bad debt (subject to further
statutory mandated reductions as set forth in Sec. 413.89(h)). The
provider cannot claim the $100 collection agency fee as a Medicare bad
debt.
We therefore are proposing to amend Sec. 413.89(e)(2) by adding a
new paragraph (e)(2)(i)(A) to specify that a provider's effort to
collect Medicare deductible and coinsurance amounts must be similar to
the effort the provider puts forth to collect comparable amounts from
non-Medicare patients. A provider's dissimilar debt collection
practices for Medicare and non-Medicare patient accounts do not
constitute a reasonable collection effort to claim reimbursement from
Medicare for a bad debt, whether the collection effort from the
provider is an in-house collection effort or if the provider elects to
refer bad debt accounts to a collection agency for an outside
collection effort. A provider may use a collection agency to perform a
reasonable collection effort on its behalf. The provider must ensure
that the collection agency's collection effort is similar to the effort
the collection agency puts forth to collect comparable amounts from
non-Medicare patients. The collection agency's collection effort can
include subsequent billings, collection letters, and telephone calls or
personal contacts with this party which constitute a genuine, rather
than a token, collection effort. The collection agency's collection
effort may include using or threatening to use court action to obtain
payment. The fee charged by the collection agency is its charge for
providing the collection service and is not considered a Medicare bad
debt. Where a provider uses the services of a collection agency and the
collection agency performs a reasonable collection effort, Medicare
recognizes the fees the collection agency charges the provider as an
allowable administrative cost. Where the collection agency does not
follow the reasonable collection effort requirement, Medicare does not
recognize the fees as an allowable administrative cost. Collection
accounts that remain at a collection agency, for whatever reason,
including accounts that are monitored passively by the collection
agency, cannot be claimed by the provider as a Medicare bad debt. When
a collection agency obtains payment of an account receivable, the gross
amount collected reduces the patient's account receivable by the same
amount and must be credited to the patient's account. The collection
fee deducted by the agency is charged to administrative costs.
These revisions would be effective for cost reporting periods
beginning before, on and after the effective date of this rule because
we are clarifying and codifying our longstanding policy.
(4) Documentation Required--Reasonable Collection Effort for Non-
Indigent Beneficiaries
Medicare's longstanding bad debt policy requires that as part of a
provider's reasonable collection effort for beneficiaries, including
non-indigent beneficiaries, the provider must maintain and, upon
request, furnish to the Medicare contractor documentation of the
provider's collection effort, whether the provider performs the
collection effort in house or whether the provider uses a collection
agency to perform the required collection effort on the provider's
behalf. PRM section 310.B. The documentation of the collection effort
must include: The provider's bad debt collection policy which describes
the collection process for Medicare and non-Medicare patients; the
patient account history documents which show the dates of various
collection actions such as the issuance of bills, follow-up collection
letters, reports of telephone calls and personal contact, etc. Unpaid
deductible and coinsurance amounts without collection effort
documentation are not considered as allowable bad debts.
Therefore, we propose to amend Sec. 413.89(e)(2) by adding a new
paragraph (e)(2)(i)(A)(6) to specify the requirements a provider must
follow in order to establish the provider's reasonable collection
effort for non-indigent beneficiaries.
Because these are clarifications of codifications of longstanding
Medicare bad debt policy, these revisions would be effective for cost
reporting periods beginning before, on and after the effective date of
the final rule.
b. Reasonable Collection Effort, Beneficiaries Determined Indigent by
Provider Using Required Criteria
Under PRM, Chapter 3, Section 312, a provider may determine a
beneficiary to be indigent for purposes of claiming a beneficiary's
unpaid deductible and/or coinsurance amounts as a Medicare bad debt. A
provider can determine a beneficiary's indigence in one of two ways:
(1) When the beneficiary is eligible for Medicaid as either a
categorically or medically needy individual (that is, a dual eligible
Medicare beneficiary); or (2) the provider determines a non-dual
eligible Medicare beneficiary, to be indigent by applying the
provider's customary methods for determining a patient to be indigent
under the evaluation criteria in PRM section 312. A. through D. Once
indigence is determined by the provider, and the provider concludes
that there has been no improvement in the beneficiary's financial
condition, the debt may be deemed uncollectible without the provider
having to collect the unpaid Medicare cost sharing liability from
beneficiaries by applying the requirements set forth in PRM section 310
for non-indigent beneficiaries.
Over the past several years, the criteria set forth in PRM section
312 regarding the determination of indigence have been the subject of
litigation as questions have been raised as to whether the criteria are
mandatory. In this proposed rule, we are proposing to clarify and
codify our longstanding policy and criteria set forth in PRM section
312 A. through D. (setting for the requirements for a facility's
determination of indigency).
Stakeholders have asked why PRM section 312.C requires that the
beneficiary's total resources be considered when a provider evaluates a
beneficiary's indigence. We believe that each beneficiary's unique
total resources must be evaluated to determine whether a beneficiary is
indigent. This evaluation must include, but is not limited to, an
analysis of assets (only those convertible to cash, and unnecessary for
the beneficiary's daily living), liabilities, and income and expenses,
as well as any extenuating circumstances that would affect the
determination of the beneficiary's indigence.
Therefore, we are proposing to amend Sec. 413.89(e)(2) by adding
new paragraph (e)(2)(ii) to define an indigent non-dual eligible
beneficiary as a Medicare beneficiary who is determined to be indigent
by the provider and not eligible for Medicaid as categorically or

[[Page 32872]]

medically needy. We are also proposing to amend Sec. 413.89(e)(2) by
adding new paragraph (e)(2)(ii)(A) to specify that to determine a
beneficiary to be an indigent non-dual eligible beneficiary, the
provider must apply its customary methods for determining whether the
beneficiary is indigent under the following requirements: (1) The
beneficiary's indigence must be determined by the provider, not by the
beneficiary; that is, a beneficiary's signed declaration of their
inability to pay their medical bills and/or deductibles and coinsurance
amounts cannot be considered proof of indigence; (2) the provider must
take into account a beneficiary's total resources which includes, but
is not limited to, an analysis of assets (only those convertible to
cash and unnecessary for the beneficiary's daily living), liabilities,
and income and expenses. While a provider must take into account a
beneficiary's total resources in determining indigence, any extenuating
circumstances that would affect the determination of the beneficiary's
indigence must also be considered; and (3) the provider must determine
that no source other than the beneficiary would be legally responsible
for the beneficiary's medical bill; for example, a legal guardian.
We are also proposing to amend Sec. 413.89(e)(2) by adding new
paragraph (e)(2)(ii)(B) to specify that as part of its determination of
indigence, the provider must maintain and furnish, upon request to its
Medicare contractor, documentation (for example, a Policy for
Determination of Indigence) describing the method by which indigence or
medical indigence was determined and the beneficiary specific
documentation which supports the provider's documentation of each
beneficiary's indigence or medical indigence. Once indigence is
determined and the provider concludes that there has been no
improvement in the beneficiary's financial status, the bad debt may be
deemed uncollectible without applying a collection effort. Unpaid
deductible and coinsurance amounts without the provider's documentation
of its determination of indigence will not be considered as allowable
bad debts.
In this proposed rule, we are proposing that these revisions would
be effective for cost reporting periods beginning before, on and after
the effective date of this rule because they are clarifications and
codifications of longstanding Medicare policies.
c. Reasonable Collection Effort, Dual Eligible Beneficiaries and the
Medicaid Remittance Advice
Dual eligible beneficiaries are Medicare beneficiaries who are
enrolled in Medicare (either Part A, Part B, or both), and are also
enrolled in ``full Medicaid'' coverage and/or the Medicare Savings
Program (MSP).\506\ Authorized under sections 1902 (a)(10)(E) and
1905(p) and (s) of the Act, the MSP includes four mandatory Medicaid
eligibility groups that assist low income Medicare beneficiaries with
their Medicare expenses.\507\ One specific category of MSP is the
Qualified Medicare Beneficiaries (QMB) program. Under 1905(p)(1) of the
Act, a QMB is an individual who is entitled to hospital insurance
benefits under Part A of Medicare, with income not exceeding 100
percent of the Federal poverty level, and resources not exceeding three
times the SSI limit.
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\506\ ``Full Medicaid'' coverage refers to the package of
services, beyond coverage of Medicare premiums and cost-sharing,
that certain individuals are entitled to when they qualify under
eligibility groups covered under a state's Medicaid program.
\507\ The MSP includes the Qualified Medicare Beneficiary,
Specified Low-Income Medicare Beneficiary Qualifying Individual, and
Qualified Disabled and Working Individual programs. Depending upon
the MSP group the individual is enrolled in, the MSP pays all or
some of an individual's Medicare expenses, including Parts A and B
premiums, deductibles, coinsurance and copayments.
---------------------------------------------------------------------------

Section 1902(a)(10)(E) of the Act directs State Medicaid Agencies
to pay providers for QMB cost sharing amounts as defined in section
1905(p)(3) of the Act. Under section 1905(p)(3) of the Act, ``Medicare
cost sharing'' includes costs incurred with respect to a QMB, ``without
regard to whether the costs incurred were for items and services for
which medical assistance is otherwise available under the plan.'' The
``Medicare cost sharing'' includes Medicare Part A and B coinsurance
and deductibles. Section 1902(n)(2) of the Act permits the State to
limit payment for QMB cost sharing to the amount necessary to provide a
total payment to the provider (including Medicare, Medicaid, required
nominal Medicaid copayments, and third party payments) equal to the
amount a State would have paid for the service under the state plan.
State Medicaid Management Information Systems (MMIS), funded under
section 1903(a)(3) of the Act are required, as an express condition of
a State receiving enhanced federal matching funds for the design,
development, installation and administration of their MMIS systems, to
process Medicare crossover \508\ claims, including QMB cost sharing,
for adjudication of Medicaid payment of Medicare cost sharing amounts,
including deductibles and coinsurance for Medicare services. The MMIS
is also required to furnish the provider with a Medicaid remittance
advice (RA), a document that outlines the State's cost sharing
liability for a particular service or set of services for the patient/
beneficiary.\509\ The Medicaid RA will also show whether the State has
no liability for Medicare cost sharing for a beneficiary's service
pursuant to the State plan.\510\ The MMIS must process all Medicare
crossover claims for QMBs, including Medicare-adjusted claims that are
submitted by Medicaid-enrolled providers, even if a service or provider
category is not currently recognized in the Medicaid State Plan.
However, we recognize that there may be instances where the Medicare
crossover claim process does not occur automatically and providers must
instead submit their Medicare claims manually to Medicaid for
adjudication and determination of the state's cost sharing liability.
The most direct and logical way to know a State's cost sharing
liability for a QMB is from the Medicaid RA. If a State Medicaid
program had Medicare cost sharing responsibility and refused to pay, or
failed to process a Medicare crossover claim to determine its cost
sharing liability, it would be out of compliance with its Medicaid
State plan and would be subject to enforcement action by CMS.
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\508\ ``Crossover'' claims are initiated when a Medicare
certified provider submits a claim to its Medicare contractor for
processing of the Medicare covered service and the claim ``crosses
over'' to Medicaid for the State to determine and set forth the
State's cost sharing liability towards beneficiaries' Medicare cost
sharing. This crossover claim includes the primary payment amount
from Medicare.
\509\ http://www.medicaid.gov/Federal-Policy-Guidance/downloads/CIB-06-07-2013.pdf.
\510\ http://www.medicaid.gov/Federal-Policy-Guidance/downloads/CIB-06-07-2013.pdf.
---------------------------------------------------------------------------

A State's requirement to determine its cost sharing liability for
QMBs was also set forth at section 3490.14(A) of the State Medicaid
Manual (SMM) (CMS Pub. 45); Payment of Medicare Part A and Part B
Deductibles and Coinsurance--State Agency Responsibility, when paper
claims were submitted by Medicare providers to the State to determine
its cost sharing liability. Specifically, section 3490.14(A)(1) and (2)
of the SMM required the State Agency to provide, through the State
Plan, the payment rates applicable for services that are either covered
or not covered by the State Plan, in order to determine the

[[Page 32873]]

amount of Medicare coinsurance and deductibles that the State was
responsible to pay. Because a QMB's financial situation and Medicaid
eligibility status may change over the course of a very short period of
time and the State is required to maintain the most current patient
eligibility and financial information, the State is in the best
position to fulfill its statutory requirement and make the most
accurate determination of its cost sharing liability for any unpaid
Medicare deductibles and coinsurance.
Providers are prohibited under section 1902(n)(3) of the Act from
seeking to collect payment from a QMB for Medicare deductibles or
coinsurance, even if the Medicaid State plan's cost sharing liability
is less than the total amount of the Medicare deductibles and
coinsurance. Medicare may reimburse providers who provide Medicare
covered services to dual eligible beneficiaries the difference between
beneficiaries' unpaid Medicare cost sharing and the State's Medicare
cost sharing liability for the beneficiary, up to the allowable
Medicare bad debt amount if the provider has made a reasonable
collection effort. To satisfy the reasonable collection effort, a
provider that has furnished services to a dual eligible beneficiary
must determine whether the State's Title XIX Medicaid Program (or a
local welfare agency, if applicable) is responsible to pay all or a
portion of the beneficiary's Medicare deductible and/or coinsurance
amounts. A provider satisfies this by billing the State or State
designee such as a Medicaid managed care organization (MCO), to
determine any Medicare cost sharing amounts for which the State may be
liable to the provider. This is known as the ``must-bill policy'' for
dual eligible beneficiaries and is outlined in PRM sections 312 and
322.
In accordance with PRM section 312, providers seeking Medicare
reimbursement for bad debts for dual eligible beneficiaries' cost
sharing are required to: (1) Bill the State Medicaid program to
determine that no source other than the patient would be legally
responsible for the patient's medical bill; for example, title XIX,
local welfare agency and guardian (the ``must bill requirement''); and
(2) obtain and submit to the Contractor, a Medicaid RA from the State
Medicaid program (the ``RA requirement''). The must-bill policy and the
RA requirement to document the States' cost sharing liability are both
longstanding policies of CMS, as shown in PRM sections 312 and 322
themselves: Administrative decisions applying the policies; and section
4499, exhibit 15.08 of the Medicare Intermediary Manual (CMS Pub. 13-4)
(December 1985).
It has always been our position that the must-bill policy and the
RA requirement are necessary to ensure that the provider obtains
contemporaneous documentation that can be maintained in the usual
course of the provider's business as required by Sec. 413.20(a). The
historical background of the RA requirement is also set forth in PRM
section 322, Medicare Bad Debts Under State Welfare Programs:
Thus, when Medicare certified providers provide services to QMBs
and claim bad debt to Medicare for unpaid cost sharing amounts,
Medicare bad debt policy requires providers to bill the State and
submit to their contractors the Medicaid RA as documentation to
evidence the State's liability for dual eligible beneficiaries'
deductible and/or coinsurance amounts. If a provider does not bill the
State and submit the Medicaid RA to Medicare with its claim for bad
debt reimbursement for dual eligible beneficiaries, the result is that
unpaid deductible and coinsurance amounts cannot be included as an
allowable Medicare bad debt.
In 2003, the Medicare ``must bill'' policy was upheld by the 9th
Circuit Court of Appeals in Community Hospital of the Monterey
Peninsula v. Thompson, including the use of a Medicaid RA to determine
the State's liability. Community Hosp. of Monterey Peninsula v.
Thompson, 323 F.3d 782 (9th Cir. 2003). In August 2004, CMS issued a
Joint Signature Memorandum (``JSM'') 370, reiterating the ``must bill''
policy for dual eligible beneficiaries. Specifically, the JSM 370
reiterated that where the State owes none or only a portion of the dual
eligible beneficiary's deductible or coinsurance, the unpaid cost
sharing for the beneficiary is not reimbursable to the provider by
Medicare until the provider bills the State, and the State refuses
payment by producing a Medicaid RA.
In October 2004, we issued a newsletter that reiterated and
clarified the contents of the JSM by stating that in instances where
the State owes none or only a portion of the dual eligible patient's
deductible or copayment, the unpaid liability for the bad debt is not
reimbursable to the provider by Medicare until the provider bills the
State, and the State refuses payment (with a State Remittance Advice).
In order to satisfy the regulatory requirement that a bad debt is
uncollectible, the provider must bill the State Medicaid Agency and
receive a Medicaid RA that contains a formal denial from the State or a
statement setting forth the State's cost sharing liability. A State's
failure to process a bill for determination of its cost sharing equates
to a provider's failure to determine the cost sharing liability of the
State. The burden remains on the provider to work with the State to
determine the State's cost sharing amounts. This burden is not
transferred to the Medicare program and the Medicare program has no
duty to determine a State's cost sharing liability. A provider cannot
substitute an estimate of the State's cost sharing liability for the
Medicaid RA, as this does not satisfy the regulatory requirement of
demonstrating that the bad debt is uncollectible. Any amount that the
State is obligated to pay, either by statute or under the terms of its
approved Medicaid State plan, will not be included as an allowable
Medicare bad debt, regardless of whether the State actually pays its
obligated amount to the provider. However, the deductible and/or
coinsurance amount, or any portion thereof, that the State is not
obligated to pay and which remains unpaid by the beneficiary can be
included as an allowable Medicare bad debt.
Prior to the implementation of automated claims processing, section
3490.14(B) of the SMM previously provided a mechanism whereby providers
could bill the State for the determination of the State's cost sharing
amounts without actually being or becoming a Medicaid provider. In
accordance with section 3490.14(B), ``Subject to State law a provider
has the right to accept a patient either as private pay only, as a QMB
only, or (if the patient is both a QMB and Medicaid eligible) as a full
Medicaid patient, but the provider must advise the patient, for payment
purposes, how he/she is accepted. Medicaid payment of Medicare
deductible and coinsurance amounts may be made only to Medicaid
participating providers, even though a Medicare service may not be
covered by the Medicaid State plan. A provider agreement necessary for
participation for this purpose (for example, for furnishing the
services to the individual as a QMB) may be executed through the
submission of a claim to the Medicaid agency requesting Medicaid
payment for Medicare deductibles and coinsurance for QMBs.'' Although
this SMM provision is no longer in effect, we believe State Medicaid
Agencies have a statutory obligation to determine any Medicare cost
sharing for QMBs, however some States do not recognize certain Medicare
provider types or services under the State Medicaid program and do not
process Medicare

[[Page 32874]]

crossover claims and issue a Medicaid RA.
Some States' noncompliance with the statutory requirement to
process Medicare crossover claims and produce a Medicaid RA have
resulted in numerous appeals filed by providers whose claims for
reimbursement of unpaid Medicare cost sharing from services provided to
dual eligible beneficiaries were denied for Medicare bad debt
reimbursement because the State did not process the Medicare crossover
claim and issue a Medicaid RA to the provider.
In 2013, CMS attempted to address States' non-compliance with the
Federal statutory requirements at sections 1902(a)(10)(E), 1902(n) and
1903(a)(3) of the Act, by issuing an Informational Bulletin,\511\ which
reminded States of the Federal statutory requirement to process
Medicare cost sharing claims for QMBs from Medicare-certified
providers, and to be able to document proper processing of such claims.
A State's non-compliance with the Federal statutory requirements
conflicts with Medicare's must bill policy, resulting in the State's
non-compliance and leaving providers disadvantaged.
---------------------------------------------------------------------------

\511\ https://www.medicaid.gov/federal-policy-guidance/downloads/cib-06-07-2013.pdf.
---------------------------------------------------------------------------

We continue to believe that the best documentation to evidence
States' cost sharing liability for a dual eligible beneficiary is the
Medicaid RA, and that the Medicare requirements for the provider to
bill the State and submit the RA to its contractor should remain. Where
the State processes a Medicare crossover claim and issues a Medicaid RA
to the provider that details the State's Medicare cost sharing
liability, we believe that providers must continue to provide the
Medicaid RA in order to claim Medicare bad debt. Therefore, we are
proposing that the provider must bill that State and submit the
Medicaid RA to Medicare to evidence the State's Medicare cost sharing
liability, so that any State Medicare cost sharing liability can be
deducted from the Medicare bad debt reimbursement.
Consistent with this proposal, we are proposing to amend Sec.
413.89(e)(2) by adding a new paragraph (e)(2)(iii) to clarify and
codify that that, effective for cost reporting periods beginning on and
before the effective date of this rule, to be considered a reasonable
collection effort, a provider that has furnished services to a dual
eligible beneficiary must determine whether the State's Title XIX
Medicaid Program (or a local welfare agency, if applicable) is
responsible to pay all or a portion of the beneficiary's Medicare
deductible and/or coinsurance amounts. To make this determination, the
provider must submit a bill to its Medicaid/title XIX agency (or to its
local welfare agency) to determine the State's cost sharing obligation
to pay all or a portion of the applicable Medicare deductible and
coinsurance. (This is effectuated by the provider submitting a bill to
Medicare for payment and the MAC administering the payment process
automatically `crosses over' the bill to the applicable Medicaid/title
XIX agency for determination of the State's obligation, if any, toward
the cost sharing.) The provider must then submit to its contractor a
Medicaid RA reflecting the State's payment decision. Any amount that
the State is obligated to pay, either by statute or under the terms of
its approved Medicaid State plan, will not be included as an allowable
Medicare bad debt, regardless of whether the State actually pays its
obligated amount to the provider. However, the Medicare deductible and/
or coinsurance amount, or any portion thereof that the State is not
obligated to pay, can be included as an allowable Medicare bad debt. A
provider's failure to bill the State and produce to its Medicare
contractor documentation, including the RA reflecting the State's
verification that it processed a bill to determine its liability, will
result in unpaid deductible and coinsurance amounts not being included
as an allowable Medicare bad debt. Unpaid deductible and coinsurance
amounts without collection effort documentation will not be considered
as allowable bad debts.
We are proposing that these revisions be effective for cost
reporting periods beginning before, on and after the effective date of
this rule because they clarify and codify our longstanding policy to
require that the provider effectuate a reasonable collection effort by
billing the party (state) responsible for the Medicare cost sharing of
the beneficiary. The result of the provider billing the State and the
State processing the Medicare crossover claim is the provider's receipt
of the Medicaid RA which is necessary to evidence the State's Medicare
cost sharing liability.
Although the best documentation to evidence a State's Medicare cost
sharing liability for a dual eligible beneficiary is the Medicaid RA,
we acknowledge that challenges exist for providers when States do not
comply with the Federal statutory requirements. So as not to
disadvantage providers in States that are not in compliance with the
Federal statute, we are considering alternatives for providers to
comply with the ``must bill'' policy and still evidence a State's cost
sharing liability (or absence thereof) for dual eligible beneficiaries
when a State does not process a Medicare crossover claim and issue a
Medicaid RA to providers that could be finalized in the final rule. For
example, alternative documentation to a Medicaid RA could be obtained
by providers from a State that demonstrates it will not enroll the
provider in Medicaid, or a certain class of a type of provider, for the
limited purpose of processing a claim for determining cost sharing
liability. Providers could obtain alternative documentation to a RA
such as a State Medicaid notification where the State has no legal
obligation to pay the beneficiary's Medicare cost sharing. In a State
that has a Medicare cost sharing liability for a beneficiary's service,
the Medicaid State Plan may set forth the Medicare cost sharing
liability for particular services. Alternatively, in a State that has a
Medicare cost sharing liability for a beneficiary's service, the State
could obtain alternative documentation to a Medicaid RA that sets forth
the State's Medicare cost sharing liability that would then be deducted
from the provider's Medicare bad debt reimbursement. In addition to
verifying the state's cost sharing liability, it will also be important
that any alternative documentation to a Medicaid RA accurately verifies
a beneficiary's eligibility for Medicaid for the date of service. We
are considering adopting a policy in the final rule to the effect that
when a State does not process a Medicare crossover claim and issue a
Medicaid RA, the provider could obtain, and submit to its Medicare
contractor, some form of alternative documentation to evidence a
state's Medicare cost sharing liability (or absence thereof). We
welcome suggestions from stakeholders regarding the best alternative
documentation to the Medicaid RA that a provider could obtain and
submit to Medicare to evidence a beneficiary's Medicaid eligibility for
the date of service and the State's Medicare cost sharing liability (or
absence thereof) and regarding whether we should or could adopt such a
policy effective for past cost reporting periods, including whether
doing so would serve an important public interest by allowing providers
with cases currently pending before the PRRB an avenue for timely and
cost-effective resolution.
d. Accounting Standard Update Topic 606 and Accounting for Medicare Bad
Debt
(1) Accounting Standard Update Topic 606
The principles of cost reimbursement require that providers
maintain

[[Page 32875]]

sufficient financial records and statistical data for proper
determination of costs payable under the program. Sec. 413.20(a).
Additionally, providers must use standardized definitions and follow
accounting, statistical, and reporting practices that are widely
accepted in the hospital and related fields. Sec. 413.20(a). Medicare
accounting standards follow the general accounting standards unless the
Secretary declares otherwise on a particular matter. Sec. 413.20(a).
The regulations at Sec. 413.89(c) provide that normal accounting
treatment: Reduction in revenue. Bad debts, charity, and courtesy
allowances represent reductions in revenue. The failure to collect
charges for services furnished does not add to the cost of providing
the services. Such costs have already been incurred in the production
of the services. In this regard, providers are required to record bad
debts and uncollectible accounts as a direct reduction of net patient
revenue rather than an operating expense in their financial records.
Additionally, PRM section 314 Accounting Period for Bad Debts,
provides further guidance to providers for the accounting treatment of
Medicare bad debts and sets forth that ``Uncollectible deductibles and
coinsurance amounts are recognized as allowable bad debts in the
reporting period in which the debts are determined to be worthless.
Allowable bad debts must be related to specific amounts which have been
determined to be uncollectible. Since bad debts are uncollectible
accounts receivable and notes receivable, the provider should have the
usual accounts receivable records-ledger cards and source documents to
support its claim for a bad debt for each account included.'' PRM
section 314. PRM section 320 sets forth methods of determining bad debt
expense, where ``accounts receivable are analyzed and a determination
made as to specific accounts which are deemed uncollectible. The
amounts deemed to be uncollectible are charged to an expense account
for uncollectible accounts. The amounts charged to the expense account
for bad debts should be adequately identified as to those which
represent deductible and coinsurance amounts applicable to
beneficiaries and those which are applicable to other than
beneficiaries or which are for other than covered services. Those bad
debts which are applicable to beneficiaries for uncollectible
deductible and coinsurance amounts are included in the calculation of
reimbursable bad debts.''
The Financial Accounting Standards Board's (FASB) Accounting
Standards Update (ASU) 2014-09, Revenue from Contracts with Customers
(Topic 606), (hereinafter ``ASU Topic 606''), was published in May 2014
with the first implementation period in 2018. Under the ASU Topic 606,
there are changes in the national accounting standard for revenue
recognition of patient-related bad debts and uncollectible accounts, as
well as changes to terminology regarding bad debts. These changes are
for all industries and organizations nationwide, including the
healthcare sector and providers. Under the ASU Topic 606, an amount
representing a bad debt would generally no longer be reported
separately as an operating expense in the provider's financial
statements, but will be treated as an ``implicit price concession,''
and included as a reduction in patient revenue. Additionally, under the
ASU Topic 606 standards, bad debts are now considered to be
``reductions in patient revenue'' instead of ``uncollectible accounts
receivable and notes receivable'' in accordance with the current
language in PRM section 316. Additionally, under the ASU Topic 606
standards, the provider should have the usual ``accounting recordations
for the reductions in revenue'' instead of ``accounts receivable
records ledger cards'' pursuant to the current language in PRM section
316.
Although ASU Topic 606 requires different reporting of providers
and terminology for bad debts (implicit price concessions), there is no
change in the required criteria a provider must meet to qualify a
beneficiary's bad debt account for Medicare bad debt reimbursement
under Sec. 413.89. Therefore, in this proposed rule, we are proposing
to recognize the ASU Topic 606 terminology in Sec. 413.89.
Specifically, we are proposing to recognize that bad debts, also known
as ``implicit price concessions,'' are amounts considered to be
uncollectible from accounts that were created or acquired in providing
services. ``Implicit price concessions'' are designations for
uncollectible claims arising from the furnishing of services, and may
be collectible in money in the relatively near future and are recorded
in the provider's accounting records as a component of net patient
revenue.
We are proposing to amend Sec. 413.89(b)(1) by adding new
paragraph (b)(1)(i) to specify that for cost reporting periods
beginning before October 1, 2020, bad debts are amounts considered to
be uncollectible from accounts and notes receivable that were created
or acquired in providing services. ``Accounts receivable'' and ``notes
receivable'' are designations for claims arising from the furnishing of
services, and are collectible in money in the relatively near future.
Consistent with this proposal, we are also proposing to amend Sec.
413.89(b)(1) by adding new paragraph (b)(1)(ii) to specify that for
cost reporting periods beginning on or after October 1, 2020, bad
debts, also known as ``implicit price concessions,'' are amounts
considered to be uncollectible from accounts that were created or
acquired in providing services. ``Implicit price concessions'' are
designations for uncollectible claims arising from the furnishing of
services, and may be collectible in money in the relatively near future
and are recorded in the provider's accounting records as a component of
net patient revenue. We are also proposing to amend Sec. 413.89(c) by
adding new paragraph (c)(1) to specify that effective for cost
reporting periods beginning before October 1, 2020 bad debts, charity,
and courtesy allowances represent reductions in revenue. The failure to
collect charges for services furnished does not add to the cost of
providing the services. Such costs have already been incurred in the
production of the services. We are also proposing to amend Sec.
413.89(c) by adding new paragraph (c)(2) to specify that, effective for
cost reporting periods beginning on or after October 1, 2020, bad
debts, also known as ``implicit price concessions,'' charity, and
courtesy allowances represent reductions in revenue. The failure to
collect charges for services furnished does not add to the cost of
providing the services. Such costs have already been incurred in the
production of the services.
(2) Medicare Bad Debt and Contractual Allowances
Medicare regulations require providers to follow standardized
definitions, accounting, statistics, and reporting practices that are
widely accepted in the hospital and related fields. PRM section 320
sets forth methods of determining bad debt expense, where accounts
receivable are analyzed and a determination made as to specific
accounts which are deemed uncollectible. The amounts deemed to be
uncollectible are charged to an expense account for uncollectible
accounts. The amounts charged to the expense account for bad debts
should be adequately identified as amounts that represent deductible
and coinsurance amounts applicable to Medicare beneficiaries, including
QMBs, amounts that are applicable to non-beneficiaries, or amounts that
are for other than covered services. Those bad debts which are
applicable to Medicare

[[Page 32876]]

beneficiaries, including QMBs, for uncollectible deductible and
coinsurance amounts are included in the calculation of reimbursable bad
debts.''
Based on recent questions received, it appears that many providers
are not accurate in their accounting classification method of writing-
off a beneficiary's deductible and coinsurance amounts for Medicare-
Medicaid crossover claims, by incorrectly writing off Medicare-Medicaid
crossover bad debts to a contractual allowance account. Contractual
allowances, also known as contractual adjustments, are the difference
between what a healthcare provider bills for the service rendered
versus what it will contractually be paid (or should be paid) based on
the terms of its contracts with third-party insurers and/or government
programs.\512\ Some providers have been writing Medicare-Medicaid
crossover bad debt amounts off to a contractual allowance account
because they are unable to bill the beneficiary for the difference
between the billed amount and the Medicaid claim payment amount. Other
providers are writing these amounts off to a contractual allowance
account because the Medicaid remittance advice referenced the unpaid
amount as a ``Medicaid contractual allowance.''
---------------------------------------------------------------------------

\512\ https://www.lbmc.com/blog/contractual-allowance-for-healthcare-providers.
---------------------------------------------------------------------------

These Medicare-Medicaid crossover claim amounts do not meet the
classification requirements for a Medicare bad debt as set forth in PRM
section 320 and are not compliant with Sec. 413.20 because these
amounts were written off to a contractual adjustment or allowance
account instead of a bad debt expense account.
In this proposed rule, we are proposing to clarify that Medicare
bad debts must not be written off to a contractual allowance account
but must be charged to an expense account for uncollectible accounts
(bad debt or implicit price concession). Consistent with this proposal,
we are proposing to amend Sec. 413.89(c) by adding paragraph (c)(3) to
specify that, effective for cost reporting periods beginning on or
after October 1, 2020, Medicare bad debts must not be written off to a
contractual allowance account but must be charged to an expense account
for uncollectible accounts (bad debt or implicit price concession).
e. Technical Corrections in 42 CFR Parts 412 and 417
A technical correction is required for 42 CFR 412.622(b)(2)(i)
which incorrectly refers to 42 CFR 413.80 instead of the correct
citation of Sec. 413.89, which is the regulation that sets forth rules
pertaining to the bad debts of Medicare beneficiaries.
A technical correction is also required for 42 CFR 417.536(g) which
incorrectly refers to Sec. 413.80 instead of the correct citation of
Sec. 413.89, which sets forth that bad debts, charity, and courtesy
allowances are deductions from revenue and are not to be included in
allowable costs.

X. MedPAC Recommendations

Under section 1886(e)(4)(B) of the Act, the Secretary must consider
MedPAC's recommendations regarding hospital inpatient payments. Under
section 1886(e)(5) of the Act, the Secretary must publish in the annual
proposed and final IPPS rules the Secretary's recommendations regarding
MedPAC's recommendations. We have reviewed MedPAC's March 2020 ``Report
to the Congress: Medicare Payment Policy'' and have given the
recommendations in the report consideration in conjunction with the
proposed policies set forth in this proposed rule. MedPAC
recommendations for the IPPS for FY 2021 are addressed in Appendix B to
this proposed rule.
For further information relating specifically to the MedPAC reports
or to obtain a copy of the reports, contact MedPAC at (202) 653-7226,
or visit MedPAC's website at: http://www.medpac.gov.

XI. Other Required Information

A. Publicly Available Files

IPPS-related data are available on the internet for public use. The
data can be found on the CMS website at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
Following is a listing of the IPPS-related data files that are
available.
Commenters interested in discussing any data files used in
construction of this proposed rule should contact Michael Treitel at
(410) 786-4552.
1. CMS Wage Data Public Use File
This file contains the hospital hours and salaries from Worksheet
S-3, parts II and III from FY 2017 Medicare cost reports used to create
the proposed FY 2021 IPPS wage index. Multiple versions of this file
are created each year. For a discussion of the release of different
versions of this file, we refer readers to section III.L. of the
preamble of this proposed rule.
Media: internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files.html.
Periods Available: FY 2007 through FY 2021 IPPS Update.
2. CMS Occupational Mix Data Public Use File
This file contains the CY 2016 occupational mix survey data to be
used to compute the occupational mix adjusted wage indexes. Multiple
versions of this file are created each year. For a discussion of the
release of different versions of this file, we refer readers to section
III.L. of the preamble of this proposed rule.
Media: internet at: https://www.cms.gov/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files.html.
Period Available: FY 2021 IPPS Update.
3. Provider Occupational Mix Adjustment Factors for Each Occupational
Category Public Use File
This file contains each hospital's occupational mix adjustment
factors by occupational category. Two versions of these files are
created each year to support the rulemaking.
Media: internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-AService-Payment/AcuteInpatientPPS/Wage-Index-Files.html.
Period Available: FY 2021 IPPS Update.
4. Other Wage Index Files
CMS releases other wage index analysis files after each proposed
and final rule.
Media: internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files.html.
Periods Available: FY 2005 through FY 2021 IPPS Update.
5. FY 2021 IPPS FIPS CBSA State and County Crosswalk
This file contains a crosswalk of State and county codes used by
the Federal Information Processing Standards (FIPS), county name, and a
list of Core-Based Statistical Areas (CBSAs).
Media: internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html (on the navigation panel
on the left side of the page, click on the FY 2021 proposed rule home
page or the FY 2021 final rule home page) or https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html.

[[Page 32877]]

Period Available: FY 2021 IPPS Update.
6. HCRIS Cost Report Data
The data included in this file contain cost reports with fiscal
years ending on or after September 30, 1996. These data files contain
the highest level of cost report status.
Media: internet at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Downloadable-Public-Use-Files/Cost-Reports/Cost-Reports-by-Fiscal-Year.html.
(We note that data are no longer offered on a CD. All of the data
collected are now available free for download from the cited website.)
7. Provider-Specific File
This file is a component of the PRICER program used in the MAC's
system to compute DRG/MS-DRG payments for individual bills. The file
contains records for all prospective payment system eligible hospitals,
including hospitals in waiver States, and data elements used in the
prospective payment system recalibration processes and related
activities. Beginning with December 1988, the individual records were
enlarged to include pass-through per diems and other elements.
Media: internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ProspMedicareFeeSvcPmtGen/psf_text.html.
Period Available: Quarterly Update.
8. CMS Medicare Case-Mix Index File
This file contains the Medicare case-mix index by provider number
based on the MS-DRGs assigned to the hospital's discharges using the
GROUPER version in effect on the date of the discharge. The case-mix
index is a measure of the costliness of cases treated by a hospital
relative to the cost of the national average of all Medicare hospital
cases, using DRG/MS-DRG weights as a measure of relative costliness of
cases. Two versions of this file are created each year to support the
rulemaking.
Media: internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html, or for the more recent data files, https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html
(on the navigation panel on the left side of page, click on the
specific fiscal year proposed rule home page or fiscal year final rule
home page desired).
Periods Available: FY 1985 through FY 2021.
9. MS-DRG Relative Weights (Also Table 5--MS-DRGs)
This file contains a listing of MS-DRGs, MS-DRG narrative
descriptions, relative weights, and geometric and arithmetic mean
lengths of stay for each fiscal year. Two versions of this file are
created each year to support the rulemaking.
Media: internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html, or for the more recent data files, https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html
(on the navigation panel on the left side of page, click on the
specific fiscal year proposed rule home page or the fiscal year final
rule home page desired).
Periods Available: FY 2005 through FY 2021 IPPS Update.
10. IPPS Payment Impact File
This file contains data used to estimate payments under Medicare's
hospital inpatient prospective payment systems for operating and
capital-related costs. The data are taken from various sources,
including the Provider-Specific File, HCRIS Cost Report Data, MedPAR
Limited Data Sets, and prior impact files. The data set is abstracted
from an internal file used for the impact analysis of the changes to
the prospective payment systems published in the Federal Register. Two
versions of this file are created each year to support the rulemaking.
Media: internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Historical-Impact-Files-for-FY-1994-through-Present.html, or for the more recent data files, https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html (on the navigation panel on the left side
of page, click on the specific fiscal year proposed rule home page or
fiscal year final rule home page desired).
Periods Available: FY 1994 through FY 2021 IPPS Update.
11. AOR/BOR Tables
This file contains data used to develop the MS-DRG relative
weights. It contains mean, maximum, minimum, standard deviation, and
coefficient of variation statistics by MS-DRG for length of stay and
standardized charges. The BOR tables are ``Before Outliers Removed''
and the AOR is ``After Outliers Removed.'' (Outliers refer to
statistical outliers, not payment outliers.)
Two versions of this file are created each year to support the
rulemaking.
Media: internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html, or for the more recent data files, https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html
(on the navigation panel on the left side of page, click on the
specific fiscal year proposed rule home page or fiscal year final rule
home page desired).
Periods Available: FY 2005 through FY 2021 IPPS Update.
12. Prospective Payment System (PPS) Standardizing File
This file contains information that standardizes the charges used
to calculate relative weights to determine payments under the hospital
inpatient operating and capital prospective payment systems. Variables
include wage index, cost-of-living adjustment (COLA), case-mix index,
indirect medical education (IME) adjustment, disproportionate share,
and the Core-Based Statistical Area (CBSA). The file supports the
rulemaking.
Media: internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html (on the navigation panel
on the left side of the page, click on the FY 2021 proposed rule home
page or the FY 2021 final rule home page) or https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html.
Period Available: FY 2021 IPPS Update.
13. MS-DRG Relative Weights Cost Centers File
This file provides the lines on the cost report and the
corresponding revenue codes that we used to create the 19 national cost
center cost-to-charge ratios (CCRs) that we used in the relative weight
calculation.
Media: internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html (on the navigation panel
on the left side of the page, click on the FY 2021 proposed rule home
page or the FY 2021 final rule home page) or https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html.
Period Available: FY 2021 IPPS Update.

[[Page 32878]]

14. Hospital Readmissions Reduction Program Supplemental File
Updated data are not available at this time. Therefore, we refer
readers to the FY 2020 IPPS/LTCH PPS final rule supplemental file,
which has the most recent finalized payment adjustment factor
components and is the same data as would have been used to create the
FY 2021 IPPS/LTCH PPS proposed rule supplemental file.
Media: internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html (on the navigation panel
on the left side of the page, click on the FY 2021 proposed rule home
page or the FY 2021 final rule home page) or https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html.
Period Available: FY 2021 IPPS Update.
15. Medicare Disproportionate Share Hospital (DSH) Supplemental File
This file contains information on the calculation of the
uncompensated care payments for FY 2021. Variables include the data
used to determine a hospital's share of uncompensated care payments,
total uncompensated care payments and estimated per claim uncompensated
care payment amounts. The file supports the rulemaking.
Media: internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html (on the navigation panel
on the left side of the page, click on the FY 2021 proposed rule home
page or the FY 2021 final rule home page) or https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html.
Period Available: FY 2021 IPPS Update.
16. New Technology Thresholds File
This file contains the cost thresholds by MS-DRG that are generally
used to evaluate applications for new technology add-on payments for
the fiscal year that follows the fiscal year that is otherwise the
subject of the rulemaking. As we discuss in section II.F.5.i. of the
preamble of this proposed rule, we are proposing to apply the proposed
threshold value for proposed new MS-DRG 018 in evaluating the cost
criterion for the CAR T-cell therapy technologies for purposes of FY
2021 new technology add-on payments. As also discussed in section
II.G.5.i of the preamble of this proposed rule, beginning with FY 2022,
we are proposing to use the proposed threshold values associated with
the proposed rule for that fiscal year to evaluate the cost criterion
for all other applications for new technology add-on payments and
previously approved technologies that may continue to receive new
technology add-on payments, if those technologies would be assigned to
a proposed new MS-DRG for that same fiscal year. (We note that the
information in this file was previously provided in Table 10 of the
annual IPPS proposed and final rules (83 FR 41739).)
Media: internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html (on the navigation panel
on the left side of the page, click on the applicable fiscal year's
proposed rule or final rule home page) or https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html.
Periods Available: For FY 2021 and FY 2022 applications.

B. Collection of Information Requirements

1. Statutory Requirement for Solicitation of Comments
Under the Paperwork Reduction Act (PRA) of 1995, we are required to
provide 60-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. In
order to fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the PRA of 1995 requires that
we solicit comment on the following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
In this proposed rule, we are soliciting public comment on each of
these issues for the following sections of this document that contain
information collection requirements (ICRs).
2. ICRs Regarding PRRB Electronic Filing (Sec. Sec. 405.1801 Through
405.1889)
As stated earlier in section IX.B.3 of the preamble of this
proposed rule, we propose to amend the regulations at 42 CFR 405.1801
through 405.1889 to allow the PRRB to make use of the system mandatory
in PRRB appeals. Proposed Sec. 405.1801 states that except for
subpoena requests being sent to a nonparty pursuant to Sec.
405.1857(c), the reviewing entity may prescribe the method(s) by which
a party must make a submission, including the requirement to use an
electronic filing system for submission of documents. Proposed
amendments to the regulations at 42 CFR 405.1843 make clear that
parties to a Board appeal must familiarize themselves with the
instructions for handling a PRRB appeal, including any and all
requirements related to the electronic or online filing of documents
for future mandatory filing.
The burden associated with the requirements in discussed in this
section is the time and effort necessary to review instructions and
register for the electronic submission system as well as the time and
effort to gather develop and submit various documents associated with a
PRRB appeal. While these requirements impose burden, we believe the
requirements are exempt from the PRA in accordance with the
implementing regulations of the PRA at 5 CFR 1320.4. Information
collected during the conduct of a criminal investigation or civil
action or during the conduct of an administrative action,
investigation, or audit involving an agency against specific
individuals or entities is not subject to the PRA.
3. ICRs for Requests for Changes to the Medicare Severity Diagnosis-
Related Group (MS-DRG) Classifications
As discussed in section II.D. of the preamble of this proposed
rule, the public may request changes to the MS-DRG classifications to
reflect changes in treatment patterns, technology, and any other
factors that may change the relative use of hospital resources. The
burden associated with requesting changes to the MS-DRG classifications
will be discussed in a forthcoming information collection request,
which is currently under development. However, upon completion of the
ICR, we will publish the required 60-day and 30-day notices to solicit
public comments in accordance with the requirements of the PRA.
4. ICRs Relating to the Hospital Readmissions Reduction Program
In section IV.K. of the preamble of this proposed rule, we discuss
proposed requirements for the Hospital Readmissions Reduction Program.
In this proposed rule, we are not removing or adopting any new measures
into the Hospital Readmissions Reduction Program. All six of the
Hospital

[[Page 32879]]

Readmissions Reduction Program's measures are claims-based measures. We
do not believe that continuing to use these claims-based measures
creates or reduces any burden for hospitals because they will continue
to be collected using Medicare FFS claims that hospitals are already
submitting to the Medicare program for payment purposes.
5. ICRs for the Hospital Value-Based Purchasing (VBP) Program
In section IV.L. of the preamble of this proposed rule, we provide
estimated and newly established performance standards for the Hospital
VBP Program for certain measures for the FY 2023, FY 2024, FY 2025, and
FY 2026 program years. We do not believe that updating program
performance standards will create or reduce any burden for hospitals.
Data submissions for the Hospital VBP Program are associated with the
Hospital Inpatient Quality Reporting Program under OMB control number
0938-1022, the National Healthcare Safety Network under OMB control
number 0920-0666, and the Hospital Consumer Assessment of Healthcare
Providers and Systems (HCAHPS) survey under OMB control number 0938-
0981. Because the FY 2023 Hospital VBP Program will use data that are
also used to calculate quality measures in other programs and Medicare
fee-for-service claims data that hospitals are already submitting to
CMS for payment purposes, the program does not anticipate any change in
burden associated with this proposed rule.
6. ICRs Relating to the Hospital-Acquired Condition (HAC) Reduction
Program
In section IV.M. of the preamble of this proposed rule, we discuss
proposed requirements for the HAC Reduction Program. In this proposed
rule, we are not proposing to remove any measures or adopt any new
measures into the HAC Reduction Program. The HAC Reduction Program has
adopted six measures. We do not believe that the claims-based CMS PSI
90 measure in the HAC Reduction Program creates or reduces any burden
for hospitals because it is collected using Medicare FFS claims
hospitals are already submitting to the Medicare program for payment
purposes. We note the burden associated with collecting and submitting
data for the HAI measures (CDI, CAUTI, CLABSI, MRSA, and Colon and
Abdominal Hysterectomy SSI) via the NHSN system is captured under a
separate OMB control number, 0920-0666 (expiration November 30, 2021),
and therefore will not impact our burden estimates.
In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41478 through
41484), we finalized our policy to validate NHSN HAI measures under the
HAC Reduction Program, which will require hospitals to submit
validation templates for the NHSN HAI measures beginning with Q3 CY
2020 discharges. OMB has currently approved 43,200 hours of burden and
approximately $1.6 million under OMB control number 0938-1352
(expiration date January 31, 2021), accounting for information
collection burden experienced by up to 600 IPPS hospitals selected for
validation under the HAC Reduction Program for the FY 2023 program year
and each subsequent year. In section IV.M.6. of the preamble of this
proposed rule, we propose to change the pool of hospitals selected for
validation under the HAC Reduction Program from up to 600 hospitals to
up to 400 hospitals, as similarly proposed under the Hospital IQR
Program, as discussed in section VIII.A. of the preamble of this
proposed rule. In this FY 2021 IPPS/LTCH PPS proposed rule, we are
updating our burden calculation using the most recent data from the
Bureau of Labor Statistics, which reflects a median hourly wage of
$19.40 \513\ per hour for a Medical Records and Health Information
Technician professional. We calculate the cost of overhead, including
fringe benefits, at 100 percent of the hourly wage estimate, consistent
with the previous year. This is necessarily a rough adjustment, both
because fringe benefits and overhead costs vary significantly from
employer-to-employer and because methods of estimating these costs vary
widely from study-to-study. Nonetheless, we believe that doubling the
hourly wage rate ($19.40 x 2 = $38.80) to estimate total cost is a
reasonably accurate estimation method. Accordingly, we calculate cost
burden to hospitals using a wage plus benefits estimate of $38.80 per
hour.
---------------------------------------------------------------------------

\513\ Occupational Employment and Wages. Available at: https://www.bls.gov/ooh/healthcare/medical-records-and-health-information-technicians.htm.
---------------------------------------------------------------------------

We previously estimated a reporting burden of 80 hours (20 hours
per record x 1 record per hospital per quarter x 4 quarters) per
hospital selected for validation per year to submit the CLABSI and
CAUTI templates, and 64 hours (16 hours per record x 1 record per
hospital per quarter x 4 quarters) per hospital selected for validation
per year to submit the MRSA and CDI templates for a total of 43,200
hours ([80 hours x 300 hospitals] + [64 hours x 300 hospitals]). Based
on our proposals in this proposed rule, we estimate a new total burden
of 28,800 hours ([80 hours per hospital to submit CLABSI and CAUTI
templates x 200 hospitals selected for validation] + [64 hours per
hospital to submit MRSA and CDI templates x 200 hospitals selected for
validation]), reflecting a total burden decrease of 14,400 hours
(43,200 hours-28,800 hours), and a new total burden cost of
approximately $1,117,440 (28,800 hours x $38.80 per hour).\514\ We will
submit the revised information collection estimates to OMB for approval
under OMB control number 0938-1352.
---------------------------------------------------------------------------

\514\ Occupational Employment and Wages. Available at: https://www.bls.gov/ooh/healthcare/medical-records-and-health-information-technicians.htm.
---------------------------------------------------------------------------

7. ICRs for the Hospital Inpatient Quality Reporting (IQR) Program
a. Background
The Hospital IQR Program (formerly referred to as the Reporting
Hospital Quality Data for Annual Payment Update (RHQDAPU) Program) was
originally established to implement section 501(b) of the MMA, Public
Law 108-173. OMB has currently approved 1,612,710 hours of burden and
approximately $60.7 million under OMB control number 0938-1022,
accounting for information collection burden experienced by
approximately 3,300 IPPS hospitals and 1,100 non-IPPS hospitals for the
FY 2022 payment determination. In this proposed rule, we describe the
burden changes with regard to collection of information under OMB
control number 0938-1022 (expiration date December 31, 2022) for IPPS
hospitals due to the proposed policies in this proposed rule.
In section VIII.A.5.b. of the preamble to this proposed rule, we
are proposing to progressively increase the numbers of quarters of eCQM
data reported, from one self-selected quarter of data to four quarters
of data over a 3-year period, by requiring hospitals to report two
quarters of data for the CY 2021 reporting period/FY 2023 payment
determination, three quarters of data for the CY 2022 reporting period/
FY 2024 payment determination, and four quarters of data beginning with
the CY 2023 reporting period/FY 2025 payment determination and for
subsequent years. We expect these policies will increase our collection
of information burden estimates. Details on these policies as well as
the expected burden changes are discussed further in this section of
this rule.

[[Page 32880]]

In section VIII.A. of the preamble to this proposed rule, we are
proposing to begin public display of eCQM data beginning with data
reported by hospitals for the CY 2021 reporting period and for
subsequent years. As discussed further in this proposed rule, we do not
expect this policy to affect our information collection burden
estimates.
In section VIII.A.11. of the preamble to this proposed rule, we
also are proposing several changes to streamline validation processes
under the Hospital IQR Program. We are proposing to: (1) Require the
use of electronic file submissions via a CMS-approved secure file
transmission process and no longer allow the submission of paper copies
of medical records or copies on digital portable media such as CD, DVD,
or flash drive; starting with validation affecting the FY 2024 payment
determination; (2) combine the validation processes for chart-
abstracted measures and eCQMs for validation affecting the FY 2024
payment determination by: (a) Aligning data submission quarters; (b)
combining hospital selection, including: (i) Reducing the pool of
hospitals randomly selected for chart-abstracted measure validation;
and (ii) integrating and applying targeting criteria for eCQM
validation; (c) removing previous exclusion criteria; and (d) combining
scoring processes by providing one combined validation score for the
validation of chart-abstracted measures and eCQMs with the eCQM portion
of the combined score weighted at zero; and (3) formalize the process
for conducting educational reviews for eCQM validation affecting the FY
2023 payment determination in alignment with current processes for
providing feedback for chart-abstracted validation results. As
discussed further in this proposed rule, we expect our proposed policy
to align the hospital selection process will increase our information
collection burden estimates. We do not expect the other proposed
validation policies to affect our information collection burden
estimates. Details on these policies as well as the expected burden
changes are discussed further in this section of this rule.
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42602 through
42605), we estimated that reporting measures for the Hospital IQR
Program could be accomplished by staff with a median hourly wage of
$18.83 per hour. We note that since then, more recent wage data have
become available, and we are updating the wage rate used in these
calculations in this proposed rule. The most recent data from the
Bureau of Labor Statistics reflects a median hourly wage of $19.40 per
hour for a Medical Records and Health Information Technician
professional.\515\ We calculated the cost of overhead, including fringe
benefits, at 100 percent of the median hourly wage, consistent with
previous years. This is necessarily a rough adjustment, both because
fringe benefits and overhead costs vary significantly by employer and
methods of estimating these costs vary widely in the literature.
Nonetheless, we believe that doubling the hourly wage rate ($19.40 x 2
= $38.80) to estimate total cost is a reasonably accurate estimation
method. Accordingly, we will calculate cost burden to hospitals using a
wage plus benefits estimate of $38.80 per hour throughout the
discussion in this section of this rule for the Hospital IQR Program.
---------------------------------------------------------------------------

\515\ U.S. Bureau of Labor Statistics. Occupational Outlook
Handbook, Medical Records and Health Information Technicians.
Available at: https://www.bls.gov/ooh/healthcare/medical-records-and-health-information-technicians.htm.
---------------------------------------------------------------------------

b. Information Collection Burden Estimates for Proposed Policies
Related to eCQM Reporting and Submission Requirements for the CY 2021
Reporting Period/FY 2023 Payment Determination, the CY 2022 Reporting
Period/FY 2024 Payment Determination, and the CY 2023 Reporting Period/
FY 2025 Payment Determination and Subsequent Years
In the FY 2020 IPPS/LTCH PPS final rule, we finalized eCQM
reporting and submission requirements such that hospitals submit one,
self-selected calendar quarter of data for four eCQMs for the CYs 2020
and 2021 reporting periods/FYs 2022 and 2023 payment determinations (84
FR 42503) and one, self-selected calendar quarter of data for three
self-selected eCQMs and the Safe Use of Opioids--Concurrent Prescribing
eCQM for the CY 2022 reporting period/FY 2024 payment determination (84
FR 42505). Our related information collection estimates were discussed
at (84 FR 42604).
In sections VIII.A.10.e.(1). through (4). of the preamble to this
proposed rule, we are proposing to progressively increase the number of
quarters of eCQM data reported, from one self-selected quarter of data
to four quarters of data over a 3-year period, by requiring hospitals
to report: (1) Two quarters of data for the CY 2021 reporting period/FY
2023 payment determination, while continuing to require hospitals to
report four self-selected eCQMs; (2) three quarters of data for the CY
2022 reporting period/FY 2024 payment determination, while continuing
to report three self-selected eCQMs and the Safe Use of Opioids; and
(3) four quarters of data beginning with the CY 2023 reporting period/
FY 2025 payment determination and for subsequent years, while
continuing to require hospitals to report three self-selected eCQMs and
the Safe Use of Opioids--Concurrent Prescribing eCQM. We believe there
would be a progressive increase to the burden estimate over the 3-year
period due to these proposed policies.
We previously estimated the information collection burden
associated with the eCQM reporting and submission requirements to be 40
minutes per hospital per year (10 minutes x 4 eCQMs x 1 quarter = 40
minutes), or 0.67 hours per hospital per year (40 minutes/60). We
estimated a total annual burden of 2,200 hours across all IPPS
hospitals (0.67 hours x 3,300 IPPS hospitals). Using the updated wage
estimate as described previously, we estimate this to represent a total
annual cost of $85,360 ($38.80 hourly wage x 2,200 annual hours) across
all IPPS hospitals. Based on our proposal to progressively increase the
number of quarters of data reported, from one self-selected quarter of
data to four quarters of data over a 3-year period, we estimate an
annual burden increase of 2,200 hours and $85,360 for all participating
IPPS hospitals for each of the CY 2021 reporting period/FY 2023 payment
determination, CY 2022 reporting period/FY 2024 payment determination,
and CY 2023 reporting period/FY 2025 payment determination by
increasing the number of quarters of eCQM data required to be reported
by hospitals from one self-selected quarter of data to two quarters of
data, then to three quarters of data, and finally to four quarters of
data, respectively, for a total increase of 6,600 hours (2,200 hours +
2,200 hours + 2,200 hours) and $256,080 ($85,360 + $85,360 + $85,360)
across a 3-year period for all participating IPPS hospitals.
c. Information Collection Burden Estimate for Proposed eCQM Public
Display Requirements Beginning With the CY 2021 Reporting Period/FY
2023 Payment Determination
In section VIII.A.13.b. of the preamble to this proposed rule, we
are proposing to begin public display of eCQM data beginning with data
reported by hospitals for the CY 2021 reporting period and for
subsequent years. Because hospitals would not have any additional
information collection requirements, we believe there would be no
change to the information collection burden estimate due to this
policy, but

[[Page 32881]]

acknowledge that there are other types of burden associated with this
proposal. For example, there is burden associated with the optional
reviewing of hospital-specific reports during the public reporting
preview; however, we believe this burden is nominal because hospitals
already review these reports with respect to other types of measures
for the Hospital IQR Program.
d. Information Collection Burden Estimate for Proposed Updates to the
Processes for Validation of Hospital IQR Program Measure Data
In section VIII.A.11. of the preamble to this proposed rule, we are
proposing to make several changes to streamline the validation process.
We are proposing to: (1) Require the use of electronic file submissions
via a CMS-approved secure file transmission process and no longer allow
the submission of paper copies of medical records or copies on digital
portable media such as CD, DVD, or flash drive, beginning with
validation of Q1 2021 data affecting the FY 2024 payment determination;
(2) combine the validation processes for chart-abstracted measures and
eCQMs by: (a) Aligning data submission quarters, with the validation
quarters affecting the FY 2023 payment determination serving as a
transition year before being fully aligned as to validation quarters
affecting the FY 2024 payment determination; (b) combining hospital
selection, including: (i) Reducing the pool of hospitals randomly
selected for chart-abstracted measure validation, and (ii) integrating
and applying targeting criteria for eCQM validation, beginning with
validation affecting the FY 2024 payment determination; (c) removing
previous exclusion criteria; and (d) combining scoring processes by
providing one combined validation score for the validation of chart-
abstracted measures and eCQMs with the eCQM portion of the combined
score weighted at zero, beginning with validation affecting the FY 2024
payment determination; and (3) formalize the process for conducting
educational reviews for eCQM validation in alignment with current
processes for providing feedback for chart-abstracted validation
results, beginning with eCQM validation affecting the FY 2023 payment
determination.
As noted in the FY 2017 IPPS/LTCH IPPS final rule (81 FR 57261), we
have been reimbursing hospitals directly for expenses associated with
submission of medical records for data validation; specifically, we
reimburse hospitals at 12 cents per photocopied page; for hospitals
providing medical records digitally via a rewritable disc, such as
encrypted CD-ROMs, DVDs, or flash drives, we reimburse hospitals at a
rate of 40 cents per disc, along with $3.00 per record; and for
hospitals providing medical records as electronic files submitted via
secure file transmission, we reimburse hospitals at $3.00 per record.
In addition, in the FY 2017 IPPS/LTCH IPPS final rule (81 FR 57261), we
finalized that for eCQM validation, we reimburse hospitals at $3.00 per
record for providing medical records as electronic files submitted via
secure file transmission (paper copies and digital portable media are
not accepted for eCQM validation). Because we directly reimburse, we do
not anticipate any net change in information collection burden
associated with our proposal to require electronic file submissions of
medical records via secure file transmission for hospitals selected for
chart-abstracted measures validation; hospitals would continue to be
reimbursed at $3.00 per record.
We do not anticipate any net change in information collection
burden associated with our proposals to align the data submission
quarters, to combine the hospital selection process by reducing the
pool of hospitals randomly selected for validation for chart-abstracted
measures from 400 hospitals to up to 200 hospitals, or to combine the
scoring processes to provide one combined validation score for the
validation of chart-abstracted measures and eCQMs. However, we refer
readers to section I.K. of Appendix A of this proposed rule for a
discussion of the potential burden reduction other than information
collection burden that we believe hospitals could experience that are
associated with our proposals to align the validation processes for
chart-abstracted measures and eCQMs. In addition, we do not anticipate
any information collection burden associated with our proposal to
formalize the process for conducting educational reviews for eCQM
validation. As discussed in section VIII.A.11.b.(3). of the preamble to
this proposed rule, this process would allow any validated hospital to
request an educational review of their eCQM validation results with
CMS.
We previously estimated the information collection burden
associated with eCQM validation to be 80 minutes per record, or
approximately 11 hours per hospital per year (80 minutes per record x 8
records x 1 quarter/60 = 10.67 hours) (81 FR 57261). We estimated a
total annual burden of approximately 2,200 hours across 200 IPPS
hospitals selected for eCQM validation each year (11 hours x 200 IPPS
hospitals). Using the updated wage estimate as described previously, we
estimate this to represent a total annual cost of $85,360 (2,200 hours
x $38.80) across 200 hospitals.
The previous estimate of 80 minutes per record was based on our
limited experience working with voluntary hospital participants during
the eCQM validation pilot conducted in 2015 (79 FR 50269 through
50272). For the validation pilot, participating hospitals attended a
30-minute pre-briefing session and had to install CMS-approved software
that allowed our Clinical Data Abstraction Center (CDAC) contractor to
remotely view isolated records in real-time under hospital supervision
in order to compare all abstracted data with QRDA Category I file data
and summarize the results of the real-time session (79 FR 50270). Since
this 2015 pilot, the eCQM validation process that we have implemented
under the Hospital IQR Program has been significantly streamlined so
that we no longer need hospitals to allow remote access to the CDAC
contractor to view records in real-time under each hospital's
supervision nor for them to engage in discussions with our contractor
during the process. Instead, hospitals selected for eCQM validation are
required to submit timely and complete copies of medical records on
eCQMs selected for validation to CMS by submitting records in PDF file
format within 30 calendar days following the medical records request
date listed on the CDAC request form via the QualityNet secure file
transmission process (81 FR 57179).
Based on this updated process, as well as hospitals having gained
several years of experience using EHRs, we are revising our previous
estimate from 80 minutes per record to 10 minutes per record. This is
the amount of time we estimate is needed for hospitals to create PDF
files and to electronically submit each medical record to us via the
CMS-approved secure file transmission process. The estimate of 10
minutes per record is similar to our estimate of 10 minutes per eCQM
per quarter in submitting QRDA Category I files via the QualityNet
secure portal (81 FR 57260). We note that as mentioned previously,
hospitals will still be reimbursed at $3.00 per record (81 FR 57261).
In addition, we anticipate that our proposal to progressively
increase the number of quarters of eCQM data reported, from one self-
selected quarter of data to four quarters of data over a 3-year period,
would similarly increase the total number of quarters of data from
which cases would be selected for

[[Page 32882]]

eCQM validation over a 3-year period. We also anticipate that our
proposal to combine the hospital selection process such that the
Hospital IQR Program would validate a pool of up to 400 hospitals
across measure types (up to 200 hospitals would be randomly selected
and up to 200 hospitals would be selected using targeting criteria)
would increase the number of hospitals selected for eCQM validation
from up to 200 hospitals to up to 400 hospitals. Therefore, we estimate
the following burden changes over a 3-year period using the revised
estimate of 10 minutes (0.1667 hours) per record as discussed
previously. For eCQM validation of CY 2021 data affecting the FY 2024
payment determination, we estimate a total burden of 1,067 hours across
400 IPPS hospitals selected for eCQM validation (0.1667 hours x 2
quarters x 8 cases x 400 IPPS hospitals) and $41,400 (1,067 hours x
38.80). This reflects a total burden decrease of 1,133 hours (2,200
hours-1,067 hours) and $43,960 ($85,360-$41,400) compared to our
previous burden estimate for eCQM validation affecting the FY 2024
payment determination. For eCQM validation of CY 2022 data affecting
the FY 2025 payment determination, we estimate a total burden of 1,600
hours across 400 IPPS hospitals selected for eCQM validation (0.1667
hours x 3 quarters x 8 cases x 400 IPPS hospitals) and $62,080 (1,600
hours x $38.80). This reflects a total burden decrease of 600 hours
(2,200 hours-1,600 hours) and $23,280 ($85,360-$62,080) compared to our
previous burden estimate for eCQM validation affecting the FY 2025
payment determination. For eCQM validation of CY 2023 data affecting
the FY 2026 payment determination, and for subsequent years, we
estimate a total burden of 2,133 hours across 400 IPPS hospitals
selected for eCQM validation (0.1667 hours x 4 quarters x 8 cases x 400
IPPS hospitals) and $82,760 (2,133 hours x $38.80). This reflects a
total burden decrease of 67 hours (2,200 hours-2,133 hours) and $2,600
($85,360-$82,760) compared to our previous burden estimate for eCQM
validation affecting the FY 2026 payment determination and subsequent
years.
e. Summary of Information Collection Burden Estimates for the Hospital
IQR Program
In summary, under OMB control number 0938-1022, we estimate a total
information collection burden increase for 3,300 IPPS hospitals of
6,533 hours (6,600 hours-67 hours) associated with our proposed
policies and updated burden estimates described previously and a total
cost increase related to this information collection of approximately
$253,480 (6,533 hours x $38.80) (which also reflects use of an updated
hourly wage rate as previously discussed), across a 4-year period from
the CY 2021 reporting period/FY 2023 payment determination through the
CY 2024 reporting period/FY 2026 payment determination, compared to our
currently approved information collection burden estimates. The tables
summarize the total burden changes for each respective FY payment
determination compared to our currently approved information collection
burden estimates (the table for the FY 2026 payment determination
reflects the cumulative burden changes). We will submit the revised
information collection estimates to OMB for approval under OMB control
number 0938-1022.
BILLING CODE 4120-01-P

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[GRAPHIC] [TIFF OMITTED] TP29MY20.216

[[Page 32885]]

BILLING CODE 4120-01-C
8. ICRs for the PPS-Exempt Cancer Hospital Quality Reporting (PCHQR)
Program
As discussed in section VIII.B. of the preamble of this proposed
rule, section 1866(k)(1) of the Act requires, for purposes of FY 2014
and each subsequent fiscal year, that a hospital described in section
1886(d)(1)(B)(v) of the Act (a PPS-exempt cancer hospital, or a PCH)
submit data in accordance with section 1866(k)(2) of the Act with
respect to such fiscal year. There is no financial impact to PCH
Medicare payment if a PCH does not participate.
As discussed in section VIII.B.3. of the preamble of this proposed
rule, we are proposing to adopt refined versions of two existing
measures: Catheter-associated Urinary Tract Infection (CAUTI) and
Central Line-associated Bloodstream Infection (CLABSI), beginning with
the FY 2023 program year. The refined versions of the measure
incorporate an updated SIR calculation methodology developed by the
Centers for Disease Control and Prevention (CDC) that calculates rates
stratified by patient care locations within PCHs, without the use of
predictive models or comparisons in the rate calculations. If our
proposal is finalized as proposed, we do not estimate any net change in
burden hours for the PCHQR Program for the FY 2023 program year because
there would be no change in the data submission requirements for PCHs.
We note that burden estimates for these CDC NHSN measures are submitted
separately under OMB control number 0920-0666.
The PCHQR Program measure set would continue to consist of 15
measures for the FY 2023 program year. As previously stated, the most
recent data from the Bureau of Labor Statistics reflects a median
hourly wage of $19.40 (previously $18.83). Consequently, while our
proposal will not yield a net change in burden hours, the change in
labor wage will cause an increase in burden cost for the PCHQR Program.
Therefore, using the previously finalized hourly burden estimate of
75,779 burden hours across the 11 PCHs for data collection and
submission of all 15 measures, we estimate a total annual labor cost of
$2,940,225 (75,779 hours x $38.80 per hour) for all 11 PCHs for the FY
2023 program year. The burden hours associated with these reporting
requirements is currently approved under OMB control number 0938-1175.
The updated burden cost, based on the increase in the labor wage, will
be revised and submitted to OMB.
9. ICRs for the Promoting Interoperability Programs
In section VIII.D. of the preamble of this proposed rule, we
discuss several proposals for the Medicare and Medicaid Promoting
Interoperability Programs. OMB has currently approved 623,562 total
burden hours and approximately $61 million under OMB control number
0938-1278, accounting for information collection burden experienced by
approximately 3,300 eligible hospitals and CAHs (Medicare-only and
dual-eligible) that attest to CMS under the Medicare Promoting
Interoperability Program. The collection of information burden analysis
in this proposed rule focuses on eligible hospitals and CAHs that
attest to the objectives and measures, and report CQMs, under the
Medicare Promoting Interoperability Program for the reporting period in
CY 2021.
b. Summary of Policies for Eligible Hospitals and CAHs That Attest to
CMS Under the Medicare Promoting Interoperability Program
In section VIII.D.3.b. of the preamble of this rule, we are
proposing the following changes for eligible hospitals and CAHs that
attest to CMS under the Medicare Promoting Interoperability Program:
(1) An EHR reporting period of a minimum of any continuous 90-day
period in CY 2022 for new and returning participants (eligible
hospitals and CAHs); (2) to maintain the Electronic Prescribing
Objective's Query of PDMP measure as optional and worth 5 bonus points
in CY 2021; (3) to modify the name of the Support Electronic Referral
Loops by Receiving and Incorporating Health Information measure; (4) to
progressively increase the number of quarters for which hospitals are
required to report eCQM data, from the current requirement of one self-
selected calendar quarter of data, to four calendar quarters of data,
over a 3-year period. Specifically, we propose to require: (a) 2 Self-
selected calendar quarters of data for the CY 2021 reporting period;
(b) 3 self-selected calendar quarters of data for the CY 2022 reporting
period; and (c) 4 self-selected calendar quarters of data beginning
with the CY 2023 reporting period, where the proposed submission period
for the Medicare Promoting Interoperability Program would be the 2
months following the close of the CY 2023 (ending February 28, 2024);
(5) to begin publicly reporting eCQM performance data beginning with
the eCQM data reported by eligible hospitals and CAHs for the reporting
period in CY 2021 on the Hospital Compare and/or data.medicare.gov
websites or successor websites; (6) to correct errors and amend
regulation text under Sec. 495.104(c)(5)(viii)(B) through (D)
regarding transition factors under section 1886(n)(2)(E)(i) of the Act
for the incentive payments for Puerto Rico eligible hospitals; and (7)
to correct errors and amend regulation text under Sec.
495.20(e)(5)(iii) and (l)(11)(ii)(C)(1) for regulatory citations for
the ONC certification criteria. We are amending our regulation texts as
necessary to incorporate these proposed changes.
c. Summary of Collection of Information Burden Estimates
(1) Summary of Estimates Used To Calculate the Collection of
Information Burden
In the Medicare and Medicaid Programs; Electronic Health Record
Incentive Program--Stage 3 and Modifications to Meaningful Use in 2015
Through 2017 final rule (80 FR 62917), we estimated it will take an
individual provider or designee approximately 10 minutes to attest to
each objective and associated measure that requires a numerator and
denominator to be generated. The measures that require a ``yes/no''
response will take approximately one minute to complete. We estimated
that the Security Risk Analysis measure will take approximately 6 hours
for an individual provider or designee to complete (we note this
measure is still part of the program, but is not subject to
performance-based scoring). We continue to believe these are
appropriate burden estimates for reporting and have used this
methodology in our collection of information burden estimates for this
proposed rule.
Given the proposals, we estimate a total burden estimate of 6 hours
31 minutes per respondent (6.5 hours) which remains unchanged from the
FY 2020 IPPS/LTCH PPS final rule (84 FR 42044).

[[Page 32886]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.217

(2) Hourly Labor Costs
In the Medicare and Medicaid Programs; Electronic Health Record
Incentive Program--Stage 3 and Modifications to Meaningful Use in 2015
Through 2017 final rule (80 FR 62917), we estimated a mean hourly rate
of $63.46 for the staff involved in attesting to EHR technology,
meaningful use objectives and associated measures, and electronically
submitting the clinical quality measures. We had previously used the
mean hourly rate of $68.22 for the necessary staff involved in
attesting to the objectives and measures under 42 CFR 495.24(e) in the
FY 2020 IPPS/LTCH PPS final rule (84 FR 42609), however, this rate has
since been updated to $69.34 for the FY 2021 proposed rule based upon
recently-released 2018 data from the Bureau of Labor Statistics
(BLS).\516\
---------------------------------------------------------------------------

\516\ https://www.bls.gov/oes/current/oes231011.htm.
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In summary, if our proposal is finalized as proposed, we do not
estimate any net change in burden hours for the Medicare Promoting
Interoperability Program for CY 2021, as there is no substantive change
in measures or data submission requirements for eligible hospitals and
CAHs in our proposals. However, we discovered an incorrect mathematical
calculation in last year's final rule and are correcting it in the
table that follows. The correction we are providing in following table
is that 3,300 responses multiplied by 6.5 burden hours equals 21,450
total annual burden hours (a decrease in 44 hours from what was
mistakenly reported last year). While we reiterate that the proposals
included in this rule do not contribute to additional or reduced burden
hours, please note that the correction of this error will update
subsequent burden calculations detailed below.
As previously stated, recent data from the BLS reflects a median
hourly staff wage of $69.34 (previously $68.22). Consequently, while
our proposal will not yield a net change in burden hours, the change in
labor wage will cause an increase in burden cost for the program.
Therefore, using the updated estimate of total annual burden hours of
21,450 burden hours across 3,300 responses to data collection and
submissions for the program objectives' measures, we estimate a total
annual labor cost of $1,487,343 (21,450 hours x $69.34 per hour) for
the CY 2021 EHR reporting period. The burden hours associated with
these reporting requirements is currently approved under OMB control
number 0938-1278. The updated burden cost, based solely on the increase
in labor wages, will be revised and submitted to OMB.
[GRAPHIC] [TIFF OMITTED] TP29MY20.218

[[Page 32887]]

As no measures have been removed nor introduced since last year's
final rule, but are mainly continuations of current policies, we do not
consider the proposals included in this section to change the program.
That being said, the numerical-correction of the total annual burden
hours and an updated BLS hourly labor cost of reporting will impact the
program's total cost. Thus, the Collection Burden's Total Cost for CY
2021 of $1,487,343 is an increase of $21,022.32 from last year's final
rule.
10. ICR for the Submission of Electronic Medical Records to Quality
Improvement Organizations (QIOs)
In section IX.A. of this proposed rule, we discuss our proposals
relating to the submission of patient records to the QIOs in an
electronic format by providers and practitioners in accordance with
Sec. 476.78 and by institutions and practitioners in accordance with
Sec. 480.111. These patient records must be submitted to the QIOs for
purposes of one or more QIO functions. As a result, the collection and
review of such records by the QIOs constitutes an audit, investigation
or administrative action as specified in section 1154(a) of the Act.
Therefore, we believe these collection requirements are not subject to
the PRA as stipulated under 5 CFR 1320.4(a)(2).
11. ICR for Payer-Specific Negotiated Charges Data Collection
Section IV.P. of the preamble of this proposed rule discusses the
proposed data collection of market-based payment rate information by
MS-DRG on the Medicare cost report for cost reporting periods ending on
or after January 1, 2021. First, hospitals would report the median
payer-specific negotiated charge by MS-DRG for payers that are MA
organizations. Second, hospitals would report the median payer-specific
negotiated charge by MS-DRG for all third-party payers, which include
MA organizations. We propose to collect this market-based information
on new form CMS-2552-10, Worksheet S-12.
Consistent with the desire to reduce the Medicare program's
reliance on the hospital chargemaster, as well as to inject market
pricing into Medicare FFS reimbursement, thereby addressing the
objectives under E.O.s 13813 and 13890, we believe reporting this
market based information will be less burdensome for hospitals given
that hospitals are required, beginning in CY 2021, to make public their
payer-specific negotiated charges for the same service packages under
the requirements we finalized in the Hospital Price Transparency final
rule. The market-based rate information we are proposing to collect on
the Medicare cost report would be the median of the payer-specific
negotiated charges for every MS-DRG, that the hospital has negotiated
with its MA organizations and all of its third party payers, which
include MA organizations. We believe that because hospitals are already
required to publically report the payer-specific negotiated charge
information that they will use to calculate these medians, the
additional calculation and reporting of the median payer-specific
negotiated charge will be less burdensome for hospitals.
Burden hours estimate the time (number of hours) required for each
IPPS hospital to complete ongoing data gathering and recordkeeping
tasks, search existing data resources, review instructions, and
complete the Form CMS-2552-10, Worksheet S-12. The most recent data
from the System for Tracking Audit and Reimbursement, an internal CMS
data system maintained by the Office of Financial Management (OFM),
reports that 3,189 hospitals, the current number of Medicare certified
IPPS hospitals, file Form CMS-2552-10 annually.
In section IV.P.2.c. of the preamble to this proposed rule, we
proposed that subsection (d) hospitals in the 50 states and DC, as
defined at section 1886(d)(1)(B) of the Act, and subsection (d) Puerto
Rico hospitals, as defined under section 1886(d)(9)(A) of the Act,
would be required to report the median payer-specific negotiated charge
information. Hospitals that do not negotiate payment rates and only
receive non-negotiated payments for service would be exempted from this
definition. We recognize that Critical Access Hospitals (CAHs) may, in
some instances, negotiate payment rates; however, because CAHs are not
subsection (d) hospitals and are not paid on the basis of MS-DRGs, CAHs
would be excluded from this proposed requirement. We also are proposing
that hospitals in Maryland, which are currently paid under the Maryland
Total Cost of Care Model, would be exempt from this data collection
requirement during the performance period of the Model. Based on this
proposal, we estimate that 3,189 hospitals would be required to comply
with this market-based data collection proposal.
Based on our understanding of the resources necessary to report
this information, we estimate an average annual burden per hospital of
15 hours (5 hours for recordkeeping and 10 hours for reporting) for the
Worksheet S-12. The burden is minimized because the median payer-
specific negotiated charge data collected on the Worksheet S-12 is
based on payer-specific data maintained by the hospital.
We estimated the total annual burden hours as follows: 3,189
hospitals times 15 hours per hospital equals 47,835 annual burden
hours.
The 5 hours for recordkeeping include hours for bookkeeping,
accounting and auditing clerks; the 10 hours for reporting include
accounting and audit professionals' activities. We believe the basic
median calculation would be captured within the recordkeeping portion
of this assessment.
Based on the most recent Bureau of Labor Statistics (BLS) in its
2019 Occupation Outlook Handbook, the mean hourly wage for Category 43-
3031 (bookkeeping, accounting and auditing clerks) is $20.65 (https://www.bls.gov/oes/current/oes433031.htm). We added 100 percent of the
mean hourly wage to account for fringe and overhead benefits, which
calculates to $41.30 ($20.65 + $20.65) and multiplied it by 5 hours, to
determine the annual recordkeeping costs per hospital to be $206.50
($41.30 x 5 hours).
The mean hourly wage for Category 13-2011 (accounting and audit
professionals) is $38.23 (www.bls.gov/oes/current/oes132011.htm). We
added 100 percent of the mean hourly wage to account for fringe and
overhead benefits, which calculates to $76.46 ($38.23 + $38.23) and
multiplied it by 10 hours, to determine the annual reporting costs per
hospital to be $764.60 ($76.46 x 10 hours). We have calculated the
total annual cost per hospital of $971.10 by adding the recordkeeping
costs of $206.50 plus the reporting costs of $764.60 (see Table K1). We
estimated the total annual cost to be $3,096,838 ($971.10 times 3,189
IPPS hospitals) (see Table K2).

[[Page 32888]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.219

We believe that because hospitals are already required to
publically report the payer-specific negotiated charge information that
they will use to calculate these medians, the additional calculation
and reporting of the median payer-specific negotiated charge will be
less burdensome for hospitals than if hospitals did not already have
this information compiled. The Hospital Price Transparency final rule
required that hospitals establish, update, and make public via the
internet standard charges in two different ways: (1) A single machine-
readable file with a list of standard charges (including gross charges,
payer-specific negotiated charges, de-identified minimum negotiated
charges, de-identified maximum negotiated charges, and discounted cash
prices) for all items and services including service packages
identified by MS-DRG; and (2) standard charges (including payer-
specific negotiated charges, discounted cash prices, de-identified
minimum negotiated charges, de-identified maximum negotiated charges)
in a consumer-friendly manner for as many of the 70 CMS-specified
shoppable services that are provided by the hospital, and as many
additional hospital-selected shoppable services as is necessary for a
combined total of at least 300 shoppable services. We note that the
proposed data collection requirement in this proposed rule would apply
to a smaller subset of hospitals as compared to the public reporting
requirements under the Hospital Price Transparency final rule.
In total, the Hospital Price Transparency final rule estimated in
the first year of public reporting, it would take a hospital an
estimated 150 hours at a cost of $11,898.60 per hospital \517\ to
implement and comply with the requirements, as specified at 45 CFR part
180. The estimated 150 hours of burden for the first year includes 10
total hours for a lawyer ($138.68/hour) and general operations manager
($119.12/hour) to read and review the rule; 80 hours for a business
operations specialist ($74.00/hour) to gather and compile the required
information and post it in the form and manner specified in the
Hospital Price Transparency final rule; 30 hours for a network and
computer system administrator ($83.72/hour) to comply with the form and
manner standards set forth in the Hospital Price Transparency final
rule; 30 hours for a registered nurse ($72.60/hour) to capture the
necessary clinical input to comply with reporting the CMS-specified and
hospital-selected shoppable services. (150 hours = 5 hours + 5 hours +
80 hours + 30 hours + 30 hours; totaling a cost of $11,898.60 ($693.40
+ $595.60 + $5,920 + $2,511.60 + $2,178) per hospital.)
---------------------------------------------------------------------------

\517\ The estimated hourly cost for each labor category used in
this analysis were referencing the Bureau of Labor Statistics report
on Occupational Employment and Wages, May 2018 (Bureau of Labor
Statistics report on Occupational Employment and Wages, May 2018
Available at: https://www.bls.gov/oes/2018/may/oes_nat.htm). We also
have calculated the cost of overhead at 100 percent of the mean
hourly wage, in line with the Hospital Inpatient and Hospital
Outpatient Quality Reporting programs (81 FR 57260 and 82 FR 59477,
respectively).
---------------------------------------------------------------------------

In this proposed rule, we propose that hospitals calculate and
report on the Medicare cost report two median payer-specific negotiated
charges using the payer-specific negotiated charge data they are
required to make public under the Hospital Price Transparency final
rule. Therefore, the burden associated with establishing and updating
the payer-specific negotiated charges has already been assumed.
Specifically, given that the payer-specific negotiated charge is one of
the five types of standard charges (gross charges, payer-specific
negotiated charges, de-identified minimum negotiated charges, de-
identified maximum negotiated charges, and discounted cash prices) that
the Hospital Price Transparency final rule requires that hospitals
estimate, update and make public, we believe that a fraction of the
estimated 80 hours of burden associated with gathering, compiling, and
posting, that required information in the form and manner specified in
the Hospital Price Transparency final rule, would support the reporting
efforts in this proposed rule. We are interested in hearing from

[[Page 32889]]

commenters if burden estimates in this proposed rule accurately capture
the time needed to take information already gathered for the Hospital
Price Transparency final rule and report it to CMS in the manner
requested.
We refer readers to the Hospital Price Transparency final rule for
the full burden assessment analysis for the requirements set forth
within that final rule (84 FR 65524).
We maintain that the estimated burden associated with completing
the Worksheet S-12 would be 15 hours (5 hours for recordkeeping and 10
hours for reporting), given the minimized burden since hospitals would
already have collected the payer-specific negotiated charge data and
would only then need to calculate the median payer-specific negotiated
charge by MS-DRG for payers that are MA organizations and for all
third-party payers.
Further instructions for the reporting of this market-based data
collection proposal on the Medicare cost report will be discussed in a
forthcoming revision of the ICR request currently approved under OMB
control number 0938-0050, expiration date March 31, 2022.
12. Summary of All Burden in This Proposed Rule
The following chart reflects the total burden and associated costs
for the provisions included in this proposed rule.
[GRAPHIC] [TIFF OMITTED] TP29MY20.220

C. Response to Comments

Because of the large number of public comments we normally receive
on Federal Register documents, we are not able to acknowledge or
respond to them individually. We will consider all comments we receive
by the date and time specified in the DATES section of this proposed
rule, and, when we proceed with a subsequent document(s), we will
respond to those comments in the preamble to that document.

D. Waiver of the 60-Day Delayed Effective Date for the Final Rule

We are committed to ensuring that we fulfill our statutory
obligation to update the IPPS and LTCH PPS as required by law and are
working diligently in that regard. We ordinarily provide a 60-day delay
in the effective date of final rules after the date they are issued in
accord with the Congressional Review Act (CRA) (5 U.S.C. 801(a)(3)).
However, section 808(2) of the CRA provides that, if an agency finds
good cause that notice and public procedure are impracticable,
unnecessary, or contrary to the public interest, the rule shall take
effect at such time as the agency determines.
The United States is responding to an outbreak of respiratory
disease caused by a novel (new) coronavirus that has now been detected
in more than 190 locations internationally, including in all 50 States
and the District of Columbia. The virus has been named ``SARS-CoV-2''
and the disease it causes has been named ``coronavirus disease 2019''
(abbreviated ``COVID-19'').
On January 30, 2020, the International Health Regulations Emergency
Committee of the World Health Organization (WHO) declared the outbreak
a ``Public Health Emergency of international concern'' (PHEIC). On
January 31, 2020, Health and Human Services Secretary, Alex M. Azar II,
declared a PHE for the United States to aid the nation's healthcare
community in responding to COVID-19. On March 11, 2020, the WHO
publicly characterized COVID-19 as a pandemic. On March 13, 2020 the
President of the United States declared the COVID-19 outbreak a
national emergency.
Due to CMS prioritizing efforts in support of containing and
combatting the COVID-19 PHE, and devoting significant resources to that
end, the work needed on the IPPS and LTCH PPS payment rule will not be
completed in accordance with our usual schedule for this rulemaking,
which aims for a publication date of at least 60 days before the start
of the fiscal year to which it applies. Up to an additional 30 days may
be needed to complete the work needed on this payment rule. The IPPS
and LTCH PPS payment rule is necessary to annually review and update
the payment systems, and it is critical to ensure that the payment
policies for these systems are effective on the first day of the fiscal
year to which they are intended to apply. Therefore, due to CMS
prioritizing efforts in support of containing and combatting the COVID-
19 PHE, and devoting significant resources to that end, we are hereby
waiving the 60-day delay in the effective date of the IPPS and LTCH PPS
final rule; it would be contrary to the public interest for CMS to do
otherwise. However, we do expect

[[Page 32890]]

to provide a 30-day delay in the effective date of the final rule in
accord with section 5 U.S.C. 553(d) of the Administrative Procedure
Act, which ordinarily requires a 30-day delay in the effective date of
a final rule from the date of its public availability in the Federal
Register, and section 1871(e)(1)(B)(i) of the Act, which generally
prohibits a substantive rule from taking effect before the end of the
30-day period beginning on the date of its public availability.

List of Subjects

42 CFR Part 405

Administrative practice and procedure, Health facilities, Health
professions, Kidney diseases, Medical devices, Medicare, Reporting and
recordkeeping requirements, Rural areas, X-rays.

42 CFR Part 412

Administrative practice and procedure, Health facilities, Medicare,
Puerto Rico, Reporting and recordkeeping requirements.

42 CFR Part 413

Health facilities, Kidney diseases, Medicare, Puerto Rico,
Reporting and recordkeeping requirements.

42 CFR Part 417

Administrative practice and procedure, Grant programs--health,
Health care, Health insurance, Health maintenance organizations (HMO),
Loan programs--health, Medicare, Reporting and recordkeeping
requirements.

42 CFR Part 476

Grant programs--health, Health care, Health facilities, Health
professions, Quality Improvement Organizations (QIOs), Reporting and
recordkeeping requirements.

42 CFR Part 480

Health care, Health professions, Health records, Penalties,
Privacy, Quality Improvement Organizations (QIOs), Reporting and
recordkeeping requirements.

42 CFR Part 484

Health facilities, Health professions, Medicare, Reporting and
recordkeeping requirements.

42 CFR Part 495

Administrative practice and procedure, Health facilities, Health
maintenance organizations (HMO), Health professions, Health records,
Medicaid, Medicare, Penalties, Privacy, Reporting and recordkeeping
requirements.

For the reasons set forth in the preamble, the Centers for Medicare
and Medicaid Services proposed to amend 42 CFR chapter IV as set forth
below:

PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED

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1. The authority citation for part 405 continues to read as follows:

Authority: 42 U.S.C. 263a, 405(a), 1302, 1320b-12, 1395x,
1395y(a), 1395ff, 1395hh, 1395kk, 1395rr, and 1395ww(k).

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2. Section 405.1801 is amended--
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a. In paragraph (a), in the definition of ``Date of receipt''--
0
i. By revising paragraphs (1)(ii) and (2) introductory text;
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ii. In paragraph (2)(i) by removing the phrase ``; or'' and adding a
period in its place; and
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iii. By adding paragraph (2)(iii); and
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b. By revising paragraph (d) introductory text.
The revisions and addition read as follows:

Sec. 405.1801 Introduction.

(a) * * *
Date of receipt * * *
(1) * * *
(ii) For purposes of a contractor hearing, if no contractor hearing
officer is appointed (or none is currently presiding), the date of
receipt of materials sent to the contractor hearing officer (as
permitted under paragraph (d) of this section) is presumed to be, as
applicable, the date that the contractor stamps ``Received'' on the
materials, or the date of electronic delivery.
* * * * *
(2) A reviewing entity. For purposes of this definition, a
reviewing entity is deemed to include the Office of the Attorney
Advisor. The determination as to the date of receipt by the reviewing
entity to which the document or other material was submitted (as
permitted under paragraph (d) of this section) is final and binding as
to all parties to the appeal. The date of receipt of documents by a
reviewing entity is presumed to be, as applicable, one of the following
dates:
* * * * *
(iii) Of electronic delivery. In writing or written means a hard
copy or electronic submission (subject to the restrictions in paragraph
(d) of this section), as applicable throughout this subpart.
* * * * *
(d) Method for submissions and calculating time periods and
deadlines. Except for subpoena requests being sent to a nonparty under
Sec. 405.1857(c), the reviewing entity may prescribe the method(s) by
which a party must make a submission, including the requirement to use
an electronic filing system for submission of documents. Such methods
or instructions apply to any period of time or deadline prescribed or
allowed under this subpart (for example, requests for appeal under
Sec. Sec. 405.1811(b), 405.1835(b), and 405.1837(c) and (e)) or
authorized by a reviewing entity. In computing any period of time or
deadline prescribed or allowed under this subpart or authorized by a
reviewing entity the following principles are applicable:
* * * * *

Sec. 405.1811 [Amended]

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3. Section 405.1811 is amended in paragraph (c)(1) by removing the
phrase ``the date the contractor stamped'' and adding in its place is
the phrase ``the date of electronic delivery, or the date the
contractor stamped''.

Sec. 405.1813 [Amended]

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4. Section 405.1813 is amended--
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a. In paragraph (d) by removing the phrase ``must give prompt written
notice to the provider, and mail a copy'' and adding in its place is
the phrase ``must send prompt written notice to the provider, and send
a copy''; and
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b. In paragraph (e)(1) by removing the phrase ``promptly mails the
decision'' and adding in its place is the phrase ``promptly sends the
decision''.

Sec. 405.1814 [Amended]

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5. Section 405.1814 is amended in paragraph (c)(2) by removing the
phrase ``must be mailed promptly'' and adding in its place is the
phrase ``must be sent promptly''.

Sec. 405.1819 [Amended]

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6. Section 405.1819 is amended by removing the phrase ``prior to the
mailing of notice'' and adding in its place is the phrase ``prior to
the sending of notice''.

Sec. 405.1821 [Amended]

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7. Section 405.1821 is amended--
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a. In paragraph (c)(1) by removing the phrase ``be mailed promptly''
and adding in its place is the phrase ``be sent promptly''; and
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b. In paragraph (c)(3)(iii)(B) by removing the phrase ``Issue and
mail'' and adding in its place is the phrase ``Issue and send''.

Sec. 405.1831 [Amended]

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8. Section 405.1831 is amended in paragraph (d) by removing the phrase
``must be mailed'' and adding in its place is the phrase ``must be
sent''.

[[Page 32891]]

Sec. 405.1834 [Amended]

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9. Section 405.1834 is amended in paragraph (e)(3) by removing the
phrase ``must be mailed'' and adding in its place is the phrase ``must
be sent''.

Sec. 405.1835 [Amended]

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10. Section 405.1835 is amended--
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a. In paragraph (b) introductory text by removing ``in writing to the
Board'', ``(b)(1) through (b)(4)'', and ``(b)(1), (b)(2), or (b)(3)''
and adding in their places ``in writing in the manner prescribed by the
Board'', ``(b)(1) through (4)'', and ``(b)(1), (2), or (3)'',
respectively.
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b. In paragraph (d) introductory text by removing removing ``in writing
to the Board'', ``(d)(1) through (d)(4)'', and ``(d)(1), (d)(2), or
(d)(3)'' and adding in their places ``in writing in the manner
prescribed by the Board'', ``(d)(1) through (4)'', and ``(d)(1), (2),
or (3)'', respectively.

Sec. 405.1836 [Amended]

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11. Section 405.1836 is amended --
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a. In paragraph (d) by removing the phrase ``and mail a copy'' and
adding in its place is the phrase ``and send a copy''; and
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b. In paragraph (e)(1) by removing the phrase ``of this subpart''
wherever it appears and removing the phrase ``must be mailed'' and
adding in its place is the phrase ``must be sent''.

Sec. 405.1840 [Amended]

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12. Section 405.1840 is amended paragraph (c)(2) by removing the phrase
``of this subpart'' wherever it appears and removing the phrase ``must
be mailed'' and adding in its place is the phrase ``must be sent''.
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13. Section 405.1843 is amended--
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a. By redesignating paragraph (a) as paragraph (a)(1);
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b. In newly redesignated paragraph (a)(1) by removing the phrase ``of
this subpart'';
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c. By adding paragraph (a)(2); and
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d. In paragraph (d)(2) by removing the phrase ``promptly mail copies''
and adding in its place is the phrase ``promptly send copies''.
The addition reads as follows:

Sec. 405.1843 Parties to proceedings in a Board appeal.

(a) * * *
(2) All parties to a Board appeal are to familiarize themselves
with the instructions for handling a Provider Reimbursement Review
Board (PRRB) appeal, including any and all requirements related to the
electronic/online filing of documents.
* * * * *

Sec. 405.1845 [Amended]

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14. Section 405.1845 is amended in paragraph (h)(2)(iii) by removing
the phrase ``Mail the remand'' and adding in its place is the phrase
``Send the remand''.

Sec. 405.1849 [Amended]

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15. Section 405.1849 is amended by removing the phrase ``mail written
notice thereof to the parties at their last known addresses,'' and
adding in its place is the phrase ``send notice thereof to the parties'
contact information on file,''.

Sec. 405.1851 [Amended]

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16. Section 405.1851 is amended by removing the phrase ``mailing of
notice'' and adding in its place is the phrase ``issuing of the
notice''.

Sec. 405.1853 [Amended]

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17. Section 405.1853 is amended in paragraph (e)(5)(vi)(A) by removing
the phrase ``issue and mail'' and adding in its place is the phrase
``issue and send''.
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18. Section 405.1857 is amended--
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a. By revising paragraph (c)(1) introductory text; and
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b. In paragraph (c)(4)(iii)(A) by removing the phrase ``mail promptly
to each party'' and adding in its place is the phrase ``send promptly
to each party''.
The revision reads as follows:

Sec. 405.1857 Subpoenas.

* * * * *
(c) * * *
(1) Subpoena requests. The requesting party must send any subpoena
request submitted to the Board promptly to the party or nonparty
subject to the subpoena, and to any other party to the Board appeal. If
the subpoena request is being sent to a nonparty subject to the
subpoena, then the subpoena request must be sent by certified mail. The
request must--
* * * * *

Sec. 405.1868 [Amended]

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19. Section 405.1868 is amended in paragraph (d)(1) by removing the
phrase ``must be mailed'' and adding in its place is the phrase ``must
be sent''.

Sec. 405.1871 [Amended]

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20. Section 405.1871 is amended in paragraph (a)(5) by removing the
phrase ``must be mailed'' and adding in its place is the phrase ``must
be sent''.

Sec. 405.1875 [Amended]

0
21. Section 405.1875 is amended--
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a. In paragraph (c)(1)(iv) by removing the phrase ``must be mailed''
and adding in its place is the phrase ``must be sent''; and
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b. In paragraph (e)(2) by removing the phrase ``mail a copy'' and
adding in its place is the phrase ``send a copy''.

Sec. 405.1885 [Amended]

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22. Section 405.1885 is amended--
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a. In paragraph (b)(1) by removing the phrase ``of this subpart'' and
removing the term ``mailed'' and adding in its place the term ``sent''
each time it appears; and
0
b. In paragraph (b)(2)(i) by removing the phrase ``request to reopen is
conclusively presumed to be the date of delivery by a nationally-
recognized next-day courier, or the date stamped ``Received'' by CMS,
the contractor or the reviewing entity (where a nationally-recognized
next-day courier is not employed),'' and adding in its place the phrase
``request to reopen is determined by applying the date of receipt
presumption criteria for reviewing entities defined in Sec.
405.1801(a),''.

PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL
SERVICES

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23. The authority citation for part 412 continues to read as follows:

Authority: 42 U.S.C. 1302 and 1395hh.

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24. Section 412.1 is amended by revising paragraph (a)(1) to read as
follows:

Sec. 412.1 Scope of part.

(a) * * *
(1) This part implements sections 1886(d) and (g) of the Act by
establishing a prospective payment system for the operating costs of
inpatient hospital services furnished to Medicare beneficiaries in cost
reporting periods beginning on or after October 1, 1983 and a
prospective payment system for the capital-related costs of inpatient
hospital services furnished to Medicare beneficiaries in cost reporting
periods beginning on or after October 1, 1991.
(i) Under these prospective payment systems, payment for the
operating and capital-related costs of inpatient hospital services
furnished by hospitals subject to the systems (generally, short-term,
acute-care hospitals) is made on the basis of prospectively determined
rates and applied on a per discharge basis.
(ii) Payment for other costs related to inpatient hospital services
(organ acquisition costs incurred by hospitals with approved organ
transplantation centers, the costs of qualified nonphysician
anesthetist's services, as described in Sec. 412.113(c), direct costs
of approved nursing and allied health educational programs, costs
related to

[[Page 32892]]

hematopoietic stem cell acquisition for the purpose of an allogeneic
hematopoietic stem cell transplant as described in Sec. 412.113(e)) is
made on a reasonable cost basis.
(iii) Payment for the direct costs of graduate medical education is
made on a per resident amount basis in accordance with Sec. Sec.
413.75 through 413.83 of this chapter.
(iv) Additional payments are made for outlier cases, bad debts,
indirect medical education costs, and for serving a disproportionate
share of low-income patients.
(v) Under either prospective payment system, a hospital may keep
the difference between its prospective payment rate and its operating
or capital-related costs incurred in furnishing inpatient services, and
the hospital is at risk for inpatient operating or inpatient capital-
related costs that exceed its payment rate.
* * * * *
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25. Section 412.2 is amended by adding paragraph (e)(6) to read as
follows:

Sec. 412.2 Basis of payment.

* * * * *
(e) * * *
(6) For cost reporting periods beginning on or after October 1,
2020, the costs of allogenic hematopoietic stem cell acquisition, as
described in Sec. 412.113(e), for the purpose of an allogeneic
hematopoietic stem cell transplant.
* * * * *
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26. Section 412.64 is amended by adding paragraph (e)(5) to read as
follows:

Sec. 412.64 Federal rates for inpatient operating costs for Federal
fiscal year 2005 and subsequent fiscal years.

* * * * *
(e) * * *
(5) CMS makes an adjustment to the standardized amount to ensure
that the reasonable cost based payments for allogeneic hematopoietic
stem cell acquisition costs are made in a manner so that aggregate
payments to hospitals are not affected.
* * * * *

Sec. 412.82 [Amended]

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27. Section 412.82 is amended in paragraph (c) by removing the
reference ``Sec. 412.86'' and adding in its place ``Sec. 412.83''.
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28. Section 412.85 and an undesignated center heading preceeding the
section are added to read as follows:

Payment Adjustment for Certain Clinical Trials Cases

Sec. 412.85 Payment adjustment for certain clinical trial cases.

(a) General rule. For discharges occurring on or after October 1,
2020, the amount of payment for a discharge described in paragraph (b)
of this section is adjusted as described in paragraph (c) of this
section.
(b) Discharges subject to payment adjustment. Payment is adjusted
in accordance with paragraph (c) of this section for discharges
assigned to MS-DRG 018 that are part of a clinical trial as determined
by CMS based on the reporting of a diagnosis code indicating the
encounter is part of a clinical research program on the claim for the
discharge.
(c) Adjustment. The DRG weighting factor determined under Sec.
412.60(b) is adjusted by a factor that reflects the average cost for
cases to be assigned to MS-DRG 018 that are part of a clinical trial to
the average cost for cases to be assigned to MS-DRG 018 that are not
part of a clinical trial.

Sec. 412.86 [Redesignated as Sec. 412.83]

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29. Section 412.86 is redesignated as Sec. 412.83.

Sec. 412.86 [Added and Reserved]

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29a. New reserved Sec. 412.86 is added.
0
30. Section 412.87 is amended--
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a. By revising paragraphs (c)(1), (d) introductory text, (d)(1), (e)
introductory text, and (e)(2); and
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b. By adding paragraph (e)(3).
The revisions and addition read as follows:

Sec. 412.87 Additional payment for new medical services and
technologies: General provisions.

* * * * *
(c) * * *
(1) A new medical device is part of the Food and Drug
Administration's (FDA) Breakthrough Devices Program and has received
marketing authorization for the indication covered by the Breakthrough
Device designation.
* * * * *
(d) Eligibility criteria for alternative pathway for certain
antimicrobial products. (1)(i) A new medical product is designated by
the FDA as a Qualified Infectious Disease Product and has received
marketing authorization for the indication covered by the Qualified
Infectious Disease Product designation; or
(ii) For discharges occurring on or after October 1, 2021, a new
medical product is approved under FDA's Limited Population Pathway for
Antibacterial and Antifungal Drugs (LPAD) and used for the indication
approved under the LPAD pathway.
* * * * *
(e) Announcement of determinations and deadline for consideration
of new medical service or technology applications, and conditional
approval for certain antimicrobial products. * * *
(2) Except as provided for in paragraph (e)(3) of this section, CMS
only considers, for add-on payments for a particular fiscal year, an
application for which the new medical service or technology has
received FDA marketing authorization by July 1 prior to the particular
fiscal year.
(3) A technology for which an application is submitted under an
alternative pathway for certain antimicrobial products under paragraph
(d) of this section that does not receive FDA marketing authorization
by the July 1 deadline specified in paragraph (e)(2) of this section
may be conditionally approved for the new technology add-on payment for
a particular fiscal year, effective for discharges beginning in the
first quarter after FDA marketing authorization is granted, provided
that FDA marketing authorization is granted before July 1 of the fiscal
year for which the applicant applied for new technology add-on
payments.
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31. Section 412.88 is amended--
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a. In paragraph (a)(2)(ii)(A) introductory text by removing the
reference ``paragraph (a)(2)(ii)(2) of this section'' and adding in its
place ``paragraph (a)(2)(ii)(B) of this section'';
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b. By revising paragraphs (a)(2)(ii)(B) introductory text and (b)(2).
The revisions read as follows:

Sec. 412.88 Additional payment for new medical service or
technology.

(a) * * *
(2) * * *
(ii) * * *
(B) For a medical product designated by FDA as a Qualified
Infectious Disease Product or, for discharges occurring on or after
October 1, 2020, for a product approved under FDA's Limited Population
Pathway for Antibacterial and Antifungal Drugs, if the costs of the
discharge (determined by applying the operating cost-to-charge ratios
as described in Sec. 412.84(h)) exceed the full DRG payment, an
additional amount equal to the lesser of--
* * * * *
(b) * * *
(2) For discharges occurring on or after October 1, 2019. Unless a
discharge case qualifies for outlier payment under Sec. 412.84,
Medicare will not pay any additional amount beyond the DRG payment
plus--

[[Page 32893]]

(i) 65 percent of the estimated costs of the new medical service or
technology;
(ii) For a medical product designated by FDA as a Qualified
Infectious Disease Product, 75 percent of the estimated costs of the
new medical service or technology; or
(iii) For discharges occurring on or after October 1, 2020, for a
product approved under FDA's Limited Population Pathway for
Antibacterial and Antifungal Drugs, 75 percent of the estimated costs
of the new medical service or technology.
0
32. Section 412.92 is amended by revising paragraph (c)(3) to read as
follows:

Sec. 412.92 Special treatment: Sole community hospitals.

* * * * *
(c) * * *
(3) The term service area means the area from which a hospital
draws at least 75 percent of its inpatients during the most recent 12-
month cost reporting period ending before it applies for classification
as a sole community hospital. If the most recent cost reporting period
ending before the hospital applies for classification as a sole
community hospital is for less than 12 months, the hospital's most
recent 12-month or longer cost reporting period before the short period
is used.
* * * * *
0
33. Section 412.96 is amended by adding paragraph (c)(2)(iii) to read
as follows:

Sec. 412.96 Special treatment: Referral centers.

* * * * *
(c) * * *
(2) * * *
(iii) If the hospital's cost reporting period that began during the
same fiscal year as the cost reporting periods used to compute the
regional median discharges under paragraph (i) of this section is for
less than 12 months or longer than 12 months, the hospital's number of
discharges for that cost reporting period will be annualized to
estimate the total number of discharges for a 12-month cost reporting
period.
* * * * *
0
34. Section 412.104 is amended by revising paragraph (a) to read as
follows:

Sec. 412.104 Special treatment: Hospitals with high percentage of
ESRD discharges.

(a) Criteria for classification. CMS provides an additional payment
to a hospital for inpatient services provided to ESRD beneficiaries who
receive a dialysis treatment during a hospital stay, if the hospital
has established that ESRD beneficiary discharges, excluding discharges
classified into any of the following MS-DRGs, where the beneficiary
received dialysis services during the inpatient stay, constitute 10
percent or more of its total Medicare discharges:
(1) MS-DRG 019 (Simultaneous Pancreas/Kidney Transplant with
Hemodialysis).
(2) MS-DRGs 650 and 651 (Kidney Transplant with Hemodialysis with
MCC, without MCC, respectively).
(3) MS-DRGs 682, 683, and 684 (Renal Failure with MCC, with CC,
without CC/MCC, respectively).
* * * * *

Sec. 412.105 [Amended]

0
35. Section 412.105(f)(1)(ix)(A) is amended--
0
a. By removing the phrase ``to reflect residents added because'' and
added in its place the phrase ``to reflect displaced residents added
because'' each time it appears.
0
b. By removing the citations ``Sec. Sec. 413.79(h)(1) and (h)(2)'',
``Sec. Sec. 413.79(h)(1) and (h)(3)(ii)'', and ``Sec. Sec.
413.79(h)(1) and (h)(3)(i)'' and adding in their places the citations
``Sec. 413.79(h)(1) and (2)'', ``Sec. 413.79(h)(1) and (h)(3)(ii)'',
and ``Sec. 413.79(h)(1) and (h)(3)(i)'', respectively.
0
36. Section 412.106 is amended by removing the semicolon at the end of
paragraph (g)(1)(iii)(C)(6) and adding a period in its place and adding
paragraphs (g)(1)(iii)(C)(7) and (8) to read as follows:

Sec. 412.106 Special treatment: Hospitals that serve a
disproportionate share of low-income patients.

* * * * *
(g) * * *
(1) * * *
(iii) * * *
(C) * * *
(7) For fiscal year 2021, CMS will base its estimates of the amount
of hospital uncompensated care on data on uncompensated care costs,
defined as charity care costs plus non-Medicare and non-reimbursable
Medicare bad debt costs from 2017 cost reports from the most recent
Hospital Cost Report Information System (HCRIS) database extract,
except that, for Puerto Rico hospitals and Indian Health Service or
Tribal hospitals, CMS will base its estimates on utilization data for
Medicaid and Medicare Supplemental Security Income (SSI) patients, as
determined by CMS in accordance with paragraphs (b)(2)(i) and (b)(4) of
this section, using data on Medicaid utilization from 2013 cost reports
from the most recent HCRIS database extract and the most recent
available year of data on Medicare SSI utilization (or, for Puerto Rico
hospitals, a proxy for Medicare SSI utilization data).
(8) For each subsequent fiscal year, for all eligible hospitals,
except Indian Health Service and Tribal hospitals, CMS will base its
estimates of the amount of hospital uncompensated care on data on
uncompensated care costs, defined as charity care costs plus non-
Medicare and non-reimbursable Medicare bad debt costs from cost reports
from the most recent cost reporting year for which audits have been
conducted.
* * * * *
0
37. Section 412.113 is amended by adding paragraph (e) to read as
follows:

Sec. 412.113 Other payments.

* * * * *
(e) Allogeneic hematopoietic stem cell acquisition. For cost
reporting periods beginning on or after October 1, 2020, in the case of
a subsection (d) hospital that furnishes an allogeneic hematopoietic
stem cell transplant to an individual, payment to such hospital for
hematopoietic stem cell acquisition costs is made on a reasonable cost
basis.
(1) An allogeneic hematopoietic stem cell transplant is the
intravenous infusion of hematopoietic cells derived from bone marrow,
peripheral blood stem cells, or cord blood, but not including embryonic
stem cells, of a donor to an individual that are or may be used to
restore hematopoietic function in such individual having an inherited
or acquired deficiency or defect.
(2) Allogeneic hematopoietic stem cell acquisition costs recognized
under this paragraph (e) are costs of acquiring hematopoietic stem
cells from a donor. These costs are as follows:
(i) Registry fees from a national donor registry described in 42
U.S.C. 274k, if applicable, for stem cells from an unrelated donor.
(ii) Tissue typing of donor and recipient.
(iii) Donor evaluation.
(iv) Physician pre-admission/pre-procedure donor evaluation
services.
(v) Costs associated with the collection procedure (for example,
general routine and special care services, procedure/operating room and
other ancillary services, apheresis services).
(vi) Post-operative/post-procedure evaluation of donor.
(vii) Preparation and processing of stem cells derived from bone
marrow, peripheral blood stem cells, or cord blood (but not including
embryonic stem cells).

[[Page 32894]]

(3) A subsection (d) hospital that furnishes allogeneic
hematopoietic stem cell transplants is required to formulate a standard
acquisition charge that approximates the hospital's average cost of
acquiring hematopoietic stem cells for all of its allogeneic
hematopoietic stem cell transplants. Actual charges are converted to
reasonable cost using the corresponding ancillary cost-to-charge
ratios.
(4) The hospital's Medicare share of the allogeneic hematopoietic
stem cell acquisition costs is based on the ratio of the number of its
allogeneic hematopoietic stem cell transplants furnished to Medicare
beneficiaries to the total number of its allogeneic hematopoietic stem
cell transplants furnished to all patients, regardless of payer, which
is applied to reasonable cost.
(5) A subsection (d) hospital must maintain an itemized statement
that identifies the services furnished in collecting hematopoietic stem
cells, the charges, the person receiving the service (donor/recipient;
if donor the provider must identify the prospective recipient), and the
prospective recipient's health care insurance number.
0
38. Section 412.115 is amended by revising paragraph (c) to read as
follows:

Sec. 412.115 Additional payments.

* * * * *
(c) QIO reimbursement for cost of sending requested patient records
to the QIO. An additional payment is made to a hospital in accordance
with Sec. 476.78 of this chapter for the costs of sending requested
patient records to the QIO in electronic format, by facsimile, or by
photocopying and mailing.
0
39. Section 412.152 is amended by revising the definitions of
``Applicable period'' and ``Applicable period for dual eligibility'' to
read as follows:

Sec. 412.152 Definitions for the Hospital Readmissions Reduction
Program.

* * * * *
Applicable period is, with respect to a fiscal year, the 3-year
period (specified by the Secretary) from which data are collected in
order to calculate excess readmission ratios and adjustments under the
Hospital Readmissions Reduction Program.
(1) The applicable period for FY 2022 is the 3-year period from
July 1, 2017 through June 30, 2020; and
(2) Beginning with the FY 2023 program year, the applicable period
is the 3-year period advanced by 1-year from the prior year's period
from which data are collected in order to calculate excess readmission
ratios and adjustments under the Hospital Readmissions Reduction
Program, unless otherwise specified by the Secretary. That is, for FY
2023, the applicable period is the 3-year period from July 1, 2018
through June 30, 2021.
Applicable period for dual eligibility is the 3-year data period
corresponding to the applicable period for the Hospital Readmissions
Reduction Program, unless otherwise established by the Secretary.
* * * * *
0
40. Section 412.170 is amended by revising the definition of
``Applicable period'' and adding the definitions of ``CDC NHSN HAI''
and ``CMS PSI 90'' in alphabetical order to read as follows:

Sec. 412.170 Definitions for the Hospital-Acquired Condition
Reduction Program.

* * * * *
Applicable period is, unless otherwise specified by the Secretary,
with respect to a fiscal year, the 2-year period (specified by the
Secretary) from which data are collected in order to calculate the
total hospital-acquired condition score under the Hospital-Acquired
Condition Reduction Program.
(1) The applicable period for FY 2023--
(i) For the CMS PSI 90 measure is the 24-month period from July 1,
2019 through June 30, 2021; and
(ii) For the CDC NHSN HAI measures is the 24-month period from
January 1, 2020 through December 31, 2021.
(2) Beginning with the FY 2023 program year, the applicable period
is the 24-month period advanced by 1-year from the prior fiscal year's
period from which data are collected in order to calculate the total
hospital-acquired condition score under the Hospital-Acquired Condition
Reduction Program, unless otherwise specified by the Secretary.
CDC NHSN HAI stands for Centers for Disease Control and Prevention
National Healthcare Safety Network healthcare-associated infection
measures.
CMS PSI 90 stands for Patient Safety and Adverse Events Composite
for Selected Indicators (modified version of PSI 90).
* * * * *
0
41. Section 412.230 is amended by revising paragraph (d)(2)(ii)(A) to
read as follows:

Sec. 412.230 Criteria for an individual hospital seeking
redesignation to another rural area or an urban area.

* * * * *
(d) * * *
(2) * * *
(ii) * * *
(A) For hospital-specific data, the hospital must provide a
weighted 3-year average of its average hourly wages using data from the
CMS hospital wage survey used to construct the wage index in effect for
prospective payment purposes.
(1) For the limited purpose of qualifying for geographic
reclassification based on wage data from cost reporting periods
beginning prior to FY 2000, a hospital may request that its wage data
be revised if the hospital is in an urban area that was subject to the
rural floor for the period during which the wage data the hospital
wishes to revise were used to calculate its wage index.
(2) Once a hospital has accumulated at least 1 year of wage data in
the applicable 3-year average hourly wage period used by the MGCRB, the
hospital is eligible to apply for reclassification based on those data.
* * * * *
0
42. Section 412.278 is amended by revising paragraph (b)(1) to read as
follows:

Sec. 412.278 Administrator's review.

* * * * *
(b) * * *
(1) The hospital's request for review must be in writing and sent
to the Administrator, in care of the Office of the Attorney Advisor.
The request must be received by the Administrator within 15 days after
the date the MGCRB issues its decision. The hospital must also submit
an electronic copy of its request for review to to CMS's Hospital and
Ambulatory Policy Group.
* * * * *
0
43. Section 412.312 is amended by adding paragraph (f) to read as
follows:

Sec. 412.312 Payment based on the Federal rate.

* * * * *
(f) Payment adjustment for certain clinical trial cases. For
discharges occurring on or after October 1, 2020, in determining the
payment amount under this section for certain clinical trial cases as
described in Sec. 412.85(b), the DRG weighting factor described in
paragraph (b)(1) of this section is adjusted as described in Sec.
412.85(c).
0
44. Section 412.523 is amended by adding paragraph (c)(3)(xvii) to read
as follows:

Sec. 412.523 Methodology for calculating the Federal prospective
payment rates.

* * * * *
(c) * * *
(3) * * *
(xvii) For long-term care prospective payment system fiscal year
2021 and subsequent fiscal years. The long-term care hospital
prospective payment

[[Page 32895]]

system standard Federal payment rate for a long-term care hospital
prospective payment system fiscal year is the standard Federal payment
rate for the previous long-term care prospective payment system fiscal
year updated by the percentage increase in the market basket index (as
determined by CMS) less a multifactor productivity adjustment (as
determined by CMS), and further adjusted, as appropriate, as described
in paragraph (d) of this section.
* * * * *
0
45. Section 412.622 is amended by revising paragraph (b)(2)(i) to read
as follows:

Sec. 412.622 Basis of payment.

* * * * *
(b) * * *
(2) * * *
(i) Bad debts of Medicare beneficiaries, as provided in Sec.
413.89 of this chapter; and
* * * * *

PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR
END-STAGE RENAL DISEASE SERVICES; PROSPECTIVELY DETERMINED PAYMENT
RATES FOR SKILLED NURSING FACILITIES; PAYMENT FOR ACUTE KIDNEY
INJURY DIALYSIS

0
46. The authority citation for part 413 continues to read as follows:

Authority: 42 U.S.C. 1302, 1395d(d), 1395f(b), 1395g, 1395l(a),
(i), and (n), 1395x(v), 1395hh, 1395rr, 1395tt, and 1395ww.

0
47. Section 413.20 is amended by revising paragraph (d)(3) to read as
follows:

Sec. 413.20 Financial data and reports.

* * * * *
(d) * * *
(3)(i) The provider must furnish the contractor--
(A) Upon request, copies of patient service charge schedules and
changes thereto as they are put into effect; and
(B) Its median payer-specific negotiated charge by MS-DRG for
payers that are Medicare Advantage (MA) organizations, and its median
payer-specific negotiated charge by MS-DRG for all third party payers,
as applicable, and changes thereto as they are put into effect.
(ii) The contractor evaluates the charge schedules as specified in
paragraph (d)(3)(i) of this section to determine the extent to which
they may be used for determining program payment.
* * * * *
0
48. Section 413.79 is amended by adding paragraph (h)(1)(iii) to read
as follows:

Sec. 413.79 Direct GME payments: Determination of the weighted
number of FTE residents.

* * * * *
(h) * * *
(1) * * *
(iii) Displaced resident means a resident who--
(A) Leaves a program after the hospital or program closure is
publicly announced, but before the actual hospital or program closure;
(B) Is assigned to and training at planned rotations at another
hospital who will be unable to return to his/her rotation at the
closing hospital or program;
(C) Is matched into a GME program at the closing hospital or
program but has not yet started training at the closing hospital or
program;
(D) Is physically training in the hospital on the day prior to or
day of program or hospital closure; or
(E) Is on approved leave at the time of the announcement of closure
or actual closure, and therefore, cannot return to his/her rotation at
the closing hospital or program.
* * * * *
0
49. Section 413.89 is amended by revising paragraphs (b), (c), (e)(2),
and (f) to read as follows:

Sec. 413.89 Bad debts, charity, and courtesy allowances.

* * * * *
(b) Definitions--(1) Bad debts. (i) For cost reporting periods
beginning before October 1, 2020:
(A) Bad debts are amounts considered to be uncollectible from
accounts and notes receivable that were created or acquired in
providing services.
(B) ``Accounts receivable'' and ``notes receivable'' are
designations for claims arising from the furnishing of services, and
are collectible in money in the relatively near future.
(ii) For cost reporting periods beginning on or after October 1,
2020, bad debts are amounts considered to be uncollectible from patient
accounts that were created or acquired in providing services and are
categorized as implicit price concessions for cost reporting purposes
and are recorded in the provider's accounting records as a component of
net patient revenue.
(2) Charity allowances. Charity allowances are reductions in
charges made by the provider of services because of the indigence or
medical indigence of the patient. Cost of free care (uncompensated
services) furnished under a Hill-Burton obligation are considered as
charity allowances.
(3) Courtesy allowances. Courtesy allowances indicate a reduction
in charges in the form of an allowance to physicians, clergy, members
of religious orders, and others as approved by the governing body of
the provider, for services received from the provider. Employee fringe
benefits, such as hospitalization and personnel health programs, are
not considered to be courtesy allowances.
(c) Normal accounting treatment: Reduction in revenue. (1)
Effective for cost reporting periods beginning before October 1, 2020,
bad debts, charity, and courtesy allowances represent reductions in
revenue. The failure to collect charges for services furnished does not
add to the cost of providing the services. Such costs have already been
incurred in the production of the services.
(2) Effective for cost reporting periods beginning on or after
October 1, 2020, bad debts, also known as ``implicit price
concessions,'' charity, and courtesy allowances represent reductions in
revenue. The failure to collect charges for services furnished does not
add to the cost of providing the services. Such costs have already been
incurred in the production of the services.
(3) Effective for cost reporting periods beginning on or after
October 1, 2020, Medicare bad debts must not be written off to a
contractual allowance account but must be charged to an expense account
for uncollectible accounts.
* * * * *
(e) * * *
(2) The provider must be able to establish that reasonable
collection efforts were made.
(i) Non-indigent beneficiary. A non-indigent beneficiary is a
beneficiary who has not been determined to be categorically or
medically needy by a State Medicaid Agency to receive medical
assistance from Medicaid, nor have they been determined to be indigent
by the provider for Medicare bad debt purposes. To be considered a
reasonable collection effort for non-indigent beneficiaries all of the
following are applicable:
(A) A provider's collection effort or the effort of a collection
agency acting on the provider's behalf, or both, to collect Medicare
deductible or coinsurance amounts must consist of all of the following:

[[Page 32896]]

(1) Be similar to the collection effort put forth to collect
comparable amounts from non-Medicare patients.
(2) For cost reporting periods beginning before October 1, 2020,
involve the issuance of a bill to the beneficiary or the party
responsible for the beneficiary's personal financial obligations on or
shortly after discharge or death of the beneficiary.
(3) For cost reporting periods beginning on or after October 1,
2020, involve the issuance of a bill to the beneficiary or the party
responsible for the beneficiary's personal financial obligations on or
before 120 days after the latter of one of the following:
(i) The date of the Medicare remittance advice.
(ii) The date of the remittance advice from the beneficiary's
secondary payer, if any.
(4) Include other actions such as subsequent billings, collection
letters and telephone calls or personal contacts with this party which
constitute a genuine, rather than token, collection effort.
(5)(i) Last at least 120 days after paragraph (e)(2)(i)(A)(2) or
(3) of this section is met before being written off as uncollectible
under paragraph (e)(3) of this section.
(ii) Start a new 120-day collection period each time a partial
payment is received within a 120-day collection period until the
remaining unpaid amount is paid in full or remains unpaid after 120
days.
(6) Maintaining and, upon request, furnishing documentation to its
contractor that includes all of the following:
(i) The provider's bad debt collection policy which describes the
collection process for Medicare and non-Medicare patients.
(ii) The patient account history documents which show the dates of
various collection actions such as the issuance of bills to the
beneficiary, follow-up collection letters, reports of telephone calls
and personal contact, etc.
(iii) The beneficiary's file with copies of the bill(s) and follow-
up notices.
(B) A provider that uses a collection agency to perform its
collection effort must do all of the following:
(1) Reduce the beneficiary's account receivable by the gross amount
collected.
(2) Include any fee charged by the collection agency as an
administrative cost.
(3) Before claiming the unpaid amounts as a Medicare bad debt,
cease all collection efforts, including the collection agency efforts,
and ensure that the collection accounts have been returned to the
provider from the agency.
(ii) Indigent non-dual eligible beneficiary. An indigent non-dual
eligible beneficiary is a beneficiary who is determined to be indigent
or medically indigent by the provider and is not eligible for Medicaid
as categorically or medically needy.
(A) To determine a beneficiary to be an indigent non-dual eligible
beneficiary, the provider must do all of the following:
(1) Not use a beneficiary's declaration of their inability to pay
their medical bills or deductibles and coinsurance amounts as sole
proof of indigence or medical indigence.
(2) Take into account a beneficiary's total resources which
include, but are not limited to, an analysis of all of the following:
(i) Assets (only those convertible to cash and unnecessary for the
beneficiary's daily living).
(ii) Liabilities.
(iii) Income.
(iv) Expenses.
(3) Consider any extenuating circumstances that would affect the
determination of the beneficiary's indigence or medical indigence.
(4) Determine that no source other than the beneficiary would be
legally responsible for the beneficiary's medical bill, such as a legal
guardian or State Medicaid program.
(5) Maintain and, upon request, furnish its contractor its
indigence policy describing the method by which indigence or medical
indigence is determined and all the beneficiary specific documentation
which supports the provider's determination of each beneficiary's
indigence or medical indigence.
(B) Once indigence is determined and the provider concludes that
there has been no improvement in the beneficiary's financial status,
the bad debt may be deemed uncollectible without applying a collection
effort.
(iii) Indigent dual-eligible beneficiaries (including qualified
Medicare beneficiaries). Providers may deem Medicare beneficiaries
indigent or medically indigent when such individuals have also been
determined eligible for Medicaid under a State's Title XIX Medicaid
program as either categorically needy individuals or medically needy
individuals. To be considered a reasonable collection effort for dual-
eligible beneficiaries, a provider--
(A) Must determine whether the State's Title XIX Medicaid Program
(or a local welfare agency, if applicable) is responsible to pay all or
a portion of the beneficiary's Medicare deductible or coinsurance
amounts;
(B) Must submit a bill to its Medicaid/Title XIX agency (or to its
local welfare agency) to determine the State's cost sharing obligation
to pay all or a portion of the applicable Medicare deductible and
coinsurance;
(C) Must submit the Medicaid remittance advice received from the
State to its Medicare contractor;
(D) Must reduce allowable Medicare bad debt by any amount that the
State is obligated to pay, either by statute or under the terms of its
approved Medicaid State plan, regardless of whether the State actually
pays its obligated amount to the provider; and
(E) May include the Medicare deductible or coinsurance amount, or
any portion thereof that the State is not obligated to pay, and which
remains unpaid by the beneficiary, as an allowable Medicare bad debt.
(f) Reporting period for writing off bad debts and reporting of
recoveries of bad debts reimbursed in prior periods. For cost reporting
periods beginning before, on, or after October 1, 2020, the deductible
and coinsurance amounts uncollected from beneficiaries are to be
written off and recognized as allowable bad debts in the cost reporting
period in which the accounts are deemed to be worthless.
(1) Any payment on the account made by the beneficiary or a
responsible party, after the write-off date but before the end of the
cost reporting period, must be used to reduce the final bad debt for
the account claimed in that cost report.
(2) In some cases an amount written off as a bad debt and
reimbursed by the program in a prior cost reporting period may be
recovered in a subsequent period.
(i) In situations described in this paragraph (f)(2), the recovered
amount must be used to reduce the provider's reimbursable costs in the
period in which the amount is recovered.
(ii) The amount of reduction in the period of recovery (as
specified in paragraph (f)(2)(i) of this section) must not exceed the
actual amount reimbursed by the program for the related bad debt in the
applicable prior cost reporting period.
* * * * *
0
50. Section 413.355 is revised to read as follows:

Sec. 413.355 Additional payment: QIO reimbursement for cost of
sending records electronically or by photocopy and mailing.

An additional payment is made to a skilled nursing facility in
accordance

[[Page 32897]]

with Sec. 476.78 of this chapter for the costs of sending requested
patient records to the QIO in electronic format, by facsimile, or by
photocopying and mailing.

PART 417--HEALTH MAINTENANCE ORGANIZATIONS, COMPETITIVE MEDICAL
PLANS, AND HEALTH CARE PREPAYMENT PLANS

0
51. The authority citation for part 417 is revised to read as follows:

Authority: 42 U.S.C. 300e, 300e-5, 300e-91302 and 1395hh), and
31 U.S.C. 9701.

0
52. Section 417.536 is amended by revising paragraph (g) to read as
follows:

Sec. 417.536 Cost payment principles.

* * * * *
(g) Charity and courtesy allowances. As specified in Sec. 413.89
of this chapter, charity and courtesy allowances are deductions from
revenue and may not be included as allowable costs.
* * * * *

PART 476--QUALITY IMPROVEMENT ORGANIZATION REVIEW

0
53. The authority citation for part 476 is revised to read as follows:

Authority: 42 U.S.C. 1302 and 1395hh.

0
54. Section 476.78 is amended--
0
a. In paragraph (b)(2)(i) by removing the phrase ``photocopy and
deliver to the QIO'' and adding in its place ``deliver to the QIO'';
0
b. By revising paragraphs (b)(2)(ii) and (c);
0
c. By redesignating paragraph (d) as paragraph (f);
0
d. By adding new paragraph (d) and paragraph (e); and
0
e. By revising newly redesignated paragraph (f).
The revisions and additions read as follows:

Sec. 476.78 Responsibilities of providers and practitioners.

* * * * *
(b) * * *
(2) * * *
(ii) Except if granted a waiver as described in paragraph (d) of
this section, send secure transmission of an electronic version of each
requested patient record to the QIO.
(A) Providers and practitioners must deliver electronic versions of
patient records within 14 calendar days of the request.
(B) A QIO is authorized to require the receipt of the patient
records earlier than the 14-day timeframe if the QIO makes a
preliminary determination that the review involves a potential gross
and flagrant or substantial violation as specified in part 1004 of this
title and circumstances warrant earlier receipt of the patient records.
(C) A practitioner's or provider's failure to comply with the
request for patient records within the established timeframe may result
in the QIO taking action in accordance with Sec. 476.90.
* * * * *
(c) Submission of patient records in electronic format. Except as
specified in paragraph (d) of this section, a provider or practitioner
must deliver patient records requested by a QIO for the purpose of
fulfilling one or more QIO functions, in an electronic format, using
the mechanism specified by the QIO. In the absence of any mechanism
specified by the requesting QIO, the requested patient records must be
submitted using any CMS-approved mechanism.
(d) Waiver from the requirement to submit patient records in an
electronic format. (1) A provider or practitioner that lacks the
capability to submit requested patient records to the requesting QIO in
an electronic format may request a waiver from the requirements in
paragraph (c) of this section.
(i) For providers that are required to execute a written agreement
with the QIO, a request for a waiver must be made during execution of
the written agreement with the QIO.
(ii) Providers that are required to execute a written agreement
with the QIO must request a waiver by notifying the QIO that they lack
the capability to submit patient records in electronic format, if their
lack of capability arises after the written agreement is executed.
(iii) Upon approval of the waiver, the waiver becomes part of the
written agreement with the QIO.
(iv) A provider with an approved waiver may submit patient records
by facsimile or by photocopying and mailing to the QIO.
(v) A provider with an approved waiver may be reimbursed by the QIO
for patient records submitted by facsimile or by photocopying and
mailing in accordance with paragraph (e)(2) of this section.
(vi) A QIO may not reimburse for any patient record submitted to
the QIO by facsimile or by photocopying and mailing if the provider
does not have an approved waiver.
(2) Providers and practitioners that are not required to execute a
written agreement with the QIO may request a waiver to be exempted from
submitting patient records in an electronic format.
(i) Such providers and practitioners may request a waiver by
notifying the QIO that they lack the capability to submit patient
records in electronic format.
(ii) Upon approval of the waiver, a provider or practitioner may
submit patient records by facsimile or by photocopying and mailing to
the QIO.
(iii) Providers and practitioners with approved waivers may be
reimbursed by the QIO for patient records submitted by facsimile or by
photocopying and mailing in accordance with paragraph (e)(2) of this
section.
(iv) A QIO may not reimburse for any patient records submitted to
the QIO by facsimile or by photocopying and mailing, if the provider or
practitioner does not have an approved waiver.
(e) Reimbursement for submitting patient records to the QIO. (1)
For purposes of this paragraph (e), a patient record means all patient
care data and other pertinent data or information relating to care or
services provided to an individual patient in the possession of the
provider or practitioner, as requested by a QIO for the purpose of
performing one or more QIO functions.
(2) A QIO may reimburse a provider or practitioner for requested
patient records submitted in an electronic format, at the rate of $3.00
per patient record.
(3) For a provider or practitioner that has an approved waiver
under paragraph (d) of this section, a QIO may reimburse the provider
or practitioner for requested records submitted by--
(i) Facsimile at the rate of $0.15 per page; or
(ii) Photocopying and mailing at the rate of $0.15 per page, plus
the cost of first class postage.
(4) A QIO may only reimburse a provider or practitioner once for
each patient record submitted, per request, even if a patient record is
submitted using multiple formats, in fragments, or more than once in
response to a single request by the QIO.
(f) Appeals. Reimbursement for the costs of submitting requested
patient records to the QIO in electronic format, by facsimile or by
photocopying and mailing is an additional payment to providers under
the prospective payment system, as specified in Sec. Sec. 412.115,
413.355, and 484.265 of this chapter. Appeals concerning these costs
are subject to the review process specified in part 405, subpart R, of
this chapter.

PART 480--ACQUISITION, PROTECTION, AND DISCLOSURE OF QUALITY
IMPROVEMENT ORGANIZATION INFORMATION

0
55. The authority citation for part 480 is revised to read as follows:

[[Page 32898]]

Authority: 42 U.S.C. 1302 and 1395hh.

0
56. Section 480.111 is amended by revising paragraph (d) to read as
follows:

Sec. 480.111 QIO access to records and information of institutions
and practitioners.

* * * * *
(d)(1) When submitting patient records to the QIO under this
section, the institution or practitioner must do so consistent with the
requirements in Sec. 476.78(c) and (d) of this chapter.
(2) Reimbursement to an institution or practitioner for the cost of
providing patient records is paid in accordance with Sec. 476.78(e) of
this chapter.

PART 484--HOME HEALTH SERVICES

0
57. The authority citation for part 484 continues to read as follows:

Authority: 42 U.S.C. 1302 and 1395hh unless otherwise noted.

0
58. Section 484.265 is revised to read as follows:

Sec. 484.265 Additional payment.

An additional payment is made to a home health agency in accordance
with Sec. 476.78 of this chapter for the costs of sending requested
patient records to the QIO in electronic format, by facsimile, or by
photocopying and mailing.

PART 495--STANDARDS FOR THE ELECTRONIC HEALTH RECORD TECHNOLOGY
INCENTIVE PROGRAM

0
59. The authority citation for part 495 continues to read as follows:

Authority: 42 U.S.C. 1302 and 1395hh.

0
60. Section 495.4 is amended in the definition of ``EHR reporting
period for a payment adjustment year'' by adding paragraphs (2)(vi) and
(3)(vi) to read as follows:

Sec. 495.4 Definitions.

* * * * *
EHR reporting period for a payment adjustment year. * * *
(2) * * *
(vi) The following are applicable for 2022:
(A) If an eligible hospital has not successfully demonstrated it is
a meaningful EHR user in a prior year, the EHR reporting period is any
continuous 90-day period within CY 2022 and applies for the FY 2023 and
2024 payment adjustment years. For the FY 2023 payment adjustment year,
the EHR reporting period must end before and the eligible hospital must
successfully register for and attest to meaningful use no later than
October 1, 2022.
(B) If in a prior year an eligible hospital has successfully
demonstrated it is a meaningful EHR user, the EHR reporting period is
any continuous 90-day period within CY 2022 and applies for the FY 2024
payment adjustment year.
(3) * * *
(vi) The following are applicable for 2022:
(A) If a CAH has not successfully demonstrated it is a meaningful
EHR user in a prior year, the EHR reporting period is any continuous
90-day period within CY 2022 and applies for the FY 2022 payment
adjustment year.
(B) If in a prior year a CAH has successfully demonstrated it is a
meaningful EHR user, the EHR reporting period is any continuous 90-day
period within CY 2022 and applies for the FY 2022 payment adjustment
year.
* * * * *

Sec. 495.20 [Amended]

0
61. Section 495.20 is amended--
0
a. In paragraph (e)(5)(iii) by removing the reference ``45 CFR
170.304(g)'' and adding in its place the reference ``45 CFR
170.314(g)''; and
0
b. In paragraph (l)(11)(ii)(C)(1) by removing the reference ``45 CFR
107.314(b)(2)'' and adding in its place the reference ``45 CFR
170.314(b)(2)''.
0
62. Section 495.24 to be amended by revising paragraph (e)(5)(iii)(B)
and the heading for paragraph (e)(6)(ii)(B) to read as follows:

Sec. 495.24 Stage 3 meaningful use objectives and measures for EPs,
eligible hospitals and CAHs for 2019 and subsequent years.

* * * * *
(e) * * *
(5) * * *
(iii) * * *
(B) Query of prescription drug monitoring program (PDMP) measure.
Subject to paragraph (e)(3) of this section, for at least one Schedule
II opioid electronically prescribed using CEHRT during the EHR
reporting period, the eligible hospital or CAH uses data from CEHRT to
conduct a query of a Prescription Drug Monitoring Program (PDMP) for
prescription drug history, except where prohibited and in accordance
with applicable law. This measure is worth 5 bonus points in CYs 2019,
2020, and 2021.
* * * * *
(6) * * *
(ii) * * *
(B) Support electronic referral loops by receiving and reconciling
health information measure. * * *
* * * * *
0
63. Section 495.104 is amended by revising paragraphs (c)(5)(viii)(B)
through (D) to read as follows:

Sec. 495.104 Incentive payments to eligible hospitals.

* * * * *
(c) * * *
(5) * * *
(viii) * * *
(B) \3/4\ for FY 2019;
(C) \1/2\ for FY 2020; and
(D) \1/4\ for FY 2021.
* * * * *

Dated: March 24, 2020.
Seema Verma,
Administrator, Centers for Medicare and Medicaid Services.
Dated: April 9, 2020.
Alex M. Azar II,
Secretary, Department of Health and Human Services.

Note: The following Addendum and Appendixes will not appear in
the Code of Federal Regulations.

Addendum--Schedule of Standardized Amounts, Update Factors, Rate-of-
Increase Percentages Effective With Cost Reporting Periods Beginning On
or After October 1, 2020, and Payment Rates for LTCHs Effective for
Discharges Occurring On or After October 1, 2020

I. Summary and Background

In this Addendum, we are setting forth a description of the
methods and data we used to determine the proposed prospective
payment rates for Medicare hospital inpatient operating costs and
Medicare hospital inpatient capital-related costs for FY 2021 for
acute care hospitals. We also are setting forth the rate-of-increase
percentage for updating the target amounts for certain hospitals
excluded from the IPPS for FY 2021. We note that, because certain
hospitals excluded from the IPPS are paid on a reasonable cost basis
subject to a rate-of-increase ceiling (and not by the IPPS), these
hospitals are not affected by the proposed figures for the
standardized amounts, offsets, and budget neutrality factors.
Therefore, in this proposed rule, we are setting forth the rate-of-
increase percentage for updating the target amounts for certain
hospitals excluded from the IPPS that will be effective for cost
reporting periods beginning on or after October 1, 2020.
In addition, we are setting forth a description of the methods
and data we used to determine the proposed LTCH PPS standard Federal
payment rate that would be applicable to Medicare LTCHs for FY 2021.
In general, except for SCHs and MDHs, for FY 2021, each
hospital's payment per discharge under the IPPS is based on 100
percent of the Federal national rate, also known as the national
adjusted standardized amount. This amount reflects the national
average hospital cost per case from a base year, updated for
inflation.
SCHs are paid based on whichever of the following rates yields
the greatest aggregate payment: The Federal national rate
(including, as discussed in section IV.G. of

[[Page 32899]]

the preamble of this proposed rule, uncompensated care payments
under section 1886(r)(2) of the Act); the updated hospital-specific
rate based on FY 1982 costs per discharge; the updated hospital-
specific rate based on FY 1987 costs per discharge; the updated
hospital-specific rate based on FY 1996 costs per discharge; or the
updated hospital-specific rate based on FY 2006 costs per discharge.
Under section 1886(d)(5)(G) of the Act, MDHs historically were
paid based on the Federal national rate or, if higher, the Federal
national rate plus 50 percent of the difference between the Federal
national rate and the updated hospital-specific rate based on FY
1982 or FY 1987 costs per discharge, whichever was higher. However,
section 5003(a)(1) of Public Law 109-171 extended and modified the
MDH special payment provision that was previously set to expire on
October 1, 2006, to include discharges occurring on or after October
1, 2006, but before October 1, 2011. Under section 5003(b) of Public
Law 109-171, if the change results in an increase to an MDH's target
amount, we must rebase an MDH's hospital specific rates based on its
FY 2002 cost report. Section 5003(c) of Public Law 109-171 further
required that MDHs be paid based on the Federal national rate or, if
higher, the Federal national rate plus 75 percent of the difference
between the Federal national rate and the updated hospital specific
rate. Further, based on the provisions of section 5003(d) of Public
Law 109-171, MDHs are no longer subject to the 12-percent cap on
their DSH payment adjustment factor. Section 50205 of the Bipartisan
Budget Act of 2018 extended the MDH program for discharges on or
after October 1, 2017 through September 30, 2022.
As discussed in section IV.B. of the preamble of this proposed
rule, in accordance with section 1886(d)(9)(E) of the Act as amended
by section 601 of the Consolidated Appropriations Act, 2016 (Pub. L.
114-113), for FY 2021, subsection (d) Puerto Rico hospitals will
continue to be paid based on 100 percent of the national
standardized amount. Because Puerto Rico hospitals are paid 100
percent of the national standardized amount and are subject to the
same national standardized amount as subsection (d) hospitals that
receive the full update, our discussion later in this section does
not include references to the Puerto Rico standardized amount or the
Puerto Rico-specific wage index.
As discussed in section II. of this Addendum, we are proposing
to make changes in the determination of the prospective payment
rates for Medicare inpatient operating costs for acute care
hospitals for FY 2021. In section III. of this Addendum, we discuss
our proposed policy changes for determining the prospective payment
rates for Medicare inpatient capital-related costs for FY 2021. In
section IV. of this Addendum, we are setting forth the rate-of-
increase percentage for determining the rate-of-increase limits for
certain hospitals excluded from the IPPS for FY 2021. In section V.
of this Addendum, we discuss proposed policy changes for determining
the LTCH PPS standard Federal rate for LTCHs paid under the LTCH PPS
for FY 2021. The tables to which we refer in the preamble of this
proposed rule are listed in section VI. of this Addendum and are
available via the internet on the CMS website.

II. Proposed Changes to Prospective Payment Rates for Hospital
Inpatient Operating Costs for Acute Care Hospitals for FY 2021

The basic methodology for determining prospective payment rates
for hospital inpatient operating costs for acute care hospitals for
FY 2005 and subsequent fiscal years is set forth under Sec. 412.64.
The basic methodology for determining the prospective payment rates
for hospital inpatient operating costs for hospitals located in
Puerto Rico for FY 2005 and subsequent fiscal years is set forth
under Sec. Sec. 412.211 and 412.212. Later in this section, we
discuss the factors we are proposing to use for determining the
proposed prospective payment rates for FY 2021.
In summary, the proposed standardized amounts set forth in
Tables 1A, 1B, and 1C that are listed and published in section VI.
of this Addendum (and available via the internet on the CMS website)
reflect--
Equalization of the standardized amounts for urban and
other areas at the level computed for large urban hospitals during
FY 2004 and onward, as provided for under section
1886(d)(3)(A)(iv)(II) of the Act.
The labor-related share that is applied to the
standardized amounts to give the hospital the highest payment, as
provided for under sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of
the Act. For FY 2021, depending on whether a hospital submits
quality data under the rules established in accordance with section
1886(b)(3)(B)(viii) of the Act (hereafter referred to as a hospital
that submits quality data) and is a meaningful EHR user under
section 1886(b)(3)(B)(ix) of the Act (hereafter referred to as a
hospital that is a meaningful EHR user), there are four possible
applicable percentage increases that can be applied to the national
standardized amount. We refer readers to section IV.B. of the
preamble of this proposed rule for a complete discussion on the
proposed FY 2021 inpatient hospital update. The table that follows
shows these four scenarios:
[GRAPHIC] [TIFF OMITTED] TP29MY20.221

We note that section 1886(b)(3)(B)(viii) of the Act, which
specifies the adjustment to the applicable percentage increase for
``subsection (d)'' hospitals that do not submit quality data under
the rules established by the Secretary, is not applicable to
hospitals located in Puerto Rico.
In addition, section 602 of Public Law 114-113 amended section
1886(n)(6)(B) of the Act to specify that Puerto Rico hospitals are
eligible for incentive payments for the meaningful use of certified
EHR technology, effective beginning FY 2016, and also to apply the
adjustments to the applicable percentage increase under section
1886(b)(3)(B)(ix) of the Act to Puerto Rico hospitals that are not
meaningful EHR users, effective FY 2022. Accordingly, because the
provisions of section 1886(b)(3)(B)(ix) of the Act are not
applicable to hospitals located in Puerto Rico until FY 2022, the
adjustments under this provision are not applicable for FY 2021.

[[Page 32900]]

An adjustment to the standardized amount to ensure
budget neutrality for DRG recalibration and reclassification, as
provided for under section 1886(d)(4)(C)(iii) of the Act.
An adjustment to ensure the wage index and labor-
related share changes (depending on the fiscal year) are budget
neutral, as provided for under section 1886(d)(3)(E)(i) of the Act
(as discussed in the FY 2006 IPPS final rule (70 FR 47395) and the
FY 2010 IPPS final rule (74 FR 44005). We note that section
1886(d)(3)(E)(i) of the Act requires that when we compute such
budget neutrality, we assume that the provisions of section
1886(d)(3)(E)(ii) of the Act (requiring a 62-percent labor-related
share in certain circumstances) had not been enacted.
An adjustment to ensure the effects of geographic
reclassification are budget neutral, as provided for under section
1886(d)(8)(D) of the Act, by removing the FY 2020 budget neutrality
factor and applying a revised factor.
A positive adjustment of 0.5 percent in FYs 2019
through 2023 as required under section 414 of the MACRA.
An adjustment to ensure the effects of the Rural
Community Hospital Demonstration program required under section 410A
of Public Law 108-173, as amended by sections 3123 and 10313 of
Public Law 111-148, which extended the demonstration program for an
additional 5 years, as amended by section 15003 of Public Law 114-
255 which amended section 410A of Public Law 108-173 to provide for
a 10-year extension of the demonstration program (in place of the 5-
year extension required by the Affordable Care Act) beginning on the
date immediately following the last day of the initial 5-year period
under section 410A(a)(5) of Public Law 108-173, are budget neutral
as required under section 410A(c)(2) of Public Law 108-173.
Beginning with FY 2021, an adjustment to ensure the
effects of the reasonable cost based payment for allogeneic
hematopoietic stem cell acquisition costs under section 108 of the
Further Consolidated Appropriations Act, 2020 (Pub. L. 116-94), are
budget neutral as required under section 108 of Public Law 116-94.
An adjustment to the standardized amount to implement
in a budget neutral manner the increase in the wage index values for
hospitals with a wage index value below the 25th percentile wage
index value across all hospitals (as described in section III.N. of
the preamble of this proposed rule).
As discussed in this section and in section III.2.d of
the preamble of this proposed rule, an adjustment to the
standardized amount (using our exceptions and adjustments authority
under section 1886(d)(5)(I)(i) of the Act) to implement in a budget
neutral manner our proposed transition for hospitals negatively
impacted due to proposed changes to the wage index (including the
proposed implementation of the revised OMB market labor
delineations). We refer the reader to section III.2.d. of the
preamble of this proposed rule, for a detailed discussion.
An adjustment to remove the FY 2020 outlier offset and
apply an offset for FY 2021, as provided for in section
1886(d)(3)(B) of the Act.
For FY 2021, consistent with current law, we are proposing to
apply the rural floor budget neutrality adjustment to hospital wage
indexes. Also, consistent with section 3141 of the Affordable Care
Act, instead of applying a State-level rural floor budget neutrality
adjustment to the wage index, we are proposing to apply a uniform,
national budget neutrality adjustment to the FY 2021 wage index for
the rural floor.

A. Calculation of the Proposed Adjusted Standardized Amount

1. Standardization of Base-Year Costs or Target Amounts

In general, the national standardized amount is based on per
discharge averages of adjusted hospital costs from a base period
(section 1886(d)(2)(A) of the Act), updated and otherwise adjusted
in accordance with the provisions of section 1886(d) of the Act. The
September 1, 1983 interim final rule (48 FR 39763) contained a
detailed explanation of how base-year cost data (from cost reporting
periods ending during FY 1981) were established for urban and rural
hospitals in the initial development of standardized amounts for the
IPPS.
Sections 1886(d)(2)(B) and 1886(d)(2)(C) of the Act require us
to update base-year per discharge costs for FY 1984 and then
standardize the cost data in order to remove the effects of certain
sources of cost variations among hospitals. These effects include
case-mix, differences in area wage levels, cost-of-living
adjustments for Alaska and Hawaii, IME costs, and costs to hospitals
serving a disproportionate share of low-income patients.
For FY 2021, we are proposing to continue to use the national
labor-related and nonlabor-related shares (which are based on the
2014-based hospital market basket) that were used in FY 2020.
Specifically, under section 1886(d)(3)(E) of the Act, the Secretary
estimates, from time to time, the proportion of payments that are
labor-related and adjusts 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.'' For FY 2021, as discussed in section III. of the
preamble of this proposed rule, we are proposing to continue to use
a labor-related share of 68.3 percent for the national standardized
amounts for all IPPS hospitals (including hospitals in Puerto Rico)
that have a wage index value that is greater than 1.0000. Consistent
with section 1886(d)(3)(E) of the Act, we are proposing to apply the
wage index to a labor-related share of 62 percent of the national
standardized amount for all IPPS hospitals (including hospitals in
Puerto Rico) whose wage index values are less than or equal to
1.0000.
The proposed standardized amounts for operating costs appear in
Tables 1A, 1B, and 1C that are listed and published in section VI.
of the Addendum to this proposed rule and are available via the
internet on the CMS website.

2. Computing the National Average Standardized Amount

Section 1886(d)(3)(A)(iv)(II) of the Act requires that,
beginning with FY 2004 and thereafter, an equal standardized amount
be computed for all hospitals at the level computed for large urban
hospitals during FY 2003, updated by the applicable percentage
update. Accordingly, we are proposing to calculate the FY 2021
national average standardized amount irrespective of whether a
hospital is located in an urban or rural location.

3. Updating the National Average Standardized Amount

Section 1886(b)(3)(B) of the Act specifies the applicable
percentage increase used to update the standardized amount for
payment for inpatient hospital operating costs. We note that, in
compliance with section 404 of the MMA, in this proposed rule, we
are proposing to use the 2014-based IPPS operating and capital
market baskets for FY 2021. As discussed in section IV.B. of the
preamble of this proposed rule, in accordance with section
1886(b)(3)(B) of the Act, as amended by section 3401(a) of the
Affordable Care Act, we are proposing to reduce the FY 2021
applicable percentage increase (which for this proposed rule is
based on IGI's fourth quarter 2019 forecast of the 2014-based IPPS
market basket) by the MFP adjustment (the 10-year moving average of
MFP for the period ending FY 2021) of 0.4 percentage point, which
for this proposed rule is also calculated based on IGI's fourth
quarter 2019 forecast.
Based on IGI's fourth quarter 2019 forecast of the hospital
market basket increase (as discussed in Appendix B of this proposed
rule), the forecast of the hospital market basket increase for FY
2021 for this proposed rule is 3.0 percent. As discussed earlier,
for FY 2021, depending on whether a hospital submits quality data
under the rules established in accordance with section
1886(b)(3)(B)(viii) of the Act and is a meaningful EHR user under
section 1886(b)(3)(B)(ix) of the Act, there are four possible
applicable percentage increases that can be applied to the
standardized amount. We refer readers to section IV.B. of the
preamble of this proposed rule for a complete discussion on the FY
2021 inpatient hospital update to the standardized amount. We also
refer readers to the previous table for the four possible applicable
percentage increases that would be applied to update the national
standardized amount. The proposed standardized amounts shown in
Tables 1A through 1C that are published in section VI. of this
Addendum and that are available via the internet on the CMS website
reflect these differential amounts.
Although the update factors for FY 2021 are set by law, we are
required by section 1886(e)(4) of the Act to recommend, taking into
account MedPAC's recommendations, appropriate update factors for FY
2021 for both IPPS hospitals and hospitals and hospital units
excluded from the IPPS. Section 1886(e)(5)(A) of the Act requires
that we publish our recommendations in the Federal Register for
public comment. Our recommendation on the update factors is set
forth in Appendix B of this proposed rule.

[[Page 32901]]

4. Methodology for Calculation of the Average Standardized Amount

The methodology we used to calculate the proposed FY 2021
standardized amount is as follows:
To ensure we are only including hospitals paid under
the IPPS in the calculation of the standardized amount, we applied
the following inclusion and exclusion criteria: Include hospitals
whose last four digits fall between 0001 and 0879 (section 2779A1 of
Chapter 2 of the State Operations Manual on the CMS website at:
https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/som107c02.pdf); exclude CAHs at the time of this proposed
rule; exclude hospitals in Maryland (because these hospitals are
paid under an all payer model under section 1115A of the Act); and
remove PPS-excluded cancer hospitals that have a ``V'' in the fifth
position of their provider number or a ``E'' or ``F'' in the sixth
position.
As in the past, we are proposing to adjust the FY 2021
standardized amount to remove the effects of the FY 2020 geographic
reclassifications and outlier payments before applying the FY 2021
updates. We then applied budget neutrality offsets for outliers and
geographic reclassifications to the standardized amount based on
proposed FY 2021 payment policies.
We do not remove the prior year's budget neutrality
adjustments for reclassification and recalibration of the DRG
relative weights and for updated wage data because, in accordance
with sections 1886(d)(4)(C)(iii) and 1886(d)(3)(E) of the Act,
estimated aggregate payments after updates in the DRG relative
weights and wage index should equal estimated aggregate payments
prior to the changes. If we removed the prior year's adjustment, we
would not satisfy these conditions.
Budget neutrality is determined by comparing aggregate IPPS
payments before and after making changes that are required to be
budget neutral (for example, changes to MS-DRG classifications,
recalibration of the MS-DRG relative weights, updates to the wage
index, and different geographic reclassifications). We include
outlier payments in the simulations because they may be affected by
changes in these parameters.
Consistent with our methodology established in the FY
2011 IPPS/LTCH PPS final rule (75 FR 50422 through 50433), because
IME Medicare Advantage payments are made to IPPS hospitals under
section 1886(d) of the Act, we believe these payments must be part
of these budget neutrality calculations. However, we note that it is
not necessary to include Medicare Advantage IME payments in the
outlier threshold calculation or the outlier offset to the
standardized amount because the statute requires that outlier
payments be not less than 5 percent nor more than 6 percent of total
``operating DRG payments,'' which does not include IME and DSH
payments. We refer readers to the FY 2011 IPPS/LTCH PPS final rule
for a complete discussion on our methodology of identifying and
adding the total Medicare Advantage IME payment amount to the budget
neutrality adjustments.
Consistent with the methodology in the FY 2012 IPPS/
LTCH PPS final rule, in order to ensure that we capture only fee-
for-service claims, we are only including claims with a ``Claim
Type'' of 60 (which is a field on the MedPAR file that indicates a
claim is an FFS claim).
Consistent with our methodology established in the FY
2017 IPPS/LTCH PPS final rule (81 FR 57277), in order to further
ensure that we capture only FFS claims, we are excluding claims with
a ``GHOPAID'' indicator of 1 (which is a field on the MedPAR file
that indicates a claim is not an FFS claim and is paid by a Group
Health Organization).
Consistent with our methodology established in the FY
2011 IPPS/LTCH PPS final rule (75 FR 50422 through 50423), we
examine the MedPAR file and remove pharmacy charges for anti-
hemophilic blood factor (which are paid separately under the IPPS)
with an indicator of ``3'' for blood clotting with a revenue code of
``0636'' from the covered charge field for the budget neutrality
adjustments. We also remove organ acquisition charges from the
covered charge field for the budget neutrality adjustments because
organ acquisition is a pass-through payment not paid under the IPPS.
The participation of hospitals under the BPCI (Bundled
Payments for Care Improvement) Advanced model started on October 1,
2018. The BPCI Advanced model, tested under the authority of section
3021 of the Affordable Care Act (codified at section 1115A of the
Act), is comprised of a single payment and risk track, which bundles
payments for multiple services beneficiaries receive during a
Clinical Episode. Acute care hospitals may participate in the BPCI
Advanced model in one of two capacities: As a model Participant or
as a downstream Episode Initiator. Regardless of the capacity in
which they participate in the BPCI Advanced model, participating
acute care hospitals will continue to receive IPPS payments under
section 1886(d) of the Act. Acute care hospitals that are
Participants also assume financial and quality performance
accountability for Clinical Episodes in the form of a reconciliation
payment. For additional information on the BPCI Advanced model, we
refer readers to the BPCI Advanced web page on the CMS Center for
Medicare and Medicaid Innovation's website at: https://innovation.cms.gov/initiatives/bpci-advanced/.
For FY 2021, consistent with how we treated hospitals that
participated in the BPCI Advanced Model in the FY 2020 IPPS/LTCH PPS
final rule (84 FR 42620), we are proposing to include all applicable
data from subsection (d) hospitals participating in the BPCI
Advanced model in our IPPS payment modeling and ratesetting
calculations. We believe it is appropriate to include all applicable
data from the subsection (d) hospitals participating in the BPCI
Advanced model in our IPPS payment modeling and ratesetting
calculations because these hospitals are still receiving IPPS
payments under section 1886(d) of the Act. For the same reasons, we
also are proposing to include all applicable data from subsection
(d) hospitals participating in the Comprehensive Care for Joint
Replacement (CJR) Model in our IPPS payment modeling and ratesetting
calculations.
Consistent with our methodology established in the FY
2013 IPPS/LTCH PPS final rule (77 FR 53687 through 53688), we
believe that it is appropriate to include adjustments for the
Hospital Readmissions Reduction Program and the Hospital VBP Program
(established under the Affordable Care Act) within our budget
neutrality calculations.
Both the hospital readmissions payment adjustment (reduction)
and the hospital VBP payment adjustment (redistribution) are applied
on a claim-by-claim basis by adjusting, as applicable, the base-
operating DRG payment amount for individual subsection (d)
hospitals, which affects the overall sum of aggregate payments on
each side of the comparison within the budget neutrality
calculations.
In order to properly determine aggregate payments on each side
of the comparison, consistent with the approach we have taken in
prior years, for FY 2021, we are proposing to apply a proposed proxy
based on the prior fiscal year hospital readmissions payment
adjustment (for FY 2021 this would be FY 2020 final adjustment
factors from Table 15 of the FY 2020 IPPS/LTCH final rule) and a
proposed proxy based on the prior fiscal year hospital VBP payment
adjustment (for FY 2021 this would be FY 2020 final adjustment
factors from Table 16B of the FY 2020 IPPS/LTCH final rule) on each
side of the comparison, consistent with the methodology that we
adopted in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53687 through
53688). That is, we are proposing to apply a proxy readmissions
payment adjustment factor and a proxy hospital VBP payment
adjustment factor from the prior final rule on both sides of our
comparison of aggregate payments when determining all budget
neutrality factors described in section II.A.4. of this Addendum.
The Affordable Care Act also established section
1886(r) of the Act, which modifies the methodology for computing the
Medicare DSH payment adjustment beginning in FY 2014. Beginning in
FY 2014, IPPS hospitals receiving Medicare DSH payment adjustments
receive an empirically justified Medicare DSH payment equal to 25
percent of the amount that would previously have been received under
the statutory formula set forth under section 1886(d)(5)(F) of the
Act governing the Medicare DSH payment adjustment. In accordance
with section 1886(r)(2) of the Act, the remaining amount, equal to
an estimate of 75 percent of what otherwise would have been paid as
Medicare DSH payments, reduced to reflect changes in the percentage
of individuals who are uninsured and any additional statutory
adjustment, will be available to make additional payments to
Medicare DSH hospitals based on their share of the total amount of
uncompensated care reported by Medicare DSH hospitals for a given
time period. In order to properly determine aggregate payments on
each side of the comparison for budget neutrality, prior to FY 2014,
we included estimated Medicare DSH payments on both sides of our
comparison of

[[Page 32902]]

aggregate payments when determining all budget neutrality factors
described in section II.A.4. of this Addendum.
To do this for FY 2021 (as we did for the last 7 fiscal years),
we are proposing to include estimated empirically justified Medicare
DSH payments that will be paid in accordance with section 1886(r)(1)
of the Act and estimates of the additional uncompensated care
payments made to hospitals receiving Medicare DSH payment
adjustments as described by section 1886(r)(2) of the Act. That is,
we are proposing to consider estimated empirically justified
Medicare DSH payments at 25 percent of what would otherwise have
been paid, and also the estimated additional uncompensated care
payments for hospitals receiving Medicare DSH payment adjustments on
both sides of our comparison of aggregate payments when determining
all budget neutrality factors described in section II.A.4. of this
Addendum.
When calculating total payments for budget neutrality,
to determine total payments for SCHs, we model total hospital-
specific rate payments and total Federal rate payments and then
include whichever one of the total payments is greater. As discussed
in section IV.G. of the preamble to this proposed rule and later in
this section, we are proposing to continue to use the FY 2014
finalized methodology under which we take into consideration
uncompensated care payments in the comparison of payments under the
Federal rate and the hospital-specific rate for SCHs. Therefore, we
are proposing to include estimated uncompensated care payments in
this comparison.
Similarly, for MDHs, as discussed in section IV.G. of the
preamble of this proposed rule, when computing payments under the
Federal national rate plus 75 percent of the difference between the
payments under the Federal national rate and the payments under the
updated hospital-specific rate, we are proposing to continue to take
into consideration uncompensated care payments in the computation of
payments under the Federal rate and the hospital-specific rate for
MDHs.
We are proposing to include an adjustment to the
standardized amount for those hospitals that are not meaningful EHR
users in our modeling of aggregate payments for budget neutrality
for FY 2021. Similar to FY 2020, we are including this adjustment
based on data on the prior year's performance. Payments for
hospitals will be estimated based on the proposed applicable
standardized amount in Tables 1A and 1B for discharges occurring in
FY 2021.
In our determination of all proposed budget neutrality
factors described in section II.A.4. of this Addendum, we use
transfer-adjusted discharges. Specifically, we calculated the
transfer-adjusted discharges using the statutory expansion of the
postacute care transfer policy to include discharges to hospice care
by a hospice program as discussed in section IV.A.2.b. of the
preamble of this proposed rule.
We finally note that the wage index value is calculated and
assigned to a hospital based on the hospital's labor market area.
Under section 1886(d)(3)(E) of the Act, beginning with FY 2005, we
delineate hospital labor market areas based on the Core-Based
Statistical Areas (CBSAs) established by the Office of Management
and Budget (OMB). The current statistical areas used in FY 2020 are
based on OMB standards published on February 28, 2013 (79 FR 49951)
and Census 2010 data and Census Bureau population estimates for 2014
and 2015 (OMB Bulletin No. 17-01). As stated in section II.D.2. of
the preamble to this proposed rule, on April 10, 2018 OMB issued OMB
Bulletin No. 18-03 which superseded the August 15, 2017 OMB Bulletin
No. 17-01. On September 14, 2018, OMB issued OMB Bulletin No. 18-04
which superseded the April 10, 2018 OMB Bulletin No. 18-03. These
bulletins 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 OMB Bulletin No.
18-04 may be obtained at https://www.whitehouse.gov/wp-content/uploads/2018/09/Bulletin-18-04.pdf. (We note, on March 6, 2020 OMB
issued OMB Bulletin 20-01 (available on the web at https://www.whitehouse.gov/wp-content/uploads/2020/03/Bulletin-20-01.pdf),
and as discussed in preamble, this bulletin was not issued in time
for development of this proposed rule.)
In section III.A.2. of the preamble to this proposed rule, we
are proposing to implement the revised OMB delineations as described
in the September 14, 2018 OMB Bulletin No. 18-04, effective October
1, 2020 beginning with the FY 2021 IPPS wage index. Consistent with
our proposed policy to adopt the revised OMB delineations, in order
to properly determine aggregate payments on each side of the
comparison for our budget neutrality calculations, we are using wage
indexes based on the new OMB delineations in the determination of
all of the budget neutrality factors discussed in this section. We
also note that, consistent with past practice as finalized in the FY
2005 IPPS final rule (69 FR 49034), we are not proposing to adopt
the revised OMB delineations themselves in a budget neutral manner.
We continue to believe that the proposed revision to the labor
market areas in and of itself does not constitute an ``adjustment or
update'' to the adjustment for area wage differences, as provided
under section 1886(d)(3)(E) of the Act.

a. Proposed Recalibration of MS-DRG Relative Weights

Section 1886(d)(4)(C)(iii) of the Act specifies that, beginning
in FY 1991, the annual DRG reclassification and recalibration of the
relative weights must be made in a manner that ensures that
aggregate payments to hospitals are not affected. As discussed in
section II.G. of the preamble of this proposed rule, we normalized
the recalibrated MS-DRG relative weights by an adjustment factor so
that the average case relative weight after recalibration is equal
to the average case relative weight prior to recalibration. However,
equating the average case relative weight after recalibration to the
average case relative weight before recalibration does not
necessarily achieve budget neutrality with respect to aggregate
payments to hospitals because payments to hospitals are affected by
factors other than average case relative weight. Therefore, as we
have done in past years, we are proposing to make a budget
neutrality adjustment to ensure that the requirement of section
1886(d)(4)(C)(iii) of the Act is met.
For FY 2021, to comply with the requirement that MS-DRG
reclassification and recalibration of the relative weights be budget
neutral for the standardized amount and the hospital-specific rates,
we used FY 2019 discharge data to simulate payments and compared the
following:
Aggregate payments using the FY 2020 labor-related
share percentages, the revised OMB labor market area delineations
proposed for FY 2021, the FY 2020 relative weights, and the FY 2020
pre-reclassified wage data, and applied the proposed FY 2021
hospital readmissions payment adjustments and estimated FY 2021
hospital VBP payment adjustments; and
Aggregate payments using the FY 2020 labor-related
share percentages, the revised OMB labor market area delineations
proposed for FY 2021, the proposed FY 2021 relative weights, and the
FY 2020 pre-reclassified wage data, and applied the proposed FY 2021
hospital readmissions payment adjustments and estimated FY 2021
hospital VBP payment adjustments applied previously. Because this
payment simulation uses the FY 2021 relative weights, consistent
with our proposal in section IV.I. of the preamble to this proposed
rule, we applied the proposed adjustor for CAR T-cell therapy
clinical trial cases in our simulation of these payments. (As
discussed in section II.E.2.b. of the preamble of this proposed
rule, we also proposed to calculate an adjustment to account for the
CAR T-cell therapy cases identified as clinical trial cases in
calculating the FY 2021 relative weights and for purposes of budget
neutrality and outlier simulations.) We note that because the
simulations of payments for all of the budget neutrality factors
discussed in this section also use the FY 2021 relative weights, we
also applied the proposed adjustor for CAR T-cell therapy clinical
trial cases in all simulations of payments for the budget neutrality
factors discussed later in this section. We refer the reader to
section IV.I. of the preamble of this proposed rule for a complete
discussion on the proposed adjustor for CAR T-cell therapy clinical
trial cases and to section II.E.2.b. of the preamble of this
proposed rule, for a complete discussion of the proposed adjustment
to the FY 2021 relative weights to account for the CAR T-cell
therapy cases identified as clinical trial cases.
Based on this comparison, we computed a proposed budget
neutrality adjustment factor and applied this factor to the
standardized amount. As discussed in section IV. of this Addendum,
we also are proposing to apply the MS-DRG reclassification and
recalibration budget neutrality factor to the hospital-specific
rates that are effective for cost reporting periods beginning on or
after October 1, 2020. Please see the table later in this section
setting forth each of the FY 2021 proposed budget neutrality
factors.

[[Page 32903]]

b. Updated Wage Index--Proposed Budget Neutrality Adjustment

Section 1886(d)(3)(E)(i) of the Act requires us to update the
hospital wage index on an annual basis beginning October 1, 1993.
This provision also requires us to make any updates or adjustments
to the wage index in a manner that ensures that aggregate payments
to hospitals are not affected by the change in the wage index.
Section 1886(d)(3)(E)(i) of the Act requires that we implement the
wage index adjustment in a budget neutral manner. However, section
1886(d)(3)(E)(ii) of the Act sets the labor-related share at 62
percent for hospitals with a wage index less than or equal to
1.0000, and section 1886(d)(3)(E)(i) of the Act provides that the
Secretary shall calculate the budget neutrality adjustment for the
adjustments or updates made under that provision as if section
1886(d)(3)(E)(ii) of the Act had not been enacted. In other words,
this section of the statute requires that we implement the updates
to the wage index in a budget neutral manner, but that our budget
neutrality adjustment should not take into account the requirement
that we set the labor-related share for hospitals with wage indexes
less than or equal to 1.0000 at the more advantageous level of 62
percent. Therefore, for purposes of this budget neutrality
adjustment, section 1886(d)(3)(E)(i) of the Act prohibits us from
taking into account the fact that hospitals with a wage index less
than or equal to 1.0000 are paid using a labor-related share of 62
percent. Consistent with current policy, for FY 2021, we are
proposing to adjust 100 percent of the wage index factor for
occupational mix. We describe the occupational mix adjustment in
section III.E. of the preamble of this proposed rule.
To compute a proposed budget neutrality adjustment factor for
wage index and labor-related share percentage changes, we used FY
2019 discharge data to simulate payments and compared the following:
Aggregate payments using the revised OMB labor market
area delineations proposed for FY 2021, the proposed FY 2021
relative weights and the FY 2020 pre-reclassified wage indexes,
applied the FY 2020 labor-related share of 68.3 percent to all
hospitals (regardless of whether the hospital's wage index was above
or below 1.0000), and applied the proposed FY 2021 hospital
readmissions payment adjustment and the estimated FY 2021 hospital
VBP payment adjustment; and
Aggregate payments using the revised OMB labor market
area delineations proposed for FY 2021, the proposed FY 2021
relative weights and the proposed FY 2021 pre-reclassified wage
indexes, applied the proposed labor-related share for FY 2021 of
68.3 percent to all hospitals (regardless of whether the hospital's
wage index was above or below 1.0000), and applied the same proposed
FY 2021 hospital readmissions payment adjustments and estimated FY
2021 hospital VBP payment adjustments applied previously.
In addition, we applied the proposed MS-DRG reclassification and
recalibration budget neutrality adjustment factor (derived in the
first step) to the proposed payment rates that were used to simulate
payments for this comparison of aggregate payments from FY 2020 to
FY 2021. Based on this comparison, we computed a proposed budget
neutrality adjustment factor and applied this factor to the
standardized amount for changes to the wage index. Please see the
table later in this section for a summary of the FY 2021 proposed
budget neutrality factors.

c. Reclassified Hospitals--Proposed Budget Neutrality Adjustment

Section 1886(d)(8)(B) of the Act provides that certain rural
hospitals are deemed urban. In addition, section 1886(d)(10) of the
Act provides for the reclassification of hospitals based on
determinations by the MGCRB. Under section 1886(d)(10) of the Act, a
hospital may be reclassified for purposes of the wage index.
Under section 1886(d)(8)(D) of the Act, the Secretary is
required to adjust the standardized amount to ensure that aggregate
payments under the IPPS after implementation of the provisions of
sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act are equal
to the aggregate prospective payments that would have been made
absent these provisions. We note, with regard to the requirement
under section 1886(d)(8)(C)(iii) of the Act, as finalized in the FY
2020 IPPS/LTCH PPS final rule (84 FR 42333 through 42336), we
excluded the wage data of urban hospitals that have reclassified as
rural under section 1886(d)(8)(E) of the Act (as implemented in
Sec. 412.103) from the calculation of ``the wage index for rural
areas in the State in which the county is located.'' We refer the
reader to the FY 2015 IPPS final rule (79 FR 50371 and 50372) for a
complete discussion regarding the requirement of section
1886(d)(8)(C)(iii) of the Act. We further note that the wage index
adjustments provided for under section 1886(d)(13) of the Act are
not budget neutral. Section 1886(d)(13)(H) of the Act provides that
any increase in a wage index under section 1886(d)(13) shall not be
taken into account in applying any budget neutrality adjustment with
respect to such index under section 1886(d)(8)(D) of the Act. To
calculate the budget neutrality adjustment factor for FY 2021, we
used FY 2019 discharge data to simulate payments and compared the
following:
Aggregate payments using the proposed FY 2021 labor-
related share percentages, the revised OMB labor market area
delineations proposed for FY 2021, the proposed FY 2021 relative
weights, and the proposed FY 2021 wage data prior to any
reclassifications under sections 1886(d)(8)(B) and (C) and
1886(d)(10) of the Act, and applied the proposed FY 2021 hospital
readmissions payment adjustments and the estimated FY 2021 hospital
VBP payment adjustments; and
Aggregate payments using the proposed FY 2021 labor-
related share percentages, the revised OMB labor market area
delineations proposed for FY 2021, the proposed FY 2021 relative
weights, and the proposed FY 2021 wage data after such
reclassifications, and applied the same proposed FY 2021 hospital
readmissions payment adjustments and the estimated FY 2021 hospital
VBP payment adjustments applied previously.
We note that the reclassifications applied under the second
simulation and comparison are those listed in Table 2 associated
with this proposed rule, which is available via the internet on the
CMS website. This table reflects reclassification crosswalks
proposed for FY 2021, and apply the proposed policies explained in
section III. of the preamble of this proposed rule. Based on this
comparison, we computed a proposed budget neutrality adjustment
factor and applied this factor to the standardized amount to ensure
that the effects of these provisions are budget neutral, consistent
with the statute. Please see the table later in this section for a
summary of the FY 2021 proposed budget neutrality factors.
The proposed FY 2021 budget neutrality adjustment factor was
applied to the proposed standardized amount after removing the
effects of the FY 2020 budget neutrality adjustment factor. We note
that the proposed FY 2021 budget neutrality adjustment reflects FY
2021 wage index reclassifications approved by the MGCRB or the
Administrator at the time of development of this proposed rule.

d. Rural Floor--Proposed Budget Neutrality Adjustment

Under Sec. 412.64(e)(4), we make an adjustment to the wage
index to ensure that aggregate payments after implementation of the
rural floor under section 4410 of the BBA (Pub. L. 105-33) is equal
to the aggregate prospective payments that would have been made in
the absence of this provision. Consistent with section 3141 of the
Affordable Care Act and as discussed in section III.G. of the
preamble of this proposed rule and codified at Sec.
412.64(e)(4)(ii), the budget neutrality adjustment for the rural
floor is a national adjustment to the wage index. We note, as
finalized in the FY 2020 IPPS/LTCH final rule (84 FR 42332 through
42336), for FY 2021 we are calculating the rural floor without
including the wage data of urban hospitals that have reclassified as
rural under section 1886(d)(8)(E) of the Act (as implemented in
Sec. 412.103).
Similar to our calculation in the FY 2015 IPPS/LTCH PPS final
rule (79 FR 50369 through 50370), for FY 2021, we are proposing to
calculate a national rural Puerto Rico wage index. Because there are
no rural Puerto Rico hospitals with established wage data, our
calculation of the proposed FY 2021 rural Puerto Rico wage index is
based on the policy adopted in the FY 2008 IPPS final rule with
comment period (72 FR 47323). That is, we use the unweighted average
of the wage indexes from all CBSAs (urban areas) that are contiguous
(share a border with) to the rural counties to compute the rural
floor (72 FR 47323; 76 FR 51594). Under the OMB labor market area
delineations, except for Arecibo, Puerto Rico (CBSA 11640), all
other Puerto Rico urban areas are contiguous to a rural area.
Therefore, based on our existing policy, the proposed FY 2021 rural
Puerto Rico wage index is calculated based on the average of the
proposed FY 2021 wage indexes for the following urban areas:
Aguadilla-Isabela, PR (CBSA 10380); Guayama, PR (CBSA 25020);
Mayaguez, PR (CBSA 32420); Ponce, PR (CBSA 38660); San German, PR
(CBSA

[[Page 32904]]

41900); and San Juan-Carolina-Caguas, PR (CBSA 41980).
To calculate the proposed national rural floor budget neutrality
adjustment factor, we used FY 2019 discharge data to simulate
payments, the revised OMB labor market area delineations proposed
for FY 2021 and the proposed post-reclassified national wage indexes
and compared the following:
National simulated payments without the proposed
national rural floor; and
National simulated payments with the proposed national
rural floor.
Based on this comparison, we determined a proposed national
rural floor budget neutrality adjustment factor. The national
adjustment was applied to the national wage indexes to produce
proposed rural floor budget neutral wage indexes. Please see the
table later in this section for a summary of the FY 2021 proposed
budget neutrality factors.

e. Proposed Rural Community Hospital Demonstration Program Adjustment

In section IV.O. of the preamble of this proposed rule, we
discuss the Rural Community Hospital Demonstration program, which
was originally authorized for a 5-year period by section 410A of the
Medicare Prescription Drug, Improvement, and Modernization Act of
2003 (MMA) (Pub. L. 108-173), and extended for another 5-year period
by sections 3123 and 10313 of the Affordable Care Act (Pub. L. 111-
148). Subsequently, section 15003 of the 21st Century Cures Act
(Pub. L. 114-255), enacted December 13, 2016, amended section 410A
of Public Law 108-173 to require a 10-year extension period (in
place of the 5-year extension required by the Affordable Care Act,
as further discussed later in this section). We make an adjustment
to the standardized amount to ensure the effects of the Rural
Community Hospital Demonstration program are budget neutral as
required under section 410A(c)(2) of Public Law 108-173. We refer
readers to section IV.O. of the preamble of this proposed rule for
complete details regarding the Rural Community Hospital
Demonstration.
With regard to budget neutrality, as mentioned earlier, we make
an adjustment to the standardized amount to ensure the effects of
the Rural Community Hospital Demonstration are budget neutral, as
required under section 410A(c)(2) of Public Law 108-173. For FY
2021, the total amount that we are proposing to apply to make an
adjustment to the standardized amounts to ensure the effects of the
Rural Community Hospital Demonstration program are budget neutral is
$40,804,704. Accordingly, using the most recent data available to
account for the estimated costs of the demonstration program, for FY
2021, we computed a proposed factor for the Rural Community Hospital
Demonstration budget neutrality adjustment that will be applied to
the standardized amount. Please see the table later in this section
for a summary of the FY 2021 proposed budget neutrality factors. We
refer readers to section IV.O. of the preamble of this proposed rule
on complete details regarding the calculation of the amount we are
applying to make an adjustment to the standardized amounts.
We note that, as discussed in section IV.O. of the preamble of
this proposed rule, if updated or additional data become available
prior to issuance of the FY 2021 IPPS/LTCH PPS final rule, we would
use those data to the extent appropriate to determine the budget
neutrality offset amount for FY 2021. We refer readers to section
IV.O. of the preamble of this proposed rule on complete details
regarding the availability of additional data prior to the FY 2021
IPPS/LTCH PPS final rule.

f. Proposed Stem Cell Acquisition Reasonable Cost Based Payment Budget
Neutrality Adjustment

In section IV.H. of the preamble of this proposed rule, we
discuss the reasonable cost based payment for allogeneic
hematopoietic stem cell acquisition costs beginning in FY 2021.
Section 108 of the Further Consolidated Appropriations Act, 2020
requires that, for cost reporting periods beginning on or after
October 1, 2020, in the case of a subsection (d) hospital that
furnishes an allogeneic hematopoietic stem cell transplant, payment
to such hospital for hematopoietic stem cell acquisition shall be
made on a reasonable cost basis, and also requires that, beginning
in FY 2021, the payments made based on reasonable cost for the
acquisition costs of allogeneic hematopoietic stem cells be made in
a budget neutral manner. That is, under section 1886(d)(4)(C)(iii)
of the Act as amended by section 108 of the Further Consolidated
Appropriations Act, 2020, beginning with FY 2021, the reasonable
cost based payments for allogeneic hematopoietic stem cell
acquisition costs are to be made in a manner that assures that the
aggregate IPPS payments for discharges in the fiscal year are not
greater or less than those that would have been made without such
payments. With regard to budget neutrality, we are proposing to make
an adjustment to the standardized amount to ensure the effects of
the reasonable cost-based payments for allogeneic hematopoietic stem
cell acquisition costs are budget neutral, as required under section
1886(d)(4)(C)(iii) of the Act as amended by section 108 of Public
Law 116-94. For FY 2021, based on the most recent data available for
this proposed rule, the total amount that we are proposing to apply
to make an adjustment to the standardized amounts to ensure that the
reasonable cost based payments for allogeneic hematopoietic stem
cell acquisition costs are budget neutral is $15,865,374.
Accordingly, for FY 2021 we computed a proposed budget neutrality
adjustment that we are proposing to apply to the standardized
amounts for FY 2021. Please see the table later in this section
setting forth each of the FY 2021 proposed budget neutrality
factors. We refer readers to section IV.H. of the preamble of this
proposed rule for further details regarding the calculation of the
estimated amount of reasonable cost based payments for allogeneic
hematopoietic stem cell acquisition costs that we are proposing to
use to make an adjustment to the standardized amount for FY 2021.

g. Continuation of the Low Wage Index Hospital Policy--Proposed Budget
Neutrality Adjustment

As discussed in section III.N. of the preamble of this proposed
rule, we are continuing the wage index policy finalized in the FY
2020 IPPS/LTCH PPS final rule to address wage index disparities by
increasing the wage index values for hospitals with a wage index
value below the 25th percentile wage index value across all
hospitals (the low wage index hospital policy). As discussed in the
FY 2020 IPPS/LTCH final rule (84 FR 42332), consistent with our
current methodology for implementing wage index budget neutrality
under section 1886(d)(3)(E) of the Act, we are making a budget
neutrality adjustment to the national standardized amount for all
hospitals so that the increase in the wage index for hospitals with
a wage index below the 25th percentile wage index, is implemented in
a budget neutral manner.
To calculate this proposed budget neutrality adjustment factor
for FY 2021, we used FY 2019 discharge data to simulate payments and
compared the following:
Aggregate payments using the proposed FY 2021 labor-
related share percentages, the revised OMB labor market area
delineations proposed for FY 2021, the proposed FY 2021 relative
weights, and the proposed FY 2021 wage index for each hospital
before adjusting the wage indexes under the low wage index hospital
policy but without the 5 percent cap, and applied the proposed FY
2021 hospital readmissions payment adjustments and the estimated FY
2021 hospital VBP payment adjustments, and the operating outlier
reconciliation adjusted outlier percentage discussed later in this
section; and
Aggregate payments using the FY 2021 labor-related
share percentages, the revised OMB labor market area delineations
proposed for FY 2021, the FY 2021 relative weights, and the FY 2021
wage index for each hospital after adjusting the wage indexes under
the low wage index hospital policy but without the 5 percent cap,
and applied the same proposed FY 2021 hospital readmissions payment
adjustments and the estimated FY 2021 hospital VBP payment
adjustments applied previously, and the operating outlier
reconciliation adjusted outlier percentage discussed later in this
section.
This proposed FY 2021 budget neutrality adjustment factor was
applied to the standardized amount. Please see the table later in
this section setting forth each of the FY 2021 proposed budget
neutrality factors.

h. Proposed Transition Budget Neutrality Adjustment

As noted above, in section III.A.2. of the preamble to this
proposed rule, we are proposing to implement the revised OMB
delineations as described in the September 14, 2018 OMB Bulletin No.
18-04, effective October 1, 2020 beginning with the FY 2021 IPPS
wage index. We stated that while the revised OMB delineations in the
OMB bulletin (OMB Bulletin 18-04) are not based on new census data,
there were some material changes in the OMB delineations. In
accordance with our past practice of

[[Page 32905]]

implementing transition policies to help mitigate negative impacts
on hospitals of certain wage index proposals, we believe that if we
adopt the proposed revised OMB delineations, it would be appropriate
to implement a transition policy since, as mentioned above, some of
these revisions are material, and may negatively impact payments to
hospitals. We stated that we believe applying a 5-percent cap on any
decrease in a hospital's wage index from the hospital's final wage
index from the prior fiscal year, as we did for FY 2020, would be an
appropriate transition for FY 2021 for the revised OMB delineations.
We refer the reader to section III.A.2. of the preamble to this
proposed rule for a complete discussion on the rationale of this
transition.
For FY 2020, we are proposing to use our exceptions and
adjustments authority under section 1886(d)(5)(I)(i) of the Act to
apply a budget neutrality adjustment to the standardized amount so
that our transition for hospitals negatively impacted is implemented
in a budget neutral manner. We refer readers to section III.A.2. of
the preamble of this proposed rule for a complete discussion
regarding this proposed policy. To calculate a proposed transition
budget neutrality adjustment factor for FY 2021, we used FY 2019
discharge data to simulate payments and compared the following:
Aggregate payments without the proposed 5-percent cap
using the proposed FY 2021 labor-related share percentages, the
revised OMB labor market area delineations proposed for FY 2021, the
proposed FY 2021 relative weights, the proposed FY 2021 wage index
for each hospital after adjusting the wage indexes under the low
wage index hospital policy with the associated budget neutrality
adjustment to the standardized amount, and applied the proposed FY
2021 hospital readmissions payment adjustments and the estimated FY
2021 hospital VBP payment adjustments, and the proposed operating
outlier reconciliation adjusted outlier percentage; and
Aggregate payments with the proposed 5-percent cap
using the proposed FY 2021 labor-related share percentages, the
revised OMB labor market area delineations proposed for FY 2021, the
proposed FY 2021 relative weights, the proposed FY 2021 wage index
for each hospital after adjusting the wage indexes under the low
wage index hospital policy with the associated budget neutrality
adjustment to the standardized amount, and applied the same proposed
FY 2021 hospital readmissions payment adjustments and the estimated
FY 2021 hospital VBP payment adjustments applied previously, and the
proposed operating outlier reconciliation adjusted outlier
percentage.
This proposed FY 2021 budget neutrality adjustment factor was
applied to the proposed standardized amount. Please see the table
later in this section setting forth each of the FY 2021 proposed
budget neutrality factors.
We note, Table 2 associated with this proposed rule, which is
available via the internet on the CMS website contains the wage
index by provider before and after applying the low wage index
hospital policy and the proposed transition.
[GRAPHIC] [TIFF OMITTED] TP29MY20.222

i. Proposed Adjustment for FY 2021 Required Under Section 414 of Public
Law 114-10 (MACRA)

As stated in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56785),
once the recoupment required under section 631 of the ATRA was
complete, we had anticipated making a single positive adjustment in
FY 2018 to offset the reductions required to recoup the $11 billion
under section 631 of the ATRA. However, section 414 of the MACRA
(which was enacted on April 16, 2015) replaced the single positive
adjustment we intended to make in FY 2018 with a 0.5 percent
positive adjustment for each of FYs 2018 through 2023. (As noted in
the FY 2018 IPPS/LTCH PPS proposed and final rules, section 15005 of
the 21st Century Cures Act (Pub. L. 114-255), which was enacted
December 13, 2016, reduced the adjustment for FY 2018 from 0.5
percentage points to 0.4588 percentage points.) Therefore, for FY
2021, we are proposing to implement the required +0.5 percent
adjustment to the standardized amount. This is a permanent
adjustment to the payment rates.

j. Proposed Outlier Payments

Section 1886(d)(5)(A) of the Act provides for payments in
addition to the basic prospective payments for ``outlier'' cases
involving extraordinarily high costs. To qualify for outlier
payments, a case must have costs greater than the sum of the
prospective payment rate for the MS-DRG, any IME and DSH payments,
uncompensated care payments, any new technology add-on payments, and
the ``outlier threshold'' or ``fixed-loss'' amount (a dollar amount
by which the costs of a case must exceed payments in order to
qualify for an outlier payment). We refer to the sum of the
prospective payment rate for the MS-DRG, any IME and DSH payments,
uncompensated care payments, any new technology add-on payments, and
the outlier threshold as the outlier ``fixed-loss cost threshold.''
To determine whether the costs of a case exceed the fixed-loss cost
threshold, a hospital's CCR is applied to the total covered charges
for the case to convert the charges to estimated costs. Payments for
eligible cases are then made based on a marginal cost factor, which
is a percentage of the estimated costs above the fixed-loss cost
threshold. The marginal cost factor for FY 2021 is 80 percent, or 90
percent for burn MS-DRGs 927, 928, 929, 933, 934 and 935. We have
used a marginal cost factor of 90 percent since FY 1989 (54 FR 36479
through 36480) for designated burn DRGs as well as a marginal cost
factor of 80 percent for all other DRGs since FY 1995 (59 FR 45367).
In accordance with section 1886(d)(5)(A)(iv) of the Act, outlier
payments for any year are projected to be not less than 5 percent
nor more than 6 percent of total operating DRG payments (which does
not include IME and DSH payments) plus outlier payments. When
setting the outlier threshold, we compute the percent target by
dividing the total operating outlier payments by the total operating
DRG payments plus outlier payments. We do not include any other
payments such as IME and DSH within the outlier target amount.
Therefore, it is not necessary to include Medicare Advantage IME
payments in the outlier threshold calculation. Section 1886(d)(3)(B)
of the Act requires the Secretary to reduce the average standardized
amount by a factor to account for the estimated proportion of total
DRG payments made to outlier cases. More information on outlier
payments may be found on the CMS website at: http://

[[Page 32906]]

www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/
AcuteInpatientPPS/outlier.htm.

(1) Proposed Methodology To Incorporate an Estimate of Outlier
Reconciliation in the FY 2020 Outlier Fixed-Loss Cost Threshold

The regulations in 42 CFR 412.84(i)(4) state that any outlier
reconciliation at cost report settlement will be based on operating
and capital cost-to-charge ratios (CCRs) calculated based on a ratio
of costs to charges computed from the relevant cost report and
charge data determined at the time the cost report coinciding with
the discharge is settled. We have instructed MACs to identify for
CMS any instances where: (1) A hospital's actual CCR for the cost
reporting period fluctuates plus or minus 10 percentage points
compared to the interim CCR used to calculate outlier payments when
a bill is processed; and (2) the total outlier payments for the
hospital exceeded $500,000.00 for that cost reporting period. If we
determine that a hospital's outlier payments should be reconciled,
we reconcile both operating and capital outlier payments. We refer
readers to section 20.1.2.5 of Chapter 3 of the Medicare Claims
Processing Manual (available on the CMS website at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03.pdf) for complete details regarding outlier
reconciliation. The regulation at Sec. 412.84(m) further states
that at the time of any outlier reconciliation under Sec.
412.84(i)(4), outlier payments may be adjusted to account for the
time value of any underpayments or overpayments. Section 20.1.2.6 of
Chapter 3 of the Medicare Claims Processing Manual contains
instructions on how to assess the time value of money for reconciled
outlier amounts.
If the operating CCR of a hospital subject to outlier
reconciliation is lower at cost report settlement compared to the
operating CCR used for payment, the hospital will owe CMS money
because it received an outlier overpayment at the time of claim
payment. Conversely, if the operating CCR increases at cost report
settlement compared to the operating CCR used for payment, CMS will
owe the hospital money because the hospital outlier payments were
underpaid.
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42623 through
42625), for FY 2021, we finalized a methodology to incorporate
outlier reconciliation in the FY 2021 outlier fixed loss cost
threshold. As discussed in the FY 2020 IPPS/LTCH PPS proposed rule
(84 FR 19592), we stated that rather than trying to predict which
claims and/or hospitals may be subject to outlier reconciliation, we
believe a methodology that incorporates an estimate of outlier
reconciliation dollars based on actual outlier reconciliation
amounts reported in historical cost reports would be a more feasible
approach and provide a better estimate and predictor of outlier
reconciliation for the upcoming fiscal year. We also stated that we
believe the methodology addresses stakeholder's concerns on the
impact of outlier reconciliation on the modeling of the outlier
threshold. For a detailed discussion of additional background
regarding outlier reconciliation, we refer the reader to the FY 2020
IPPS/LTCH PPS final rule.

(a) Incorporating a Proposed Projection of Outlier Payment
Reconciliations for the FY 2021 Outlier Threshold Calculation

Based on the methodology finalized in the FY 2020 IPPS/LTCH PPS
final rule (84 FR 42623 through 42625), for FY 2021, we are
proposing to continue to incorporate outlier reconciliation in the
FY 2021 outlier fixed loss cost threshold.
As discussed in the FY 2020 IPPS/LTCH PPS final rule, for FY
2020, we used the historical outlier reconciliation amounts from the
FY 2014 cost reports (cost reports with a begin date on or after
October 1, 2013, and on or before September 30, 2014), which we
believed would provide the most recent and complete available data
to project the estimate of outlier reconciliation. We refer the
reader to the FY 2020 IPPS/LTCH PPS final rule (84 FR 42623 through
42625) for a complete discussion on the use of the FY 2014 cost
report data for purposes of projecting outlier payment
reconciliations for the FY 2020 outlier threshold calculation.
In the FY 2020 IPPS/LTCH PPS final rule, we stated that the
methodology for FY 2020 could advance by 1 year the cost reports
used to determine the historical outlier reconciliation. In this
proposed rule, to determine a projection of outlier payment
reconciliations for the FY 2021 outlier threshold calculation, we
are proposing to advance the methodology by 1 year and use FY 2015
cost reports (cost reports with a begin date on or after October 1,
2014, and on or before September 30, 2015).
For FY 2021, we are proposing to use the same methodology from
FY 2020 to incorporate a projection of operating outlier payment
reconciliations for the FY 2021 outlier threshold calculation. The
following steps are the same as those finalized in the FY 2020 final
rule but with updated data for FY 2021:
Step 1.--Use the Federal FY 2015 cost reports for hospitals paid
under the IPPS from the most recent publicly available quarterly
HCRIS extract available at the time of development of the proposed
and final rules, and exclude sole community hospitals (SCHs) that
were paid under their hospital-specific rate (that is, if Worksheet
E, Part A, Line 48 is greater than Line 47). We note that when there
are multiple columns available for the lines of the cost report
described in the following steps and the provider was paid under the
IPPS for that period(s) of the cost report, then we believe it is
appropriate to use multiple columns to fully represent the relevant
IPPS payment amounts, consistent with our methodology for the FY
2020 final rule.
Step 2.--Calculate the aggregate amount of historical total of
operating outlier reconciliation dollars (Worksheet E, Part A, Line
2.01) using the Federal FY 2015 cost reports from Step 1.
Step 3.--Calculate the aggregate amount of total Federal
operating payments using the Federal FY 2015 cost reports from Step
1. The total Federal operating payments consist of the Federal
payments (Worksheet E, Part A, Line 1.01 and Line 1.02, plus Line
1.03 and Line 1.04), outlier payments (Worksheet E, Part A, Line 2
and Line 2.02), and the outlier reconciliation payments (Worksheet
E, Part A, Line 2.01). We note that a negative amount on Worksheet
E, Part A, Line 2.01 for outlier reconciliation indicates an amount
that was owed by the hospital, and a positive amount indicates this
amount was paid to the hospital.
Step 4.--Divide the amount from Step 2 by the amount from Step 3
and multiply the resulting amount by 100 to produce the percentage
of total operating outlier reconciliation dollars to total Federal
operating payments for FY 2015. This percentage amount would be used
to adjust the outlier target for FY 2021 as described in Step 5.
Step 5.--Because the outlier reconciliation dollars are only
available on the cost reports, and not in the Medicare claims data
in the MedPAR file used to model the outlier threshold, we are
proposing to target 5.1 percent minus the percentage determined in
Step 4 in determining the outlier threshold. Using the FY 2015 cost
reports based on the December 2019 HCRIS extract, because the
aggregate outlier reconciliation dollars from Step 2 are negative,
but the percentage determined in Step 4 rounds to 0, we are
targeting 5.1 percent for outlier payments for FY 2021 under our
proposed methodology.
For this FY 2021 proposed rule, we used the December 2019 HCRIS
extract of the cost report data to calculate the proposed percentage
adjustment for outlier reconciliation. For the FY 2021 final rule,
we are proposing to use the latest quarterly HCRIS extract that is
publically available at the time of the development of that rule
which, for FY 2021, would be the March 2020 extract. Similar to the
FY 2020 final rule, we may also consider the use of more recent data
that may become available for purpose of projecting the estimate of
operating outlier reconciliation used in the calculation of the
final FY 2021 outlier threshold.
For this FY 2021 proposed rule, based on the December 2019
HCRIS, 16 hospitals had an outlier reconciliation amount recorded on
Worksheet E, Part A, Line 2.01 for total operating outlier
reconciliation dollars of negative $2,516,904 (Step 2). The total
Federal operating payments based on the December 2019 HCRIS was
$90,313,815,275 (Step 3). The ratio (Step 4) is a negative 0.002787
percent, which, when rounded to the second digit, is 0.00 percent.
Therefore, for FY 2021, we are proposing to incorporate a projection
of outlier reconciliation dollars by targeting an outlier threshold
at 5.10 percent [5.1 percent-(- .00 percent)]. When the percentage
of operating outlier reconciliation dollars to total Federal
operating payments rounds to a negative value (that is, when the
aggregate amount of outlier reconciliation as a percent of total
operating payments rounds to a negative percent), the effect is a
decrease to the outlier threshold compared to an outlier threshold
that is calculated without including this estimate of operating
outlier reconciliation dollars. In section II.A.4.i.(2). of this
Addendum, we provide the FY 2021 outlier threshold as calculated for
this proposed rule both with and without including this proposed
percentage estimate of operating outlier reconciliation. However, we
note that

[[Page 32907]]

for this proposed rule, the outlier threshold is the same with and
without the proposed percentage estimate, since the projection of
outlier reconciliation rounds to zero.
As explained in the FY 2020 IPPS/LTCH PPS final rule, we would
continue to use a 5.1 percent target (or an outlier offset factor of
0.949) in calculating the outlier offset to the standardized amount.
In the past, the outlier offset was six decimals because we targeted
and set the threshold at 5.1 percent by adjusting the standardized
amount by the outlier offset until operating outlier payments
divided by total operating Federal payments plus operating outlier
payments equaled approximately 5.1 percent (this approximation
resulted in an offset beyond three decimals). However, under our
proposed methodology, we believe a three decimal offset of 0.949
reflecting 5.1 percent is appropriate rather than the unrounded six
decimal offset that we have calculated for prior fiscal years.
Specifically, as discussed in section II.A.5. of this Addendum, we
are proposing to determine an outlier adjustment by applying a
factor to the standardized amount that accounts for the projected
proportion of total estimated FY 2021 operating Federal payments
paid as outliers. Our proposed modification to the outlier threshold
methodology is designed to adjust the total estimated outlier
payments for FY 2021 by incorporating the projection of negative
outlier reconciliation. That is, under this proposal, total
estimated outlier payments for FY 2021 would be the sum of the
estimated FY 2021 outlier payments based on the claims data from the
outlier model and the estimated FY 2021 total operating outlier
reconciliation dollars. We believe the proposed methodology would
more accurately estimate the outlier adjustment to the standardized
amount by increasing the accuracy of the calculation of the total
estimated FY 2021 operating Federal payments paid as outliers. In
other words, the net effect of our outlier proposal to incorporate a
projection for outlier reconciliation dollars into the threshold
methodology would be that FY 2021 outlier payments (which include
the estimated recoupment percentage for FY 2021 of 0.00 percent)
would be 5.1 percent of total operating Federal payments plus total
outlier payments. Therefore, the operating outlier offset to the
standardized amount is 0.949 (1-0.051).
We are inviting public comment on our proposed methodology for
projecting an estimate of outlier reconciliation and incorporating
that estimate into the modeling for the fixed-loss cost outlier
threshold for FY 2021.

(b) Proposed Reduction to the FY 2021 Capital Standard Federal Rate by
an Adjustment Factor To Account for the Projected Proportion of Capital
IPPS Payments Paid as Outliers

We establish an outlier threshold that is applicable to both
hospital inpatient operating costs and hospital inpatient capital
related costs (58 FR 46348). Similar to the calculation of the
proposed adjustment to the standardized amount to account for the
projected proportion of operating payments paid as outlier payments,
as discussed in greater detail in section III.A.2. of this Addendum,
we are proposing to reduce the FY 2021 capital standard Federal rate
by an adjustment factor to account for the projected proportion of
capital IPPS payments paid as outliers. The regulations in 42 CFR
412.84(i)(4) state that any outlier reconciliation at cost report
settlement will be based on operating and capital CCRs calculated
based on a ratio of costs to charges computed from the relevant cost
report and charge data determined at the time the cost report
coinciding with the discharge is settled. As such, any
reconciliation also applies to capital outlier payments.
For FY 2021, we are proposing to use the same methodology from
FY 2020 to adjust the FY 2021 capital standard Federal rate by an
adjustment factor to account for the projected proportion of capital
IPPS payments paid as outliers. Similar to FY 2020, as part of our
proposal for FY 2021 to incorporate into the outlier model the total
outlier reconciliation dollars from the most recent and most
complete fiscal year cost report data, we also are proposing to
adjust our estimate of FY 2021 capital outlier payments to
incorporate a projection of capital outlier reconciliation payments
when determining the adjustment factor to be applied to the capital
standard Federal rate to account for the projected proportion of
capital IPPS payments paid as outliers. To do so, we are proposing
to use the following methodology, which generally parallels the
proposed methodology to incorporate a projection of operating
outlier reconciliation payments for the FY 2021 outlier threshold
calculation.
Step 1.--Use the Federal FY 2015 cost reports for hospitals paid
under the IPPS from the most recent publicly available quarterly
HCRIS extract available at the time of development of the proposed
and final rules, and exclude SCHs that were paid under their
hospital-specific rate (that is, if Worksheet E, Part A, Line 48 is
greater than Line 47). We note that when there are multiple columns
available for the lines of the cost report described in the
following steps and the provider was paid under the IPPS for that
period(s) of the cost report, then we believe it is appropriate to
use multiple columns to fully represent the relevant IPPS payment
amounts, consistent with our methodology for the FY 2020 final rule.
We used the December 2019 HCRIS extract for this proposed rule and
expect to use the March 2020 HCRIS extract for the FY 2021 final
rule. Similar to the FY 2020 final rule, we may also consider the
use of more recent data that may become available for purposes of
projecting the estimate of capital outlier reconciliation used in
the calculation of the final FY 2021 adjustment to the FY 2021
capital standard Federal rate.
Step 2.--Calculate the aggregate amount of the historical total
of capital outlier reconciliation dollars (Worksheet E, Part A, Line
93, Column 1) using the Federal FY 2015 cost reports from Step 1.
Step 3.--Calculate the aggregate amount of total capital Federal
payments using the Federal FY 2015 cost reports from Step 1. The
total capital Federal payments consist of the capital DRG payments,
including capital indirect medical education (IME) and capital
disproportionate share hospital (DSH) payments (Worksheet E, Part A,
Line 50, Column 1) and the capital outlier reconciliation payments
(Worksheet E, Part A, Line 93, Column 1). We note that a negative
amount on Worksheet E, Part A, Line 93 for capital outlier
reconciliation indicates an amount that was owed by the hospital,
and a positive amount indicates this amount was paid to the
hospital.
Step 4.--Divide the amount from Step 2 by the amount from Step 3
and multiply the resulting amount by 100 to produce the percentage
of total capital outlier reconciliation dollars to total capital
Federal payments for FY 2015. This percentage amount would be used
to adjust the estimate of capital outlier payments for FY 2021 as
described in Step 5.
Step 5.--Because the outlier reconciliation dollars are only
available on the cost reports, and not in the specific Medicare
claims data in the MedPAR file used to estimate outlier payments, we
are proposing that the estimate of capital outlier payments for FY
2021 would be determined by adding the percentage in Step 4 to the
estimated percentage of capital outlier payments otherwise
determined using the shared outlier threshold that is applicable to
both hospital inpatient operating costs and hospital inpatient
capital-related costs. (We note that this percentage is added for
capital outlier payments but subtracted in the analogous step for
operating outlier payments. We have a unified outlier payment
methodology that uses a shared threshold to identify outlier cases
for both operating and capital payments. The difference stems from
the fact that operating outlier payments are determined by first
setting a ``target'' percentage of operating outlier payments
relative to aggregate operating payments which produces the outlier
threshold. Once the shared threshold is set, it is used to estimate
the percentage of capital outlier payments to total capital payments
based on that threshold. Because the threshold is already set based
on the operating target, rather than adjusting the threshold (or
operating target), we adjust the percentage of capital outlier to
total capital payments to account for the estimated effect of
capital outlier reconciliation payments. This percentage is adjusted
by adding the capital outlier reconciliation percentage from Step 4
to the estimate of the percentage of capital outlier payments to
total capital payments based on the shared threshold.) Because the
aggregate capital outlier reconciliation dollars from Step 2 are
negative, the estimate of capital outlier payments for FY 2021 under
our proposed methodology would be lower than the percentage of
capital outlier payments otherwise determined using the shared
outlier threshold.
Similarly, for this FY 2021 proposed rule, we used the December
2019 HCRIS extract of the cost report data to calculate the proposed
percentage adjustment for outlier reconciliation. For the FY 2021
final rule, we are proposing to use the latest quarterly HCRIS
extract that is publically available at the time of the development
of that rule which, for FY 2021, would be the March

[[Page 32908]]

2020 extract. As previously noted, we may also consider the use of
more recent data that may become available for purposes of
projecting the estimate of capital outlier reconciliation used in
the calculation of the final FY 2021 adjustment to the FY 2021
capital standard Federal rate.
For this FY 2021 proposed rule, the estimated percentage of FY
2021 capital outlier payments otherwise determined using the shared
outlier threshold is 5.42 percent (estimated capital outlier
payments of $432,102,494 divided by (estimated capital outlier
payments of $432,102,494 plus the estimated total capital Federal
payment of $7,569,294,589)). Based on the December 2019 HCRIS, 16
hospitals had an outlier reconciliation amount recorded on Worksheet
E, Part A, Line 93 for total capital outlier reconciliation dollars
of negative $956,065 (Step 2). The total Federal capital payments
based on the December 2019 HCRIS was $8,114,838,772 (Step 3) which
results in a ratio (Step 4) of -0.01 percent. Therefore, for FY
2021, taking into account projected capital outlier reconciliation
payments under our proposed methodology would decrease the estimated
percentage of FY 2021 aggregate capital outlier payments by 0.01
percent.
As discussed in section III.A.2. of this Addendum, we are
proposing to incorporate the capital outlier reconciliation dollars
from Step 5 when applying the outlier adjustment factor in
determining the capital Federal rate based on the estimated
percentage of capital outlier payments to total capital Federal rate
payments for FY 2021.
We are inviting public comment on our proposed methodology for
projecting an estimate of capital outlier reconciliation and
incorporating that estimate into the modeling of the estimate of FY
2021 capital outlier payments for purposes of determining the
capital outlier adjustment factor.

(2) Proposed FY 2021 Outlier Fixed-Loss Cost Threshold

In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50977 through
50983), in response to public comments on the FY 2013 IPPS/LTCH PPS
proposed rule, we made changes to our methodology for projecting the
outlier fixed-loss cost threshold for FY 2014. We refer readers to
the FY 2014 IPPS/LTCH PPS final rule for a detailed discussion of
the changes.
As we have done in the past, to calculate the proposed FY 2021
outlier threshold, we simulated payments by applying proposed FY
2021 payment rates and policies using cases from the FY 2019 MedPAR
file. We note that because this payment simulation uses the proposed
FY 2021 relative weights, consistent with our proposal in section
IV.I. of the preamble to this proposed rule, we applied the proposed
adjustor for CAR-T cell therapy clinical trial cases in our
simulation of these payments. As discussed in section II.E.2.b. of
the preamble of this proposed rule, we also proposed to calculate an
adjustment to account for the CAR T-cell therapy cases identified as
clinical trial cases in calculating the FY 2021 relative weights and
for purposes of budget neutrality and outlier simulations. As noted
in section II.C. of this Addendum, we specify the formula used for
actual claim payment which is also used by CMS to project the
outlier threshold for the upcoming fiscal year. The difference is
the source of some of the variables in the formula. For example,
operating and capital CCRs for actual claim payment are from the PSF
while CMS uses an adjusted CCR (as described later in this section)
to project the threshold for the upcoming fiscal year. In addition,
charges for a claim payment are from the bill while charges to
project the threshold are from the MedPAR data with an inflation
factor applied to the charges (as described earlier).
In order to determine the proposed FY 2021 outlier threshold, we
inflated the charges on the MedPAR claims by 2 years, from FY 2019
to FY 2021. Consistent with the FY 2020 IPPS/LTCH PPS final rule (84
FR 42626 and 42627), we are proposing to use the following
methodology to calculate the charge inflation factor for FY 2021:
Include hospitals whose last four digits fall between
0001 and 0899 (section 2779A1 of Chapter 2 of the State Operations
Manual on the CMS website at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/som107c02.pdf); include CAHs
that were IPPS hospitals for the time period of the MedPAR data
being used to calculate the charge inflation factor; include
hospitals in Maryland; and remove PPS-excluded cancer hospitals who
have a ``V'' in the fifth position of their provider number or a
``E'' or ``F'' in the sixth position.
Include providers that are in both periods of charge
data that are used to calculate the 1-year average annual rate of-
change in charges per case. We note this is consistent with the
methodology used since FY 2014.
We excluded Medicare Advantage IME claims for the
reasons described in section I.A.4. of this Addendum. We refer
readers to the FY 2011 IPPS/LTCH PPS final rule for a complete
discussion on our methodology of identifying and adding the total
Medicare Advantage IME payment amount to the budget neutrality
adjustments.
In order to ensure that we capture only FFS claims, we
included claims with a ``Claim Type'' of 60 (which is a field on the
MedPAR file that indicates a claim is an FFS claim).
In order to further ensure that we capture only FFS
claims, we excluded claims with a ``GHOPAID'' indicator of 1 (which
is a field on the MedPAR file that indicates a claim is not an FFS
claim and is paid by a Group Health Organization).
We examined the MedPAR file and removed pharmacy
charges for anti-hemophilic blood factor (which are paid separately
under the IPPS) with an indicator of ``3'' for blood clotting with a
revenue code of ``0636'' from the covered charge field. We also
removed organ acquisition charges from the covered charge field
because organ acquisition is a pass-through payment not paid under
the IPPS.
Our general methodology to inflate the charges computes the 1-
year average annual rate-of-change in charges per case which is then
applied twice to inflate the charges on the MedPAR claims by 2 years
(for example, FY 2019 to FY 2021).
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42627), we
modified our charge inflation methodology. We stated that we believe
balancing our preference to use the latest available data from the
MedPAR files and stakeholders' concerns about being able to use
publicly available MedPAR files to review the charge inflation
factor can be achieved by modifying our methodology to use the
publicly available Federal fiscal year period (that is, for FY 2020,
we used the charge data from Federal fiscal years 2017 and 2018),
rather than the most recent data available to CMS which, under our
prior methodology, was based on calendar year data. We refer the
reader to the FY 2020 IPPS/LTCH PPS final rule for a complete
discussion regarding this change. For the same reasons discussed in
that rulemaking, for FY 2021, we are proposing to use the same
methodology as FY 2020 and advance by 1 year the MedPAR data used to
determine the charge inflation factor. That is, for FY 2021, we are
proposing to use the MedPAR files for the two most recent available
federal fiscal year time periods to calculate the charge inflation
factor, as we did for FY 2020. Specifically, for this proposed rule
we used the December 2018 MedPAR file of FY 2018 (October 1, 2017 to
September 30, 2018) charge data (released for the FY 2020 IPPS/LTCH
PPS proposed rule) and the December 2019 MedPAR file of FY 2019
(October 1, 2018 to September 30, 2019) charge data (released for
this FY 2021 IPPS/LTCH PPS proposed rule) to compute the proposed
charge inflation factor. We are proposing that for the FY 2021 final
rule, we would use more recently updated data, that is the MedPAR
files from March 2019 for the FY 2018 time period and March 2020 for
the FY 2019 time period. Under this proposed methodology, to compute
the 1-year average annual rate-of-change in charges per case for FY
2021, we compared the average covered charge per case of $61,533.34
($582,022,123,240/9,458,647 cases) from October 1, 2017, through
September 30, 2018 to the average covered charge per case of
$65,442.49 ($601,183,502,371/9,186,440 cases) from October 1, 2018
through September 30, 2019. This rate-of-change was 6.4 percent
(1.06353) or 13.1 percent (1.131096) over 2 years. The billed
charges are obtained from the claim from the MedPAR file and
inflated by the inflation factor specified previously.
As we have done in the past, in this FY 2021 IPPS/LTCH PPS
proposed rule, we are proposing to establish the proposed FY 2021
outlier threshold using hospital CCRs from the December 2019 update
to the Provider-Specific File (PSF)--the most recent available data
at the time of the development of this proposed rule. We are
proposing to apply the following edits to providers' CCRs in the
PSF. We believe these edits are appropriate in order to accurately
model the outlier threshold. We first search for Indian Health
Service providers and those providers assigned the statewide average
CCR from the current fiscal year. We then replace these CCRs with
the statewide average CCR for the upcoming fiscal year. We also
assign the statewide average CCR (for the upcoming fiscal year) to
those providers that have no value in the CCR field in the PSF or
whose CCRs exceed the ceilings described later in

[[Page 32909]]

this section (3.0 standard deviations from the mean of the log
distribution of CCRs for all hospitals). We do not apply the
adjustment factors described later in this section to hospitals
assigned the statewide average CCR. For FY 2021, we also are
proposing to continue to apply an adjustment factor to the CCRs to
account for cost and charge inflation (as explained later in this
section). We also are proposing that, if more recent data become
available, we would use that data to calculate the final FY 2021
outlier threshold.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50979), we
adopted a new methodology to adjust the CCRs. Specifically, we
finalized a policy to compare the national average case-weighted
operating and capital CCR from the most recent update of the PSF to
the national average case-weighted operating and capital CCR from
the same period of the prior year.
Therefore, as we have done since FY 2014, we are proposing to
adjust the CCRs from the December 2019 update of the PSF by
comparing the percentage change in the national average case-
weighted operating CCR and capital CCR from the December 2018 update
of the PSF to the national average case-weighted operating CCR and
capital CCR from the December 2019 update of the PSF. We note that
we used total transfer-adjusted cases from FY 2019 to determine the
national average case-weighted CCRs for both sides of the
comparison. As stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR
50979), we believe that it is appropriate to use the same case count
on both sides of the comparison, because this will produce the true
percentage change in the average case-weighted operating and capital
CCR from 1 year to the next without any effect from a change in case
count on different sides of the comparison.
Using this proposed methodology, for this proposed rule, we
calculated a proposed December 2018 operating national average case-
weighted CCR of 0.255979 and a proposed December 2019 operating
national average case-weighted CCR of 0.249649. We then calculated
the percentage change between the two national operating case-
weighted CCRs by subtracting the December 2018 operating national
average case-weighted CCR from the December 2019 operating national
average case-weighted CCR and then dividing the result by the
December 2018 national operating average case-weighted CCR. This
resulted in a proposed national operating CCR adjustment factor of
0.975271.
We used this same proposed methodology to adjust the capital
CCRs. Specifically, we calculated a December 2018 capital national
average case-weighted CCR of 0.021043 and a December 2019 capital
national average case-weighted CCR of 0.020255. We then calculated
the percentage change between the two national capital case-weighted
CCRs by subtracting the December 2018 capital national average case-
weighted CCR from the December 2019 capital national average case-
weighted CCR and then dividing the result by the December 2018
capital national average case-weighted CCR. This resulted in a
proposed national capital CCR adjustment factor of 0.962553.
For purposes of estimating the proposed outlier threshold for FY
2021, we used a wage index that reflects the policies discussed in
this proposed rule. This includes the proposed frontier State floor
adjustments in accordance with section 10324(a) of the Affordable
Care Act, the proposed out-migration adjustment as added by section
505 of Public Law 108-173, as well as incorporating the FY 2021 wage
index adjustment for hospitals with a wage index value below the
25th percentile, where the increase in the wage index value for
these hospitals would be equal to half the difference between the
otherwise applicable final wage index value for a year for that
hospital and the 25th percentile wage index value for that year
across all hospitals. We also incorporated our proposal of the 5-
percent cap on any decrease in a hospital's wage index from the
hospital's final wage index in FY 2020. If we did not take the
aforementioned into account, our estimate of total FY 2021 payments
would be too low, and, as a result, our proposed outlier threshold
would be too high, such that estimated outlier payments would be
less than our projected 5.1 percent of total payments (which
includes outlier reconciliation).
As described in sections IV.K. and IV.L., respectively, of the
preamble of this proposed rule, sections 1886(q) and 1886(o) of the
Act establish the Hospital Readmissions Reduction Program and the
Hospital VBP Program, respectively. We do not believe that it is
appropriate to include the proposed hospital VBP payment adjustments
and the hospital readmissions payment adjustments in the proposed
outlier threshold calculation or the proposed outlier offset to the
standardized amount. Specifically, consistent with our definition of
the base operating DRG payment amount for the Hospital Readmissions
Reduction Program under Sec. 412.152 and the Hospital VBP Program
under Sec. 412.160, outlier payments under section 1886(d)(5)(A) of
the Act are not affected by these payment adjustments. Therefore,
outlier payments would continue to be calculated based on the
unadjusted base DRG payment amount (as opposed to using the base-
operating DRG payment amount adjusted by the hospital readmissions
payment adjustment and the hospital VBP payment adjustment).
Consequently, we are proposing to exclude the proposed hospital VBP
payment adjustments and the estimated hospital readmissions payment
adjustments from the calculation of the proposed outlier fixed-loss
cost threshold.
We note that, to the extent section 1886(r) of the Act modifies
the DSH payment methodology under section 1886(d)(5)(F) of the Act,
the uncompensated care payment under section 1886(r)(2) of the Act,
like the empirically justified Medicare DSH payment under section
1886(r)(1) of the Act, may be considered an amount payable under
section 1886(d)(5)(F) of the Act such that it would be reasonable to
include the payment in the outlier determination under section
1886(d)(5)(A) of the Act. As we have done since the implementation
of uncompensated care payments in FY 2014, for FY 2021, we also are
proposing to allocate an estimated per-discharge uncompensated care
payment amount to all cases for the hospitals eligible to receive
the uncompensated care payment amount in the calculation of the
outlier fixed-loss cost threshold methodology. We continue to
believe that allocating an eligible hospital's estimated
uncompensated care payment to all cases equally in the calculation
of the outlier fixed-loss cost threshold would best approximate the
amount we would pay in uncompensated care payments during the year
because, when we make claim payments to a hospital eligible for such
payments, we would be making estimated per-discharge uncompensated
care payments to all cases equally. Furthermore, we continue to
believe that using the estimated per-claim uncompensated care
payment amount to determine outlier estimates provides
predictability as to the amount of uncompensated care payments
included in the calculation of outlier payments. Therefore,
consistent with the methodology used since FY 2014 to calculate the
outlier fixed-loss cost threshold, for FY 2021, we are proposing to
include estimated FY 2021 uncompensated care payments in the
computation of the proposed outlier fixed-loss cost threshold.
Specifically, we are proposing to use the estimated per-discharge
uncompensated care payments to hospitals eligible for the
uncompensated care payment for all cases in the calculation of the
proposed outlier fixed-loss cost threshold methodology.
Using this methodology, we used the formula described in section
I.C.1 of this Addendum to simulate and calculate the Federal payment
rate and outlier payments for all claims. In addition, as described
in the earlier section to this Addendum, we are proposing to
incorporate an estimate of FY 2021 outlier reconciliation in the
methodology for determining the outlier threshold. As noted
previously, for this FY 2021 proposed rule, the ratio of outlier
reconciliation dollars to total Federal Payments (Step 4) is a
negative 0.002787 percent, which, when rounded to the second digit,
is 0.00 percent. Therefore, for FY 2021, we are proposing to
incorporate a projection of outlier reconciliation dollars by
targeting an outlier threshold at 5.10 percent [5.1 percent-(-.00
percent)]. Under this proposed approach, we determined a threshold
of $30,006 and calculated total outlier payments of $4,935,261,570
and total operating Federal payments of $91,833,641,321. We then
divided total outlier payments by total operating Federal payments
plus total outlier payments and determined that this threshold
matched with the 5.10 percent target, which reflects our proposal to
incorporate an estimate of outlier reconciliation in the
determination of the outlier threshold (as discussed in more detail
in the previous section of this Addendum). Since the target remains
at 5.10 percent, we note that the threshold calculated without
applying our proposed methodology for incorporating an estimate of
outlier reconciliation in the determination of the outlier threshold
is the same as identified previously at $30,006. We are proposing an
outlier fixed-loss cost threshold for FY 2021 equal to the

[[Page 32910]]

prospective payment rate for the MS-DRG, plus any IME, empirically
justified Medicare DSH payments, estimated uncompensated care
payment, and any add-on payments for new technology, plus $30,006.

(2) Other Proposed Changes Concerning Outliers

As stated in the FY 1994 IPPS final rule (58 FR 46348), we
establish an outlier threshold that is applicable to both hospital
inpatient operating costs and hospital inpatient capital-related
costs. When we modeled the combined operating and capital outlier
payments, we found that using a common threshold resulted in a
higher percentage of outlier payments for capital-related costs than
for operating costs. We project that the threshold for FY 2021
(which reflects our methodology to incorporate an estimate of
operating outlier reconciliation) will result in outlier payments
that will equal 5.1 percent of operating DRG payments and we
estimate that capital outlier payments will equal 5.38 percent of
capital payments based on the Federal rate (which reflects our
methodology discussed previously to incorporate an estimate of
capital outlier reconciliation).
In accordance with section 1886(d)(3)(B) of the Act and as
discussed previously, we are proposing to reduce the FY 2021
standardized amount by the percentage of 5.1 percent to account for
the projected proportion of payments paid as outliers.
The proposed outlier adjustment factors that would be applied to
the operating standardized amount and capital Federal rate based on
the proposed FY 2021 outlier threshold are as follows:
[GRAPHIC] [TIFF OMITTED] TP29MY20.223

We are proposing to apply the outlier adjustment factors to the
proposed FY 2021 payment rates after removing the effects of the FY
2020 outlier adjustment factors on the standardized amount.
To determine whether a case qualifies for outlier payments, we
currently apply hospital-specific CCRs to the total covered charges
for the case. Estimated operating and capital costs for the case are
calculated separately by applying separate operating and capital
CCRs. These costs are then combined and compared with the outlier
fixed-loss cost threshold.
Under our current policy at Sec. 412.84, we calculate operating
and capital CCR ceilings and assign a statewide average CCR for
hospitals whose CCRs exceed 3.0 standard deviations from the mean of
the log distribution of CCRs for all hospitals. Based on this
calculation, for hospitals for which the MAC computes operating CCRs
greater than 1.156 or capital CCRs greater than 0.140, or hospitals
for which the MAC is unable to calculate a CCR (as described under
Sec. 412.84(i)(3) of our regulations), statewide average CCRs are
used to determine whether a hospital qualifies for outlier payments.
Table 8A listed in section VI. of this Addendum (and available only
via the internet on the CMS website) contains the proposed statewide
average operating CCRs for urban hospitals and for rural hospitals
for which the MAC is unable to compute a hospital-specific CCR
within the range previously specified. These statewide average
ratios would be effective for discharges occurring on or after
October 1, 2020 and would replace the statewide average ratios from
the prior fiscal year. Table 8B listed in section VI. of this
Addendum (and available via the internet on the CMS website)
contains the comparable proposed statewide average capital CCRs. As
previously stated, the proposed CCRs in Tables 8A and 8B would be
used during FY 2021 when hospital-specific CCRs based on the latest
settled cost report either are not available or are outside the
range noted previously. Table 8C listed in section VI. of this
Addendum (and available via the internet on the CMS website)
contains the proposed statewide average total CCRs used under the
LTCH PPS as discussed in section V. of this Addendum.
We finally note that section 20.1.2 of chapter three of the
Medicare Claims Processing Manual (on the internet at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03.pdf) covers an array of topics, including CCRs,
reconciliation, and the time value of money. We encourage hospitals
that are assigned the statewide average operating and/or capital
CCRs to work with their MAC on a possible alternative operating and/
or capital CCR as explained in the manual. Use of an alternative CCR
developed by the hospital in conjunction with the MAC can avoid
possible overpayments or underpayments at cost report settlement,
thereby ensuring better accuracy when making outlier payments and
negating the need for outlier reconciliation. We also note that a
hospital may request an alternative operating or capital CCR at any
time as long as the guidelines of the manual are followed. In
addition, the manual outlines the outlier reconciliation process for
hospitals and Medicare contractors. We refer hospitals to the manual
instructions for complete details on outlier reconciliation.

(3) FY 2019 Outlier Payments

Our current estimate, using available FY 2019 claims data, is
that actual outlier payments for FY 2019 were approximately 5.38
percent of actual total MS-DRG payments. Therefore, the data
indicate that, for FY 2019, the percentage of actual outlier
payments relative to actual total payments is higher than we
projected for FY 2019. Consistent with the policy and statutory
interpretation we have maintained since the inception of the IPPS,
we do not make retroactive adjustments to outlier payments to ensure
that total outlier payments for FY 2019 are equal to 5.1 percent of
total MS-DRG payments. As explained in the FY 2003 Outlier Final
Rule (68 FR 34502), if we were to make retroactive adjustments to
all outlier payments to ensure total payments are 5.1 percent of MS-
DRG payments (by retroactively adjusting outlier payments), we would
be removing the important aspect of the prospective nature of the
IPPS. Because such an across-the-board adjustment would either lead
to more or less outlier payments for all hospitals, hospitals would
no longer be able to reliably approximate their payment for a
patient while the patient is still hospitalized. We believe it would
be neither necessary nor appropriate to make such an aggregate
retroactive adjustment. Furthermore, we believe it is consistent
with the statutory language at section 1886(d)(5)(A)(iv) of the Act
not to make retroactive adjustments to outlier payments. This
section states that outlier payments be equal to or greater than 5
percent and less than or equal to 6 percent of projected or
estimated (not actual) MS-DRG payments. We believe that an important
goal of a PPS is predictability. Therefore, we believe that the
fixed-loss outlier threshold should be projected based on the best
available historical data and should not be adjusted retroactively.
A retroactive change to the fixed-loss outlier threshold would
affect all hospitals subject to the IPPS, thereby undercutting the
predictability of the system as a whole.
We note that, because the MedPAR claims data for the entire FY
2020 will not be available until after September 30, 2020, we are
unable to provide an estimate of actual outlier payments for FY 2020
based on FY 2019 claims data in this proposed rule. We will provide
an estimate of actual FY 2020 outlier payments in the FY 2022 IPPS/
LTCH PPS proposed rule.

5. Proposed FY 2021 Standardized Amount

The adjusted standardized amount is divided into labor-related
and nonlabor-related portions. Tables 1A and 1B listed and published
in section VI. of this Addendum (and available via the internet on
the CMS website) contain the national standardized amounts that we
are proposing to apply to all hospitals, except hospitals located in
Puerto Rico, for FY 2021. The proposed standardized amount for
hospitals in Puerto Rico is shown in Table 1C listed and published
in section VI. of this Addendum (and available via the internet on
the CMS website). The proposed amounts shown in Tables 1A and 1B
differ only in that the labor-related share applied to the

[[Page 32911]]

standardized amounts in Table 1A is 68.3 percent, and the labor-
related share applied to the standardized amounts in Table 1B is 62
percent. In accordance with sections 1886(d)(3)(E) and
1886(d)(9)(C)(iv) of the Act, we are proposing to apply a labor-
related share of 62 percent, unless application of that percentage
would result in lower payments to a hospital than would otherwise be
made. In effect, the statutory provision means that we will apply a
labor-related share of 62 percent for all hospitals whose wage
indexes are less than or equal to 1.0000.
In addition, Tables 1A and 1B include the proposed standardized
amounts reflecting the proposed applicable percentage increases for
FY 2021.
The proposed labor-related and nonlabor-related portions of the
national average standardized amounts for Puerto Rico hospitals for
FY 2021 are set forth in Table 1C listed and published in section
VI. of this Addendum (and available via the internet on the CMS
website). Similarly, section 1886(d)(9)(C)(iv) of the Act, as
amended by section 403(b) of Public Law 108-173, provides that the
labor-related share for hospitals located in Puerto Rico be 62
percent, unless the application of that percentage would result in
lower payments to the hospital.
The following table illustrates the changes from the FY 2020
national standardized amounts to the proposed FY 2021 national
standardized amounts. The second through fifth columns display the
changes from the FY 2019 standardized amounts for each applicable
proposed FY 2021 standardized amount. The first row of the table
shows the updated (through FY 2020) average standardized amount
after restoring the FY 2020 offsets for outlier payments and the
geographic reclassification budget neutrality. The MS-DRG
reclassification and recalibration and wage index budget neutrality
adjustment factors are cumulative. Therefore, those FY 2020
adjustment factors are not removed from this table. Additionally,
for FY 2021 we have applied the proposed budget neutrality factor
for the proposed policy for lowest quartile wage index hospitals and
proposed transition, described previously.
BILLING CODE 4120-01-P

[[Page 32912]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.224

[[Page 32913]]

BILLING CODE 4120-01-C

B. Proposed Adjustments for Area Wage Levels and Cost-of-Living

Tables 1A through 1C, as published in section VI. of this
Addendum (and available via the internet on the CMS website),
contain the proposed labor-related and nonlabor-related shares that
we are proposing to use to calculate the prospective payment rates
for hospitals located in the 50 States, the District of Columbia,
and Puerto Rico for FY 2021. This section addresses two types of
adjustments to the standardized amounts that are made in determining
the proposed prospective payment rates as described in this
Addendum.

1. Proposed Adjustment for Area Wage Levels

Sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act require
that we make an adjustment to the labor-related portion of the
national prospective payment rate to account for area differences in
hospital wage levels. This adjustment is made by multiplying the
labor-related portion of the adjusted standardized amounts by the
appropriate wage index for the area in which the hospital is
located. For FY 2021, as discussed in section IV.B.3. of the
preamble of this proposed rule, we are proposing to apply a labor-
related share of 68.3 percent for the national standardized amounts
for all IPPS hospitals (including hospitals in Puerto Rico) that
have a wage index value that is greater than 1.0000. Consistent with
section 1886(d)(3)(E) of the Act, we are proposing to apply the wage
index to a labor-related share of 62 percent of the national
standardized amount for all IPPS hospitals (including hospitals in
Puerto Rico) whose wage index values are less than or equal to
1.0000. In section III. of the preamble of this proposed rule, we
discuss the data and methodology for the proposed FY 2021 wage
index.

2. Proposed Adjustment for Cost-of-Living in Alaska and Hawaii

Section 1886(d)(5)(H) of the Act provides discretionary
authority to the Secretary to make adjustments as the Secretary
deems appropriate to take into account the unique circumstances of
hospitals located in Alaska and Hawaii. Higher labor-related costs
for these two States are taken into account in the adjustment for
area wages described previously. To account for higher nonlabor-
related costs for these two States, we multiply the nonlabor-related
portion of the standardized amount for hospitals in Alaska and
Hawaii by an adjustment factor.
In the FY 2013 IPPS/LTCH PPS final rule, we established a
methodology to update the COLA factors for Alaska and Hawaii that
were published by the U.S. Office of Personnel Management (OPM)
every 4 years (at the same time as the update to the labor-related
share of the IPPS market basket), beginning in FY 2014. We refer
readers to the FY 2013 IPPS/LTCH PPS proposed and final rules for
additional background and a detailed description of this methodology
(77 FR 28145 through 28146 and 77 FR 53700 through 53701,
respectively).
For FY 2018, in the FY 2018 IPPS/LTCH PPS final rule (82 FR
38530 through 38531), we updated the COLA factors published by OPM
for 2009 (as these are the last COLA factors OPM published prior to
transitioning from COLAs to locality pay) using the methodology that
we finalized in the FY 2013 IPPS/LTCH PPS final rule.
Based on the policy finalized in the FY 2013 IPPS/LTCH PPS final
rule, we are proposing to continue to use the same COLA factors in
FY 2021 that were used in FY 2019 to adjust the nonlabor-related
portion of the standardized amount for hospitals located in Alaska
and Hawaii. The following table lists the proposed COLA factors for
FY 2021.
[GRAPHIC] [TIFF OMITTED] TP29MY20.225

Based on the policy finalized in the FY 2013 IPPS/LTCH PPS final
rule, the next update to the COLA factors for Alaska and Hawaii
would occur at the same time as the update to the labor-related
share of the IPPS market basket (no later than FY 2022).

C. Calculation of the Proposed Prospective Payment Rates

1. General Formula for Calculation of the Prospective Payment Rates for
FY 2021

In general, the operating prospective payment rate for all
hospitals (including hospitals in Puerto Rico) paid under the IPPS,
except SCHs and MDHs, for FY 2021 equals the Federal rate (which
includes uncompensated care payments).
Under current law, the MDH program has been extended for
discharges occurring through September 30, 2022.
SCHs are paid based on whichever of the following rates yields
the greatest aggregate payment: the Federal national rate (which, as
discussed in section V.G. of the preamble of this proposed rule,
includes uncompensated care payments); the updated hospital-specific
rate based on FY 1982 costs per discharge; the updated hospital-
specific rate based on FY 1987 costs per discharge; the updated
hospital-specific rate based on FY 1996 costs per discharge; or the
updated hospital-specific rate based on FY 2006 costs per discharge
to determine the rate that yields the greatest aggregate payment.
The prospective payment rate for SCHs for FY 2021 equals the
higher of the applicable Federal rate, or the hospital-specific rate
as described later in this section. The prospective payment rate for
MDHs for FY 2021 equals the higher of the Federal rate, or the
Federal rate plus 75 percent of the difference between the Federal
rate and the hospital-specific rate as described in this section.
For MDHs, the updated hospital-specific rate is based on FY 1982, FY
1987, or FY 2002 costs per discharge, whichever yields the greatest
aggregate payment.

2. Operating and Capital Federal Payment Rate and Outlier Payment
Calculation

Note: The formula specified in this section is used for actual
claim payment and is also used by CMS to project the outlier
threshold for the upcoming fiscal year. The difference is the source
of some of the variables in the formula. For example, operating and
capital

[[Page 32914]]

CCRs for actual claim payment are from the PSF while CMS uses an
adjusted CCR (as described previously) to project the threshold for
the upcoming fiscal year. In addition, charges for a claim payment
are from the bill while charges to project the threshold are from
the MedPAR data with an inflation factor applied to the charges (as
described earlier).
Step 1--Determine the MS-DRG and MS-DRG relative weight (from
Table 5) for each claim based on the ICD-10-CM diagnosis and ICD-10-
PCS procedure codes on the claim.
Step 2--Select the applicable average standardized amount
depending on whether the hospital submitted qualifying quality data
and is a meaningful EHR user, as described previously.
Step 3--Compute the operating and capital Federal payment rate:

--Federal Payment Rate for Operating Costs = MS-DRG Relative Weight
x [(Labor-Related Applicable Standardized Amount x Applicable CBSA
Wage Index) + (Nonlabor-Related Applicable Standardized Amount x
Cost-of-Living Adjustment)] x (1 + IME + (DSH * 0.25))
--Federal Payment for Capital Costs = MS-DRG Relative Weight x
Federal Capital Rate x Geographic Adjustment Fact x (l + IME + DSH)

Step 4--Determine operating and capital costs:

--Operating Costs = (Billed Charges x Operating CCR)
--Capital Costs = (Billed Charges x Capital CCR).

Step 5--Compute operating and capital outlier threshold (CMS
applies a geographic adjustment to the operating and capital outlier
threshold to account for local cost variation):

--Operating CCR to Total CCR = (Operating CCR)/(Operating CCR +
Capital CCR)
--Operating Outlier Threshold = [Fixed Loss Threshold x ((Labor-
Related Portion x CBSA Wage Index) + Nonlabor-Related portion)] x
Operating CCR to Total CCR + Federal Payment with IME, DSH +
Uncompensated Care Payment + New Technology Add-On Payment Amount
--Capital CCR to Total CCR = (Capital CCR)/(Operating CCR + Capital
CCR)
--Capital Outlier Threshold = (Fixed Loss Threshold x Geographic
Adjustment Factor x Capital CCR to Total CCR) + Federal Payment with
IME and DSH

Step 6--Compute operating and capital outlier payments:

--Marginal Cost Factor = 0.80 or 0.90 (depending on the MS-DRG)
--Operating Outlier Payment = (Operating Costs--Operating Outlier
Threshold) x Marginal Cost Factor
--Capital Outlier Payment = (Capital Costs--Capital Outlier
Threshold) x Marginal Cost Factor

The payment rate may then be further adjusted for hospitals that
qualify for a low-volume payment adjustment under section
1886(d)(12) of the Act and 42 CFR 412.101(b). The base-operating DRG
payment amount may be further adjusted by the hospital readmissions
payment adjustment and the hospital VBP payment adjustment as
described under sections 1886(q) and 1886(o) of the Act,
respectively. Payments also may be reduced by the 1-percent
adjustment under the HAC Reduction Program as described in section
1886(p) of the Act. We also make new technology add-on payments in
accordance with section 1886(d)(5)(K) and (L) of the Act. Finally,
we add the uncompensated care payment to the total claim payment
amount. As noted in the previous formula, we take uncompensated care
payments and new technology add-on payments into consideration when
calculating outlier payments.

3. Hospital-Specific Rate (Applicable Only to SCHs and MDHs)

a. Calculation of Hospital-Specific Rate

Section 1886(b)(3)(C) of the Act provides that SCHs are paid
based on whichever of the following rates yields the greatest
aggregate payment: The Federal rate; the updated hospital-specific
rate based on FY 1982 costs per discharge; the updated hospital-
specific rate based on FY 1987 costs per discharge; the updated
hospital-specific rate based on FY 1996 costs per discharge; or the
updated hospital-specific rate based on FY 2006 costs per discharge
to determine the rate that yields the greatest aggregate payment.
As noted previously, the MDH program has been extended under
current law for discharges occurring through September 30, 2022. For
MDHs, the updated hospital-specific rate is based on FY 1982, FY
1987, or FY 2002 costs per discharge, whichever yields the greatest
aggregate payment.
For a more detailed discussion of the calculation of the
hospital-specific rates, we refer readers to the FY 1984 IPPS
interim final rule (48 FR 39772); the April 20, 1990 final rule with
comment period (55 FR 15150); the FY 1991 IPPS final rule (55 FR
35994); and the FY 2001 IPPS final rule (65 FR 47082).

b. Updating the FY 1982, FY 1987, FY 1996, FY 2002 and FY 2006
Hospital-Specific Rate for FY 2021

Section 1886(b)(3)(B)(iv) of the Act provides that the
applicable percentage increase applicable to the hospital-specific
rates for SCHs and MDHs 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).
Because the Act sets the update factor for SCHs and MDHs equal to
the update factor for all other IPPS hospitals, the update to the
hospital-specific rates for SCHs and MDHs is subject to the
amendments to section 1886(b)(3)(B) of the Act made by sections
3401(a) and 10319(a) of the Affordable Care Act. Accordingly, the
proposed applicable percentage increases to the hospital-specific
rates applicable to SCHs and MDHs are the following:
[GRAPHIC] [TIFF OMITTED] TP29MY20.226

For a complete discussion of the applicable percentage increase
applied to the hospital-specific rates for SCHs and MDHs, we refer
readers to section IV.B. of the preamble of this proposed rule.

[[Page 32915]]

In addition, because SCHs and MDHs use the same MS-DRGs as other
hospitals when they are paid based in whole or in part on the
hospital-specific rate, the hospital-specific rate is adjusted by a
budget neutrality factor to ensure that changes to the MS-DRG
classifications and the recalibration of the MS-DRG relative weights
are made in a manner so that aggregate IPPS payments are unaffected.
Therefore, the hospital-specific rate for an SCH or an MDH is
adjusted by the proposed MS-DRG reclassification and recalibration
budget neutrality factor, as discussed in section III. of this
Addendum and listed in the table in section II. of this Addendum.
The resulting rate is used in determining the payment rate that an
SCH or MDH would receive for its discharges beginning on or after
October 1, 2020. We note that, in this proposed rule, for FY 2021,
we are not proposing to make a documentation and coding adjustment
to the hospital-specific rate. We refer readers to section II.D. of
the preamble of this proposed rule for a complete discussion
regarding our proposed policies and previously finalized policies
(including our historical adjustments to the payment rates) relating
to the effect of changes in documentation and coding that do not
reflect real changes in case mix.

III. Proposed Changes to Payment Rates for Acute Care Hospital
Inpatient Capital-Related Costs for FY 2021

The PPS for acute care hospital inpatient capital-related costs
was implemented for cost reporting periods beginning on or after
October 1, 1991. The basic methodology for determining Federal
capital prospective rates is set forth in the regulations at 42 CFR
412.308 through 412.352. In this section of this Addendum, we
discuss the factors that we are proposing to use to determine the
capital Federal rate for FY 2021, which would be effective for
discharges occurring on or after October 1, 2020.
All hospitals (except ``new'' hospitals under Sec.
412.304(c)(2)) are paid based on the capital Federal rate. We
annually update the capital standard Federal rate, as provided in
Sec. 412.308(c)(1), to account for capital input price increases
and other factors. The regulations at Sec. 412.308(c)(2) also
provide that the capital Federal rate be adjusted annually by a
factor equal to the estimated proportion of outlier payments under
the capital Federal rate to total capital payments under the capital
Federal rate. In addition, Sec. 412.308(c)(3) requires that the
capital Federal rate be reduced by an adjustment factor equal to the
estimated proportion of payments for exceptions under Sec. 412.348.
(We note that, as discussed in the FY 2013 IPPS/LTCH PPS final rule
(77 FR 53705), there is generally no longer a need for an exceptions
payment adjustment factor.) However, in limited circumstances, an
additional payment exception for extraordinary circumstances is
provided for under Sec. 412.348(f) for qualifying hospitals.
Therefore, in accordance with Sec. 412.308(c)(3), an exceptions
payment adjustment factor may need to be applied if such payments
are made. Section 412.308(c)(4)(ii) requires that the capital
standard Federal rate be adjusted so that the effects of the annual
DRG reclassification and the recalibration of DRG weights and
changes in the geographic adjustment factor (GAF) are budget
neutral.
Section 412.374 provides for payments to hospitals located in
Puerto Rico under the IPPS for acute care hospital inpatient
capital-related costs, which currently specifies capital IPPS
payments to hospitals located in Puerto Rico are based on 100
percent of the Federal rate.

A. Determination of the Proposed Federal Hospital Inpatient
Capital-Related Prospective Payment Rate Update for FY 2021

In the discussion that follows, we explain the factors that we
are proposing to use to determine the capital Federal rate for FY
2021. In particular, we explain why the proposed FY 2021 capital
Federal rate would increase approximately 1.30 percent, compared to
the FY 2020 capital Federal rate. As discussed in the impact
analysis in Appendix A to this proposed rule, we estimate that
capital payments per discharge would increase approximately 0.6
percent during that same period. Because capital payments constitute
approximately 10 percent of hospital payments, a 1-percent change in
the capital Federal rate yields only approximately a 0.1 percent
change in actual payments to hospitals.

1. Projected Capital Standard Federal Rate Update

Under Sec. 412.308(c)(1), the capital standard Federal rate is
updated on the basis of an analytical framework that takes into
account changes in a capital input price index (CIPI) and several
other policy adjustment factors. Specifically, we adjust the
projected CIPI rate of change, as appropriate, each year for case-
mix index-related changes, for intensity, and for errors in previous
CIPI forecasts. The proposed update factor for FY 2021 under that
framework is 1.5 percent based on a projected 1.5 percent increase
in the 2014-based CIPI, a proposed 0.0 percentage point adjustment
for intensity, a proposed 0.0 percentage point adjustment for case-
mix, a proposed 0.0 percentage point adjustment for the DRG
reclassification and recalibration, and a proposed forecast error
correction of 0.0 percentage point. As discussed in section III.C.
of this Addendum, we continue to believe that the CIPI is the most
appropriate input price index for capital costs to measure capital
price changes in a given year. We also explain the basis for the FY
2021 CIPI projection in that same section of this Addendum. In this
section of this Addendum, we describe the proposed policy
adjustments that we are proposing to apply in the update framework
for FY 2021.
The case-mix index is the measure of the average DRG weight for
cases paid under the IPPS. Because the DRG weight determines the
prospective payment for each case, any percentage increase in the
case-mix index corresponds to an equal percentage increase in
hospital payments.
The case-mix index can change for any of several reasons--
The average resource use of Medicare patient changes
(``real'' case-mix change);
Changes in hospital documentation and coding of patient
records result in higher-weighted DRG assignments (``coding
effects''); or
The annual DRG reclassification and recalibration
changes may not be budget neutral (``reclassification effect'').
We define real case-mix change as actual changes in the mix (and
resource requirements) of Medicare patients, as opposed to changes
in documentation and coding behavior that result in assignment of
cases to higher-weighted DRGs, but do not reflect higher resource
requirements. The capital update framework includes the same case-
mix index adjustment used in the former operating IPPS update
framework (as discussed in the May 18, 2004 IPPS proposed rule for
FY 2005 (69 FR 28816)). (We no longer use an update framework to
make a recommendation for updating the operating IPPS standardized
amounts, as discussed in section II. of Appendix B to the FY 2006
IPPS final rule (70 FR 47707).)
For FY 2021, we are projecting a 0.5 percent total increase in
the case-mix index. We estimated that the real case-mix increase
would equal 0.5 percent for FY 2021. The net adjustment for change
in case-mix is the difference between the projected real increase in
case mix and the projected total increase in case mix. Therefore,
the proposed net adjustment for case-mix change in FY 2021 is 0.0
percentage point.
The capital update framework also contains an adjustment for the
effects of DRG reclassification and recalibration. This adjustment
is intended to remove the effect on total payments of prior year's
changes to the DRG classifications and relative weights, in order to
retain budget neutrality for all case-mix index-related changes
other than those due to patient severity of illness. Due to the lag
time in the availability of data, there is a 2-year lag in data used
to determine the adjustment for the effects of DRG reclassification
and recalibration. For example, we have data available to evaluate
the effects of the FY 2019 DRG reclassification and recalibration as
part of our update for FY 2021. We assume, for purposes of this
adjustment, that the estimate of FY 2019 DRG reclassification and
recalibration would result in no change in the case-mix when
compared with the case-mix index that would have resulted if we had
not made the reclassification and recalibration changes to the DRGs.
Therefore, we are proposing to make a 0.0 percentage point
adjustment for reclassification and recalibration in the update
framework for FY 2021.
The capital update framework also contains an adjustment for
forecast error. The input price index forecast is based on
historical trends and relationships ascertainable at the time the
update factor is established for the upcoming year. In any given
year, there may be unanticipated price fluctuations that may result
in differences between the actual increase in prices and the
forecast used in calculating the update factors. In setting a
prospective payment rate under the framework, we make an adjustment
for forecast error only if our estimate of the change in the capital
input

[[Page 32916]]

price index for any year is off by 0.25 percentage point or more.
There is a 2-year lag between the forecast and the availability of
data to develop a measurement of the forecast error. Historically,
when a forecast error of the CIPI is greater than 0.25 percentage
point in absolute terms, it is reflected in the update recommended
under this framework. A forecast error of 0.0 percentage point was
calculated for the FY 2019 update, for which there are historical
data. That is, current historical data indicated that the forecasted
FY 2019 CIPI (1.4 percent) used in calculating the FY 2019 update
factor was the same percentage increase as the actual realized price
increase (1.4 percent). As this does not exceed the 0.25 percentage
point threshold, we are not proposing an adjustment for forecast
error in the update for FY 2021.
Under the capital IPPS update framework, we also make an
adjustment for changes in intensity. Historically, we calculate this
adjustment using the same methodology and data that were used in the
past under the framework for operating IPPS. The intensity factor
for the operating update framework reflects how hospital services
are utilized to produce the final product, that is, the discharge.
This component accounts for changes in the use of quality-enhancing
services, for changes within DRG severity, and for expected
modification of practice patterns to remove noncost-effective
services. Our intensity measure is based on a 5-year average.
We calculate case-mix constant intensity as the change in total
cost per discharge, adjusted for price level changes (the CPI for
hospital and related services) and changes in real case-mix. Without
reliable estimates of the proportions of the overall annual
intensity changes that are due, respectively, to ineffective
practice patterns and the combination of quality-enhancing new
technologies and complexity within the DRG system, we assume that
one-half of the annual change is due to each of these factors. Thus,
the capital update framework provides an add-on to the input price
index rate of increase of one-half of the estimated annual increase
in intensity, to allow for increases within DRG severity and the
adoption of quality-enhancing technology.
In this proposed rule, we are proposing to continue to use a
Medicare-specific intensity measure that is based on a 5-year
adjusted average of cost per discharge for FY 2021 (we refer readers
to the FY 2011 IPPS/LTCH PPS final rule (75 FR 0436) for a full
description of our Medicare-specific intensity measure).
Specifically, for FY 2021, we are proposing to use an intensity
measure that is based on an average of cost-per-discharge data from
the 5-year period beginning with FY 2014 and extending through FY
2018. Based on these data, we estimated that case-mix constant
intensity declined during FYs 2014 through 2018. In the past, when
we found intensity to be declining, we believed a zero (rather than
a negative) intensity adjustment was appropriate. Consistent with
this approach, because we estimated that intensity would decline
during that 5-year period, we believe it is appropriate to continue
to apply a zero-intensity adjustment for FY 2021. Therefore, we are
proposing to make a 0.0 percentage point adjustment for intensity in
the update for FY 2021.
Earlier, we described the basis of the components we used to
develop the proposed 1.5 percent capital update factor under the
capital update framework for FY 2021, as shown in the following
table.
[GRAPHIC] [TIFF OMITTED] TP29MY20.227

2. Outlier Payment Adjustment Factor

Section 412.312(c) establishes a unified outlier payment
methodology for inpatient operating and inpatient capital-related
costs. A shared threshold is used to identify outlier cases for both
inpatient operating and inpatient capital-related payments. Section
412.308(c)(2) provides that the standard Federal rate for inpatient
capital-related costs be reduced by an adjustment factor equal to
the estimated proportion of capital-related outlier payments to
total inpatient capital-related PPS payments. The outlier threshold
is set so that operating outlier payments are projected to be 5.1
percent of total operating IPPS DRG payments. For FY 2021, we are
proposing to incorporate the estimated outlier reconciliation
payment amounts into the outlier threshold model, as we did for FY
2020. (For more details on our proposal to incorporate outlier
reconciliation payment amounts into the outlier threshold model,
please see section II.A. of this Addendum to this proposed rule.)
For FY 2020, we estimated that outlier payments for capital-
related PPS payments would equal 5.37 percent of inpatient capital-
related payments based on the capital Federal rate in FY 2020. Based
on the threshold discussed in section II.A. of this Addendum, we
estimate that prior to taking into account projected capital outlier
reconciliation payments, outlier payments for capital-related costs
would equal 5.40 percent for inpatient capital-related payments
based on the proposed capital Federal rate in FY 2021. However,
using the methodology outlined in section II.A. of this Addendum, we
estimate that taking into account projected capital outlier
reconciliation payments would decrease FY 2021 aggregate estimated
capital outlier payments by 0.01 percent. Therefore, accounting for
estimated capital outlier reconciliation, the estimated outlier
payments for capital-related PPS payments would equal 5.39 percent
(5.40 percent-0.01 percent) of inpatient capital-related payments
based on the capital Federal rate in FY 2021. Accordingly, we are
proposing to apply an outlier adjustment factor of 0.9461 in
determining the capital Federal rate for FY 2021. Thus, we estimate
that the percentage of capital outlier payments to total capital
Federal rate payments for FY 2021 would be higher than the
percentage for FY 2020.
The outlier reduction factors are not built permanently into the
capital rates; that is, they are not applied cumulatively in
determining the capital Federal rate. The proposed FY 2021 outlier
adjustment of 0.9461 is a -0.02 percent change from the FY 2020
outlier adjustment of 0.9463. Therefore, the proposed net change in
the outlier adjustment to the capital Federal rate for FY 2021 is
0.9998 (0.9461/0.9463;

[[Page 32917]]

calculation performed on unrounded numbers) so that the proposed
outlier adjustment would decrease the FY 2021 capital Federal rate
by approximately 0.02 percent compared to the FY 2020 outlier
adjustment.

3. Budget Neutrality Adjustment Factor for Changes in DRG
Classifications and Weights and the GAF

Section 412.308(c)(4)(ii) requires that the capital Federal rate
be adjusted so that aggregate payments for the fiscal year based on
the capital Federal rate, after any changes resulting from the
annual DRG reclassification and recalibration and changes in the
GAF, are projected to equal aggregate payments that would have been
made on the basis of the capital Federal rate without such changes.
As discussed in section III.G.3. of the preamble of this
proposed rule, in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42325
through 42339), we finalized a policy to help reduce wage index
disparities between high and low wage index hospitals by increasing
the wage index values for certain hospitals with low wage index
values. As also discussed in section III.G.3. of the preamble of
this proposed rule, this policy will continue in FY 2021. In
addition, in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42332
through 42336), we removed urban to rural reclassifications from the
calculation of the rural floor to prevent inappropriate payment
increases under the rural floor due to rural reclassifications, such
that, beginning in FY 2020, the rural floor is calculated without
including the wage data of hospitals that have reclassified as rural
under section 1886(d)(8)(E) of the Act (as implemented in the
regulations at Sec. 412.103). Therefore, as mentioned in section
III.G.1. of the preamble of this proposed rule, the rural floor for
this FY 2021 proposed rule is calculated without the wage data of
hospitals that have reclassified as rural under Sec. 412.103.
Lastly, for FY 2020, we placed a 5-percent cap on any decrease in a
hospital's wage index from the hospital's final wage index in FY
2019 (84 FR 42336 through 42338). In light of the proposed OMB
updates described in section III.A.2. of the preamble of this
proposed rule, for FY 2021 we are proposing to again cap any
decreases in the wage index at 5 percent so that a hospital's final
wage index for FY 2021 will not be less than 95 percent of its final
wage index for FY 2020.
As we discussed in the in the FY 2020 IPPS/LTCH PPS final rule
(84 FR 42638 through 42639), we augmented our historical methodology
for computing the budget neutrality factor for changes in the GAFs
in light of the effect of those wage index changes on the GAFs.
Specifically, we established a 2-step methodology, under which we
first calculate a factor to ensure budget neutrality for changes to
the GAFs due to the update to the wage data, wage index
reclassifications and redesignations, including our policy to remove
the wage data of urban hospitals that have reclassified as rural
under Sec. 412.103 from the calculation of ``the wage index for
rural areas in the State in which the county is located'' in
applying the provisions of section 1886(d)(8)(C)(iii) of the Act,
and the rural floor, including our policy to calculate the rural
floor without including the wage data of urban hospitals that have
reclassified as rural under Sec. 412.103, consistent with our
historical GAF budget neutrality factor methodology. In the second
step, we calculate a factor to ensure budget neutrality for changes
to the GAFs due to our policy to increase the wage index for
hospitals with a wage index value below the 25th percentile wage
index and our proposed policy to place a 5-percent cap on any
decrease in a hospital's wage index from the hospital's final wage
index in the prior fiscal year. In this section, we refer to these
two policies as the lowest quartile hospital wage index adjustment
and the proposed 5-percent cap on wage index decreases.
In light of the proposed changes to the wage index and other
wage index policies for FY 2021 discussed previously, which directly
affect the GAF, we are proposing to continue to compute a budget
neutrality factor for changes in the GAFs in two steps. We discuss
our proposed 2-step calculation of the GAF budget neutrality factors
for FY 2021 as follows.
To determine the GAF budget neutrality factors for FY 2021, we
first compared estimated aggregate capital Federal rate payments
based on the FY 2020 MS-DRG classifications and relative weights and
the FY 2020 GAFs to estimated aggregate capital Federal rate
payments based on the FY 2020 MS-DRG classifications and relative
weights and the proposed FY 2021 GAFs without incorporating the
effects on the GAFs of the lowest quartile hospital wage index
adjustment and the proposed 5-percent cap on wage index decreases.
To achieve budget neutrality for these changes in the GAFs, we
calculated an incremental GAF budget neutrality adjustment factor of
1.0025 for FY 2021. Next, we compared estimated aggregate capital
Federal rate payments based on the proposed FY 2021 GAFs with and
without incorporating the effects on the GAFs of the lowest quartile
hospital wage index adjustment and the proposed 5-percent cap on
wage index decreases. For this calculation, estimated aggregate
capital Federal rate payments were calculated using the proposed FY
2021 MS-DRG classifications and relative weights, and the proposed
FY 2021 GAFs (both with and without incorporating the effects on the
GAF of the lowest quartile hospital wage index adjustment and the
proposed 5-percent cap on wage index decreases). (We note, for this
calculation the proposed GAFs included the out-migration and
Frontier state adjustments.) To achieve budget neutrality for the
effects of the lowest quartile hospital wage index adjustment and
the proposed 5-percent cap on wage index decreases on the FY 2021
GAFs, we calculated an incremental GAF budget neutrality adjustment
factor of 0.99626. Therefore, to achieve budget neutrality for the
proposed changes in the GAFs, based on the proposed calculations
described previously, we are proposing to apply an incremental
budget neutrality adjustment factor of 0.9987 (1.0025 x 0.9963) for
FY 2021 to the previous cumulative FY 2020 adjustment factor.
We also compared estimated aggregate capital Federal rate
payments based on the FY 2020 MS-DRG classifications and relative
weights and the proposed FY 2021 GAFs to estimated aggregate capital
Federal rate payments based on the cumulative effects of the
proposed FY 2021 MS-DRG classifications and relative weights and the
proposed FY 2021 GAFs without the effects of the lowest quartile
hospital wage index adjustment and the proposed 5-percent cap on
wage index decreases. The proposed incremental adjustment factor for
proposed DRG classifications and changes in relative weights is
0.9995. The proposed incremental adjustment factors for proposed MS-
DRG classifications and changes in relative weights (0.9995) and for
proposed changes in the GAFs through FY 2021 (0.9987) is 0.9983
(0.9995 x 0.9987). We note that all the values are calculated with
unrounded numbers.
The GAF/DRG budget neutrality adjustment factors are built
permanently into the capital rates; that is, they are applied
cumulatively in determining the capital Federal rate. This follows
the requirement under Sec. 412.308(c)(4)(ii) that estimated
aggregate payments each year be no more or less than they would have
been in the absence of the annual DRG reclassification and
recalibration and changes in the GAFs.
The methodology used to determine the recalibration and
geographic adjustment factor (GAF/DRG) budget neutrality adjustment
is similar to the methodology used in establishing budget neutrality
adjustments under the IPPS for operating costs. One difference is
that, under the operating IPPS, the budget neutrality adjustments
for the effect of geographic reclassifications are determined
separately from the effects of other changes in the hospital wage
index and the MS-DRG relative weights. Under the capital IPPS, there
is a single GAF/DRG budget neutrality adjustment factor for changes
in the GAF (including geographic reclassification and the lowest
quartile hospital wage index adjustment and the proposed 5-percent
cap on wage index decreases described previously) and the MS-DRG
relative weights. In addition, there is no adjustment for the
effects that geographic reclassification or the lowest quartile
hospital wage index adjustment and the proposed 5-percent cap on
wage index decreases described previously have on the other payment
parameters, such as the payments for DSH or IME.
The proposed incremental GAF/DRG adjustment factor of 0.9983
(the product of the proposed incremental GAF budget neutrality
adjustment factor of 0.9987 and the proposed incremental DRG budget
neutrality adjustment factor of 0.9995) accounts for the proposed
MS-DRG reclassifications and recalibration and for proposed changes
in the GAFs. As noted previously, it also incorporates the effects
on the GAFs of FY 2021 geographic reclassification decisions made by
the MGCRB compared to FY 2020 decisions and the lowest quartile
hospital wage index adjustment, and the proposed 5-percent cap on
wage index decreases described earlier. However, it does not account
for changes in payments due to changes in the DSH and IME adjustment
factors.

[[Page 32918]]

4. Proposed Capital Federal Rate for FY 2021

For FY 2020, we established a capital Federal rate of $462.33
(84 FR 42640, as corrected in 84 FR 53613). We are proposing to
establish an update of 1.5 percent in determining the FY 2021
capital Federal rate for all hospitals. As a result of this proposed
update and the proposed budget neutrality factors discussed earlier,
we are proposing to establish a national capital Federal rate of
$468.36 for FY 2021. The proposed national capital Federal rate for
FY 2021 was calculated as follows:
The proposed FY 2021 update factor is 1.015; that is,
the proposed update is 1.5 percent.
The proposed FY 2021 budget neutrality adjustment
factor that is applied to the capital Federal rate for proposed
changes in the MS-DRG classifications and relative weights and
proposed changes in the GAFs is 0.9983.
The proposed FY 2021 outlier adjustment factor is
0.9461.
We are providing the following chart that shows how each of the
proposed factors and adjustments for FY 2021 affects the computation
of the proposed FY 2021 national capital Federal rate in comparison
to the FY 2020 national capital Federal rate. The proposed FY 2021
update factor has the effect of increasing the capital Federal rate
by 1.5 percent compared to the FY 2020 capital Federal rate. The
proposed GAF/DRG budget neutrality adjustment factor has the effect
of decreasing the capital Federal rate by 0.17 percent. The proposed
FY 2021 outlier adjustment factor has the effect of decreasing the
capital Federal rate by 0.02 percent compared to the FY 2020 capital
Federal rate. The combined effect of all the proposed changes would
increase the national capital Federal rate by approximately 1.30
percent, compared to the FY 2020 national capital Federal rate.
[GRAPHIC] [TIFF OMITTED] TP29MY20.228

B. Calculation of the Proposed Inpatient Capital-Related
Prospective Payments for FY 2021

For purposes of calculating payments for each discharge during
FY 2021, the capital Federal rate is adjusted as follows: (Standard
Federal Rate) x (DRG weight) x (GAF) x (COLA for hospitals located
in Alaska and Hawaii) x (1 + DSH Adjustment Factor + IME Adjustment
Factor, if applicable). The result is the adjusted capital Federal
rate.
Hospitals also may receive outlier payments for those cases that
qualify under the threshold established for each fiscal year.
Section 412.312(c) provides for a shared threshold to identify
outlier cases for both inpatient operating and inpatient capital-
related payments. The proposed outlier threshold for FY 2021 is in
section II.A. of this Addendum. For FY 2021, a case will qualify as
a cost outlier if the cost for the case plus the (operating) IME and
DSH payments (including both the empirically justified Medicare DSH
payment and the estimated uncompensated care payment, as discussed
in section II.A.4.j. of this Addendum) is greater than the
prospective payment rate for the MS-DRG plus the proposed fixed-loss
amount of $30,006.
Currently, as provided under Sec. 412.304(c)(2), we pay a new
hospital 85 percent of its reasonable costs during the first 2 years
of operation, unless it elects to receive payment based on 100
percent of the capital Federal rate. Effective with the third year
of operation, we pay the hospital based on 100 percent of the
capital Federal rate (that is, the same methodology used to pay all
other hospitals subject to the capital PPS).

C. Capital Input Price Index

1. Background

Like the operating input price index, the capital input price
index (CIPI) is a fixed-weight price index that measures the price
changes associated with capital costs during a given year. The CIPI
differs from the operating input price index in one important
aspect--the CIPI reflects the vintage nature of capital, which is
the acquisition and use of capital over time. Capital expenses in
any given year are determined by the stock of capital in that year
(that is, capital that remains on hand from all current and prior
capital acquisitions). An index measuring capital price changes
needs to reflect this vintage nature of capital. Therefore, the CIPI
was developed to capture the vintage nature of capital by using a
weighted-average of past capital purchase prices up to and including
the current year.
We periodically update the base year for the operating and
capital input price indexes to reflect the changing composition of
inputs for operating and capital expenses. For this FY 2021 IPPS/
LTCH PPS proposed rule, we are proposing to use the rebased and
revised IPPS operating and capital market baskets that reflect a
2014 base year. For a complete discussion of this rebasing, we refer
readers to section IV. of the preamble of the FY 2018 IPPS/LTCH PPS
final rule (82 FR 38170).

2. Forecast of the CIPI for FY 2021

Based on IHS Global Inc.'s fourth quarter 2019 forecast, for
this proposed rule, we are forecasting the 2014-based CIPI to
increase 1.5 percent in FY 2021. This reflects a projected 1.8
percent increase in vintage-weighted depreciation prices (building
and fixed equipment, and movable equipment), and a projected 3.5
percent increase in other capital expense prices in FY 2021,
partially offset by a projected 1.4 percent decline in vintage-
weighted interest expense prices in FY 2021. The weighted average of
these three factors produces the forecasted 1.5 percent increase for
the 2014-based CIPI in FY 2021. We are also proposing that if more
recent data becomes available after the publication of this proposed
rule and before the publication of the final rule (for example, a
more recent estimate of the increase in the 2014-based CIPI), we
would use such data, if appropriate, to determine the FY 2021
increase in the 2014-based CIPI for the final rule.

[[Page 32919]]

IV. Proposed Changes to Payment Rates for Excluded Hospitals: Rate-of-
Increase Percentages for FY 2021

Payments for services furnished in children's hospitals, 11
cancer hospitals, and hospitals located outside the 50 States, the
District of Columbia and Puerto Rico (that is, short-term acute care
hospitals located in the U.S. Virgin Islands, Guam, the Northern
Mariana Islands, and American Samoa) that are excluded from the IPPS
are made on the basis of reasonable costs based on the hospital's
own historical cost experience, subject to a rate-of-increase
ceiling. A per discharge limit (the target amount, as defined in
Sec. 413.40(a) of the regulations) is set for each hospital, based
on the hospital's own cost experience in its base year, and updated
annually by a rate-of-increase percentage specified in Sec.
413.40(c)(3). In addition, as specified in the FY 2018 IPPS/LTCH PPS
final rule (82 FR 38536), effective for cost reporting periods
beginning during FY 2018, the annual update to the target amount for
extended neoplastic disease care hospitals (hospitals described in
Sec. 412.22(i) of the regulations) also is the rate-of-increase
percentage specified in Sec. 413.40(c)(3). (We note that, in
accordance with Sec. 403.752(a), religious nonmedical health care
institutions (RNHCIs) are also subject to the rate-of increase
limits established under Sec. 413.40 of the regulations.)
For this FY 2021 IPPS/LTCH PPS proposed rule, based on IGI's
fourth quarter 2019 forecast, we estimated that the 2014-based IPPS
operating market basket update for FY 2021 would be 3.0 percent
(that is, the estimate of the market basket rate-of-increase). Based
on this estimate, the FY 2021 rate-of-increase percentage that would
be applied to the FY 2020 target amounts in order to calculate the
FY 2021 target amounts for children's hospitals, cancer hospitals,
RNCHIs, short-term acute care hospitals located in the U.S. Virgin
Islands, Guam, the Northern Mariana Islands, and American Samoa, and
extended neoplastic disease care hospitals would be 3.0 percent, in
accordance with the applicable regulations at 42 CFR 413.40.
However, we are proposing that if more recent data became available
for the final rule, we would use them to calculate the IPPS
operating market basket update for FY 2021.
IRFs and rehabilitation distinct part units, IPFs and
psychiatric distinct part units, and LTCHs are excluded from the
IPPS and paid under their respective PPSs. The IRF PPS, the IPF PPS,
and the LTCH PPS are updated annually. We refer readers to section
VII. of the preamble of this proposed rule and section V. of the
Addendum to this proposed rule for the updated changes to the
Federal payment rates for LTCHs under the LTCH PPS for FY 2021. The
annual updates for the IRF PPS and the IPF PPS are issued by the
agency in separate Federal Register documents.

V. Proposed Changes to the Payment Rates for the LTCH PPS for FY 2021

A. Proposed LTCH PPS Standard Federal Payment Rate for FY 2021

1. Overview

In section VII. of the preamble of this proposed rule, we
discuss our annual updates to the payment rates, factors, and
specific policies under the LTCH PPS for FY 2021.
Under Sec. 412.523(c)(3) of the regulations, for LTCH PPS FYs
2012 through 2020, we updated the standard Federal payment rate by
the most recent estimate of the LTCH PPS market basket at that time,
including additional statutory adjustments required by sections
1886(m)(3) (citing sections 1886(b)(3)(B)(xi)(II), and 1886(m)(4) of
the Act as set forth in the regulations at Sec. 412.523(c)(3)(viii)
through (xv)). (For a summary of the payment rate development prior
to FY 2012, we refer readers to the FY 2018 IPPS/LTCH PPS final rule
(82 FR 38310 through 38312) and references therein.)
Section 1886(m)(3)(A) of the Act specifies that, for rate year
2012 and each subsequent rate year, any annual update to the
standard Federal payment rate shall be reduced by the productivity
adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act
(which we refer to as ``the multifactor productivity (MFP)
adjustment'') as discussed in section VII.C.2 of the preamble of
this proposed rule.
This section of the Act further provides that the application of
section 1886(m)(3)(B) of the Act may result in the annual update
being less than zero for a rate year, and may result in payment
rates for a rate year being less than such payment rates for the
preceding rate year. (As noted in section VII.C.2. of the preamble
of this proposed rule, the annual update to the LTCH PPS occurs on
October 1 and we have adopted the term ``fiscal year'' (FY) rather
than ``rate year'' (RY) under the LTCH PPS beginning October 1,
2010. Therefore, for purposes of clarity, when discussing the annual
update for the LTCH PPS, including the provisions of the Affordable
Care Act, we use the term ``fiscal year'' rather than ``rate year''
for 2011 and subsequent years.) For LTCHs that fail to submit the
required quality reporting data in accordance with the LTCH QRP, the
annual update is reduced by 2.0 percentage points as required by
section 1886(m)(5) of the Act.

2. Development of the Proposed FY 2021 LTCH PPS Standard Federal
Payment Rate

Consistent with our historical practice, for FY 2021, we are
proposing to apply the annual update to the LTCH PPS standard
Federal payment rate from the previous year. Furthermore, in
determining the proposed LTCH PPS standard Federal payment rate for
FY 2021, we also are proposing to make certain regulatory
adjustments, consistent with past practices. Specifically, in
determining the proposed FY 2021 LTCH PPS standard Federal payment
rate, we are proposing to apply a budget neutrality adjustment
factor for the changes related to the area wage level adjustment
(that is, changes to the wage data, labor-related share, and
geographic labor-market area designations, and the proposed 5-
percent cap on any decrease in a LTCH's wage index transition
policy) as discussed in section V.B.6 of this Addendum to this
proposed rule. In addition, we are proposing to apply the permanent
budget neutrality adjustment factor (applied to LTCH PPS standard
Federal payment rate cases only) for the cost of the elimination of
the 25-percent threshold policy for FY 2021 (discussed in section
VII.D. of the preamble of this proposed rule).
In this proposed rule, we are proposing to establish an annual
update to the LTCH PPS standard Federal payment rate of 2.5 percent.
Accordingly, as reflected in proposed Sec. 412.523(c)(3)(xvii), we
are proposing to apply a factor of 1.025 to the FY 2020 LTCH PPS
standard Federal payment rate of $42,677.64 to determine the
proposed FY 2021 LTCH PPS standard Federal payment rate. Also, as
reflected in proposed Sec. 412.523(c)(3)(xvii), applied in
conjunction with the provisions of Sec. 412.523(c)(4), we are
proposing to establish an annual update to the LTCH PPS standard
Federal payment rate of 0.5 percent (that is, an update factor of
1.005) for FY 2021 for LTCHs that fail to submit the required
quality reporting data for FY 2021 as required under the LTCH QRP.
Additionally, we are applying a permanent budget neutrality
adjustment factor of 0.991249 to the LTCH PPS standard Federal
payment rate for the cost of the elimination of the 25-percent
threshold policy for FY 2021 and subsequent years after removing the
temporary budget neutrality adjustment factor of 0.990737 that was
applied to the LTCH PPS standard Federal payment rate for the cost
of the elimination of the 25-percent threshold policy for FY 2020.
Consistent with Sec. 412.523(d)(4), we are proposing to apply an
area wage level budget neutrality factor to the FY 2021 LTCH PPS
standard Federal payment rate of 1.0018755, based on the best
available data at this time, to ensure that any proposed changes to
the general updates to the area wage level adjustment (that is, the
annual update of the wage index, including any changes to the
geographic labor-market area designations and labor-related share)
would not result in any change (increase or decrease) in estimated
aggregate LTCH PPS standard Federal payment rate payments.
Accordingly, we are proposing to establish an LTCH PPS standard
Federal payment rate of $43,849.28 (calculated as $42,677.64 x
1.000517 x 1.025 x 1.0018755) for FY 2021 (calculations performed on
rounded numbers). For LTCHs that fail to submit quality reporting
data for FY 2021, in accordance with the requirements of the LTCH
QRP under section 1866(m)(5) of the Act, we are proposing to
establish an LTCH PPS standard Federal payment rate of $42,993.68
(calculated as $42,677.64 x 1.000517 x 1.005 x 1.0018755)
(calculations performed on rounded numbers) for FY 2021.

B. Proposed Adjustment for Area Wage Levels Under the LTCH PPS for
FY 2021

1. Background

Under the authority of section 123 of the BBRA, as amended by
section 307(b) of the BIPA, we established an adjustment to the LTCH
PPS standard Federal payment rate to account for differences in LTCH
area wage levels under Sec. 412.525(c). The labor-related

[[Page 32920]]

share of the LTCH PPS standard Federal payment rate is adjusted to
account for geographic differences in area wage levels by applying
the applicable LTCH PPS wage index. The applicable LTCH PPS wage
index is computed using wage data from inpatient acute care
hospitals without regard to reclassification under section
1886(d)(8) or section 1886(d)(10) of the Act.
The proposed FY 2021 LTCH PPS standard Federal payment rate wage
index values that would be applicable for LTCH PPS standard Federal
payment rate discharges occurring on or after October 1, 2020,
through September 30, 2021, are presented in Table 12A (for urban
areas) and Table 12B (for rural areas), which are listed in section
VI. of the Addendum to this proposed rule and available via the
internet on the CMS website.

2. Proposed Geographic Classifications (Labor Market Areas) for the
LTCH PPS Standard Federal Payment Rate

In adjusting for the differences in area wage levels under the
LTCH PPS, the labor-related portion of an LTCH's Federal prospective
payment is adjusted by using an appropriate area wage index based on
the geographic classification (labor market area) in which the LTCH
is located. Specifically, the application of the LTCH PPS area wage
level adjustment under existing Sec. 412.525(c) is made based on
the location of the LTCH--either in an ``urban area,'' or a ``rural
area,'' as defined in Sec. 412.503. Under Sec. 412.503, an ``urban
area'' is defined as a Metropolitan Statistical Area (MSA) (which
includes a Metropolitan division, where applicable), as defined by
the Executive OMB and a ``rural area'' is defined as any area
outside of an urban area (75 FR 37246).
The CBSA-based geographic classifications (labor market area
definitions) currently used under the LTCH PPS, effective for
discharges occurring on or after October 1, 2014, are based on the
OMB labor market area delineations based on the 2010 Decennial
Census data. In general, the current statistical areas (which were
implemented beginning with FY 2015) are based on revised OMB
delineations issued on February 28, 2013, in OMB Bulletin No. 13-01.
(As noted elsewhere in this proposed rule, we have adopted minor
revisions and updates in the years between the decennial censuses.)
We adopted these labor market area delineations because they were at
that time based on the best available data that reflect the local
economies and area wage levels of the hospitals that are currently
located in these geographic areas. We also believed that these OMB
delineations would ensure that the LTCH PPS area wage level
adjustment most appropriately accounted for and reflected the
relative hospital wage levels in the geographic area of the hospital
as compared to the national average hospital wage level. We noted
that this policy was consistent with the IPPS policy adopted in FY
2015 under Sec. 412.64(b)(1)(ii)(D) of the regulations (79 FR 49951
through 49963). (For additional information on the CBSA-based labor
market area (geographic classification) delineations currently used
under the LTCH PPS and the history of the labor market area
definitions used under the LTCH PPS, we refer readers to the FY 2015
IPPS/LTCH PPS final rule (79 FR 50180 through 50185).)
In general, it is our historical practice to update the CBSA-
based labor market area delineations annually based on the most
recent updates issued by OMB. Generally, OMB issues major revisions
to statistical areas every 10 years, based on the results of the
decennial census. However, OMB occasionally issues minor updates and
revisions to statistical areas in the years between the decennial
censuses. OMB Bulletin No. 17-01, issued August 15, 2017,
established the delineations for the Nation's statistical areas, and
the corresponding changes to the CBSA-based labor market areas were
adopted in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41731). A
copy of this bulletin may be obtained on the website at: https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/bulletins/2017/b-17-01.pdf. In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42642), we
adopted our current policy, that is, the continued use of the CBSA-
based labor market area delineations as established in OMB Bulletin
17-01 and adopted in the FY 2019 IPPS/LTCH PPS final rule.
On April 10, 2018, OMB issued OMB Bulletin No. 18-03, which
superseded the August 15, 2017 OMB Bulletin No. 17-01. On September
14, 2018, OMB issued OMB Bulletin No. 18-04, which superseded the
April 10, 2018 OMB Bulletin No. 18-03. These bulletins 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 based on the standards published on June 28, 2010
(75 FR 37246), and Census Bureau data. A copy of the September 14,
2018 OMB Bulletin No. 18-04, may be obtained at https://www.whitehouse.gov/wp-content/uploads/2018/09/Bulletin-18-04.pdf.
(We note, on March 6, 2020 OMB issued OMB Bulletin 20-01 (available
on the web at https://www.whitehouse.gov/wp-content/uploads/2020/03/Bulletin-20-01.pdf), and as discussed later in this section of this
rule was not issued in time for development of this proposed rule.)
While OMB Bulletin No. 18-04 is not based on new census data, it
includes some material changes to the OMB statistical area
delineations, including some new CBSAs, urban counties that would
become rural, rural counties that would become urban, and existing
CBSAs that would be split apart. In this proposed rule, under the
authority of section 123 of the BBRA, as amended by section 307(b)
of the BIPA, we are proposing to adopt the revised delineations
announced in OMB Bulletin No. 18-04 effective for FY 2021 under the
LTCH PPS. As noted previously, the March 6, 2020 OMB Bulletin 20-01
was not issued in time for development of this proposed rule. The
minor updates included in OMB Bulletin 20-01 do not alter the urban
or rural status of any county, and would not impact our proposed
updates to the CBSA-based labor market area delineations discussed
in this section of the rule. This proposal to adopt the revised
delineations announced in OMB Bulletin No. 18-04 is consistent with
the changes proposed under the IPPS for FY 2021 as discussed in
section III.A.2. of the preamble of this proposed rule. A summary of
these proposed changes is presented in the discussion that follows
in this section. For complete details on the proposed changes we
refer readers to section III.A.2. of the preamble of this proposed
rule.

a. Urban Counties That Would Become Rural Under the Revised OMB
Delineations

Analysis of the revised OMB labor market area delineations shows
that a total of 34 counties (and county equivalents) currently
considered part of an urban CBSA would be considered to be located
in a rural area beginning in FY 2021 under our proposal to adopt the
revisions to the OMB delineations based on OMB Bulletin No. 18-04.
The chart in section III.A.2.ii. of the preamble of this proposed
rule lists the 34 urban counties that would be rural under these
revisions to the OMB delineations.

b. Rural Counties That Would Become Urban Under the Revised OMB
Delineations

Analysis of the revised labor market area delineations shows
that a total of 47 counties (and county equivalents) located in
rural areas that would be located in urban areas beginning in FY
2021 under our proposal to adopt the revisions to the OMB
delineations based on OMB Bulletin No. 18-04. The chart in section
III.A.2.iii. of the preamble of this proposed rule lists the 47
rural counties that would be urban under these revised OMB
delineations.

c. Urban Counties That Would Move to a Different Urban CBSA Under the
Revised OMB Delineations

In addition to rural counties becoming urban and urban counties
becoming rural, some urban counties would shift from one urban CBSA
to another urban CBSA under our proposal to adopt the revised
delineations announced in OMB Bulletin No. 18-04. In other cases,
adopting the revised delineations announced in OMB Bulletin No. 18-
04 would involve a change only in CBSA name and/or number, while the
CBSA continues to encompass the same constituent counties. For
example, CBSA 19380 (Dayton, OH) would experience both a change to
its number and its name, and become CBSA 19430 (Dayton-Kettering,
OH), while all of its three constituent counties would remain the
same. In other cases, only the name of the CBSA would be modified,
and none of the currently assigned counties would be reassigned to a
different urban CBSA. The chart in section III.A.2.iii. of the
preamble of this proposed rule lists the CBSAs where we are
proposing to change the name and/or CBSA number only.
There are also counties that would shift between existing and
new CBSAs, changing the constituent makeup of the CBSAs, under our
proposal to adopt the revisions to the OMB delineations based on OMB
Bulletin No. 18-04. For example, some CBSAs would be split into
multiple new CBSAs, or a CBSA would lose one or more counties to
other urban CBSAs. The chart in section III.A.2.iv. of the preamble
of this proposed rule lists the urban counties that would move from
one urban CBSA to a new or modified CBSA

[[Page 32921]]

under our proposal to adopt these revisions to the OMB delineations.
We believe these revisions to the CBSA-based labor market area
delineations as established in OMB Bulletin 18-04 would ensure that
the LTCH PPS area wage level adjustment most appropriately accounts
for and reflects the relative hospital wage levels in the geographic
area of the hospital as compared to the national average hospital
wage level based on the best available data that reflect the local
economies and area wage levels of the hospitals that are currently
located in these geographic areas (81 FR 57298). Therefore, we are
proposing to adopt the revisions announced in OMB Bulletin No. 18-04
to the CBSA-based labor market area delineations under the LTCH PPS,
effective October 1, 2020. Accordingly, the proposed FY 2021 LTCH
PPS wage index values in Tables 12A and 12B listed in section VI. of
the Addendum to this proposed rule (which are available via the
internet on the CMS website) reflect the proposed revisions to the
CBSA-based labor market area delineations previously described. We
note that, as discussed in section III.A.2. of the preamble of this
proposed rule, these revisions to the CBSA-based delineations also
are being proposed under the IPPS.
As indicated previously, overall, we believe that our proposal
to adopt the revised delineations announced in OMB Bulletin No. 18-
04 would result in LTCH PPS wage index values being more
representative of the actual costs of labor in a given area.
However, we also recognize that some LTCHs would experience
decreases in their area wage index values as a result of our
proposal. We also realize that many LTCHs would have higher area
wage index values under our proposal. To mitigate the impact upon
LTCHs, we have in the past provided for transition periods when
adopting changes that have significant payment implications,
particularly large negative impacts. While we believe that using the
new OMB delineations would create a more accurate payment adjustment
for differences in area wage levels, we also recognize that adopting
such changes may cause some short-term instability in LTCH PPS
payments. As discussed in section V.B.5. of the Addendum to this
proposed rule, we are proposing a transition policy to help mitigate
any significant negative impacts that LTCHs may experience due to
our proposal to adopt the revised OMB delineations under the LTCH
PPS. Consistent with past practice, we are proposing that this
proposed transition would be implemented in a budget neutral manner,
as discussed in section V.B.6. of the Addendum to this proposed
rule.

3. Proposed Labor-Related Share for the LTCH PPS Standard Federal
Payment Rate

Under the payment adjustment for the differences in area wage
levels under Sec. 412.525(c), the labor-related share of an LTCH's
standard Federal payment rate payment is adjusted by the applicable
wage index for the labor market area in which the LTCH is located.
The LTCH PPS labor-related share currently represents the sum of the
labor-related portion of operating costs and a labor-related portion
of capital costs using the applicable LTCH market basket. Additional
background information on the historical development of the labor-
related share under the LTCH PPS can be found in the RY 2007 LTCH
PPS final rule (71 FR 27810 through 27817 and 27829 through 27830)
and the FY 2012 IPPS/LTCH PPS final rule (76 FR 51766 through 51769
and 51808).
For FY 2013, we rebased and revised the market basket used under
the LTCH PPS by adopting a 2009-based LTCH market basket. In
addition, beginning in FY 2013, we determined the labor-related
share annually as the sum of the relative importance of each labor-
related cost category of the 2009-based LTCH market basket for the
respective fiscal year based on the best available data. (For more
details, we refer readers to the FY 2013 IPPS/LTCH PPS final rule
(77 FR 53477 through 53479). Then, effective for FY 2017, we rebased
and revised the 2009-based LTCH market basket to reflect a 2013 base
year and determined the labor-related share annually as the sum of
the relative importance of each labor-related cost category in the
2013-based LTCH market basket using the most recent available data.
(For more details, we refer readers to the FY 2017 IPPS/LTCH PPS
final rule (81 FR 57085 through 57096).)
As noted previously in section V.A. in this Addendum to this
proposed rule, effective for FY 2021, we are proposing to rebase and
revise the 2013-based LTCH market basket to reflect a 2017 base
year. In conjunction with that proposal, as discussed in section
VII.D.6. of the preamble of this proposed rule, we are also
proposing that the LTCH PPS labor-related share for FY 2021 would be
the sum of the FY 2021 relative importance of each labor-related
cost category in the proposed 2017-based LTCH market basket using
the most recent available data. Table E9 in section VII.D.6. of the
preamble of this proposed rule shows the proposed FY 2021 labor-
related share using the proposed 2017-based LTCH market basket and
the FY 2020 labor-related share using the 2013-based LTCH market
basket. The proposed labor-related share for FY 2021 is the sum of
the relative importance of Wages and Salaries; Employee Benefits;
Professional Fees: Labor-Related; Administrative and Facilities
Support Services; Installation, Maintenance, and Repair Services;
All Other: Labor-related Services; and a portion of the Capital-
Related cost weight from the proposed 2017-based LTCH market basket.
The relative importance reflects the different rates of price change
for these cost categories between the base year (2017) and FY 2021.
Based on IHS Global Inc.'s 4th quarter 2019 forecast of the proposed
2017-based LTCH market basket, the sum of the FY 2021 relative
importance for Wages and Salaries, Employee Benefits, Professional
Fees: Labor-related, Administrative and Facilities Support Services,
Installation Maintenance & Repair Services, and All Other: Labor-
related Services is 63.6 percent. We propose that the portion of
Capital-Related costs that is influenced by the local labor market
is 46 percent, which is the same percentage applied to the 2013-
based LTCH market basket. Since the FY 2021 relative importance for
Capital-Related is 9.5 percent based on IHS Global Inc.'s 4th
quarter 2019 forecast of the proposed 2017-based LTCH market basket,
we took 46 percent of 9.5 percent to determine the proposed labor-
related share of Capital-Related for FY 2021 of 4.4 percent.
Therefore, we are proposing a total labor-related share for FY 2021
of 68.0 percent (the sum of 63.6 percent for the operating cost and
4.4 percent for the labor-related share of Capital-Related). The
total difference between the proposed FY 2021 labor-related share
using the proposed 2017-based LTCH market basket and the FY 2020
labor-related share using the 2013-based LTCH market basket is 1.7
percentage points (68.0 percent and 66.3 percent, respectively). As
discussed in greater detail in section VII.D.6. of the preamble of
this proposed rule, this difference is attributable to the revision
to the base year cost weights, the revision to the starting point of
the calculation of relative importance (base year) from 2013 to
2017, and the use of an updated IHS Global Inc. forecast and
reflecting an additional year of inflation. Consistent with our
historical practice, we also propose that if more recent data became
available, we would use that data, if appropriate, to determine the
final FY 2021 labor-related share in the final rule.

4. Proposed Wage Index for FY 2021 for the LTCH PPS Standard Federal
Payment Rate

Historically, we have established LTCH PPS area wage index
values calculated from acute care IPPS hospital wage data without
taking into account geographic reclassification under sections
1886(d)(8) and 1886(d)(10) of the Act (67 FR 56019). The area wage
level adjustment established under the LTCH PPS is based on an
LTCH's actual location without regard to the ``urban'' or ``rural''
designation of any related or affiliated provider.
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42643), we
calculated the FY 2020 LTCH PPS area wage index values using the
same data used for the FY 2020 acute care hospital IPPS (that is,
data from cost reporting periods beginning during FY 2016), without
taking into account geographic reclassification under sections
1886(d)(8) and 1886(d)(10) of the Act, as these were the most recent
complete data available at that time. In that same final rule, we
indicated that we computed the FY 2020 LTCH PPS area wage index
values, consistent with the urban and rural geographic
classifications (labor market areas) that were in place at that time
and consistent with the pre-reclassified IPPS wage index policy
(that is, our historical policy of not taking into account IPPS
geographic reclassifications in determining payments under the LTCH
PPS). As with the IPPS wage index, wage data for multicampus
hospitals with campuses located in different labor market areas
(CBSAs) are apportioned to each CBSA where the campus (or campuses)
are located. We also continued to use our existing policy for
determining area wage index values for areas where there are no IPPS
wage data.
Consistent with our historical methodology, to determine the
applicable area wage index values for the FY 2021 LTCH PPS standard
Federal payment rate, under the broad authority of section 123 of
the BBRA, as amended by section 307(b) of the BIPA, we are proposing
to continue to

[[Page 32922]]

employ our historical practice of using the same data we are
proposing to use to compute the proposed FY 2021 acute care hospital
inpatient wage index, as discussed in section III. of the preamble
of this proposed rule, that is wage data collected from cost reports
submitted by IPPS hospitals for cost reporting periods beginning
during FY 2017, because these data are the most recent complete data
available.
In addition, we are proposing to compute the FY 2021 LTCH PPS
standard Federal payment rate area wage index values consistent with
the ``urban'' and ``rural'' geographic classifications (that is, the
proposed labor market area delineations, including the updates, as
previously discussed in section V.B. of this Addendum) and our
historical policy of not taking into account IPPS geographic
reclassifications under sections 1886(d)(8) and 1886(d)(10) of the
Act in determining payments under the LTCH PPS. We are also
proposing to continue to apportion the wage data for multicampus
hospitals with campuses located in different labor market areas to
each CBSA where the campus or campuses are located, consistent with
the IPPS policy. Lastly, consistent with our existing methodology
for determining the LTCH PPS wage index values, for FY 2021, we are
proposing to continue to use our existing policy for determining
area wage index values for areas where there are no IPPS wage data.
Under our existing methodology, the LTCH PPS wage index value for
urban CBSAs with no IPPS wage data would be determined by using an
average of all of the urban areas within the State, and the LTCH PPS
wage index value for rural areas with no IPPS wage data would be
determined by using the unweighted average of the wage indices from
all of the CBSAs that are contiguous to the rural counties of the
State.
Based on the FY 2017 IPPS wage data that we are proposing to use
to determine the proposed FY 2021 LTCH PPS standard Federal payment
rate area wage index values in this final rule, there are no IPPS
wage data for the urban area of Hinesville, GA (CBSA 25980).
Consistent with our existing methodology, we calculated the proposed
FY 2021 wage index value for CBSA 25980 as the average of the wage
index values for all of the other urban areas within the State of
Georgia (that is, CBSAs 10500, 12020, 12060, 12260, 15260, 16860,
17980, 19140, 23580, 31420, 40660, 42340, 46660 and 47580), as shown
in Table 12A, which is listed in section VI. of the Addendum to this
proposed rule and available via the internet on the CMS website.
Based on the FY 2017 IPPS wage data that we are proposing to use
to determine the proposed FY 2021 LTCH PPS standard Federal payment
rate area wage index values in this proposed rule, there are no
rural areas without IPPS hospital wage data. Therefore, it is not
necessary to use our established methodology to calculate a proposed
LTCH PPS standard Federal payment rate wage index value for rural
areas with no IPPS wage data for FY 2021. We note that, as IPPS wage
data are dynamic, it is possible that the number of rural areas
without IPPS wage data will vary in the future.

5. Proposed Transition Wage Index for LTCHs Negatively Impacted

As discussed in section V.B.2. of the Addendum to this proposed
rule, overall, we believe that our proposal to adopt the revised OMB
delineations announced in Bulletin No. 18-04 for FY 2021 would
result in LTCH PPS wage index values being more representative of
the actual costs of labor in a given area. However, we also
recognize that some LTCHs would experience decreases in their area
wage index values as a result of our proposal. We also realize that
some LTCHs would have higher area wage index values under our
proposal.
To mitigate the potential impacts of proposed policies on LTCHs,
we have in the past provided for transition periods when adopting
changes that have significant payment implications, particularly
large negative impacts. For example, we have proposed and finalized
budget neutral transition policies to help mitigate negative impacts
on LTCHs following the adoption of the new CBSA delineations based
on the 2010 decennial census data in the FY 2015 IPPS/LTCH PPS final
rule (79 FR 50185). Specifically, we implemented a 1-year 50/50
blended wage index for any LTCHs that experienced a decrease in wage
index values due to our adoption of the revised delineations. This
required calculating and comparing two wage indexes for each LTCH
since that blended wage index was computed as the sum of 50 percent
of the FY 2015 LTCH PPS wage index values under the FY 2014 CBSA
delineations and 50 percent of the FY 2015 LTCH PPS wage index
values under the FY 2015 new OMB delineations. While we believed
that using the new OMB delineations would ultimately create a more
accurate payment adjustment for differences in area wage levels, we
also recognized that adopting such changes may cause some short-term
instability in LTCH PPS payments. Similar instability may result
from the proposed wage policies herein, in particular for LTCHs that
would be negatively impacted by the proposed adoption of the updates
to the OMB delineations. For example, LTCH's currently located in
CBSA 35614 (New York-Jersey City-White Plains, NY-NJ) that would be
located in new CBSA 35154 (New Brunswick-Lakewood, NJ) under the
proposed changes to the CBSA-based labor market area delineations
would experience a nearly 17 percent decrease in the wage index as a
result of the proposed change.
Consistent with our past practice of implementing transition
policies to help mitigate negative impacts on hospitals following
the adoption of the new CBSA delineations, we believe that if we
adopt the revised delineations announced in OMB Bulletin 18-04, it
would be appropriate to implement a transition policy since, as
mentioned previously, some of these revisions are material, and may
negatively impact payments to LTCHs. Similar to the policy proposed
under the IPPS for the proposed adoption of the revised delineations
announced in OMB Bulletin 18-04 discussed in section III.A.2. of the
preamble to this proposed rule, we believe applying a 5-percent cap
on any decrease in an LTCH's wage index from the LTCH's final wage
index from the prior fiscal year would be an appropriate transition
for FY 2021 for the revised OMB delineations as it provides
transparency and predictability in payment levels from FY 2020 to
the upcoming FY 2021. The proposed FY 2021 5-percent cap on wage
index decreases would be applied to all LTCHs that have any decrease
in their wage indexes, regardless of the circumstance causing the
decline. Given the significant portion of Medicare LTCH PPS payments
that are adjusted by the wage index and how relatively few LTCHs
generally see wage index declines in excess of 5 percent, LTCHs may
have difficulty adapting to changes in the wage index of this
magnitude all at once. For these reasons, under the authority of
section 123 of the BBRA, as amended by section 307(b) of the BIPA,
we are proposing to apply a 5-percent cap on any decrease in a
LTCH's wage index from the LTCH's wage index from the prior fiscal
year such that that an LTCH's final wage index for FY 2021 would not
be less than 95 percent of its final wage index for FY 2020. This
transition would allow the effects of our proposed adoption of the
revised CBSA delineations to be phased in over 2 years, where the
estimated reduction in an LTCH's wage index would be capped at 5
percent in FY 2021 (that is, no cap would be applied to the
reduction in the wage index for the second year (FY 2022)). Because
we believe that using the new OMB delineations would ultimately
create a more accurate payment adjustment for differences in area
wage levels we are not proposing to include a cap on the overall
increase in an LTCH's wage index value.
Furthermore, consistent with the requirement at Sec.
412.525(c)(2) that changes to area wage level adjustments are made
in a budget neutral manner, we are proposing that this proposed 5
percent cap on the decrease on an LTCH's wage index would not result
in any change in estimated aggregate LTCH PPS payments by including
the application of this policy in the determination of the proposed
area wage level budget neutrality factor that is applied to the
standard Federal payment rate, which is discussed in section V.B.6.
of the Addendum to this proposed rule.

6. Proposed Budget Neutrality Adjustments for Changes to the LTCH PPS
Standard Federal Payment Rate Area Wage Level Adjustment

Historically, the LTCH PPS wage index and labor-related share
are updated annually based on the latest available data. Under Sec.
412.525(c)(2), any changes to the area wage index values or labor-
related share are to be made in a budget neutral manner such that
estimated aggregate LTCH PPS payments are unaffected; that is, will
be neither greater than nor less than estimated aggregate LTCH PPS
payments without such changes to the area wage level adjustment.
Under this policy, we determine an area wage level adjustment budget
neutrality factor that is applied to the standard Federal payment
rate to ensure that any changes to the area wage level adjustments
are budget neutral such that any changes to the area wage index
values or labor-related share would not result

[[Page 32923]]

in any change (increase or decrease) in estimated aggregate LTCH PPS
payments. Accordingly, under Sec. 412.523(d)(4), we have applied an
area wage level adjustment budget neutrality factor in determining
the standard Federal payment rate, and we also established a
methodology for calculating an area wage level adjustment budget
neutrality factor. (For additional information on the establishment
of our budget neutrality policy for changes to the area wage level
adjustment, we refer readers to the FY 2012 IPPS/LTCH PPS final rule
(76 FR 51771 through 51773 and 51809).)
For FY 2021, in accordance with Sec. 412.523(d)(4), we are
proposing to apply an area wage level budget neutrality factor to
adjust the LTCH PPS standard Federal payment rate to account for the
estimated effect of the adjustments or updates to the area wage
level adjustment under Sec. 412.525(c)(1) on estimated aggregate
LTCH PPS payments, consistent with the methodology we established in
the FY 2012 IPPS/LTCH PPS final rule (76 FR 51773). As discussed
previously, we are proposing that the proposed 5 percent cap on the
decrease on an LTCH's wage index would be implemented in a budget
neutral manner by including the application of that proposed policy
in the area wage level a budget neutrality factor that is applied to
the standard Federal payment rate.
Specifically, we are proposing to determine an area wage level
adjustment budget neutrality factor that would be applied to the
LTCH PPS standard Federal payment rate under Sec. 412.523(d)(4) for
FY 2021 using the following methodology:
Step 1--Simulate estimated aggregate LTCH PPS standard Federal
payment rate payments using the FY 2020 wage index values, the FY
2020 labor-related share of 66.3 percent, and the FY 2020 labor
market area designations.
Step 2--Simulate estimated aggregate LTCH PPS standard Federal
payment rate payments using the proposed FY 2021 wage index values
based on updated hospital wage data, including the proposed 5
percent cap on the decrease on an LTCH's wage index, the proposed FY
2021 labor-related share of 68.0 percent, and the proposed FY 2021
labor market area designations. (As noted previously, the proposed
changes to the wage index values based on updated hospital wage data
are discussed in section V.B.4.a. of this Addendum to this proposed
rule; the proposed transitional 5 percent cap on the decrease on an
LTCH's wage index is discussed in section V.B.5. of this Addendum to
this proposed rule, the proposed labor-related share is discussed in
section V.B.3. of this Addendum to this proposed rule, and proposed
changes to the geographic labor-market area designations are
discussed in section V.B.2. of this Addendum to this proposed rule.)
Step 3--Calculate the ratio of these estimated total LTCH PPS
standard Federal payment rate payments by dividing the estimated
total LTCH PPS standard Federal payment rate payments using the FY
2020 area wage level adjustments (calculated in Step 1) by the
estimated total LTCH PPS standard Federal payment rate payments
using the proposed FY 2021 general updates to the area wage level
adjustment (calculated in Step 2) to determine the proposed budget
neutrality factor for general updates to the area wage level
adjustment for FY 2021 LTCH PPS standard Federal payment rate
payments.
Step 4--Apply the proposed FY 2021 general updates to the area
wage level adjustment budget neutrality factor from Step 3 to
determine the proposed FY 2021 LTCH PPS standard Federal payment
rate after the application of the proposed FY 2021 annual update.
We note that, because the area wage level adjustment under Sec.
412.525(c) is an adjustment to the LTCH PPS standard Federal payment
rate, consistent with historical practice, we only used data from
claims that qualified for payment at the LTCH PPS standard Federal
payment rate under the dual rate LTCH PPS to calculate the proposed
FY 2021 LTCH PPS standard Federal payment rate area wage level
adjustment budget neutrality factor. In addition, we note that the
estimated LTCH PPS standard Federal payment rate used in the
calculations in Steps 1 through 4 include the permanent one-time
budget neutrality adjustment factor for the estimated cost of
eliminating the 25-percent threshold policy in FY 2021 and
subsequent years (discussed in section VII.D. of the preamble of
this proposed rule).
For this proposed rule, using the steps in the methodology
previously described, we determined a proposed FY 2021 LTCH PPS
standard Federal payment rate area wage level adjustment budget
neutrality factor of 1.0018755. Accordingly, in section V.A. of the
Addendum to this proposed rule, to determine the proposed FY 2021
LTCH PPS standard Federal payment rate, we applied the proposed area
wage level adjustment budget neutrality factor of 1.0018755, in
accordance with Sec. 412.523(d)(4).

C. Proposed LTCH PPS Cost-of-Living Adjustment (COLA) for LTCHs
Located in Alaska and Hawaii

Under Sec. 412.525(b), a cost-of-living adjustment (COLA) is
provided for LTCHs located in Alaska and Hawaii to account for the
higher costs incurred in those States. Specifically, we apply a COLA
to payments to LTCHs located in Alaska and Hawaii by multiplying the
nonlabor-related portion of the standard Federal payment rate by the
applicable COLA factors established annually by CMS. Higher labor-
related costs for LTCHs located in Alaska and Hawaii are taken into
account in the adjustment for area wage levels previously described.
The methodology used to determine the COLA factors for Alaska and
Hawaii is based on a comparison of the growth in the Consumer Price
Indexes (CPIs) for Anchorage, Alaska, and Honolulu, Hawaii, relative
to the growth in the CPI for the average U.S. city as published by
the Bureau of Labor Statistics (BLS). It also includes a 25-percent
cap on the CPI-updated COLA factors. Under our current policy, we
update the COLA factors using the methodology as previously
described every 4 years (at the same time as the update to the
labor-related share of the IPPS market basket), and we last updated
the COLA factors for Alaska and Hawaii published by OPM for 2009 in
FY 2018 (82 FR 38539 through 38540).
We continue to believe that determining updated COLA factors
using this methodology would appropriately adjust the nonlabor-
related portion of the LTCH PPS standard Federal payment rate for
LTCHs located in Alaska and Hawaii. Therefore, in this proposed
rule, for FY 2021, under the broad authority conferred upon the
Secretary by section 123 of the BBRA, as amended by section 307(b)
of the BIPA, to determine appropriate payment adjustments under the
LTCH PPS, we are proposing to continue to use the COLA factors based
on the 2009 OPM COLA factors updated through 2016 by the comparison
of the growth in the CPIs for Anchorage, Alaska, and Honolulu,
Hawaii, relative to the growth in the CPI for the average U.S. city
as established in the FY 2018 IPPS/LTCH PPS final rule. (For
additional details on our current methodology for updating the COLA
factors for Alaska and Hawaii and for a discussion on the FY 2018
COLA factors, we refer readers to the FY 2018 IPPS/LTCH PPS final
rule (82 FR 38539 through 38540).)

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D. Proposed Adjustment for LTCH PPS High Cost Outlier (HCO) Cases

1. HCO Background

From the beginning of the LTCH PPS, we have included an
adjustment to account for cases in which there are extraordinarily
high costs relative to the costs of most discharges. Under this
policy, additional payments are made based on the degree to which
the estimated cost of a case (which is calculated by multiplying the
Medicare allowable covered charge by the hospital's overall hospital
CCR) exceeds a fixed-loss amount. This policy results in greater
payment accuracy under the LTCH PPS and the Medicare program, and
the LTCH sharing the financial risk for the treatment of
extraordinarily high-cost cases.
We retained the basic tenets of our HCO policy in FY 2016 when
we implemented the dual rate LTCH PPS payment structure under
section 1206 of Public Law 113-67. LTCH discharges that meet the
criteria for exclusion from the site neutral payment rate (that is,
LTCH PPS standard Federal payment rate cases) are paid at the LTCH
PPS standard Federal payment rate, which includes, as applicable,
HCO payments under Sec. 412.523(e). LTCH discharges that do not
meet the criteria for exclusion are paid at the site neutral payment
rate, which includes, as applicable, HCO payments under Sec.
412.522(c)(2)(i). In the FY 2016 IPPS/LTCH PPS final rule, we
established separate fixed-loss amounts and targets for the two
different LTCH PPS payment rates. Under this bifurcated policy, the
historic 8-percent HCO target was retained for LTCH PPS standard
Federal payment rate cases, with the fixed-loss amount calculated
using only data from LTCH cases that would have been paid at the
LTCH PPS standard Federal payment rate if that rate had been in
effect at the time of those discharges. For site neutral payment
rate cases, we adopted the operating IPPS HCO target (currently 5.1
percent) and set the fixed-loss amount for site neutral payment rate
cases at the value of the IPPS fixed-loss amount. Under the HCO
policy for both payment rates, an LTCH receives 80 percent of the
difference between the estimated cost of the case and the applicable
HCO threshold, which is the sum of the LTCH PPS payment for the case
and the applicable fixed-loss amount for such case.
In order to maintain budget neutrality, consistent with the
budget neutrality requirement at Sec. 412.522(d)(1) for HCO
payments to LTCH PPS standard Federal rate payment cases, we also
adopted a budget neutrality requirement for HCO payments to site
neutral payment rate cases by applying a budget neutrality factor to
the LTCH PPS payment for those site neutral payment rate cases. (We
refer readers to Sec. 412.522(c)(2)(i) of the regulations for
further details.) We note that, during the 4-year transitional
period, the site neutral payment rate HCO budget neutrality factor
did not apply to the LTCH PPS standard Federal payment rate portion
of the blended payment rate at Sec. 412.522(c)(3) payable to site
neutral payment rate cases. (For additional details on the HCO
policy adopted for site neutral payment rate cases under the dual
rate LTCH PPS payment structure, including the budget neutrality
adjustment for HCO payments to site neutral payment rate cases, we
refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 FR 49617
through 49623).)

2. Determining LTCH CCRs Under the LTCH PPS

a. Background

As noted previously, CCRs are used to determine payments for HCO
adjustments for both payment rates under the LTCH PPS and also are
used to determine payments for site neutral payment rate cases. As
noted earlier, in determining HCO and the site neutral payment rate
payments (regardless of whether the case is also an HCO), we
generally calculate the estimated cost of the case by multiplying
the LTCH's overall CCR by the Medicare allowable charges for the
case. An overall CCR is used because the LTCH PPS uses a single
prospective payment per discharge that covers both inpatient
operating and capital-related costs. The LTCH's overall CCR is
generally computed based on the sum of LTCH operating and capital
costs (as described in Section 150.24, Chapter 3, of the Medicare
Claims Processing Manual (Pub. 100-4)) as compared to total Medicare
charges (that is, the sum of its operating and capital inpatient
routine and ancillary charges), with those values determined from
either the most recently settled cost report or the most recent
tentatively settled cost report, whichever is from the latest cost
reporting period. However, in certain instances, we use an
alternative CCR, such as the statewide average CCR, a CCR that is
specified by CMS, or one that is requested by the hospital. (We
refer readers to Sec. 412.525(a)(4)(iv) of the regulations for
further details regarding HCO adjustments for either LTCH PPS
payment rate and Sec. 412.522(c)(1)(ii) for the site neutral
payment rate.)
The LTCH's calculated CCR is then compared to the LTCH total CCR
ceiling. Under our established policy, an LTCH with a calculated CCR
in excess of the applicable maximum CCR threshold (that is, the LTCH
total CCR ceiling, which is calculated as 3 standard deviations from
the national geometric average CCR) is generally assigned the
applicable statewide CCR. This policy is premised on a belief that
calculated CCRs above the LTCH total CCR ceiling are most likely due
to faulty data reporting or entry, and CCRs based on erroneous data
should not be used to identify and make payments for outlier cases.

b. Proposed LTCH Total CCR Ceiling

Consistent with our historical practice, we are proposing to use
the most recent data available to determine the LTCH total CCR
ceiling for FY 2021 in this proposed rule. Specifically, in this
proposed rule, we are proposing to use our established methodology
for determining the LTCH total CCR ceiling based on IPPS total CCR
data from the December 2019 update of the Provider Specific File
(PSF), which is the most recent data available, we are proposing to
establish an LTCH total CCR ceiling of 1.251 under the LTCH PPS for
FY 2021 in accordance with Sec. 412.525(a)(4)(iv)(C)(2) for HCO
cases under either payment rate and Sec. 412.522(c)(1)(ii) for the
site neutral payment rate. Consistent with our historical practice,
we are proposing to use more recent data to determine the LTCH total
CCR ceiling for FY 2021 proposed rule if it becomes

[[Page 32925]]

available. (For additional information on our methodology for
determining the LTCH total CCR ceiling, we refer readers to the FY
2007 IPPS final rule (71 FR 48118 through 48119).)

c. Proposed LTCH Statewide Average CCRs

Our general methodology for determining the statewide average
CCRs used under the LTCH PPS is similar to our established
methodology for determining the LTCH total CCR ceiling because it is
based on ``total'' IPPS CCR data. (For additional information on our
methodology for determining statewide average CCRs under the LTCH
PPS, we refer readers to the FY 2007 IPPS final rule (71 FR 48119
through 48120).) Under the LTCH PPS HCO policy for cases paid under
either payment rate at Sec. 412.525(a)(4)(iv)(C)(2), the current
SSO policy at Sec. 412.529(f)(4)(iii)(B), and the site neutral
payment rate at Sec. 412.522(c)(1)(ii), the MAC may use a statewide
average CCR, which is established annually by CMS, if it is unable
to determine an accurate CCR for an LTCH in one of the following
circumstances: (1) New LTCHs that have not yet submitted their first
Medicare cost report (a new LTCH is defined as an entity that has
not accepted assignment of an existing hospital's provider agreement
in accordance with Sec. 489.18); (2) LTCHs whose calculated CCR is
in excess of the LTCH total CCR ceiling; and (3) other LTCHs for
whom data with which to calculate a CCR are not available (for
example, missing or faulty data). (Other sources of data that the
MAC may consider in determining an LTCH's CCR include data from a
different cost reporting period for the LTCH, data from the cost
reporting period preceding the period in which the hospital began to
be paid as an LTCH (that is, the period of at least 6 months that it
was paid as a short-term, acute care hospital), or data from other
comparable LTCHs, such as LTCHs in the same chain or in the same
region.)
Consistent with our historical practice of using the best
available data, in this proposed rule, we are proposing to use our
established methodology for determining the LTCH statewide average
CCRs, based on the most recent complete IPPS ``total CCR'' data from
the December 2019 update of the PSF, as we proposed, we are
proposing to establish LTCH PPS statewide average total CCRs for
urban and rural hospitals that will be effective for discharges
occurring on or after October 1, 2020, through September 30, 2021,
in Table 8C listed in section VI. of the Addendum to this proposed
rule (and available via the internet on the CMS website). Consistent
with our historical practice, we are proposing to use more recent
data to determine the LTCH PPS statewide average total CCRs for FY
2021 proposed rule if it becomes available.
Under the current LTCH PPS labor market areas, all areas in
Delaware, the District of Columbia, New Jersey, and Rhode Island are
classified as urban. Therefore, there are no rural statewide average
total CCRs listed for those jurisdictions in Table 8C. This policy
is consistent with the policy that we established when we revised
our methodology for determining the applicable LTCH statewide
average CCRs in the FY 2007 IPPS final rule (71 FR 48119 through
48121) and is the same as the policy applied under the IPPS. In
addition, although Connecticut and Nevada have areas that are
designated as rural, in our calculation of the LTCH statewide
average CCRs, there was no data available from short-term, acute
care IPPS hospitals to compute a rural statewide average CCR or
there were no short-term, acute care IPPS hospitals or LTCHs located
in these areas as of December 2019. Therefore, consistent with our
existing methodology, we are proposing to use the national average
total CCR for rural IPPS hospitals for rural Connecticut and Nevada
in Table 8C. Furthermore, consistent with our existing methodology,
in determining the proposed urban and rural statewide average total
CCRs for Maryland LTCHs paid under the LTCH PPS, we are proposing to
continue to use, as a proxy, the national average total CCR for
urban IPPS hospitals and the national average total CCR for rural
IPPS hospitals, respectively. We are proposing to use this proxy
because we believe that the CCR data in the PSF for Maryland
hospitals may not be entirely accurate (as discussed in greater
detail in the FY 2007 IPPS final rule (71 FR 48120)).

d. Reconciliation of HCO Payments

Under the HCO policy for cases paid under either payment rate at
Sec. 412.525(a)(4)(iv)(D), the payments for HCO cases are subject
to reconciliation. Specifically, any such payments are reconciled at
settlement based on the CCR that was calculated based on the cost
report coinciding with the discharge. For additional information on
the reconciliation policy, we refer readers to Sections 150.26
through 150.28 of the Medicare Claims Processing Manual (Pub. 100-
4), as added by Change Request 7192 (Transmittal 2111; December 3,
2010), and the RY 2009 LTCH PPS final rule (73 FR 26820 through
26821).

3. Proposed High-Cost Outlier Payments for LTCH PPS Standard Federal
Payment Rate Cases

a. Proposed Changes to High-Cost Outlier Payments for LTCH PPS Standard
Federal Payment Rate Cases

Under the regulations at Sec. 412.525(a)(2)(ii) and as required
by section 1886(m)(7) of the Act, the fixed-loss amount for HCO
payments is set each year so that the estimated aggregate HCO
payments for LTCH PPS standard Federal payment rate cases are
99.6875 percent of 8 percent (that is, 7.975 percent) of estimated
aggregate LTCH PPS payments for LTCH PPS standard Federal payment
rate cases. (For more details on the requirements for high-cost
outlier payments in FY 2018 and subsequent years under section
1886(m)(7) of the Act and additional information regarding high-cost
outlier payments prior to FY 2018, we refer readers to the FY 2018
IPPS/LTCH PPS final rule (82 FR 38542 through 38544).)

b. Proposed Fixed-Loss Amount for LTCH PPS Standard Federal Payment
Rate Cases for FY 2021

When we implemented the LTCH PPS, we established a fixed-loss
amount so that total estimated outlier payments are projected to
equal 8 percent of total estimated payments under the LTCH PPS (67
FR 56022 through 56026). When we implemented the dual rate LTCH PPS
payment structure beginning in FY 2016, we established that, in
general, the historical LTCH PPS HCO policy would continue to apply
to LTCH PPS standard Federal payment rate cases. That is, the fixed-
loss amount and target for LTCH PPS standard Federal payment rate
cases would be determined using the LTCH PPS HCO policy adopted when
the LTCH PPS was first implemented, but we limited the data used
under that policy to LTCH cases that would have been LTCH PPS
standard Federal payment rate cases if the statutory changes had
been in effect at the time of those discharges.
To determine the applicable fixed-loss amount for LTCH PPS
standard Federal payment rate cases, we estimate outlier payments
and total LTCH PPS payments for each LTCH PPS standard Federal
payment rate case (or for each case that would have been a LTCH PPS
standard Federal payment rate case if the statutory changes had been
in effect at the time of the discharge) using claims data from the
MedPAR files. In accordance with Sec. 412.525(a)(2)(ii), the
applicable fixed-loss amount for LTCH PPS standard Federal payment
rate cases results in estimated total outlier payments being
projected to be equal to 7.975 percent of projected total LTCH PPS
payments for LTCH PPS standard Federal payment rate cases. We use
MedPAR claims data and CCRs based on data from the most recent PSF
(or from the applicable statewide average CCR if an LTCH's CCR data
are faulty or unavailable) to establish an applicable fixed-loss
threshold amount for LTCH PPS standard Federal payment rate cases.
In this proposed rule we are proposing to continue to use our
current methodology to calculate an applicable fixed-loss amount for
LTCH PPS standard Federal payment rate cases for FY 2021 using the
best available data that would maintain estimated HCO payments at
the projected 7.975 percent of total estimated LTCH PPS payments for
LTCH PPS standard Federal payment rate cases (based on the payment
rates and policies for these cases presented in the proposed rule).
Specifically, based on the most recent complete LTCH data
available at this time (that is, LTCH claims data from the December
2019 update of the FY 2019 MedPAR file and CCRs from the December
2019 update of the PSF), we are proposing to determine a proposed
fixed-loss amount for LTCH PPS standard Federal payment rate cases
for FY 2021 of $30,515 that would result in estimated outlier
payments projected to be equal to 7.975 percent of estimated FY 2021
payments for such cases. We are proposing to continue to make an
additional HCO payment for the cost of an LTCH PPS standard Federal
payment rate case that exceeds the HCO threshold amount that is
equal to 80 percent of the difference between the estimated cost of
the case and the outlier threshold (the sum of the proposed adjusted
LTCH PPS standard Federal payment rate payment and the proposed
fixed-loss amount for LTCH PPS standard Federal payment rate cases
of $30,515).
Consistent with our historical practice of using the best data
available, when

[[Page 32926]]

determining the fixed-loss amount for LTCH PPS standard Federal
payment rate cases for FY 2021 in the proposed rule, we are
proposing to use the most recent available LTCH claims data and CCR
data.

4. Proposed High-Cost Outlier Payments for Site Neutral Payment Rate
Cases

When we implemented the application of the site neutral payment
rate in FY 2016, in examining the appropriate fixed-loss amount for
site neutral payment rate cases issue, we considered how LTCH
discharges based on historical claims data would have been
classified under the dual rate LTCH PPS payment structure and the
CMS' Office of the Actuary projections regarding how LTCHs will
likely respond to our implementation of policies resulting from the
statutory payment changes. We again relied on these considerations
and actuarial projections in FY 2017 and FY 2018 because the
historical claims data available in each of these years were not all
subject to the LTCH PPS dual rate payment system. Similarly, for FY
2019 and FY 2020, we continued to rely on these considerations and
actuarial projections because, due to the transitional blended
payment policy for site neutral payment rate cases, FY 2018 and FY
2019 claims for these cases were not subject to the full effect of
the site neutral payment rate.
For FYs 2016 through 2020, at that time our actuaries projected
that the proportion of cases that would qualify as LTCH PPS standard
Federal payment rate cases versus site neutral payment rate cases
under the statutory provisions would remain consistent with what is
reflected in the historical LTCH PPS claims data. Although our
actuaries did not project an immediate change in the proportions
found in the historical data, they did project cost and resource
changes to account for the lower payment rates. Our actuaries also
projected that the costs and resource use for cases paid at the site
neutral payment rate would likely be lower, on average, than the
costs and resource use for cases paid at the LTCH PPS standard
Federal payment rate and would likely mirror the costs and resource
use for IPPS cases assigned to the same MS-DRG, regardless of
whether the proportion of site neutral payment rate cases in the
future remains similar to what is found based on the historical
data. As discussed in the FY 2016 IPPS/LTCH PPS final rule (80 FR
49619), this actuarial assumption is based on our expectation that
site neutral payment rate cases would generally be paid based on an
IPPS comparable per diem amount under the statutory LTCH PPS payment
changes that began in FY 2016, which, in the majority of cases, is
much lower than the payment that would have been paid if these
statutory changes were not enacted. In light of these projections
and expectations, we discussed that we believed that the use of a
single fixed-loss amount and HCO target for all LTCH PPS cases would
be problematic. In addition, we discussed that we did not believe
that it would be appropriate for comparable LTCH PPS site neutral
payment rate cases to receive dramatically different HCO payments
from those cases that would be paid under the IPPS (80 FR 49617
through 49619 and 81 FR 57305 through 57307). For those reasons, we
stated that we believed that the most appropriate fixed-loss amount
for site neutral payment rate cases for FYs 2016 through 2020 would
be equal to the IPPS fixed-loss amount for that particular fiscal
year. Therefore, we established the fixed-loss amount for site
neutral payment rate cases as the corresponding IPPS fixed-loss
amounts for FYs 2016 through 2020. In particular, in FY 2020, we
established the fixed-loss amount for site neutral payment rate
cases as the FY 2019 IPPS fixed-loss amount of $26,552 (as corrected
at 84 FR 49845).
As noted earlier, because not all claims in the data used for
this FY 2021 IPPS/LTCH PPS proposed rule were subject to the
unblended site neutral payment rate, we continue to rely on the same
considerations and actuarial projections used in FYs 2016 through
2020 when developing a fixed-loss amount for site neutral payment
rate cases for FY 2021. Our actuaries continue to project that site
neutral payment rate cases in FY 2021 will continue to mirror an
IPPS case paid under the same MS-DRG. That is, our actuaries
continue to project that the costs and resource use for FY 2021
cases paid at the site neutral payment rate would likely be lower,
on average, than the costs and resource use for cases paid at the
LTCH PPS standard Federal payment rate and will likely mirror the
costs and resource use for IPPS cases assigned to the same MS-DRG,
regardless of whether the proportion of site neutral payment rate
cases in the future remains similar to what was found based on the
historical data. (Based on the most recent FY 2019 LTCH claims data
used in the development of this FY 2021 IPPS/LTCH PPS proposed rule,
approximately 75 percent of LTCH cases were paid the LTCH PPS
standard Federal payment rate and approximately 25 percent of LTCH
cases were paid the site neutral payment rate for discharges
occurring in FY 2019.)
For these reasons, we continue to believe that the most
appropriate fixed-loss amount for site neutral payment rate cases
for FY 2021 is the IPPS fixed-loss amount for FY 2021. Therefore,
consistent with past practice, we are proposing that the applicable
HCO threshold for site neutral payment rate cases is the sum of the
site neutral payment rate for the case and the IPPS fixed-loss
amount. That is, we proposed a fixed-loss amount for site neutral
payment rate cases of $30,006. Accordingly, for FY 2021, we propose
to calculate a HCO payment for site neutral payment rate cases with
costs that exceed the HCO threshold amount that is equal to 80
percent of the difference between the estimated cost of the case and
the outlier threshold (the sum of the site neutral payment rate
payment and the proposed fixed-loss amount for site neutral payment
rate cases of $30,006).
In establishing a HCO policy for site neutral payment rate
cases, we established a budget neutrality adjustment under Sec.
412.522(c)(2)(i). We established this requirement because we
believed, and continue to believe, that the HCO policy for site
neutral payment rate cases should be budget neutral, just as the HCO
policy for LTCH PPS standard Federal payment rate cases is budget
neutral, meaning that estimated site neutral payment rate HCO
payments should not result in any change in estimated aggregate LTCH
PPS payments.
To ensure that estimated HCO payments payable to site neutral
payment rate cases in FY 2021 would not result in any increase in
estimated aggregate FY 2021 LTCH PPS payments, under the budget
neutrality requirement at Sec. 412.522(c)(2)(i), it is necessary to
reduce site neutral payment rate payments by 5.1 percent to account
for the estimated additional HCO payments payable to those cases in
FY 2021, in general, we propose to continue this policy.
As discussed earlier, consistent with the IPPS HCO payment
threshold, we estimate our fixed-loss threshold of $30,006 results
in HCO payments for site neutral payment rate cases to equal 5.1
percent of the site neutral payment rate payments that are based on
the IPPS comparable per diem amount. As such, to ensure estimated
HCO payments payable for site neutral payment rate cases in FY 2021
would not result in any increase in estimated aggregate FY 2021 LTCH
PPS payments, under the budget neutrality requirement at Sec.
412.522(c)(2)(i), it is necessary to reduce the site neutral payment
rate amount paid under Sec. 412.522(c)(1)(i) by 5.1 percent to
account for the estimated additional HCO payments payable for site
neutral payment rate cases in FY 2021. In order to achieve this, for
FY 2021, we are proposing to apply a budget neutrality factor of
0.949 (that is, the decimal equivalent of a 5.1 percent reduction,
determined as 1.0-5.1/100 = 0.949) to the site neutral payment rate
for those site neutral payment rate cases paid under Sec.
412.522(c)(1)(i). We note that, consistent with our current policy,
this proposed HCO budget neutrality adjustment would not be applied
to the HCO portion of the site neutral payment rate amount (81 FR
57309).

E. Proposed Update to the IPPS Comparable Amount To Reflect the
Statutory Changes to the IPPS DSH Payment Adjustment Methodology

In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50766), we
established a policy to reflect the changes to the Medicare IPPS DSH
payment adjustment methodology made by section 3133 of the
Affordable Care Act in the calculation of the ``IPPS comparable
amount'' under the SSO policy at Sec. 412.529 and the ``IPPS
equivalent amount'' under the site neutral payment rate at Sec.
412.522. Historically, the determination of both the ``IPPS
comparable amount'' and the ``IPPS equivalent amount'' includes an
amount for inpatient operating costs ``for the costs of serving a
disproportionate share of low-income patients.'' Under the statutory
changes to the Medicare DSH payment adjustment methodology that
began in FY 2014, in general, eligible IPPS hospitals receive an
empirically justified Medicare DSH payment equal to 25 percent of
the amount they otherwise would have received under the statutory
formula for Medicare DSH payments prior to the amendments made by
the Affordable Care Act. The remaining amount, equal to an estimate
of 75 percent of the amount that otherwise would have been paid as
Medicare DSH payments, reduced to reflect changes in the percentage

[[Page 32927]]

of individuals who are uninsured and any additional statutory
adjustment, is made available to make additional payments to each
hospital that qualifies for Medicare DSH payments and that has
uncompensated care. The additional uncompensated care payments are
based on the hospital's amount of uncompensated care for a given
time period relative to the total amount of uncompensated care for
that same time period reported by all IPPS hospitals that receive
Medicare DSH payments.
To reflect the statutory changes to the Medicare DSH payment
adjustment methodology in the calculation of the ``IPPS comparable
amount'' and the ``IPPS equivalent amount'' under the LTCH PPS, we
stated that we will include a reduced Medicare DSH payment amount
that reflects the projected percentage of the payment amount
calculated based on the statutory Medicare DSH payment formula prior
to the amendments made by the Affordable Care Act that will be paid
to eligible IPPS hospitals as empirically justified Medicare DSH
payments and uncompensated care payments in that year (that is, a
percentage of the operating Medicare DSH payment amount that has
historically been reflected in the LTCH PPS payments that are based
on IPPS rates). We also stated that the projected percentage will be
updated annually, consistent with the annual determination of the
amount of uncompensated care payments that will be made to eligible
IPPS hospitals. We believe that this approach results in appropriate
payments under the LTCH PPS and is consistent with our intention
that the ``IPPS comparable amount'' and the ``IPPS equivalent
amount'' under the LTCH PPS closely resemble what an IPPS payment
would have been for the same episode of care, while recognizing that
some features of the IPPS cannot be translated directly into the
LTCH PPS (79 FR 50766 through 50767).
For FY 2021, as discussed in greater detail in section IV.G.3.
of the preamble of this proposed rule, based on the most recent data
available, our estimate of 75 percent of the amount that would
otherwise have been paid as Medicare DSH payments (under the
methodology outlined in section 1886(r)(2) of the Act) is adjusted
to 67.86 percent of that amount to reflect the change in the
percentage of individuals who are uninsured. The resulting amount is
then used to determine the proposed amount available to make
uncompensated care payments to eligible IPPS hospitals in FY 2021.
In other words, the amount of the Medicare DSH payments that would
have been made prior to the amendments made by the Affordable Care
Act is adjusted to 50.90 percent (the product of 75 percent and
67.86 percent) and the resulting amount is used to calculate the
uncompensated care payments to eligible hospitals. As a result, for
FY 2021, we project that the reduction in the amount of Medicare DSH
payments pursuant to section 1886(r)(1) of the Act, along with the
payments for uncompensated care under section 1886(r)(2) of the Act,
will result in overall Medicare DSH payments of 75.90 percent of the
amount of Medicare DSH payments that would otherwise have been made
in the absence of the amendments made by the Affordable Care Act
(that is, 25 percent + 50.90 percent = 75.90 percent).
Therefore, for FY 2021, we are proposing to establish that the
calculation of the ``IPPS comparable amount'' under Sec. 412.529
would include an applicable operating Medicare DSH payment amount
that is equal to 75.90 percent of the operating Medicare DSH payment
amount that would have been paid based on the statutory Medicare DSH
payment formula absent the amendments made by the Affordable Care
Act. Furthermore, consistent with our historical practice, we are
proposing that, if more recent data became available, we would use
that data to determine this factor in the final rule.

F. Computing the Proposed Adjusted LTCH PPS Federal Prospective
Payments for FY 2021

Section 412.525 sets forth the adjustments to the LTCH PPS
standard Federal payment rate. Under the dual rate LTCH PPS payment
structure, only LTCH PPS cases that meet the statutory criteria to
be excluded from the site neutral payment rate are paid based on the
LTCH PPS standard Federal payment rate. Under Sec. 412.525(c), the
LTCH PPS standard Federal payment rate is adjusted to account for
differences in area wages by multiplying the labor-related share of
the LTCH PPS standard Federal payment rate for a case by the
applicable LTCH PPS wage index (the FY 2020 values are shown in
Tables 12A through 12B listed in section VI. of the Addendum to this
proposed rule and are available via the internet on the CMS
website). The LTCH PPS standard Federal payment rate is also
adjusted to account for the higher costs of LTCHs located in Alaska
and Hawaii by the applicable COLA factors (the proposed FY 2021
factors are shown in the chart in section V.C. of this Addendum) in
accordance with Sec. 412.525(b). In this proposed rule, we are
proposing to establish an LTCH PPS standard Federal payment rate for
FY 2021 of $43,849.28, as discussed in section V.A. of the Addendum
to this proposed rule. We illustrate the methodology to adjust the
proposed LTCH PPS standard Federal payment rate for FY 2021 in the
following example:
Example: During FY 2021, a Medicare discharge that meets the
criteria to be excluded from the site neutral payment rate, that is,
an LTCH PPS standard Federal payment rate case, is from an LTCH that
is located in CBSA 16984, which has a proposed FY 2021 LTCH PPS wage
index value of 1.0328 (obtained from Table 12A listed in section VI.
of the Addendum to this proposed rule and available via the internet
on the CMS website). The Medicare patient case is classified into
MS-LTC-DRG 189 (Pulmonary Edema & Respiratory Failure), which has a
proposed relative weight for FY 2021 of 0.9451 (obtained from Table
11 listed in section VI. of the Addendum to this proposed rule and
available via the internet on the CMS website). The LTCH submitted
quality reporting data for FY 2021 in accordance with the LTCH QRP
under section 1886(m)(5) of the Act.
To calculate the LTCH's total adjusted proposed Federal
prospective payment for this Medicare patient case in FY 2021, we
computed the wage-adjusted Federal prospective payment amount by
multiplying the unadjusted FY 2021 LTCH PPS standard Federal payment
rate ($43,849.28) by the labor-related share (0.680 percent) and the
wage index value (1.0328). This wage-adjusted amount was then added
to the nonlabor-related portion of the unadjusted LTCH PPS standard
Federal payment rate (0.320 percent; adjusted for cost of living, if
applicable) to determine the adjusted LTCH PPS standard Federal
payment rate, which is then multiplied by the MS-LTC-DRG relative
weight (0.9451) to calculate the total adjusted LTCH PPS standard
Federal prospective payment for FY 2021 ($42,366.27). The table
illustrates the components of the calculations in this example.
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VI. Tables Referenced in This Proposed Rule Generally Available Through
the Internet on the CMS Website

This section lists the tables referred to throughout the
preamble of this proposed rule and in the Addendum. In the past, a
majority of these tables were published in the Federal Register as
part of the annual proposed and final rules. However, similar to FYs
2012 through 2020, for the FY 2021 rulemaking cycle, the IPPS and
LTCH PPS tables will not be published in the Federal Register in the
annual IPPS/LTCH PPS proposed and final rules and will be available
through the internet. Specifically, all IPPS tables listed in this
section, with the exception of IPPS Tables 1A, 1B, 1C, and 1D, and
LTCH PPS Table 1E, will generally be available through the internet.
IPPS Tables 1A, 1B, 1C, and 1D, and LTCH PPS Table 1E are displayed
at the end of this section and will continue to be published in the
Federal Register as part of the annual proposed and final rules. For
additional discussion of the information included in the IPPS and
LTCH PPS tables associated with the IPPS/LTCH PPS proposed and final
rules, as well as prior changes to the information included in these
tables, we refer readers to the FY 2019 IPPS/LTCH PPS final rule (83
FR 41739 through 41740). In addition, under the HAC Reduction
Program, established by section 3008 of the Affordable Care Act, a
hospital's total payment may be reduced by 1 percent if it is in the
lowest HAC performance quartile. The hospital level-data for the FY
2021 HAC Reduction Program will be made publicly available once it
has undergone the review and corrections process.
As with FY 2020 IPPS/LTCH PPS proposed and final rules, we are
no longer including Table 15, which had typically included the
fiscal year readmissions payment adjustment factors because
hospitals have not yet had the opportunity to review and correct the
data before the data are made public under our policy regarding the
reporting of hospital-specific data. After hospitals have been given
an opportunity to review and correct their calculations for FY 2021,
we will post Table 15 (which will be available via the internet on
the CMS website) to display the final FY 2021 readmissions payment
adjustment factors that will be applicable to discharges occurring
on or after October 1, 2020. We expect Table 15 will be posted on
the CMS website in the fall of 2020.
Readers who experience any problems accessing any of the tables
that are posted on the CMS websites identified in this section
should contact Michael Treitel at (410) 786-4552. The following IPPS
tables for this proposed rule are generally available through the
internet on the CMS website at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. Click
on the link on the left side of the screen titled, ``FY 2021 IPPS
Proposed Rule Home Page'' or ``Acute Inpatient-Files- for
Download.''

Table 2.--Proposed Case-Mix Index and Wage Index Table by CCN--FY
2021
Table 3.--Proposed Wage Index Table by CBSA--FY 2021
Table 4A.--Proposed List of Counties Eligible for the Out-Migration
Adjustment under Section 1886(d)(13) of the Act--FY 2021
Table 4B.--Proposed Counties Redesignated under Section
1886(d)(8)(B) of the Act (LUGAR COUNTIES)--FY 2021
Table 5.--Proposed List of Medicare Severity Diagnosis-Related
Groups (MS-DRGs), Relative Weighting Factors, and Geometric and
Arithmetic Mean Length of Stay--FY 2021
Table 6A.--New Diagnosis Codes--FY 2021
Table 6B.--New Procedure Codes--FY 2021
Table 6C.--Invalid Diagnosis Codes--FY 2021
Table 6E.--Revised Diagnosis Code Titles--FY 2021
Table 6G.1.--Proposed Secondary Diagnosis Order Additions to the CC
Exclusions List--FY 2021
Table 6G.2.--Proposed Principal Diagnosis Order Additions to the CC
Exclusions List--FY 2021
Table 6H.1.--Proposed Secondary Diagnosis Order Deletions to the CC
Exclusions List--FY 2021
Table 6H.2.--Proposed Principal Diagnosis Order Deletions to the CC
Exclusions List--FY 2021
Table 6I.1.--Proposed Additions to the MCC List--FY 2021
Table 6I.2.--Proposed Deletions to the MCC List--FY 2021
Table 6J.1.--Proposed Additions to the CC List--FY 2021
Table 6J.2.--Proposed Deletions to the CC List--FY 2021
Table 6P.--ICD-10-CM and ICD-10-PCS Codes for Proposed MS-DRG
Changes--FY 2021 (Table 6P contains multiple tables, 6P.1a. through
6P.4a., that include the ICD-10-CM and ICD-10-PCS code lists
relating to proposed specific MS-DRG changes. These tables are
referred to throughout section II.D. of the preamble of this
proposed rule.)
Table 7A.--Proposed Medicare Prospective Payment System Selected
Percentile Lengths of Stay: FY 2019 MedPAR Update--December 2019
GROUPER Version 37 MS-DRGs
Table 7B.--Proposed Medicare Prospective Payment System Selected
Percentile Lengths of Stay: FY 2019 MedPAR Update--December 2019
GROUPER Version 38 MS-DRGs
Table 8A.--Proposed FY 2021 Statewide Average Operating Cost-to-
Charge Ratios (CCRs) for Acute Care Hospitals (Urban and Rural)
Table 8B.--Proposed FY 2021 Statewide Average Capital Cost-to-Charge
Ratios (CCRs) for Acute Care Hospitals
Table 16.--Proxy Hospital Value-Based Purchasing (VBP) Program
Adjustment Factors for FY 2021
Table 18.--Proposed FY 2021 Medicare DSH Uncompensated Care Payment
Factor 3

The following LTCH PPS tables for this FY 2021 proposed rule are
available through the internet on the CMS website at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/index.html under the list item for
Regulation Number CMS-1735-P:

Table 8C.--Proposed FY 2021 Statewide Average Total Cost-to-Charge
Ratios (CCRs) for LTCHs (Urban and Rural)
Table 11.--Proposed MS-LTC-DRGs, Relative Weights, Geometric Average
Length of Stay, and Short-Stay Outlier (SSO) Threshold for LTCH PPS
Discharges Occurring from October 1, 2020 through September 30, 2021
Table 12A.--Proposed LTCH PPS Wage Index for Urban Areas for
Discharges Occurring from October 1, 2020 through September 30, 2021
Table 12B.--Proposed LTCH PPS Wage Index for Rural Areas for
Discharges Occurring from October 1, 2020 through September 30, 2021
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Appendix A: Economic Analyses

I. Regulatory Impact Analysis

A. Statement of Need

This proposed rule is necessary in order to make payment and
policy changes under the Medicare IPPS for Medicare acute care
hospital inpatient services for operating and capital-related costs
as well as for certain hospitals and hospital units excluded from
the IPPS. This proposed rule also is necessary to make payment and
policy changes for Medicare hospitals under the LTCH PPS. Also as we
note later in this Appendix, the primary objective of the IPPS and
the LTCH PPS is to create incentives for hospitals to operate
efficiently and minimize unnecessary costs, while at the same time
ensuring that payments are sufficient to adequately compensate
hospitals for their legitimate costs in delivering necessary care to
Medicare beneficiaries. In addition, we share national goals of
preserving the Medicare Hospital Insurance Trust Fund.
We believe that the proposed changes in this proposed rule, such
as the proposed updates to the IPPS and LTCH PPS rates, and the
proposals and discussions relating to applications for new
technology add-on payments, are needed to further each of these
goals while maintaining the financial viability of the hospital
industry and ensuring access to high quality health care for
Medicare beneficiaries.
For example, without additional payments for new medical
technologies that meet the criteria for approval for new technology
add-on payments, Medicare beneficiaries may not have appropriate
access to these new technologies. We discuss the technologies for
which we received applications for add-on payments for new medical
technologies for FY 2021 in sections II.G.5. and 6. of the preamble
to this proposed rule. As discussed in section II.G.6. of the
preamble of this proposed rule, under the alternative pathway for
new technology add-on payments, new technologies that are medical
products with a Qualified Infectious Disease Product (QIDP)
designation or are part of the Breakthrough Device program will be
considered new and not substantially similar to an existing
technology and will not need to demonstrate that the technology
represents a substantial clinical improvement. These technologies
must still meet the cost criterion.
We are proposing to approve nine alternative pathway applicant
technologies (three Breakthrough devices and six QIDPs) for FY 2021
based our analysis of the cost criterion. We have not yet determined
whether any of the 15 technologies under the traditional pathway
discussed in section II.G.5. of the preamble of this proposed rule
will meet the criteria for new technology add-on payments for FY
2021. Those determinations will be made in the final rule following
a review of the comments received.
We expect that the proposals in this proposed rule would ensure
that the outcomes of the prospective payment systems are reasonable
and equitable, while avoiding or minimizing unintended adverse
consequences.

B. Overall Impact

We have examined the impacts of this proposed rule as required
by Executive Order 12866 on Regulatory Planning and Review
(September 30, 1993), Executive Order 13563 on Improving Regulation
and Regulatory Review (January 18, 2011), the Regulatory Flexibility
Act (RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of
the Social Security Act, section 202 of the Unfunded Mandates Reform
Act of 1995 (March 22, 1995; Pub. L. 104-4), Executive Order 13132
on Federalism (August 4, 1999), the Congressional Review Act (5
U.S.C. 804(2), and Executive Order 13771 on Reducing Regulation and
Controlling Regulatory Costs (January 30, 2017).
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that
maximize net benefits (including potential economic, environmental,
public health and safety effects, distributive impacts, and equity).
Section 3(f) of Executive Order 12866 defines a ``significant
regulatory action'' as an action that is likely to result in a rule:
(1) Having an annual effect on the economy of $100 million or more
in any 1 year, or adversely and materially affecting a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety, or State, local or tribal governments or
communities (also referred to as ``economically significant''); (2)
creating a serious inconsistency or otherwise interfering with an
action taken or planned by another agency; (3) materially altering
the budgetary impacts of entitlement grants, user fees, or loan
programs or the rights and obligations of recipients thereof; or (4)
raising novel legal or policy issues arising out of legal mandates,
the President's priorities, or the principles set forth in the
Executive Order.
We have determined that this proposed rule is a major rule as
defined in 5 U.S.C. 804(2). We estimate that the proposed changes
for FY 2021 acute care hospital operating and capital payments would
redistribute amounts in excess of $100 million to acute care
hospitals. The proposed applicable percentage increase to the IPPS
rates required by the statute, in conjunction with other proposed
payment changes in this proposed rule, would result in an estimated
$2.07 billion increase in FY 2021 payments, primarily driven by a
combined $1.98 billion increase in FY 2021 operating payments and
uncompensated care payments, and a net increase of $89 million
resulting from estimated changes in FY 2021 capital payments and new
technology add-on payments. These proposed changes are relative to
payments made in FY 2020. The impact analysis of the capital
payments can be found in section I.I. of this Appendix. In addition,
as described in section I.J. of this Appendix, LTCHs are expected to
experience a decrease in payments by approximately 36 million in FY
2021 relative to FY 2020, primarily due to the end of the statutory
transition period for site neutral payment rate cases.
Our operating impact estimate includes the proposed 0.5
percentage point adjustment required under section 414 of the MACRA
applied to the IPPS standardized amount, as discussed in section
II.D. of the preamble of this proposed rule. In addition, our
operating payment impact estimate includes the proposed 2.6 percent
hospital update to the standardized amount (which includes the
estimated 3.0 percent market basket update less the proposed 0.4
percentage point for the multifactor productivity (MFP) adjustment).
The estimates of IPPS operating payments to acute care hospitals do
not reflect any changes in hospital admissions or real case-mix
intensity, which will also affect overall payment changes.
The analysis in this Appendix, in conjunction with the remainder
of this document, demonstrates that this proposed rule is consistent
with the regulatory philosophy and principles identified in
Executive Orders 12866 and 13563, the RFA, and section 1102(b) of
the Act. This proposed rule would affect payments to a substantial
number of small rural hospitals, as well as other classes of
hospitals, and the effects on some hospitals may be significant.
Finally, in accordance with the provisions of Executive Order 12866,
the Executive Office of Management and Budget has reviewed this
proposed rule.

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C. Objectives of the IPPS and the LTCH PPS

The primary objective of the IPPS and the LTCH PPS is to create
incentives for hospitals to operate efficiently and minimize
unnecessary costs, while at the same time ensuring that payments are
sufficient to adequately compensate hospitals for their legitimate
costs in delivering necessary care to Medicare beneficiaries. In
addition, we share national goals of preserving the Medicare
Hospital Insurance Trust Fund.
We believe that the proposed changes in this proposed rule would
further each of these goals while maintaining the financial
viability of the hospital industry and ensuring access to high
quality health care for Medicare beneficiaries. We expect that these
proposed changes would ensure that the outcomes of the prospective
payment systems are reasonable and equitable, while avoiding or
minimizing unintended adverse consequences.
Because this proposed rule contains a range of policies, we
refer readers to the section of the proposed rule where each policy
is discussed. These sections include the rationale for our
decisions, including the need for the proposed policy.

D. Limitations of Our Analysis

The following quantitative analysis presents the projected
effects of our proposed policy changes, as well as statutory changes
effective for FY 2021, on various hospital groups. We estimate the
effects of individual proposed policy changes by estimating payments
per case, while holding all other payment policies constant. We use
the best data available, but, generally unless specifically
indicated, we do not attempt to make adjustments for future changes
in such variables as admissions, lengths of stay, case-mix, changes
to the Medicare population, or incentives. In addition, we discuss
limitations of our analysis for specific proposed policies in the
discussion of those proposed policies as needed.

E. Hospitals Included in and Excluded From the IPPS

The prospective payment systems for hospital inpatient operating
and capital-related costs of acute care hospitals encompass most
general short-term, acute care hospitals that participate in the
Medicare program. There were 27 Indian Health Service hospitals in
our database, which we excluded from the analysis due to the special
characteristics of the prospective payment methodology for these
hospitals. Among other short-term, acute care hospitals, hospitals
in Maryland are paid in accordance with the Maryland Total Cost of
Care Model, and hospitals located outside the 50 States, the
District of Columbia, and Puerto Rico (that is, 6 short-term acute
care hospitals located in the U.S. Virgin Islands, Guam, the
Northern Mariana Islands, and American Samoa) receive payment for
inpatient hospital services they furnish on the basis of reasonable
costs, subject to a rate-of-increase ceiling.
As of March 2020, there were 3,199 IPPS acute care hospitals
included in our analysis. This represents approximately 54 percent
of all Medicare-participating hospitals. The majority of this impact
analysis focuses on this set of hospitals. There also are
approximately 1,414 CAHs. These small, limited service hospitals are
paid on the basis of reasonable costs, rather than under the IPPS.
IPPS-excluded hospitals and units, which are paid under separate
payment systems, include IPFs, IRFs, LTCHs, RNHCIs, children's
hospitals, 11 cancer hospitals, 1 extended neoplastic disease care
hospital, and 6 short-term acute care hospitals located in the
Virgin Islands, Guam, the Northern Mariana Islands, and American
Samoa. Changes in the prospective payment systems for IPFs and IRFs
are made through separate rulemaking. Payment impacts of proposed
changes to the prospective payment systems for these IPPS-excluded
hospitals and units are not included in this proposed rule. The
impact of the proposed update and policy changes to the LTCH PPS for
FY 2021 is discussed in section I.J. of this Appendix.

F. Effects on Hospitals and Hospital Units Excluded From the IPPS

As of March 2020, there were 95 children's hospitals, 11 cancer
hospitals, 6 short-term acute care hospitals located in the Virgin
Islands, Guam, the Northern Mariana Islands and American Samoa, 1
extended neoplastic disease care hospital, and 15 RNHCIs being paid
on a reasonable cost basis subject to the rate-of-increase ceiling
under Sec. 413.40. (In accordance with Sec. 403.752(a) of the
regulation, RNHCIs are paid under Sec. 413.40.) Among the remaining
providers, 302 rehabilitation hospitals and 815 rehabilitation
units, and approximately 360 LTCHs, are paid the Federal prospective
per discharge rate under the IRF PPS and the LTCH PPS, respectively,
and 549 psychiatric hospitals and 1,016 psychiatric units are paid
the Federal per diem amount under the IPF PPS. As stated previously,
IRFs and IPFs are not affected by the proposed rate updates
discussed in this proposed rule. The impacts of the proposed changes
on LTCHs are discussed in section I.J. of this Appendix.
For children's hospitals, the 11 cancer hospitals, the 6 short-
term acute care hospitals located in the Virgin Islands, Guam, the
Northern Mariana Islands, and American Samoa, the 1 extended
neoplastic disease care hospital, and RNHCIs, the proposed update of
the rate-of-increase limit (or target amount) is the estimated FY
2021 percentage increase in the 2014-based IPPS operating market
basket, consistent with section 1886(b)(3)(B)(ii) of the Act, and
Sec. Sec. 403.752(a) and 413.40 of the regulations. Consistent with
current law, based on IGI's fourth quarter 2019 forecast of the
2014-based IPPS market basket increase, we are estimating the
proposed FY 2021 update to be 3.0 percent (that is, the estimate of
the market basket rate-of-increase). We are proposing that if more
recent data become available for the final rule, we would use such
data, if appropriate, to calculate the IPPS operating market basket
update for FY 2021. However, the Affordable Care Act requires an
adjustment for multifactor productivity (proposed 0.4 percentage
point for FY 2021), resulting in a proposed 2.6 percent applicable
percentage increase for IPPS hospitals that submit quality data and
are meaningful EHR users, as discussed in section IV.B. of the
preamble of this proposed rule. Children's hospitals, the 11 cancer
hospitals, the 6 short-term acute care hospitals located in the
Virgin Islands, Guam, the Northern Mariana Islands, and American
Samoa, the 1 extended neoplastic disease care hospital, and RNHCIs
that continue to be paid based on reasonable costs subject to rate-
of-increase limits under Sec. 413.40 of the regulations are not
subject to the reductions in the applicable percentage increase
required under the Affordable Care Act. Therefore, for those
hospitals paid under Sec. 413.40 of the regulations, the proposed
update is the percentage increase in the 2014-based IPPS operating
market basket for FY 2021, estimated at 3.0 percent
The impact of the proposed update in the rate-of-increase limit
on those excluded hospitals depends on the cumulative cost increases
experienced by each excluded hospital since its applicable base
period. For excluded hospitals that have maintained their cost
increases at a level below the rate-of-increase limits since their
base period, the major effect is on the level of incentive payments
these excluded hospitals receive. Conversely, for excluded hospitals
with cost increases above the cumulative update in their rate-of-
increase limits, the major effect is the amount of excess costs that
would not be paid.
We note that, under Sec. 413.40(d)(3), an excluded hospital
that continues to be paid under the TEFRA system and whose costs
exceed 110 percent of its rate-of-increase limit receives its rate-
of-increase limit plus the lesser of: (1) 50 percent of its
reasonable costs in excess of 110 percent of the limit; or (2) 10
percent of its limit. In addition, under the various provisions set
forth in Sec. 413.40, hospitals can obtain payment adjustments for
justifiable increases in operating costs that exceed the limit.

G. Quantitative Effects of the Proposed Policy Changes Under the
IPPS for Operating Costs

1. Basis and Methodology of Estimates

In this proposed rule, we are announcing proposed policy changes
and payment rate updates for the IPPS for FY 2021 for operating
costs of acute care hospitals. The proposed FY 2021 updates to the
capital payments to acute care hospitals are discussed in section
I.I. of this Appendix.
Based on the overall proposed percentage change in payments per
case estimated using our payment simulation model, we estimate that
total FY 2021 operating payments would increase by 2.5 percent,
compared to FY 2020. In addition to the proposed applicable
percentage increase, this amount reflects the proposed +0.5
percentage point permanent adjustment to the standardized amount
required under section 414 of MACRA. The impacts do not reflect
changes in the number of hospital admissions or real case-mix
intensity, which would also affect overall payment changes.
We have prepared separate impact analyses of the proposed
changes to each system. This section deals with the proposed changes
to the operating inpatient prospective payment system for acute care
hospitals. Our payment simulation model relies on the most recent

[[Page 32932]]

available claims data to enable us to estimate the impacts on
payments per case of certain proposed changes in this proposed rule.
However, there are other proposed changes for which we do not have
data available that would allow us to estimate the payment impacts
using this model. For those proposed changes, we have attempted to
predict the payment impacts based upon our experience and other more
limited data.
The data used in developing the quantitative analyses of
proposed changes in payments per case presented in this section are
taken from the FY 2019 MedPAR file and the most current Provider-
Specific File (PSF) that are used for payment purposes. Although the
analyses of the proposed changes to the operating PPS do not
incorporate cost data, data from the most recently available
hospital cost reports were used to categorize hospitals. Our
analysis has several qualifications. First, in this analysis, we do
not make adjustments for future changes in such variables as
admissions, lengths of stay, or underlying growth in real case-mix.
Second, due to the interdependent nature of the IPPS payment
components, it is very difficult to precisely quantify the impact
associated with each proposed change. Third, we use various data
sources to categorize hospitals in the tables. In some cases,
particularly the number of beds, there is a fair degree of variation
in the data from the different sources. We have attempted to
construct these variables with the best available source overall.
However, for individual hospitals, some miscategorizations are
possible.
Using cases from the FY 2019 MedPAR file, we simulate payments
under the operating IPPS given various combinations of payment
parameters. As described previously, Indian Health Service hospitals
and hospitals in Maryland were excluded from the simulations. The
impact of proposed payments under the capital IPPS, and the impact
of proposed payments for costs other than inpatient operating costs,
are not analyzed in this section. Estimated payment impacts of the
capital IPPS for FY 2021 are discussed in section I.I. of this
Appendix.
We discuss the following proposed changes:
The effects of the application of the proposed
applicable percentage increase of 2.6 percent (that is, a 3.0
percent market basket update with a proposed reduction of 0.4
percentage point for the multifactor productivity adjustment), and a
proposed 0.5 percentage point adjustment required under section 414
of the MACRA to the IPPS standardized amount, and the proposed
applicable percentage increase (including the market basket update
and the proposed multifactor productivity adjustment) to the
hospital-specific rates.
The effects of the proposed changes to the relative
weights and MS-DRG GROUPER.
The effects of the proposed changes in hospitals' wage
index values reflecting updated wage data from hospitals' cost
reporting periods beginning during FY 2017, compared to the FY 2016
wage data, to calculate the proposed FY 2021 wage index.
The effects of the geographic reclassifications by the
MGCRB (as of publication of this proposed rule) that will be
effective for FY 2021.
The effects of the proposed rural floor with the
application of the national budget neutrality factor to the wage
index.
The effects of the proposed frontier State wage index
adjustment under the statutory provision that requires hospitals
located in States that qualify as frontier States to not have a wage
index less than 1.0. This provision is not budget neutral.
The effects of the implementation of section
1886(d)(13) of the Act, as added by section 505 of Public Law 108-
173, which provides for an increase in a hospital's wage index if a
threshold percentage of residents of the county where the hospital
is located commute to work at hospitals in counties with higher wage
indexes for FY 2021. This provision is not budget neutral.
The effects of the wage index including our proposed
adoption of the revised labor market area delineations in OMB
Bulletin No. 18-04 and the effects of the proposed transition to
apply a 5-percent cap on any decrease in a hospital's wage index
from the hospital's final wage index from the prior fiscal year.
The total estimated change in payments based on the
proposed FY 2021 policies relative to payments based on FY 2020
policies, including estimated changes in outlier payments.
To illustrate the impact of the proposed FY 2021 changes, our
analysis begins with a FY 2020 baseline simulation model using: the
FY 2020 applicable percentage increase of 2.6 percent; the 0.5
percentage point adjustment required under section 414 of the MACRA
applied to the IPPS standardized amount; the FY 2020 MS-DRG GROUPER
(Version 37); the FY 2020 CBSA designations for hospitals based on
the OMB definitions from the 2010 Census; the FY 2020 wage index;
and no MGCRB reclassifications. Outlier payments are set at 5.1
percent of total operating MS-DRG and outlier payments for modeling
purposes.
Section 1886(b)(3)(B)(viii) of the Act, as added by section
5001(a) of Public Law 109-171, as amended by section 4102(b)(1)(A)
of the ARRA (Pub. L. 111-5) and by section 3401(a)(2) of the
Affordable Care Act (Pub. L. 111-148), provides that, for FY 2007
and each subsequent year through FY 2014, the update factor will
include a reduction of 2.0 percentage points for any subsection (d)
hospital that does not submit data on measures in a form and manner,
and at a time specified by the Secretary. Beginning in FY 2015, the
reduction is one-quarter of such applicable percentage increase
determined without regard to section 1886(b)(3)(B)(ix), (xi), or
(xii) of the Act, or one-quarter of the market basket update.
Therefore, as discussed in section IV.B.1. of the preamble of this
proposed rule, for FY 2021, we are proposing that hospitals that do
not submit quality information under rules established by the
Secretary and that are meaningful EHR users under section
1886(b)(3)(B)(ix) of the Act would receive an applicable percentage
increase of 1.85 percent. At the time this impact was prepared, 54
hospitals are estimated to not receive the full market basket rate-
of-increase for FY 2021 because they failed the quality data
submission process or did not choose to participate, but are
meaningful EHR users. For purposes of the simulations shown later in
this section, we modeled the proposed payment changes for FY 2021
using a reduced update for these hospitals.
For FY 2021, in accordance with section 1886(b)(3)(B)(ix) of the
Act, a hospital that has been identified as not a meaningful EHR
user will be subject to a reduction of three-quarters of such
applicable percentage increase determined without regard to section
1886(b)(3)(B)(ix), (xi), or (xii) of the Act. Therefore, as
discussed in section IV.B.1. of the preamble of this proposed rule,
for FY 2021, we are proposing that hospitals that are identified as
not meaningful EHR users and do submit quality information under
section 1886(b)(3)(B)(viii) of the Act would receive an applicable
percentage increase of 0.35 percent. At the time this impact
analysis was prepared, 67 hospitals are estimated to not receive the
full market basket rate-of-increase for FY 2021 because they are
identified as not meaningful EHR users that do submit quality
information under section 1886(b)(3)(B)(viii) of the Act. For
purposes of the simulations shown in this section, we modeled the
proposed payment changes for FY 2021 using a reduced update for
these hospitals.
Hospitals that are identified as not meaningful EHR users under
section 1886(b)(3)(B)(ix) of the Act and also do not submit quality
data under section 1886(b)(3)(B)(viii) of the Act would receive a
proposed applicable percentage increase of -0.4 percent, which
reflects a one-quarter reduction of the market basket update for
failure to submit quality data and a three-quarter reduction of the
market basket update for being identified as not a meaningful EHR
user together with the proposed 0.4 percentage point reduction for
the multifactor productivity adjustment. At the time this impact was
prepared, 14 hospitals are estimated to not receive the full market
basket rate-of-increase for FY 2021 because they are identified as
not meaningful EHR users that do not submit quality data under
section 1886(b)(3)(B)(viii) of the Act.
Each proposed policy change, statutory or otherwise, is then
added incrementally to this baseline, finally arriving at an FY 2021
model incorporating all of the proposed changes. This simulation
allows us to isolate the effects of each change.
Our comparison illustrates the proposed percent change in
payments per case from FY 2020 to FY 2021. Two factors not discussed
separately have significant impacts here. The first factor is the
proposed update to the standardized amount. In accordance with
section 1886(b)(3)(B)(i) of the Act, we are proposing to update the
standardized amounts for FY 2021 using a proposed applicable
percentage increase of 2.6 percent. This includes our forecasted
IPPS operating hospital market basket increase of 3.0 percent with a
proposed 0.4 percentage point reduction for the multifactor
productivity adjustment. Hospitals that fail to comply with the
quality data submission requirements and are meaningful EHR users
would receive a proposed update of 1.85

[[Page 32933]]

percent. This proposed update includes a reduction of one-quarter of
the market basket update for failure to submit these data. Hospitals
that do comply with the quality data submission requirements but are
not meaningful EHR users would receive a proposed update of 0.35
percent, which includes a reduction of three-quarters of the market
basket update. Furthermore, hospitals that do not comply with the
quality data submission requirements and also are not meaningful EHR
users would receive a proposed update of -0.4 percent. Under section
1886(b)(3)(B)(iv) of the Act, the update to the hospital-specific
amounts for SCHs and MDHs is also equal to the applicable percentage
increase, or 2.6 percent, if the hospital submits quality data and
is a meaningful EHR user.
A second significant factor that affects the proposed changes in
hospitals' payments per case from FY 2020 to FY 2021 is the change
in hospitals' geographic reclassification status from 1 year to the
next. That is, payments may be reduced for hospitals reclassified in
FY 2020 that are no longer reclassified in FY 2021. Conversely,
payments may increase for hospitals not reclassified in FY 2020 that
are reclassified in FY 2021.

2. Analysis of Table I

Table I displays the results of our analysis of the proposed
changes for FY 2021. The table categorizes hospitals by various
geographic and special payment consideration groups to illustrate
the varying impacts on different types of hospitals. The top row of
the table shows the overall impact on the 3,199 acute care hospitals
included in the analysis.
The next four rows of Table I contain hospitals categorized
according to their geographic location: All urban, which is further
divided into large urban and other urban; and rural. There are 2,459
hospitals located in urban areas and 740 hospitals in rural areas
included in our analysis. The next two groupings are by bed-size
categories, shown separately for urban and rural hospitals. The last
groupings by geographic location are by census divisions, also shown
separately for urban and rural hospitals.
The second part of Table I shows hospital groups based on
hospitals' FY 2021 payment classifications, including any
reclassifications under section 1886(d)(10) of the Act. For example,
the rows labeled urban and rural show that the numbers of hospitals
paid based on these categorizations after consideration of
geographic reclassifications (including reclassifications under
sections 1886(d)(8)(B) and 1886(d)(8)(E) of the Act that have
implications for capital payments) are 2,028, and 1,171,
respectively.
The next three groupings examine the impacts of the proposed
changes on hospitals grouped by whether or not they have GME
residency programs (teaching hospitals that receive an IME
adjustment) or receive Medicare DSH payments, or some combination of
these two adjustments. There are 2,043 nonteaching hospitals in our
analysis, 901 teaching hospitals with fewer than 100 residents, and
255 teaching hospitals with 100 or more residents.
In the DSH categories, hospitals are grouped according to their
DSH payment status, and whether they are considered urban or rural
for DSH purposes. The next category groups together hospitals
considered urban or rural, in terms of whether they receive the IME
adjustment, the DSH adjustment, both, or neither.
The next three rows examine the impacts of the proposed changes
on rural hospitals by special payment groups (SCHs, MDHs and RRCs).
There were 471 RRCs, 304 SCHs, 146 MDHs, 148 hospitals that are both
SCHs and RRCs, and 24 hospitals that are both MDHs and RRCs.
The next series of groupings are based on the type of ownership
and the hospital's Medicare utilization expressed as a percent of
total inpatient days. These data were taken from the FY 2017 or FY
2016 Medicare cost reports.
The next grouping concerns the geographic reclassification
status of hospitals. The first subgrouping is based on whether a
hospital is reclassified or not. The second and third subgroupings
are based on whether urban and rural hospitals were reclassified by
the MGCRB for FY 2021 or not, respectively. The fourth subgrouping
displays hospitals that reclassified from urban to rural in
accordance with section 1886(d)(8)(E) of the Act. The fifth
subgrouping displays hospitals deemed urban in accordance with
section 1886(d)(8)(B) of the Act.
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BILLING CODE 4120-01-C

a. Effects of the Proposed Hospital Update and Other Proposed
Adjustments (Column 1)

As discussed in section IV.B. of the preamble of this proposed
rule, this column includes the proposed hospital update, including
the proposed 3.0 percent market basket update and the proposed
reduction of 0.4 percentage point for the multifactor

[[Page 32937]]

productivity adjustment. In addition, as discussed in section II.D.
of the preamble of this proposed rule, this column includes the FY
2021 +0.5 percentage point adjustment required under section 414 of
the MACRA. As a result, we are proposing to make a 3.1 percent
update to the national standardized amount. This column also
includes the proposed update to the hospital-specific rates which
includes the proposed 3.0 percent market basket update and the
proposed reduction of 0.4 percentage point for the multifactor
productivity adjustment. As a result, we are proposing to make a 2.6
percent update to the hospital-specific rates.
Overall, hospitals would experience a 3.1 percent increase in
payments primarily due to the combined effects of the proposed
hospital update to the national standardized amount and the proposed
hospital update to the hospital-specific rate. Hospitals that are
paid under the hospital-specific rate would experience a 2.6 percent
increase in payments; therefore, hospital categories containing
hospitals paid under the hospital-specific rate would experience a
lower than average increase in payments.

b. Effects of the Proposed Changes to the MS-DRG Reclassifications and
Relative Cost-Based Weights With Recalibration Budget Neutrality
(Column 2)

Column 2 shows the effects of the proposed changes to the MS-
DRGs and relative weights with the application of the proposed
recalibration budget neutrality factor to the standardized amounts.
Section 1886(d)(4)(C)(i) of the Act requires us annually to make
appropriate classification changes in order to reflect changes in
treatment patterns, technology, and any other factors that may
change the relative use of hospital resources. Consistent with
section 1886(d)(4)(C)(iii) of the Act, we calculated a proposed
recalibration budget neutrality factor to account for the changes in
MS-DRGs and relative weights to ensure that the overall payment
impact is budget neutral.
As discussed in section II.E. of the preamble of this proposed
rule, the FY 2021 MS-DRG relative weights will be 100 percent cost-
based and 100 percent MS-DRGs. For FY 2021, the MS-DRGs are
calculated using the FY 2019 MedPAR data grouped to the proposed
Version 38 (FY 2021) MS-DRGs. The methodology to calculate the
proposed relative weights and the reclassification changes to the
GROUPER are described in more detail in section II.G. of the
preamble of this proposed rule.
The ``All Hospitals'' line in Column 2 indicates that proposed
changes due to the MS-DRGs and relative weights would result in a
0.0 percent change in payments with the application of the proposed
recalibration budget neutrality factor of 0.998761to the
standardized amount. Hospital categories that generally treat
relatively less complex cases, such as rural hospitals and smaller
urban hospitals, would experience a decrease in their payments,
while hospitals that generally treat relatively more complex cases,
such as larger urban hospitals, would experience an increase in
their payments under the proposed relative weights. For example,
rural hospitals with 50-99 beds and urban hospitals of 99 beds or
less would experience a -0.3 percent decrease in payments.
Conversely, urban hospitals of 500 beds or more would experience a
+0.2 percent increase in payments.

c. Effects of the Proposed Wage Index Changes (Column 3)

Column 3 shows the impact of the proposed updated wage data
using FY 2017 cost report data, with the application of the proposed
wage budget neutrality factor. The wage index is calculated and
assigned to hospitals on the basis of the labor market area in which
the hospital is located. Under section 1886(d)(3)(E) of the Act,
beginning with FY 2005, we delineate hospital labor market areas
based on the Core Based Statistical Areas (CBSAs) established by
OMB. The current statistical standards used in FY 2021 are based on
OMB standards published on February 28, 2013 (75 FR 37246 and
37252), and 2010 Decennial Census data (OMB Bulletin No. 13-01), as
updated in OMB Bulletin Nos. 15-01 and 17-01. (We refer readers to
the FY 2015 IPPS/LTCH PPS final rule (79 FR 49951 through 49963) for
a full discussion on our adoption of the OMB labor market area
delineations, based on the 2010 Decennial Census data, effective
beginning with the FY 2015 IPPS wage index, to the FY 2017 IPPS/LTCH
PPS final rule (81 FR 56913) for a discussion of our adoption of the
CBSA updates in OMB Bulletin No. 15-01, which were effective
beginning with the FY 2017 wage index, and to the FY 2020 IPPS/LTCH
PPS final rule (83 FR 41362) for a discussion of our adoption of the
CBSA update in OMB Bulletin No. 17-01 for the FY 2020 wage index.)
As discussed in section III.A.2.a. of the preamble of this
proposed rule, OMB Bulletin No. 18-04 established revised
delineations for statistical areas, and in order to implement these
changes for the IPPS, it is necessary to identify the new labor
market area delineation for each county and hospital in the country
that would be affected by the revised OMB delineations. We believe
that adopting the revised OMB delineations described in OMB Bulletin
No. 18-04 would allow us to maintain a more accurate payment system
that reflects the reality of population shifts and labor market
conditions. We further believe that using these delineations will
increase the integrity of the IPPS wage index system by creating a
more accurate representation of geographic variations in wage
levels. As discussed in this section, in this proposed rule, we are
proposing to implement the revised OMB delineations as described in
the September 14, 2018 OMB Bulletin No. 18-04, effective beginning
with the FY 2021 IPPS wage index.
Section 1886(d)(3)(E) of the Act requires that, beginning
October 1, 1993, we annually update the wage data used to calculate
the wage index. In accordance with this requirement, the proposed
wage index for acute care hospitals for FY 2021 is based on data
submitted for hospital cost reporting periods, beginning on or after
October 1, 2016 and before October 1, 2017. The estimated impact of
the updated wage data using the FY 2017 cost report data and the
proposed revised OMB labor market area delineations on hospital
payments is isolated in Column 3 by holding the other proposed
payment parameters constant in this simulation. That is, Column 3
shows the proposed percentage change in payments when going from a
model using the FY 2020 wage index, based on FY 2016 wage data, the
labor-related share of 68.3 percent, under the proposed revised OMB
delineations and having a 100-percent occupational mix adjustment
applied, to a model using the proposed FY 2021 pre-reclassification
wage index based on FY 2017 wage data with the labor-related share
of 68.3 percent, under the proposed revised OMB delineations, also
having a 100-percent occupational mix adjustment applied, while
holding other payment parameters, such as use of the proposed
Version 38 MS-DRG GROUPER constant. The proposed FY 2021
occupational mix adjustment is based on the CY 2016 occupational mix
survey.
In addition, the column shows the impact of the application of
the proposed wage budget neutrality to the national standardized
amount. In FY 2010, we began calculating separate wage budget
neutrality and recalibration budget neutrality factors, in
accordance with section 1886(d)(3)(E) of the Act, which specifies
that budget neutrality to account for wage index changes or updates
made under that subparagraph must be made without regard to the 62
percent labor-related share guaranteed under section
1886(d)(3)(E)(ii) of the Act. Therefore, for FY 2021, we are
proposing to calculate the proposed wage budget neutrality factor to
ensure that payments under updated wage data and the labor-related
share of 68.3 percent are budget neutral, without regard to the
lower labor-related share of 62 percent applied to hospitals with a
wage index less than or equal to 1.0. In other words, the wage
budget neutrality is calculated under the assumption that all
hospitals receive the higher labor-related share of the standardized
amount. The proposed FY 2021 wage budget neutrality factor is
0.999362 and the overall proposed payment change is 0 percent.
Column 3 shows the impacts of updating the wage data using FY
2017 cost reports. Overall, the new wage data and the labor-related
share, combined with the proposed wage budget neutrality adjustment,
would lead to no change for all hospitals, as shown in Column 3.
In looking at the wage data itself, the national average hourly
wage would increase 1.02 percent compared to FY 2020. Therefore, the
only manner in which to maintain or exceed the previous year's wage
index was to match or exceed the proposed 1.02 percent increase in
the national average hourly wage. Of the 3,181 hospitals with wage
data for both FYs 2020 and 2021, 1,655 or 52 percent would
experience an average hourly wage increase of 1.02 percent or more.
The following chart compares the shifts in wage index values for
hospitals due to proposed changes in the average hourly wage data
for FY 2021 relative to FY 2020. These figures reflect proposed
changes in the ``pre-reclassified, occupational mix-adjusted wage
index,'' that is, the wage index before the application of
geographic reclassification, the rural floor, the out-migration
adjustment, and other wage index exceptions and adjustments. We note
that this analysis was

[[Page 32938]]

performed by applying the proposed revised OMB labor market area
delineations to the FY 2021 proposed wage data and also by
recomputing the FY 2020 final wage data to reflect the proposed
revised OMB delineations. (We refer readers to sections III.G.
through III.L. of the preamble of this proposed rule for a complete
discussion of the exceptions and adjustments to the wage index.) We
note that the ``post-reclassified wage index'' or ``payment wage
index,'' which is the wage index that includes all such exceptions
and adjustments (as reflected in Tables 2 and 3 associated with this
proposed rule, which are available via the internet on the CMS
website) is used to adjust the labor-related share of a hospital's
standardized amount, either 68.3 percent or 62 percent, depending
upon whether a hospital's wage index is greater than 1.0 or less
than or equal to 1.0. Therefore, the proposed pre-reclassified wage
index figures in the following chart may illustrate a somewhat
larger or smaller proposed change than would occur in a hospital's
payment wage index and total payment.
The following chart shows the projected impact of proposed
changes in the area wage index values for urban and rural hospitals.
[GRAPHIC] [TIFF OMITTED] TP29MY20.237

d. Effects of MGCRB Reclassifications (Column 4)

Our impact analysis to this point has assumed acute care
hospitals are paid on the basis of their actual geographic location
(with the exception of ongoing policies that provide that certain
hospitals receive payments on bases other than where they are
geographically located). The proposed changes in Column 4 reflect
the per case payment impact of moving from this baseline to a
simulation incorporating the MGCRB decisions for FY 2021.
By spring of each year, the MGCRB makes reclassification
determinations that will be effective for the next fiscal year,
which begins on October 1. The MGCRB may approve a hospital's
reclassification request for the purpose of using another area's
wage index value. Hospitals may appeal denials of MGCRB decisions to
the CMS Administrator. Further, hospitals have 45 days from the date
the IPPS proposed rule is issued in the Federal Register to decide
whether to withdraw or terminate an approved geographic
reclassification for the following year (we refer readers to the
discussion of our clarification of this policy in section III.I.2.
of the preamble to this proposed rule).
The overall effect of geographic reclassification is required by
section 1886(d)(8)(D) of the Act to be budget neutral. Therefore,
for purposes of this impact analysis, we are proposing to apply an
adjustment of 0.988003 to ensure that the effects of the
reclassifications under sections 1886(d)(8)(B) and (C) and
1886(d)(10) of the Act are budget neutral (section II.A. of the
Addendum to this proposed rule). Geographic reclassification
generally benefits hospitals in rural areas. We estimate that the
geographic reclassification would increase payments to rural
hospitals by an average of 1.1 percent. By region, most rural
hospital categories would experience increases in payments due to
MGCRB reclassifications. Hospitals in the rural West North Central
and Mountain regions would experience a decrease in payments due to
MGCRB reclassifications, while hospitals in the rural New England
region would experience no change in payments due to MGCRB
reclassifications,
Table 2 listed in section VI. of the Addendum to this proposed
rule and available via the internet on the CMS website reflects the
reclassifications for FY 2021.

e. Effects of the Proposed Rural Floor, Including Application of
National Budget Neutrality (Column 5)

As discussed in section III.B. of the preamble of the FY 2009
IPPS final rule, the FY 2010 IPPS/RY 2010 LTCH PPS final rule, the
FYs 2011 through 2020 IPPS/LTCH PPS final rules, and this FY 2021
IPPS/LTCH PPS proposed rule, section 4410 of Public Law 105-33
established the rural floor by requiring that the wage index for a
hospital in any urban area cannot be less than the wage index
applicable to hospitals located in rural areas in the same State. We
will apply a uniform budget neutrality adjustment to the wage index.
Column 5 shows the effects of the proposed rural floor.
The Affordable Care Act requires that we apply one rural floor
budget neutrality factor to the wage index nationally. We have
calculated a proposed FY 2021 rural floor budget neutrality factor
to be applied to the wage index of 0.993991, which would reduce wage
indexes by 0.6 percent.
Column 5 shows the projected impact of the proposed rural floor
with the national rural floor budget neutrality factor applied to
the wage index based on the proposed revised OMB labor market area
delineations. The column compares the post-reclassification FY 2021
wage index of providers before the rural floor adjustment and the
post-reclassification FY 2021 wage index of providers with the rural
floor adjustment based on the proposed revised OMB labor market area
delineations. Only urban hospitals can benefit from the rural floor.
Because the provision is budget neutral, all other hospitals that do
not receive an increase to their wage index from the rural floor
adjustment (that is, all rural hospitals and those urban hospitals
to which the adjustment is not made) would experience a decrease in
payments due to the budget neutrality adjustment that is applied to
the wage index nationally. (As finalized in the FY 2020 IPPS/LTCH
PPS final rule, we calculate the rural floor without including the
wage data of hospitals that have reclassified as rural under Sec.
412.103.)
We estimate that 255 hospitals would receive the rural floor in
FY 2021. All IPPS hospitals in our model would have their wage
indexes reduced by the proposed rural floor budget neutrality
adjustment of 0.993991 We project that, in aggregate, rural
hospitals would experience a 0.1 percent decrease in payments as a
result of the application of the proposed rural floor budget
neutrality because the rural hospitals do not benefit from the rural
floor, but have their wage indexes downwardly adjusted to ensure
that the application of the rural floor is budget neutral overall.
We project that, in the aggregate, hospitals located in urban areas
would experience no change in payments because increases in payments
to hospitals benefitting from the rural floor offset decreases in
payments to nonrural floor urban hospitals whose wage index is
downwardly adjusted by the rural floor budget neutrality factor.
Urban hospitals in the New England region would experience a 2.1
percent increase in payments primarily due to the application of the
rural floor in Massachusetts. Fifty-three urban providers in
Massachusetts are expected to receive the rural floor wage index
value, including the rural floor budget neutrality adjustment, which
would increase payments overall to hospitals in Massachusetts by an
estimated $145 million. We estimate that Massachusetts hospitals
would receive approximately a 3.8 percent increase in IPPS payments
due to the application of the rural floor in FY 2021. Urban Puerto
Rico hospitals are expected to experience a 0.2 percent increase in
payments as a result of the application of the proposed rural floor
for FY 2021.

[[Page 32939]]

f. Effects of the Application of the Proposed Frontier State Wage Index
and Proposed Out-Migration Adjustment (Column 6)

This column shows the combined effects of the application of
section 10324(a) of the Affordable Care Act, which requires that we
establish a minimum post-reclassified wage index of 1.00 for all
hospitals located in ``frontier States,'' and the effects of section
1886(d)(13) of the Act, as added by section 505 of Public Law 108-
173, which 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 area with a higher wage index. These two wage index
provisions are not budget neutral and would increase payments
overall by 0.1 percent compared to the provisions not being in
effect.
The term ``frontier States'' is defined in the statute as States
in which at least 50 percent of counties have a population density
less than 6 persons per square mile. Based on these criteria, 5
States (Montana, Nevada, North Dakota, South Dakota, and Wyoming)
are considered frontier States and 45 hospitals located in those
States would receive a frontier wage index of 1.0000. Overall, this
provision is not budget neutral and is estimated to increase IPPS
operating payments by approximately $70 million. Urban hospitals
located in the West North Central region would experience an
increase in payments by 0.6 percent, because many of the hospitals
located in this region are frontier State hospitals.
In addition, section 1886(d)(13) of the Act, as added by section
505 of Public Law 108-173, 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 area with a higher wage index.
Hospitals located in counties that qualify for the payment
adjustment will receive an increase in the wage index that is equal
to a weighted average of the difference between the wage index of
the resident county, post-reclassification and the higher wage index
work area(s), weighted by the overall percentage of workers who are
employed in an area with a higher wage index. There are an estimated
203 providers that would receive the out-migration wage adjustment
in FY 2021. Rural hospitals generally would qualify for the
adjustment, resulting in a 0.1 percent increase in payments. This
provision appears to benefit section 401 hospitals and RRCs in that
they would each experience a 0.1 percent increase in payments. This
out-migration wage adjustment also is not budget neutral, and we
estimate the impact of these providers receiving the out-migration
increase would be approximately $46 million.

g. Effects of All FY 2021 Proposed Changes (Column 7)

Column 7 shows our estimate of the proposed changes in payments
per discharge from FY 2020 and FY 2021, resulting from all proposed
changes reflected in this proposed rule for FY 2021. It includes
combined effects of the year-to-year change of the previous columns
in the table.
The proposed average increase in payments under the IPPS for all
hospitals is approximately 2.5 percent for FY 2021 relative to FY
2020 and for this row is primarily driven by the proposed changes
reflected in Column 1. Column 7 includes the proposed annual
hospital update of 3.1 percent to the national standardized amount.
This proposed annual hospital update includes the proposed 3.0
percent market basket update and the proposed 0.4 percentage point
reduction for the multifactor productivity adjustment. As discussed
in section II.D. of the preamble of this proposed rule, this column
also includes the +0.5 percentage point adjustment required under
section 414 of the MACRA. Hospitals paid under the hospital-specific
rate would receive a 2.6 percent hospital update. As described in
Column 1, the proposed annual hospital update with the proposed +0.5
percent adjustment for hospitals paid under the national
standardized amount, combined with the proposed annual hospital
update for hospitals paid under the hospital-specific rates, would
result in a 2.5 percent increase in payments in FY 2021 relative to
FY 2020. This estimated increase also reflects the effects of the
proposed adoption of the revised labor market area delineations in
OMB Bulletin 18-04 and the effects of the proposed transition to
apply a 5-percent cap on any decrease in a hospital's wage index
from the hospital's final wage index from the prior fiscal year.
Additionally, the estimated increase also reflects an estimated
decrease in outlier payments of 0.4 percent (from our current
estimate of FY 2020 outlier payments of approximately 5.5 percent to
5.1 percent projected for FY 2021 based on the FY 2019 MedPAR data
used for this proposed rule calculated for purposes of this impact
analysis). There are also interactive effects among the various
factors comprising the payment system that we are not able to
isolate, which contribute to our estimate of the proposed changes in
payments per discharge from FY 2020 and FY 2021 in Column 7.
Overall payments to hospitals paid under the IPPS due to the
proposed applicable percentage increase and proposed changes to
policies related to MS-DRGs, geographic adjustments, and outliers
are estimated to increase by 2.5 percent for FY 2021. Hospitals in
urban areas would experience a 2.5 percent increase in payments per
discharge in FY 2021 compared to FY 2020. Hospital payments per
discharge in rural areas are estimated to increase by 2.3 percent in
FY 2021.

3. Impact Analysis of Table II

Table II presents the projected impact of the proposed changes
for FY 2021 for urban and rural hospitals and for the different
categories of hospitals shown in Table I. It compares the estimated
average payments per discharge for FY 2020 with the estimated
proposed average payments per discharge for FY 2021, as calculated
under our models. Therefore, this table presents, in terms of the
average dollar amounts paid per discharge, the combined effects of
the proposed changes presented in Table I. The estimated percentage
changes shown in the last column of Table II equal the estimated
percentage changes in average payments per discharge from Column 7
of Table I.

[[Page 32940]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.238

[[Page 32941]]

[GRAPHIC] [TIFF OMITTED] TP29MY20.239

H. Effects of Other Proposed Policy Changes

In addition to those proposed policy changes discussed
previously that we are able to model using our IPPS payment
simulation model, we are proposing to make various other changes in
this proposed rule. As noted in section I.G. of this regulatory
impact analysis, our payment simulation model uses the most recent
available claims data to estimate the impacts on payments per case
of certain proposed changes in this proposed rule. Generally, we
have limited or no specific data available with which to estimate
the impacts of these proposed changes using that payment simulation
model. For those proposed changes, we have attempted to predict the
payment impacts based upon our experience and other more limited
data. Our estimates of the likely impacts associated with these
other proposed changes are discussed in this section.

1. Effects of Proposed Policies Relating to New Medical Service and
Technology Add-On Payments

a. Proposed Changes to the Alternative Pathway for Certain
Antimicrobial Products

In section II.H.9.b of the preamble of this proposed rule, we
are proposing to revise Sec. 412.87(d)(1) to add drugs approved
under FDA's LPAD pathway to the current alternative new technology
add-on payment pathway for QIDPs, beginning with

[[Page 32942]]

discharges occurring on or after October 1, 2021.
Given the relatively recent introduction of the FDA's LPAD
pathway there have not been any drugs that were approved under the
FDA's LPAD pathway that applied for an NTAP under the IPPS and were
not approved for that NTAP. If all of the future LPADs that would
have applied for new technology add-on payments would have been
approved under existing criteria, this proposal has no impact
relative to current policy. To the extent that there are future
LPADs that are the subject of applications for new technology add-on
payments, and those applications would have been denied under the
current new technology add-on payment criteria, this proposal is a
cost, but that cost is not estimable. We also note that as this
proposal, if finalized, would be effective beginning with new
technology add-on payment applications for FY 2022, there would be
no impact of this proposal in FY 2021.

b. Proposed Change to Announcement of Determinations and Deadline for
Consideration of New Medical Service or Technology Applications for
Certain Antimicrobial Products

In section II.H.9.c. of the preamble of this proposed rule, we
are proposing to revise Sec. 412.87(e) to add a new paragraph (3)
which would provide for conditional new technology add-on payment
approval for a technology for which an application is submitted
under the alternative pathway for certain antimicrobial products at
Sec. 412.87(d) that does not receive FDA marketing authorization by
the July 1 deadline specified in Sec. 412.87(e)(2), provided that
the technology receives FDA marketing authorization by July 1 of the
particular fiscal year for which the applicant applied for new
technology add-on payments.
If all of the future antimicrobial products eligible for the
alternative pathway for certain antimicrobial products at Sec.
412.87(d) receive marketing authorization by the July 1 deadline
specified in Sec. 412.87(e)(2), this proposal has no impact. To the
extent that there are future antimicrobial products that do not
receive marketing authorization by that deadline, but do receive FDA
marketing authorization by July 1 of the particular fiscal year for
which the applicant applied for new technology add-on payments, this
proposal is a cost, but that cost is not estimable.

c. Proposed FY 2021 Status of Technologies Approved for FY 2020 New
Technology Add-On Payments

In section II.H.4. of the preamble of this proposed rule, we are
proposing to discontinue new technology add-on payments for the
AQUABEAM System (Aquablation), ERLEADA[supreg],
GIAPREZA^TM, the remede[macr][supreg] System,
VABOMERE^TM, VYXEOS^TM, the Sentinel[supreg]
Cerebral Protection System, and KYMRIAH[supreg] and YESCARTA[supreg]
for FY 2021 because these technologies will have been on the U.S.
market for 3 years. We also are proposing to continue to make new
technology add-on payments for AndexXa^TM, AZEDRA[supreg],
BALVERSA^TM, Cablivi[supreg], ELZONRIS[supreg],
Esketamine, Jakafi[supreg], T2 Bacteria Test Panel, XOSPATA[supreg],
and ZEMDRI^TM in FY 2021 because these technologies would
still be considered new for purposes of new technology add-on
payments. Under Sec. 412.88(a)(2) and in conjunction with our
proposed change to the calculation of the new technology add-on
payments for products approved under the LPAD pathway, the new
technology add-on payment for each case would be limited to the
lesser of: (1) 65 percent of the costs of the new technology (or 75
percent of the costs for technologies designated as QIDPs or
approved under the LPAD pathway); or (2) 65 percent of the amount by
which the costs of the case exceed the standard MS-DRG payment for
the case (or 75 percent of the amount for technologies designated as
QIDPs or approved under the LPAD pathway). Because it is difficult
to predict the actual new technology add-on payment for each case,
our estimates below are based on the increase in new technology add-
on payments for FY 2021 as if every claim that would qualify for a
new technology add-on payment would receive the maximum add-on
payment. The following are estimates for FY 2021 for the 10
technologies for which we are proposing to continue to make new
technology add-on payments in FY 2021:
Based on the applicant's estimate for FY 2019, we
currently estimate that new technology add-on payments for
AndexXa^TM would increase overall FY 2021 payments by
$98,755,313 (maximum add-on payment of $18,281.25 * 5,402 patients).
Based on the applicant's estimate for FY 2020, we
currently estimate that new technology add-on payments for
AZEDRA[supreg] would increase overall FY 2021 payments by
$39,260,000 (maximum add-on payment of $98,150 * 400 patients).
Based on the applicant's estimate for FY 2020, we
currently estimate that new technology add-on payments for
BALVERSA^TM would increase overall FY 2021 payments by
$178,162 (maximum add-on payment of $3,563.23 * 50 patients).
Based on the applicant's estimate for FY 2020, we
currently estimate that new technology add-on payments for
Cablivi[supreg] would increase overall FY 2021 payments by
$4,351,165 (maximum add-on payment of $33,215 * 131 patients).
Based on the applicant's estimate for FY 2020, we
currently estimate that new technology add-on payments for
ELZONRIS[supreg] would increase overall FY 2021 payments by
$30,985,668 (maximum add-on payment of $125,448.05 * 247 patients).
Based on the applicant's estimate for FY 2020, we
currently estimate that new technology add-on payments for
Esketamine would increase overall FY 2021 payments by $6,494,656
(maximum add-on payment of $1,014.79 * 6,400 patients).
Based on the applicant's estimate for FY 2020, we
currently estimate that new technology add-on payments for
Jakafi[supreg] would increase overall FY 2021 payments by $556,788
(maximum add-on payment of $3,977.06 * 140 patients).
Based on the applicant's estimate for FY 2020, we
currently estimate that new technology add-on payments for T2
Bacteria Test Panel would increase overall FY 2021 payments by
$3,669,803 (maximum add-on payment of $97.50 * 37,639 patients).
Based on the applicant's estimate for FY 2020, we
currently estimate that new technology add-on payments for
XOSPATA[supreg] would increase overall FY 2021 payments by
$13,710,938 (maximum add-on payment of $7,312.50 * 1,875 patients).
Based on the applicant's estimate for FY 2019 we
currently estimate that new technology add-on payments for
ZEMDRI^TM would increase overall FY 2021 payments by
$10,209,375 (maximum add-on payment of $4,083.75 * 2,500 patients).
Overall, we estimate that FY 2021 new technology add-on payments
for technologies that were approved in FY 2020 would be
approximately $208 million.

d. Proposed FY 2021 Applications for New Technology Add-On Payments

In sections II.G.5. and 6. of the preamble to this proposed
rule, we discuss 24 technologies for which we received applications
for add-on payments for new medical services and technologies for FY
2021. We note that three applicants withdrew their application prior
to the issuance of this proposed rule. As explained in the preamble
to this proposed rule, add-on payments for new medical services and
technologies under section 1886(d)(5)(K) of the Act are not required
to be budget neutral. As discussed in section II.G.6. of the
preamble of this proposed rule, under the alternative pathway for
new technology add-on payments, new technologies that are medical
products with a QIDP designation or are part of the Breakthrough
Device program will be considered new and not substantially similar
to an existing technology and will not need to demonstrate that the
technology represents a substantial clinical improvement. These
technologies must still meet the cost criterion.
As also discussed in section II.G.6. of the preamble of this
proposed rule, to provide additional transparency and predictability
with respect to these technologies, in this proposed rule we are
making a proposal to approve or disapprove each of the nine
alternative pathway applications based on whether the technology
meets the cost criterion. Specifically, we are proposing to approve
the nine alternative pathway applicant technologies (3 Breakthrough
devices and 6 QIDPs) for FY 2021 based on our analysis of the cost
criterion. Based on preliminary information from the applicants at
the time of this proposed rule, we estimate that total payments for
the nine technologies that applied under the alternative pathway, if
approved, would be approximately $240 million for FY 2021. Total
estimated FY 2021 payments for new technologies that are designated
as a QIDP would be approximately $200 million, and total estimated
FY 2021 payments for new technologies that are part of the
Breakthrough Device program would be approximately $40 million. We
note that these estimated payments may be updated in the final rule
based on revised or additional information CMS receives prior to the
final rule.
We have not yet determined whether any of the 15 technologies
that applied under the traditional pathway discussed in section

[[Page 32943]]

II.G.5. of the preamble of this proposed rule will meet the criteria
for new technology add-on payments for FY 2021. Consequently, it is
premature to estimate the potential payment impact of these 15
technologies for any potential new technology add-on payments for FY
2021. We note that, as in past years, if any of the 15 technologies
that applied under the traditional pathway are found to be eligible
for new technology add-on payments for FY 2021, in the FY 2021 IPPS/
LTCH PPS final rule, we would discuss the estimated payment impact
for FY 2021.

2. Effects of Proposed Changes to MS-DRGs Subject to the Postacute Care
Transfer Policy and the MS-DRG Special Payment Policy

In section IV.A. of the preamble of this proposed rule, we
discuss our proposed changes to the list of MS-DRGs subject to the
postacute care transfer policy and the MS DRG special payment policy
for FY 2021. As reflected in Table 5 listed in section VI. of the
Addendum to this proposed rule (which is available via the internet
on the CMS website), using criteria set forth in regulations at 42
CFR 412.4, we evaluated MS-DRG charge, discharge, and transfer data
to determine which proposed new or revised MS-DRGs would qualify for
the postacute care transfer and MS-DRG special payment policies. As
a result of our proposals to revise the MS-DRG classifications for
FY 2021, which are discussed in section II.F. of the preamble of
this proposed rule, we are proposing to add two MS-DRGs to the list
of MS-DRGs that would be subject to the postacute care transfer
policy and the MS-DRG special payment policy. Column 2 of Table I in
this Appendix A shows the effects of the proposed changes to the MS-
DRGs and the proposed relative payment weights and the application
of the proposed recalibration budget neutrality factor to the
standardized amounts.
Section 1886(d)(4)(C)(i) of the Act requires us annually to make
appropriate DRG classification changes in order to reflect changes
in treatment patterns, technology, and any other factors that may
change the relative use of hospital resources. The analysis and
methods for determining the changes due to the MS-DRGs and relative
payment weights account for and include changes as a result of the
proposed changes to the MS-DRGs subject to the MS-DRG postacute care
transfer and MS-DRG special payment policies. We refer readers to
section I.G. of this Appendix A for a detailed discussion of payment
impacts due to the proposed MS-DRG reclassification policies for FY
2021.

3. Effects of the Proposed Changes to Medicare DSH and Uncompensated
Care Payments for FY 2021

As discussed in section IV.G. of the preamble of this proposed
rule, under section 3133 of the Affordable Care Act, hospitals that
are eligible to receive Medicare DSH payments will receive 25
percent of the amount they previously would have received under the
statutory formula for Medicare DSH payments under section
1886(d)(5)(F) of the Act. The remainder, equal to an estimate of 75
percent of what formerly would have been paid as Medicare DSH
payments (Factor 1), reduced to reflect changes in the percentage of
uninsured individuals and any additional statutory adjustment
(Factor 2), is available to make additional payments to each
hospital that qualifies for Medicare DSH payments and that has
uncompensated care. Each hospital eligible for Medicare DSH payments
will receive an additional payment based on its estimated share of
the total amount of uncompensated care for all hospitals eligible
for Medicare DSH payments. The uncompensated care payment
methodology has redistributive effects based on the proportion of a
hospital's amount of uncompensated care relative to the aggregate
amount of uncompensated care of all hospitals eligible for Medicare
DSH payments (Factor 3). The change to Medicare DSH payments under
section 3133 of the Affordable Care Act is not budget neutral.
In this proposed rule, we are proposing to establish the amount
to be distributed as uncompensated care payments to DSH eligible
hospitals, which for FY 2021 is $7,816,726,242.92. This figure
represents 75 percent of the amount that otherwise would have been
paid for Medicare DSH payment adjustments adjusted by a proposed
Factor 2 of 67.86 percent. For FY 2020, the amount available to be
distributed for uncompensated care was $8,350,599,096.04, or 75
percent of the amount that otherwise would have been paid for
Medicare DSH payment adjustments adjusted by a Factor 2 of 67.14
percent. To calculate Factor 3 for FY 2021, we are proposing to use
information on uncompensated care costs from Worksheet S-10 of
hospitals' FY 2017 cost reports for all eligible hospitals, with the
exception of Puerto Rico hospitals and Indian Health Service and
Tribal hospitals, for which we are proposing to continue to use low-
income insured days from FY 2013 cost report and FY 2018 SSI days to
determine Factor 3. For purposes of this proposed rule, we used
uncompensated care data from the HCRIS database, as updated through
February 19, 2020, Medicaid days from hospitals' FY 2013 cost
reports from the same extract of HCRIS, and SSI days from the FY
2018 SSI ratios. For a complete discussion of the proposed
methodology for calculating Factor 3, we refer readers to section
IV.G.4. of the preamble of this proposed rule.
To estimate the impact of the combined effect of the proposed
changes to Factors 1 and 2, as well as the proposed changes to the
data used in determining Factor 3, on the calculation of Medicare
uncompensated care payments, we compared total uncompensated care
payments estimated in the FY 2020 IPPS/LTCH PPS final rule to total
uncompensated care payments estimated in this FY 2021 IPPS/LTCH PPS
proposed rule. For FY 2020, we calculated 75 percent of the
estimated amount that would be paid as Medicare DSH payments absent
section 3133 of the Affordable Care Act, adjusted by a Factor 2 of
67.14 percent and multiplied by a Factor 3 calculated using the
methodology described in the FY 2020 IPPS/LTCH PPS final rule. For
FY 2021, we calculated 75 percent of the estimated amount that would
be paid as Medicare DSH payments absent section 3133 of the
Affordable Care Act, adjusted by a proposed Factor 2 of 67.86
percent and multiplied by a Factor 3 calculated using the proposed
methodology described previously.
Our analysis included 2,410 hospitals that are projected to be
eligible for DSH in FY 2021. It did not include hospitals that
terminated their participation from the Medicare program as of
January 22, 2020, Maryland hospitals, new hospitals, MDHs, and SCHs
that are expected to be paid based on their hospital-specific rates.
The 27 hospitals participating in the Rural Community Hospital
Demonstration Program were also excluded from this analysis, as
participating hospitals are not eligible to receive empirically
justified Medicare DSH payments and uncompensated care payments. In
addition, the data from merged or acquired hospitals were combined
under the surviving hospital's CMS certification number (CCN), and
the nonsurviving CCN was excluded from the analysis. The estimated
impact of the proposed changes in Factors 1, 2, and 3 on
uncompensated care payments across all hospitals projected to be
eligible for DSH payments in FY 2021, by hospital characteristic, is
presented in the following table.
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The proposed changes in projected uncompensated care payments
for FY 2021 in relation to the uncompensated care payments for FY
2020 are driven by a proposed decrease in Factor 1 and a proposed
increase in Factor 2, as well as by a decrease in the number of
hospitals projected to be eligible to receive DSH in FY 2021
relative to FY 2020. Proposed Factor 1 has decreased from $12.643
billion to $11.519 billion, while the proposed percent change in the
percent of individuals who are uninsured (Factor 2) has increased
from 67.14 percent to 67.86 percent. Based on the proposed changes
in these two factors, the impact analysis found that, across all
projected DSH eligible hospitals, proposed FY 2021 uncompensated
care payments are estimated at approximately $7.817 billion, or a
proposed decrease of approximately 6.39 percent from FY 2020
uncompensated care payments (approximately $8.351 billion). While
these proposed changes would result in a net decrease in the amount
available to be distributed in uncompensated care payments, the
projected payment decreases vary by hospital type. This
redistribution of uncompensated care payments is caused by proposed
changes in Factor 3. As seen in the previous table, a percent change
lower than negative 6.39 percent indicates that hospitals within the
specified category are projected to experience a larger decrease in
uncompensated care payments, on average, compared to the universe of
projected FY 2021 DSH hospitals. Conversely, a percent change
greater than negative 6.39 percent indicates that a hospital type is
projected to have a smaller decrease than the overall average.
Similarly, a positive percent change indicates an increase in
uncompensated care payments. The variation in the distribution of
payments by hospital characteristic is largely dependent on a given
hospital's uncompensated care costs as reported in the Worksheet S-
10, or number of Medicaid days and SSI days for Puerto Rico
hospitals and Indian Health Service and Tribal hospitals, used in
the Factor 3 computation.
Rural hospitals, in general, are projected to experience larger
decreases in uncompensated care payments than their urban
counterparts. Overall, rural hospitals are projected to receive an
11.48 percent decrease in uncompensated care payments, while urban
hospitals are projected to receive a 6.05 percent decrease in
uncompensated care payments.
By bed size, smaller rural hospitals are projected to receive
the largest decreases in uncompensated care payments. Rural
hospitals with 0-99 beds are projected to receive a 14.13 percent
payment decrease, and rural hospitals with 100-249 beds are
projected to receive an 11.44 percent

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decrease. These decreases for smaller rural hospitals are greater
than the overall hospital average. However, larger rural hospitals
with 250+ beds are projected to receive a 5.47 percent payment
increase. This is not consistent with the trend among urban
hospitals, with the smallest urban hospitals (0-99 beds) projected
to receive a decrease in uncompensated care payments of 3.55
percent, urban hospitals with 100-249 beds projected to receive a
decrease of 6.23 percent, and larger urban hospitals with 250+ beds
projected to receive a 6.12 percent decrease in uncompensated care
payments, all of which are smaller decreases than the overall
hospital average.
By region, rural hospitals are expected to receive larger than
average decreases in uncompensated care payments in all Regions,
except for rural hospitals in the East North Central and West North
Central Regions, which are projected to receive smaller than average
decreases. Regionally, urban hospitals are projected to receive a
more varied range of payment changes. Urban hospitals in the New
England, the Middle Atlantic, West South Central, and Mountain
Regions, as well as urban hospitals in Puerto Rico, are projected to
receive larger than average decreases in uncompensated care
payments. Hospitals in the South Atlantic, East North Central, East
South Central, and West North Central Regions are projected to
receive smaller than average decreases in uncompensated care
payments, while urban hospitals in the Pacific Region are projected
to receive a 3.31 percent increase in uncompensated care payments.
By payment classification, although hospitals in urban areas
overall are expected to receive a 5.77 percent decrease in
uncompensated care payments, hospitals in large urban areas are
expected to see a decrease in uncompensated care payments of 4.76
percent, while hospitals in other urban areas are expected to
receive a decrease in uncompensated care payments of 7.66 percent.
By payment classification, hospitals in rural areas are projected to
receive a decrease of 7.97 percent.
Nonteaching hospitals are projected to receive a payment
decrease of 6.28 percent, teaching hospitals with fewer than 100
residents are projected to receive a payment decrease of 6.30
percent, and teaching hospitals with 100+ residents have a projected
payment decrease of 6.57 percent. All of these decreases are
consistent with the overall hospital average. Proprietary and
government hospitals are projected to receive larger than average
decreases of 7.41 and 7.46 percent respectively, while voluntary
hospitals are expected to receive a payment decrease of 5.52
percent. Hospitals with less than 65 percent Medicare utilization
are projected to receive decreases in uncompensated care payments
consistent with the overall hospital average percent change, while
hospitals with greater than 65 percent Medicare utilization are
projected to receive a larger decrease of 28.82 percent. Effects of
Proposed Reductions Under the Hospital Readmissions Reduction
Program for FY 2021.
In section IV.K. of the preamble of this proposed rule, we
discuss our proposed policies for the FY 2021 Hospital Readmissions
Reduction Program. This program requires a reduction to a hospital's
base operating DRG payment to account for excess readmissions of
selected applicable conditions and procedures. The table and
analysis in this proposed rule illustrate the estimated financial
impact of the Hospital Readmission Reduction Program payment
adjustment methodology by hospital characteristic. Hospitals are
stratified into quintiles based on the proportion of dual-eligible
stays among Medicare fee-for-service (FFS) and managed care stays
between July 1, 2015 and June 30, 2018 (that is, the FY 2020
Hospital Readmissions Reduction Program's performance period).
Hospitals' excess readmission ratios (ERRs) are assessed relative to
their peer group median and a neutrality modifier is applied in the
payment adjustment factor calculation to maintain budget neutrality.
For the purpose of modeling the proposed FY 2021 payment adjustment
factors for this proposed rule, we used the payment adjustment
factors from the FY 2020 Hospital Readmissions Reduction Program and
the FY 2020 Hospital IPPS proposed rule Impact File to analyze
results by hospital characteristics. In the FY 2021 IPPS/LTCH PPS
final rule, we will provide an updated estimate of the financial
impact using the proportion of dual-eligibles, excess readmission
ratios, and aggregate payments for each condition/procedure and all
discharges for applicable hospitals from the FY 2021 Hospital
Readmissions Reduction Program applicable period (that is, July 1,
2016 through June 30, 2019).
These analyses include 3,027 non-Maryland hospitals eligible to
receive a penalty during the performance period. Hospitals are
eligible to receive a penalty if they have 25 or more eligible
discharges for at least one measure between July 1, 2015 and June
30, 2018. The second column in the table indicates the total number
of non-Maryland hospitals with available data for each
characteristic that have an estimated payment adjustment factor less
than 1 (that is penalized hospitals).
The third column in the table indicates the percentage of
penalized hospitals among those eligible to receive a penalty by
hospital characteristic. For example, 82.80 percent of eligible
hospitals characterized as non-teaching hospitals are expected to be
penalized. Among teaching hospitals, 88.41 percent of eligible
hospitals with fewer than 100 residents and 95.22 percent of
eligible hospitals with 100 or more residents are expected to be
penalized.
The fourth column in the table estimates the financial impact on
hospitals by hospital characteristic. The table shows the share of
penalties as a percentage of all base operating DRG payments for
hospitals with each characteristic. This is calculated as the sum of
penalties for all hospitals with that characteristic over the sum of
all base operating DRG payments for those hospitals between October
1, 2017 and September 30, 2018 (FY 2018). For example, the penalty
as a share of payments for urban hospitals is 0.69 percent. This
means that total penalties for all urban hospitals are 0.69 percent
of total payments for urban hospitals. Measuring the financial
impact on hospitals as a percentage of total base operating DRG
payments accounts for differences in the amount of base operating
DRG payments for hospitals within the characteristic when comparing
the financial impact of the program on different groups of
hospitals.
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5. Effects of Requirements Under the FY 2021 Hospital Value-Based
Purchasing (VBP) Program

In section IV.L. of the preamble of this proposed rule, we
discuss the Hospital VBP Program under which the Secretary makes
value-based incentive payments to hospitals based on their
performance on measures during the performance period with respect
to a fiscal year. These incentive payments will be funded for FY
2021 through a reduction to the FY 2021 base operating DRG payment
amount for the discharge for the hospital for such fiscal year, as
required by section 1886(o)(7)(B) of the Act. The applicable
percentage for FY 2021 and subsequent years is 2 percent. The total
amount available for value-based incentive payments must be equal to
the total amount of reduced payments for all hospitals for the
fiscal year, as estimated by the Secretary.
In section IV.L.1.b. of the preamble of this proposed rule, we
estimate the available pool of funds for value-based incentive
payments in the FY 2021 program year, which, in accordance with
section 1886(o)(7)(C)(v) of the Act, will be 2.00 percent of base
operating DRG payment amounts, or a total of approximately $1.9
billion. This estimated available pool for FY 2021 is based on the
historical pool of hospitals that were eligible to participate in
the FY 2020 program year and the payment information from the
December 2019 update to the FY 2019 MedPAR file.
The estimated impacts of the FY 2021 program year by hospital
characteristic, found in the table in this section, are based on
historical TPSs. We used the FY 2020 program year's TPSs to
calculate the proxy adjustment factors used for this impact
analysis. These are the most recently available scores that
hospitals were given an opportunity to review and correct. The proxy
adjustment factors use estimated annual base operating DRG payment
amounts derived from the December 2019 update to the FY 2019 MedPAR
file. The proxy adjustment factors can be found in Table 16
associated with this proposed rule (available via the internet on
the CMS website).
The impact analysis shows that, for the FY 2021 program year,
the number of hospitals that are expected to receive an increase in
their base operating DRG payment amount is higher than the number of
hospitals that are expected to receive a decrease. On average, among
urban hospitals, hospitals in the West North Central region are
expected to have the largest positive percent change in base
operating DRG payment amounts, and among rural hospitals, hospitals
in the Pacific region are expected to have the largest positive
percent change in base operating DRG payment amounts. Urban Middle
Atlantic, Urban East South Central, and Urban West South Central
regions are expected to experience, on average, a decrease in base
operating DRG payment amounts. All other regions, both urban and
rural, are expected to experience, on average, an increase in base
operating DRG payment amounts.
As DSH patient percentage increases, the average percent change
in base operating DRG payment amounts is expected to decrease. With
respect to hospitals' Medicare utilization as a percent of inpatient
days (MCR), as the MCR percent increases, the average percent change
in base operating DRG payment amounts is expected to increase for
MCR percent 0 to 65, but for MCR percent greater than 65, the
average percent change in base operating DRG payment amounts is
expected to decrease. On average, teaching hospitals are expected to
have a decrease in base operating DRG payment amounts while non-
teaching hospitals are expected to have an increase in base
operating DRG payment amounts.
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Actual FY 2021 program year's TPSs will not be reviewed and
corrected by hospitals until after the FY 2021 IPPS/LTCH PPS final
rule has been published. Therefore, the same

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historical universe of eligible hospitals and corresponding TPSs
from the FY 2020 program year were used for the updated impact
analysis in this proposed rule.

6. Effects of Requirements Under the HAC Reduction Program for FY 2021

In section IV.M. of the preamble of this proposed rule, we
discuss the requirements for the HAC Reduction Program for FY 2021.
In this proposed rule, we are not proposing to remove measures or
adopt any new measures into the HAC Reduction Program.

a. Burden Associated With Validation

In section IV.M.6. of the preamble of this proposed rule, we
propose to change the pool of hospitals selected for validation
under the HAC Reduction Program from up to 600 hospitals to up to
400 hospitals, in alignment with the proposal under the Hospital IQR
Program, as discussed in section VIII.A. of the preamble of this
proposed rule. In section XI.B.7. of the preamble of this proposed
rule, we update our burden estimates to reflect the proposal to
decrease the number hospitals selected for validation and to reflect
an updated median hourly wage, and the updated burden estimates show
a decrease in burden of 14,400 hours and -$558,720 for each program
year. We note the burden associated with these requirements is
captured in an information collection request currently available
for review and comment, OMB control number 0938-1352 (expires
December 31, 2021).
We also note the burden associated with collecting and
submitting data via the NHSN system is captured under a separate OMB
control number, 0920-0666 (expiration date November 30, 2021), and
therefore is not included in our burden estimates.

b. The Cumulative Effect of Program Measures and the Scoring
Methodology

We are presenting the estimated impact of the FY 2021 HAC
Reduction Program on hospitals by hospital characteristic. These FY
2021 HAC Reduction Program results were calculated using the same
scoring methodology used in the FY 2020 HAC Reduction Program.
Hospitals received a measure score for each measure, calculated as
the hospital's Winsorized z-score for that measure relative to other
hospitals in the program. Each hospital's Total HAC Score was
calculated as the equally weighted average of the hospital's measure
scores. The table in this section presents the estimated proportion
of hospitals in the worst-performing quartile of Total HAC Scores by
hospital characteristic.
Hospitals' CMS Patient Safety Indicator 90 (CMS PSI 90) measure
results are based on Medicare fee-for-service (FFS) discharges from
July 1, 2017 through June 30, 2019 and version 10.0 of the PSI
software. Hospitals' measure results for Centers for Disease Control
and Prevention (CDC) Central Line-Associated Bloodstream Infection
(CLABSI), Catheter-Associated Urinary Tract Infection (CAUTI), Colon
and Abdominal Hysterectomy Surgical Site Infection (SSI),
Methicillin-resistant Staphylococcus aureus (MRSA) bacteremia, and
Clostridium difficile Infection (CDI) are derived from standardized
infection ratios (SIRs) calculated with hospital surveillance data
reported to the National Healthcare Safety Network (NHSN) for
infections occurring between January 1, 2017 and December 31, 2018.
To analyze the results by hospital characteristic, we used the
FY 2020 final rule Impact File. This table includes 3,125 non-
Maryland hospitals with a FY 2021 Total HAC Score. Maryland
hospitals and hospitals without a Total HAC Score are excluded from
the table. Of these 3,125 hospitals, 3,116 hospitals had information
for geographic location with bed size, Safety-net status,
disproportionate share hospital (DSH) percent, and teaching status;
3,125 had information on region, 3,088 had information for
ownership; and 3,104 had information for Medicare Cost Report (MCR)
percent. The first column presents a breakdown of each
characteristic.
The second column in the table indicates the total number of
non-Maryland hospitals with a FY 2021 Total HAC Score and available
data for each characteristic. For example, with regard to teaching
status, 2,020 hospitals are characterized as non-teaching hospitals,
846 are characterized as teaching hospitals with fewer than 100
residents, and 250 are characterized as teaching hospitals with at
least 100 residents. This only represents a total of 3,116 hospitals
because the other 9 hospitals are missing from the FY 2020 final
rule Impact File.
The third column in the table indicates the number of hospitals
for each characteristic that would be in the worst-performing
quartile of Total HAC Scores. These hospitals would receive a
payment reduction under the FY 2021 HAC Reduction Program. For
example, with regard to teaching status, 443 hospitals out of 2,020
hospitals characterized as non-teaching hospitals would be subject
to a payment reduction. Among teaching hospitals, 208 out of 846
hospitals with fewer than 100 residents and 122 out of 250 hospitals
with 100 or more residents would be subject to a payment reduction.
The fourth column in the table indicates the proportion of
hospitals for each characteristic that would be in the worst-
performing quartile of Total HAC Scores and thus receive a payment
reduction under the FY 2021 HAC Reduction Program. For example, 21.9
percent of the 2,020 hospitals characterized as non-teaching
hospitals, 24.6 percent of the 846 teaching hospitals with fewer
than 100 residents, and 48.8 percent of the 250 teaching hospitals
with 100 or more residents would be subject to a payment reduction.
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7. Proposed Policy Change Related to Medical Residents Affected by
Residency Program or Teaching Hospital Closure

In section IV.N. of this proposed rule, we are proposing to
amend the Medicare policy with regard to closing teaching hospitals
and closing residency programs to address the needs of residents
attempting to find alternative hospitals in which to complete their
training and the incentives of home and receiving hospitals with
regard to seamless Medicare IME and direct GME funding. There are no
new Medicare funded slots being created by this proposal; as under
current policy, the maximum number of FTE cap slots that may be
transferred with displaced residents is the number equal to the
closing hospital's IME and direct GME FTE caps. Additionally, all of
the funding for these residents would eventually be transferred
permanently to new hospitals under current law (section 5506 of the
Affordable Care Act, which provides for permanent redistribution of
slots due to hospital closure), regardless of whether or not we do
or do not finalize these proposed changes. As a result, we believe
that ultimately, there is no new cost generated for the Medicare
program as a result of this proposal.

8. Effect of the Proposed Payment for Allogeneic Hematopoietic Stem
Cell Acquisition Costs

Section 108 of the Further Consolidated Appropriations Act, 2020
(Pub. L. 116-94) provides that, effective for cost reporting periods
beginning on or after October 1, 2020, payment to a subsection (d)
hospital that furnishes an allogeneic hematopoietic stem cell
transplant for hematopoietic stem cell acquisition shall be made on
a reasonable cost basis, and that the Secretary shall specify the
items included in such hematopoietic stem cell acquisition in
rulemaking. This statutory provision also requires that, beginning
in FY 2021, the payments made based on reasonable cost for

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the acquisition costs of allogeneic hematopoietic stem cells be made
in a budget neutral manner. Our proposals to implement section 108
of the Further Consolidated Appropriations Act, 2020 are discussed
in section II.H. of the preamble of this proposed rule, including
our proposed adjustment to the standardized amount to ensure the
effects of the additional payments for allogeneic hematopoietic stem
cell acquisition costs are budget neutral, as required under that
law.

9. Effects of Implementation of the Rural Community Hospital
Demonstration Program in FY 2021

In section IV.O. of the preamble of this proposed rule for FY
2021, we discussed our implementation and budget neutrality
methodology for section 410A of Public Law 108-173, as amended by
sections 3123 and 10313 of Public Law 111-148, and more recently, by
section 15003 of Public Law 114-255, which requires the Secretary to
conduct a demonstration that would modify payments for inpatient
services for up to 30 rural hospitals.
Section 15003 of Public Law 114-255 requires the Secretary to
conduct the Rural Community Hospital Demonstration for a 10-year
extension period (in place of the 5-year extension period required
by the Affordable Care Act), beginning on the date immediately
following the last day of the initial 5-year period under section
410A(a)(5) of Public Law 108-173. Specifically, section 15003 of
Public Law 114-255 amended section 410A(g)(4) of Public Law 108-173
to require that, for hospitals participating in the demonstration as
of the last day of the initial 5-year period, the Secretary shall
provide for continued participation of such rural community
hospitals in the demonstration during the 10-year extension period,
unless the hospital makes an election to discontinue participation.
Furthermore, section 15003 of Public Law 114-255 requires that,
during the second 5 years of the 10-year extension period, the
Secretary shall provide for participation under the demonstration
during the second 5 years of the 10-year extension period for
hospitals that are not described in section 410A(g)(4) of Public Law
108-173.
Section 15003 of Public Law 114-255 also requires that no later
than 120 days after enactment of Public Law 114-255 that the
Secretary issue a solicitation for applications to select additional
hospitals to participate in the demonstration program for the second
5 years of the 10-year extension period so long as the maximum
number of 30 hospitals stipulated by Public Law 111-148 is not
exceeded. Section 410A(c)(2) of Public Law 108-173 requires that in
conducting the demonstration program under this section, the
Secretary shall ensure that the aggregate payments made by the
Secretary do not exceed the amount which the Secretary would have
paid if the demonstration program under this section was not
implemented (budget neutrality).
In the preamble to this proposed rule, we described the terms of
participation for the extension period authorized by Public Law 114-
255. In the FY 2018 IPPS/LTCH PPS final rule, we finalized our
policy with regard to the effective date for the application of the
reasonable cost-based payment methodology under the demonstration
for those among the hospitals that had previously participated and
were choosing to participate in the second 5-year extension period.
According to our finalized policy, each of these previously
participating hospitals began the second 5 years of the 10-year
extension period on the date immediately after the date the period
of performance under the 5-year extension period ended. Seventeen of
the 21 hospitals that completed their periods of participation under
the extension period authorized by the Affordable Care Act elected
to continue in the second 5-year extension period, while 13
additional hospitals were selected to participate. One of the
hospitals selected in 2017 withdrew from the demonstration prior to
beginning participation on July 1, 2018, while each of the remaining
newly participating hospitals began its 5-year period of
participation effective the start of the first cost reporting period
on or after October 1, 2017. In addition, one among the previously
participating hospitals closed effective January 2019, while one
withdrew effective October 1, 2019. Thus, 27 hospitals are scheduled
to participate in FY 2021.
In the FY 2018 IPPS/LTCH PPS final rule, we finalized the budget
neutrality methodology in accordance with our policies for
implementing the demonstration, adopting the general methodology
used in previous years, whereby we estimated the additional payments
made by the program for each of the participating hospitals as a
result of the demonstration. In order to achieve budget neutrality,
we adjusted the national IPPS rates by an amount sufficient to
account for the added costs of this demonstration. In other words,
we have applied budget neutrality across the payment system as a
whole rather than across the participants of this demonstration. The
language of the statutory budget neutrality requirement permits the
agency to implement the budget neutrality provision in this manner.
The statutory language requires that aggregate payments made by the
Secretary do not exceed the amount which the Secretary would have
paid if the demonstration was not implemented, but does not identify
the range across which aggregate payments must be held equal.
For this proposed rule, the resulting amount applicable to FY
2021 is $40,804,704, which we are including in the budget neutrality
offset adjustment for FY 2021. This estimated amount is based on the
specific assumptions regarding the data sources used, that is,
recently available ``as submitted'' cost reports and historical and
currently finalized update factors for cost and payment.
In previous years, we have incorporated a second component into
the budget neutrality offset amounts identified in the final IPPS
rules. As finalized cost reports became available, we determined the
amount by which the actual costs of the demonstration for an
earlier, given year differed from the estimated costs for the
demonstration set forth in the final IPPS rule for the corresponding
fiscal year, and we incorporated that amount into the budget
neutrality offset amount for the upcoming fiscal year. We have
calculated this difference for FYs 2005 through 2015 between the
actual costs of the demonstration as determined from finalized cost
reports once available, and estimated costs of the demonstration as
identified in the applicable IPPS final rules for these years.
With the extension of the demonstration for another 5-year
period, as authorized by section 15003 of Public Law 114-255, we
will continue this general procedure. All finalized cost reports are
not yet all available for the 19 hospitals that completed a cost
reporting period beginning in FY 2016 according to the demonstration
cost-based payment methodology. If the entire set of finalized cost
reports is available in time, we will include within the budget
neutrality adjustment in the FY 2021 IPPS/LTCH final rule the
difference between the actual costs of the demonstration as
determined from these cost reports and the estimated costs of the
demonstration as determined in the FY 2016 IPPS final rule.
For this proposed rule for FY 2021, the total amount that we are
applying to the national IPPS rates is $40,804,704.

10. Effects of Continued Implementation of the Frontier Community
Health Integration Project (FCHIP) Demonstration

In section VI.B.2. of the preamble of this proposed we discuss
the implementation of the FCHIP demonstration, which allows eligible
entities to develop and test new models for the delivery of health
care services in eligible counties in order to improve access to and
better integrate the delivery of acute care, extended care, and
other health care services to Medicare beneficiaries in no more than
four States. Budget neutrality estimates for the demonstration will
be based on the demonstration period of August 1, 2016 through July
31, 2019. The demonstration includes three intervention prongs,
under which specific waivers of Medicare payment rules will allow
for enhanced payment: Telehealth, skilled nursing facility/nursing
facility services, and ambulance services. These waivers were
implemented with the goal of increasing access to care with no net
increase in costs. (We also discussed this policy in the FY 2018
IPPS/LTCH PPS final rule (82 FR 38294 through 38296), the FY 2019
IPPS/LTCH PPS final rule (83 FR 41516 through 41517), and the FY
2020 IPPS/LTCH PPS final rule (84 FR 42044 through 42701), but did
not make any changes to the policy that was adopted in FY 2017.)
We specified the payment enhancements for the demonstration and
selected CAHs for participation with the goal of maintaining the
budget neutrality of the demonstration on its own terms (that is,
the demonstration will produce savings from reduced transfers and
admissions to other health care providers, thus offsetting any
increase in payments resulting from the demonstration). However,
because of the small size of this demonstration program and
uncertainty associated with projected Medicare utilization and
costs, in the FY 2017 IPPS/LTCH PPS final rule we adopted a
contingency plan (81 FR 57064 through 57065) to ensure that the
budget neutrality requirement in section 123 of Public Law 110-275
is met. Accordingly, if analysis of claims data for the Medicare
beneficiaries

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receiving services at each of the participating CAHs, as well as of
other data sources, including cost reports, shows that increases in
Medicare payments under the demonstration during the 3-year period
are not sufficiently offset by reductions elsewhere, we will recoup
the additional expenditures attributable to the demonstration
through a reduction in payments to all CAHs nationwide. The
demonstration is projected to impact payments to participating CAHs
under both Medicare Part A and Part B. Thus, in the event that we
determine that aggregate payments under the demonstration exceed the
payments that would otherwise have been made, we will recoup
payments through reductions of Medicare payments to all CAHs under
both Medicare Part A and Part B. Because of the small scale of the
demonstration, it would not be feasible to implement budget
neutrality by reducing payments only to the participating CAHs.
Therefore, we will make the reduction to payments to all CAHs, not
just those participating in the demonstration, because the FCHIP
demonstration is specifically designed to test innovations that
affect delivery of services by this provider category. As we
explained in the FY 2017 IPPS/LTCH PPS final rule (81 FR 57064
through 57065), we believe that the language of the statutory budget
neutrality requirement at section 123(g)(1)(B) of the Act permits
the agency to implement the budget neutrality provision in this
manner. The statutory language merely refers to ensuring that
aggregate payments made by the Secretary do not exceed the amount
which the Secretary estimates would have been paid if the
demonstration project was not implemented, and does not identify the
range across which aggregate payments must be held equal.
Under the policy adopted as stated in FY 2017 IPPS/LTCH PPS
final rule, in the event the demonstration is found not to have been
budget neutral, any excess costs will be recouped beginning in CY
2020. Based on the currently available data, the determination of
budget neutrality results is preliminary and the amount of any
reduction to CAH payments that would be needed in order to recoup
excess costs under the demonstration remains uncertain. Therefore,
we are proposing to revise the policy originally adopted in the FY
2017 IPPS/LTCH PPS final rule, to delay the implementation of any
budget neutrality adjustment and will revisit this policy in
rulemaking for FY 2022 when we expect to have complete data for the
demonstration period. Since our data analysis is incomplete, it is
not possible to determine the impact of this policy for any national
payment system for FY 2021.

11. Effects of the Proposed Submission of Electronic Medical Records to
Quality Improvement Organizations (QIOs)

In section IX.A. of this proposed rule, we specify our proposals
regarding the reimbursement to providers, practitioners and
institutions for electronic submission of patient records required
for QIO purposes. Over the last several years, numerous healthcare
providers subject to QIO review activity under Sec. 476.78 and
480.111 have requested reimbursement for submitting requested
patient records in an electronic format. However, our regulations
concerning reimbursement to providers and practitioners for
submitting patient records and information required for QIO review
activity under Sec. 476.78 only permitted reimbursement for records
sent via photocopying and mailing or facsimile. This had the
unintended consequence of discouraging providers from using the more
efficient and cost effective means of submitting patient records and
information to the QIOs in an electronic format solely because
reimbursement was available only for patient records and information
submitted via photocopying and mailing.
The proposed updates to the regulation respond to requests from
providers, by addressing reimbursement for submitting records to the
QIO in electronic format as well as by photocopying and mailing and
facsimile. According to 2017 Office of National Coordinator survey
result, 96 percent of all non-federal acute care hospitals possessed
certified health IT. Ninety-nine percent of large hospitals (more
than 300 beds) had certified health IT, while 97 percent of medium-
sized hospitals (more than 100 beds) had certified health IT. Also
nearly 9 in 10 (86 percent) of office-based physicians had adopted
any EHR, and nearly 4 in 5 (80 percent) had adopted a certified EHR
(https://dashboard.healthit.gov/quickstats/quickstats.php). Given
the widespread adoption of the Certified Electronic Health Record
Technology (CEHRT), we believe that the providers and QIOs now have
the capacity to send and receive patient records in electronic
format. In light of these facts, we believe that it would now be
appropriate for us to require providers, practitioners and
institutions to submit patient records to the QIOs in electronic
format. Our proposal would also provide appropriate reimbursement
for patient records submitted to the QIOs in an electronic format.
We believe these changes would result in a large shift among
providers, practitioners and institutions, which are subject to QIO
review and which submit information and documents for the QIOs to
perform their QIO functions under Sec. Sec. 476.78 and 480.111,
toward submitting patient records in electronic format. As discussed
later in this section, we believe these proposals would help reduce
CMS's costs for QIO labor associated with scanning and uploading
patient records they receive by mail or facsimile, as well as
reducing the time to complete QIO reviews as electronic records are
generally easier to store and search. Thus, a requirement for
providers to submit patient records to QIOs in electronic format
would be advantageous for CMS. Providers and practitioners who are
unable to send patient records to the QIOs in an electronic format
would be able to obtain a waiver to permit them to submit records to
the QIO via facsimile or photocopying and mailing under our
proposal. We are proposing a new reimbursement rate for patient
records submitted by facsimile or by photocopying and mailing to
account for current wage and materials costs, and proposing a waiver
process that is minimally burdensome for providers, practitioners,
and institutions.
We expect that our proposal to require providers and
practitioners to submit records to QIOs in and electronic format
would have significant implications in terms of cost savings.
Because CMS reimburses the QIOs directly for all payments to
providers and practitioners for sending records to the QIOs and pays
QIOs for their work, including the additional time and overhead
expenses related to using paper records instead of electronic
records. Therefore, any cost savings to the QIOs as a result of the
adoption of electronic formats for submission of patient records
would result in a cost savings to CMS. The less it costs to send
records to the QIOs, the less CMS has to reimburse for those costs.
To estimate savings, we assumed 100% compliance and that CMS
would receive, and therefore issue, zero requests for waivers.
Although we assume that 20 percent of providers could seek a waiver,
given the percentage of providers that currently have access to
Certified Electronic Health Record Technology (CEHRT), the ultimate
projection is that all providers will be able to submit patient
records in electronic format in the future. We are interested in
hearing from commenters whether this is a reasonable assumption.
We then estimate the total savings by subtracting the total cost
of sending records electronically from the total cost of sending
records by photocopying and mailing. Over the last 5 years,
providers and practitioners have sent about 1.2 million patient
records to the QIOs, totaling approximately 342 million pages of
documents. Currently, providers are reimbursed at the rate of 12
cents per page, which results in a total reimbursement cost of about
$41 million over 5 years. In contrast, under our current proposal,
sending 1.2 million records electronically at a rate of
reimbursement of $3 per record would amount to a total reimbursement
cost of roughly $3.6 million. Subtracting $3.6 million (the
estimated cost of sending records electronically over 5 years) from
$41 (the cost of sending records by fax or by mail), would result in
a total estimated savings to CMS of $37.4 million. We would save
money on the efforts of the QIOs to scan and process the paper
records before sending them on for review electronically. However,
these longer-run savings would be preceded by short-run transition
costs, and we request comment that would facilitate the estimation
of upfront costs experienced by QIOs.
Based on our estimates for case volume set forth previously, and
assuming the QIOs cost for scanning and labor is $0.10 per page,
based on the information set out in Table 1 of this Appendix, we
estimate that it would save CMS about $34.3 million if the agency no
longer needed to scan 342 million pages of records. Savings in
payments for the labor and materials costs provided to both
providers and QIOs for photocopying, scanning, and uploading results
in total savings to CMS of $71.8 million. Tables 2 and 3 of this
Appendix illustrate the cost savings to CMS over 5 years.
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The BFCC-QIO contracts under the 12th scope of work currently
have four task orders that are awarded on a staggered 5-year basis.
Currently CMS has budgeted $95.8 million per year for each of the
four BFCC-QIOs task orders, for an estimated 5-year cost of $479
million. We estimate that the costs of file transfer through
photocopying and mailing, facsimile and in electronic formats would
be a small fraction of the total operations budget of the QIOs. We
believe that he proposed

[[Page 32957]]

changes would also benefit providers and practitioners in fulfilling
their responsibilities under Sec. 476.78 (obligating providers and
practitioners to, among other things, furnish records to QIOs) and
under Sec. 480.111 (obligating institutions and practitioners to
provide access, records and information to QIOs), by providing
reimbursement for electronically providing copies of patient's
medical records to the QIOs.
Given our estimate, discussed in section IX.A.2.d. of this
proposed rule that an appropriate employee can reasonably photocopy
6 pages of documents per minute and scan documents at the rate of 6
documents per minute, we estimate that these proposed changes would
save providers and CMS a total of approximately 1.9 million labor
hours over 5 years. We expect these proposals would also result in a
positive environmental impact by avoiding printing, photocopying,
faxing, scanning, and recycling about 342.2 million pages of medical
records by providers and QIOs over 5 years.

12. Effects of the Proposed Changes To Allow for Electronic Filing of
Provider Reimbursement Review Board Appeals

In section IX.B. of the preamble of this proposed rule, we are
proposing changes regarding PRRB appeals. We believe that these
proposed changes would have minimal impact in terms of burden or
cost on users. We also believe that requiring all parties involved
in PRRB appeals to use OH CDMS would create efficiencies and reduce
the burden and cost to external users in that, when a file or
document is uploaded into the system and filed with the Board, the
system simultaneously serves it on the opposing party. As a result,
the system would eliminate the need to print documents and pay for
postage for most submissions. Additionally, there is no material
out-of-pocket direct cost or investment to utilize OH CDMS; parties
do not need to purchase separate software. Finally, the required use
of the system would also reduce the administrative burden on OH
staff to enter data and scan correspondence, and would free up
government resources to adjudicate cases and manage the docket.
Similarly, it would enhance the PRRB's ability to strategically
manage the PRRB's complex docket as it would provide better
analytics for case management activities such as scheduling,
jurisdictional and procedural reviews, and long-range docket
planning. Last, the required use of the system would also reduce
paper documents and the related costs associated with processing and
securely storing the PRRB's records.

13. Effects of the Proposed Revisions of Medicare Bad Debt Policy

In section IX.C. of the preamble of this proposed rule, we are
proposing clarifications and codification of certain longstanding
Medicare bad debt reimbursement provisions and requirements for all
Medicare providers, suppliers, and other entities eligible to
receive Medicare payment for bad debt by revising 42 CFR 413.89, Bad
debts, charity, and courtesy allowances. We are also proposing to
codify our longstanding reasonable collection effort to require a
Medicaid remittance advice (RA) for dual eligible beneficiaries. We
are also seeking suggestions from stakeholders regarding the best
alternative documentation to the Medicaid RA that a provider could
obtain and submit to Medicare to evidence the State's Medicare cost
sharing liability (or absence thereof) in instances where the State
does not process a Medicare crossover claim and issue a Medicaid RA
for certain dual eligible beneficiaries. In addition, we are
recognizing the new Accounting Standard Update--Topic 606 for
revenue recognition and classification of Medicare bad debts. We are
also making a technical correction to the cross references in 42 CFR
412.622(b)(2)(i) and 42 CFR 417.536(g) to Medicare bad debt
reimbursement policy. As a result of our proposals, there would be
no costs to the Medicare Program and no increased burden placed upon
providers, suppliers or other entities. As a result of our
proposals, there would be a savings to the Medicare Program by the
reduction of appeal and litigation costs. Providers would benefit
and realize a burden reduction with our proposal to accept
alternative documentation to evidence a provider's reasonable
collection effort for certain dual eligible beneficiaries.

14. Effects of a Potential Market Based MS-DRG Relative Weight
Methodology

In section IV.P.4. of the preamble of this proposed rule, we are
seeking comment on a potential methodology for estimating the MS-DRG
relative weights beginning in FY 2024 based on the median payer-
specific negotiated charge information we are proposing to collect
on the cost report and which we may consider adopting in the FY 2021
IPPS/LTCH PPS final rule. We note that the estimated total annual
burden hours for this proposal are as follows: 3,189 hospitals times
15 hours per hospital equals 47,835 annual burden hours and
$3,096,838. We refer readers to section XI.B.11. of the preamble of
this proposed rule for further analysis of this assessment.
If CMS were to adopt a change to the MS-DRG relative weight
methodology, we would apply a budget neutrality factor to ensure
that the overall payment impact of any MS-DRG relative weight
changes was budget neutral, as required by section
1886(d)(4)(C)(iii) of the Act and consistent with our current
practice.
Once we have access to the proposed payer-specific negotiated
charge information at the MS-DRG level, we will be able to more
precisely estimate the potential payment impact of any potential
changes to the MS-DRG relative weight methodology beginning in FY
2024. However, to explore the potential impacts more generally, we
conducted a literature search to compare the payment rates of
Medicare FFS, MA organizations, and other commercial payers. As
noted in section IV.P.2.b. of the preamble of this proposed rule,
Berenson et al.\518\ surveyed senior hospital and health plan
executives and found that MA plans nominally pay only 100 to 105
percent of traditional Medicare rates and, in real economic terms,
possibly less. Respondents broadly identified three primary reasons
for near-payment equivalence: Statutory and regulatory provisions
that limit out-of-network payments to traditional Medicare rates, de
facto budget constraints that MA plans face because of the need to
compete with traditional Medicare and other MA plans, and a market
equilibrium that permits relatively lower MA rates as long as
commercial rates remain well above the traditional Medicare rates.
---------------------------------------------------------------------------

\518\ Berenson RA, Sunsine JH, Helms D, Lawton E. Why Medicare
Advantage plans pay hospitals traditional Medicare prices. Health
Aff (Millwood). 2015;34(8):1289-1295.
---------------------------------------------------------------------------

We next researched empirically based comparisons of Medicare FFS
rates, MA organization rates, and rates of other commercial payers.
Baker et al.\519\ used data from Medicare and the Health Care Cost
Institute (HCCI) to identify the prices paid for hospital services
by FFS Medicare, MA plans, and commercial insurers in 2009 and 2012.
They calculated the average price per admission, and its trend over
time, in each of the three types of insurance for fixed baskets of
hospital admissions across metropolitan areas. After accounting for
differences in hospital networks, geographic areas, and case-mix
between MA and FFS Medicare, they found that MA plans paid 5.6
percent less for hospital services compared to FFS Medicare. For the
time period studied, the authors suggest that at least one channel
through which MA plans paid lower prices was by obtaining greater
discounts on types of FFS Medicare admissions that were known to
have very short lengths-of-stay. They also found that the rates paid
by commercial plans were much higher than those of either MA or FFS
Medicare, and growing. At least some of this difference they
indicated came from the much higher prices that commercial plans
paid for profitable service lines.
---------------------------------------------------------------------------

\519\ Baker LC, Bundorf MK, Devlin AM, Kessler DP. Medicare
Advantage plans pay less than traditional Medicare pays. Health Aff
(Millwood). 2016;35(8):1444-1451.
---------------------------------------------------------------------------

Maeda and Nelson \520\ also analyzed data from the HCCI in their
research. They compared the hospital prices paid by MA organizations
and commercial plans with Medicare FFS prices using 2013 claims from
the HCCI. The HCCI claims were used to calculate hospital prices for
private insurers, and Medicare's payment rules were used to estimate
Medicare FFS prices. The authors focused on stays at acute care
hospitals in metropolitan statistical areas (MSAs). They found MA
prices to be roughly equal to Medicare FFS prices, on average, but
commercial prices were 89 percent higher than FFS prices. In
addition, commercial prices varied greatly across and within MSAs,
but MA prices varied much less. The authors considered their results
generally consistent with the Baker et al. study findings in that
hospital payments by MA plans were much more similar to Medicare FFS
levels than they were to commercial payment levels, although they
noted that

[[Page 32958]]

they used slightly different methods to calculate Medicare FFS
prices.
---------------------------------------------------------------------------

\520\ Maeda JLK, Nelson L. How Do the Hospital Prices Paid by
Medicare Advantage Plans and Commercial Plans Compare with Medicare
Fee-for-Service Prices? The Journal of Health Care Organization,
Provision, and Financing. 2018;55(1-8)
---------------------------------------------------------------------------

I. Effects of Proposed Changes in the Capital IPPS

1. General Considerations

For the impact analysis presented in this section, we used data
from the December 2019 update of the FY 2019 MedPAR file and the
December 2019 update of the Provider-Specific File (PSF) that was
used for payment purposes. Although the analyses of the proposed
changes to the capital prospective payment system do not incorporate
cost data, we used the December 2019 update of the most recently
available hospital cost report data (FYs 2017 and 2018) to
categorize hospitals. Our analysis has several qualifications. We
use the best data available and make assumptions about case-mix and
beneficiary enrollment, as described later in this section.
Due to the interdependent nature of the IPPS, it is very
difficult to precisely quantify the impact associated with each
proposed change. In addition, we draw upon various sources for the
data used to categorize hospitals in the tables. In some cases (for
instance, the number of beds), there is a fair degree of variation
in the data from different sources. We have attempted to construct
these variables with the best available sources overall. However, it
is possible that some individual hospitals are placed in the wrong
category.
Using cases from the December 2019 update of the FY 2019 MedPAR
file, we simulated payments under the capital IPPS for FY 2020 and
the proposed payments for FY 2021 for a comparison of total payments
per case. Short-term, acute care hospitals not paid under the
general IPPS (for example, hospitals in Maryland) are excluded from
the simulations.
The methodology for determining a capital IPPS payment is set
forth at Sec. 412.312. The basic methodology for calculating the
proposed capital IPPS payments in FY 2021 is as follows:
(Standard Federal rate) x (DRG weight) x (GAF) x (COLA for
hospitals located in Alaska and Hawaii) x (1 + DSH adjustment factor
+ IME adjustment factor, if applicable).
In addition to the other adjustments, hospitals may receive
outlier payments for those cases that qualify under the threshold
established for each fiscal year. We modeled payments for each
hospital by multiplying the capital Federal rate by the GAF and the
hospital's case-mix. Then we added estimated payments for indirect
medical education, disproportionate share, and outliers, if
applicable. For purposes of this impact analysis, the model includes
the following assumptions:
The capital Federal rate was updated, beginning in FY
1996, by an analytical framework that considers changes in the
prices associated with capital-related costs and adjustments to
account for forecast error, changes in the case-mix index, allowable
changes in intensity, and other factors. As discussed in section
III.A.1. of the Addendum to this proposed rule, the proposed update
to the capital Federal rate is 1.5 percent for FY 2021.
In addition to the proposed FY 2021 update factor, the
proposed FY 2021 capital Federal rate was calculated based on a
proposed GAF/DRG budget neutrality adjustment factor of 0.9983 and a
proposed outlier adjustment factor of 0.9461.

2. Results

We used the payment simulation model previously described in
section I.I. of Appendix A of this proposed rule to estimate the
potential impact of the proposed changes for FY 2021 on total
capital payments per case, using a universe of 3,199 hospitals. As
previously described, the individual hospital payment parameters are
taken from the best available data, including the December 2019
update of the FY 2019 MedPAR file, the December 2019 update to the
PSF, and the most recent cost report data from the December 2019
update of HCRIS. In Table III, we present a comparison of estimated
proposed total payments per case for FY 2020 and estimated total
payments per case for FY 2021 based on the proposed FY 2021 payment
policies. Column 2 shows estimates of payments per case under our
model for FY 2020. Column 3 shows estimates of proposed payments per
case under our model for FY 2021. Column 4 shows the proposed total
percentage change in payments from FY 2020 to FY 2021. The change
represented in Column 4 includes the proposed 1.5 percent update to
the capital Federal rate and other proposed changes in the
adjustments to the capital Federal rate. The comparisons are
provided by: (1) Geographic location; (2) region; and (3) payment
classification.
The simulation results show that, on average, capital payments
per case in FY 2021 are expected to increase as compared to capital
payments per case in FY 2020. This expected increase overall is
primarily due to the proposed 1.5 percent update to the capital
Federal rate for FY 2021, in conjunction with estimated changes in
outlier payments and DSH payments. Under Sec. 412.320, in order to
receive capital DSH payments a hospital must be located in an urban
area for payment purposes and have 100 or more beds. As discussed in
section III.A.2. of the preamble of this proposed rule, there are
counties that would become rural if we finalize our proposal to
implement the revised OMB delineations, and therefore, hospitals in
those areas (that have 100 or more beds) would no longer be eligible
for capital DSH payments beginning in FY 2021. In general, regional
variations in estimated capital payments per case in FY 2021 as
compared to capital payments per case in FY 2020 are primarily due
to changes in GAFs, and are generally consistent with the projected
changes in payments due to proposed changes in the wage index (and
proposed policies affecting the wage index), as shown in Table I in
section I.G. of this Appendix A.
The net impact of these proposed changes is an estimated 0.62
percent increase in capital payments per case from FY 2020 to FY
2021 for all hospitals (as shown in Table III).
The geographic comparison shows that, on average, hospitals in
both urban and rural classifications would experience an increase in
capital IPPS payments per case in FY 2021 as compared to FY 2020.
Capital IPPS payments per case would increase by an estimated 0.5
percent for hospitals in urban areas while payments to hospitals in
rural areas would increase by 0.7 percent in FY 2020 to FY 2021.
The comparisons by region show that the estimated changes in
capital payments per case from FY 2020 to FY 2021 would increase in
nearly all urban areas, ranging from a 0.1 percent increase for the
South Atlantic region to a 1.2 percent increase for the Pacific
region. We estimate a decrease for the Mountain region of 0.4
percent in capital

[[Page 32959]]

payments per case from FY 2020 to FY 2021. Similarly, nearly all
rural regions are expected to increase in capital payments per case
from FY 2020 to FY 2021, ranging from 0.3 percent for the South
Atlantic and Mountain rural regions to a 1.6 percent increase for
the East North Central rural region. We estimate no change in
capital payments per case from FY 2020 to FY 2021 for the West North
Central rural region. These regional differences are primarily due
to the changes in the proposed GAFs and estimated changes in outlier
payments.
Hospitals of all types of ownership (that is, voluntary
hospitals, government hospitals, and proprietary hospitals) are
expected to experience an increase in capital payments per case from
FY 2020 to FY 2021. The projected increase in capital payments for
government hospitals is estimated to be 0.9 percent. Proprietary
hospitals and voluntary hospitals are both expected to experience an
increase in capital IPPS payments of 0.5 percent.
Section 1886(d)(10) of the Act established the MGCRB. Hospitals
may apply for reclassification for purposes of the wage index for FY
2021. Reclassification for wage index purposes also affects the GAFs
because that factor is constructed from the hospital wage index. To
present the effects of the hospitals being reclassified as of the
publication of this proposed rule for FY 2021, we show the proposed
average capital payments per case for reclassified hospitals for FY
2021. Urban reclassified hospitals are expected to experience a
decrease in capital payments of 0.1 percent; urban nonreclassified
hospitals are expected to experience an increase in capital payments
of 1.0 percent. The estimated percentage increase for rural
reclassified hospitals is 0.9 percent, and for rural nonreclassified
hospitals, the estimated percentage increase in capital payments is
0.8 percent. The estimated percentage decrease for All 401
reclassified hospitals is 0.6 percent, which is mostly due to the
changes in the proposed GAFs.
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J. Proposed Effects of Payment Rate Changes and Policy Changes
Under the LTCH PPS

1. Introduction and General Considerations

In section VII. of the preamble of this proposed rule and
section V. of the Addendum to this proposed rule, we set forth the
annual update to the payment rates for the LTCH PPS for FY 2021. In
the preamble of this proposed rule, we specify the statutory
authority for the provisions that are presented, identify the
policies for FY 2021, and present rationales for our decisions as
well as alternatives that were considered. In this section of
Appendix A to this proposed rule, we discuss the impact of the
changes to the payment rate, factors, and other payment rate
policies related to the LTCH PPS that are presented in the preamble
of this proposed rule in terms of their estimated fiscal impact on
the Medicare budget and on LTCHs.
There are 360 LTCHs included in this impact analysis. We note
that, although there are currently approximately 366 LTCHs, for
purposes of this impact analysis, we excluded the data of all-
inclusive rate providers consistent with the development of the FY
2021 MS-LTC-DRG relative weights (discussed in section VII.B.3.c. of
the preamble of this proposed rule). In the impact analysis, we used
the payment rate, factors, and policies presented in this proposed
rule, the proposed 2.5 percent annual update to the LTCH PPS
standard Federal payment rate, the permanent one-time budget
neutrality adjustment factor for the estimated cost of eliminating
the 25-percent threshold policy in FY 2021 as discussed in section
VII.D. of the preamble of this proposed rule, the proposed update to
the MS-LTC-DRG classifications and relative weights, the proposed
update to the wage index values, labor-related share, and changes to
the geographic labor-market area designations, and the proposed 5-
percent cap transition policy, and the best available claims and CCR
data to estimate the change in payments for FY 2021.
Under the dual rate LTCH PPS payment structure, payment for LTCH
discharges that

[[Page 32962]]

meet the criteria for exclusion from the site neutral payment rate
(that is, LTCH PPS standard Federal payment rate cases) is based on
the LTCH PPS standard Federal payment rate. Consistent with the
statute, the site neutral payment rate is the lower of the IPPS
comparable per diem amount as determined under Sec. 412.529(d)(4),
including any applicable outlier payments as specified in Sec.
412.525(a), reduced by 4.6 percent for FYs 2018 through 2026; or 100
percent of the estimated cost of the case as determined under Sec.
412.529(d)(2). In addition, there are two separate high cost outlier
targets--one for LTCH PPS standard Federal payment rate cases and
one for site neutral payment rate cases. The statute also
establishes a transitional payment method for cases that are paid
the site neutral payment rate for LTCH discharges occurring in cost
reporting periods beginning during FY 2016 through FY 2019. For FY
2021, we expected no site neutral payment rate cases would still be
eligible for the transitional payment method since it only applies
to those site neutral payment rate cases whose discharges occur
during a LTCH's cost reporting period that begins before October 1,
2019. Site neutral payment rate cases whose discharges from an LTCH
occur during the LTCH's cost reporting period that begins on or
after October 1, 2019 are paid the site neutral payment rate amount
determined under Sec. 412.522(c)(1).
Based on the best available data for the 360 LTCHs in our
database that were considered in the analyses used for this proposed
rule, we estimate that overall LTCH PPS payments in FY 2021 will
decrease by approximately 0.9 percent (or approximately $36 million)
based on the rates and factors presented in section VII. of the
preamble and section V. of the Addendum to this proposed rule.
The applicability of this transitional payment method for site
neutral payment rate cases is dependent upon both the discharge date
of the case and the start date of the LTCH's FY 2020 cost reporting
period. The statutory transitional payment method for cases that are
paid the site neutral payment rate for LTCH discharges occurring in
cost reporting periods beginning during FY 2019 uses a blended
payment rate, which is determined as 50 percent of the site neutral
payment rate amount for the discharge and 50 percent of the LTCH PPS
standard Federal prospective payment rate amount for the discharge
(Sec. 412.522(c)(3)). There are LTCHs that have a cost reporting
period beginning during FY 2019 that includes discharges that occur
during Federal FY 2020. For example, an LTCH with a January 1, 2020
through December 31, 2020 cost reporting period would have 9 months
of discharges that occur during Federal FY 2020 (that is, discharges
that occur from January 1, 2020 through September 30, 2020).
Therefore, when estimating FY 2020 LTCH PPS payments for site
neutral payment rate cases for this impact analysis, because the
statute specifies that the site neutral payment rate effective date
for a given LTCH is based on the date that the LTCH's cost reporting
period begins during FY 2020, we included an adjustment to account
for this rolling effective date, consistent with the general
approach used for the LTCH PPS impact analysis presented in the FY
2016 IPPS/LTCH PPS proposed rule (80 FR 49831). This approach
accounts for the fact that site neutral payment rate cases in FY
2020 that are in an LTCH's cost reporting period that begins before
October 1, 2019 continue to be paid under the transitional payment
method until the start of the LTCH's first cost reporting period
beginning on or after October 1, 2019. Site neutral payment rate
cases whose discharges from LTCHs occurring during an LTCH's cost
reporting period that begins on or after October 1, 2019 will no
longer be paid under the transitional payment method and will
instead be paid the site neutral payment rate amount as determined
under Sec. 412.522(c)(1).
For purposes of this impact analysis, to estimate total FY 2020
LTCH PPS payments for site neutral payment rate cases, we are
proposing to use the same general approach as was used in the FY
2016 IPPS/LTCH PPS proposed rule with modifications to account for
the rolling end date to the transitional blended payment rate in FY
2020 instead of the rolling effective date for implementation of the
transitional site neutral payment rate in FY 2016. (We note, this is
the same approach as was used in the FY 2018 IPPS/LTCH PPS proposed
and final rules, which was prior to the extension of the
transitional blended payment for LTCH cost reporting periods
beginning in FY 2018 and FY 2019 provided by the provisions of
section 51005(a) of the Bipartisan Budget Act of 2018 (Pub. L. 115-
123). In summary, under this approach, we grouped LTCHs based on the
quarter their cost reporting periods will begin during FY 2020. For
example, LTCHs with cost reporting periods that begin during October
through December 2020 begin during the first quarter of FY 2020. For
LTCHs grouped in each quarter of FY 2020, we modeled those LTCHs'
estimated FY 2020 site neutral payment rate payments under the
transitional blended payment rate based on the quarter in which the
LTCHs in each group will continue to be paid the transitional
payment method for the site neutral payment rate cases.
For purposes of this estimate, then, we assume the cost
reporting period is the same for all LTCHs in each of the quarterly
groups and that this cost reporting period begins on the first day
of that quarter. (For example, the first group consists of 36 LTCHs
whose cost reporting period begins in the first quarter of FY 2020
so that, for purposes of this estimate, we assume all 36 LTCHs began
their FY 2020 cost reporting period on October 1, 2019.) Second, we
estimated the proportion of FY 2020 site neutral payment rate cases
in each of the quarterly groups, and we then assume this proportion
is applicable for all four quarters of FY 2020. (For example, as
discussed in more detail later in this section, we estimate the
first quarter group will discharge 7.9 percent of all FY 2020 site
neutral payment rate cases; and therefore, we estimate that group of
LTCHs will discharge 7.9 percent of all FY 2020 site neutral payment
rate cases in each quarter of FY 2020.) Then, we modeled estimated
FY 2020 payments on a quarterly basis under the LTCH PPS standard
Federal payment rate based on the assumptions described previously.
We continue to believe that this approach is a reasonable means of
taking the rolling effective date into account when estimating FY
2020 payments.
For purposes of this impact analysis, to estimate total FY 2021
LTCH PPS payments for site neutral payment rate cases, the
transitional blended payment rate was not applied to such cases
because all discharges in FY 2021 are either in the LTCH's cost
reporting period that began during FY 2020 or in the LTCH's cost
reporting period that will begin during FY 2021. Site neutral
payment rate cases whose discharges from an LTCH occur during the
LTCH's cost reporting period that begins on or after October 1, 2019
are paid the site neutral payment rate amount determined under Sec.
412.522(c)(1).
Based on the fiscal year begin date information in the December
2019 update of the provider specific file (PSF) and the LTCH claims
from the December 2019 update of the FY 2019 MedPAR files for the
360 LTCHs in our database used for this proposed rule, we found the
following: 7.9 percent of site neutral payment rate cases are from
36 LTCHs whose cost reporting periods began during the first quarter
of FY 2020; 26.5 percent of site neutral payment rate cases are from
84 LTCHs whose cost reporting periods will begin in the second
quarter of FY 2020; 9.4 percent of site neutral payment rate cases
are from 48 LTCHs whose cost reporting periods will begin in the
third quarter of FY 2020; and 56.2 percent of site neutral payment
rate cases are from 188 LTCHs whose cost reporting periods will
begin in the fourth quarter of FY 2020. (We note, four of the 360
LTCHs in our database used for this proposed rule did not have any
site neutral payment rate cases.) Therefore, the following
percentages apply in the approach described previously:
First Quarter FY 2020: 7.9 percent of site neutral
payment rate cases (that is, the percentage of discharges from LTCHs
whose FY 2020 cost reporting period began in the first quarter of FY
2020) are no longer eligible for the transitional blended payment
method, while the remaining 92.1 percent of site neutral payment
rate discharges are eligible to be paid under the transitional
payment method.
Second Quarter FY 2020: 34.4 percent of site neutral
payment rate second quarter discharges (that is, the percentage of
discharges from LTCHs whose FY 2020 cost reporting period that
begins in the first or second quarter of FY 2020) are no longer
eligible for the transitional blended payment method, while the
remaining 65.6 percent of site neutral payment rate second quarter
discharges are eligible to be paid under the transitional payment
method.
Third Quarter FY 2020: 43.8 percent of site neutral
payment rate third quarter discharges (that is, the percentage of
discharges from LTCHs whose FY 2020 cost reporting period that
begins in the first, second, or third quarter of FY 2020) are no
longer eligible for the transitional blended payment method while
the remaining 56.2 percent of site neutral payment rate third
quarter discharges are eligible to be paid under the transitional
payment method.
Fourth Quarter FY 2021: 100.0 percent of site neutral
payment rate fourth quarter

[[Page 32963]]

discharges (that is, the percentage of discharges from LTCHs whose
FY 2020 cost reporting period that begins in the first, second,
third, or fourth quarter of FY 2020) are no longer eligible for the
transitional blended payment method.
Based on the FY 2019 LTCH cases that were used for the analysis
in this proposed rule, approximately 25 percent of those cases were
classified as site neutral payment rate cases (that is, 25 percent
of LTCH cases did not meet the patient-level criteria for exclusion
from the site neutral payment rate). Our Office of the Actuary
currently estimates that the percent of LTCH PPS cases that will be
paid at the site neutral payment rate in FY 2021 will not change
significantly from the most recent historical data. Taking into
account the transitional blended payment rate and other changes that
will apply to the site neutral payment rate cases in FY 2021, we
estimate that aggregate LTCH PPS payments for these site neutral
payment rate cases will decrease by approximately 21 percent (or
approximately $105 million). We note, we estimate payments to site
neutral payment rate cases in FY 2021 represent approximately 10
percent of estimated aggregate FY 2021 LTCH PPS payments.
Based on the FY 2019 LTCH cases that were used for the analysis
in this proposed rule, approximately 75 percent of LTCH cases will
meet the patient-level criteria for exclusion from the site neutral
payment rate in FY 2021, and will be paid based on the LTCH PPS
standard Federal payment rate for the full year. We estimate that
total LTCH PPS payments for these LTCH PPS standard Federal payment
rate cases in FY 2021 will increase approximately 2.1 percent (or
approximately $69 million). This estimated increase in LTCH PPS
payments for LTCH PPS standard Federal payment rate cases in FY 2021
is primarily due to the proposed 2.5 percent annual update to the
LTCH PPS standard Federal payment rate for FY 2021 and the projected
0.5 percent decrease in high cost outlier payments discussed in
section V.D.3.b.(3). of the Addendum to this proposed rule.
Based on the 360 LTCHs that were represented in the FY 2019 LTCH
cases that were used for the analyses in this proposed rule
presented in this Appendix, we estimate that aggregate FY 2020 LTCH
PPS payments will be approximately $3.797 billion, as compared to
estimated aggregate FY 2021 LTCH PPS payments of approximately
$3.761 billion, resulting in an estimated overall decrease in LTCH
PPS payments of approximately $36 million. As discussed earlier,
this estimated decrease in payments is primarily due to the rolling
end to the statutory transitional blended payment rate for site
neutral payment rate cases. We also note that the estimated $36
million decrease in LTCH PPS payments in FY 2021 does not reflect
changes in LTCH admissions or case-mix intensity, which will also
affect the overall payment effects of the policies in this proposed
rule.
The LTCH PPS standard Federal payment rate for FY 2020 is
$42,677.64. For FY 2021, we are proposing to establish an LTCH PPS
standard Federal payment rate of $43,849.28 which reflects the
proposed 2.5 percent annual update to the LTCH PPS standard Federal
payment rate, the incremental change in the one-time budget
neutrality adjustment factor of 0.991249 for eliminating the 25-
percent threshold policy in FY 2021 as discussed in section VII.D.
of the preamble of this proposed rule, and the proposed budget
neutrality factor for general updates to the area wage level
adjustment of 1.0018755 (discussed in section V.B.6. of the Addendum
to this proposed rule). For LTCHs that fail to submit data for the
LTCH QRP, in accordance with section 1886(m)(5)(C) of the Act, we
are proposing an LTCH PPS standard Federal payment rate of
$42,993.68. This LTCH PPS standard Federal payment rate reflects the
updates and factors previously described, as well as the required
2.0 percentage point reduction to the annual update for failure to
submit data under the LTCH QRP. We note that the factors previously
described to determine the FY 2021 LTCH PPS standard Federal payment
rate are applied to the FY 2020 LTCH PPS standard Federal rate set
forth under Sec. 412.523(c)(3)(xvi) (that is, $42,677.64).
Table IV shows the estimated impact for LTCH PPS standard
Federal payment rate cases. The estimated change attributable solely
to the proposed annual update of 2.5 percent to the LTCH PPS
standard Federal payment rate is projected to result in an increase
of 2.5 percent in payments per discharge for LTCH PPS standard
Federal payment rate cases from FY 2020 to FY 2021, on average, for
all LTCHs (Column 6). The estimated increase of 2.5 percent shown in
Column 6 of Table IV also includes estimated payments for short-stay
outlier (SSO) cases, a portion of which are not affected by the
annual update to the LTCH PPS standard Federal payment rate, as well
as the reduction that is applied to the annual update for LTCHs that
do not submit the required LTCH QRP data. However, for all hospital
categories, the projected increase in payments based on the LTCH PPS
standard Federal payment rate to LTCH PPS standard Federal payment
rate cases still rounds to approximately 2.5 percent, the same as
the proposed annual update for FY 2021.
For FY 2021, we are proposing to update the wage index values
based on the most recent available data (data from cost reporting
periods beginning during FY 2017 which is the same data used for the
proposed FY 2021 IPPS wage index), the proposed labor-related share
of 68.0 for FY 2021, based on the most recent available data (IGI's
fourth quarter 2019 forecast) on the relative importance of the
labor-related share of operating and capital costs of the proposed
2017-based LTCH market basket, and the proposed changes to the labor
market areas based on the revisions to the CBSA delineations. We
also are applying an area wage level budget neutrality factor of
1.0018755 to ensure that the proposed changes to the area wage level
adjustment, including the proposed 5-percent cap transition policy,
would not result in any change in estimated aggregate LTCH PPS
payments to LTCH PPS standard Federal payment rate cases.
We currently estimate total high cost outlier payments for LTCH
PPS standard Federal payment rate cases will decrease from FY 2020
to FY 2021. Based on the FY 2019 LTCH cases that were used for the
analyses in this proposed rule, we estimate that the FY 2020 high
cost outlier threshold of $26,778 (as established in the FY 2020
IPPS/LTCH PPS final rule) would result in estimated high cost
outlier payments for LTCH PPS standard Federal payment rate cases in
FY 2020 that are projected to exceed the 7.975 percent target.
Specifically, we currently estimate that high cost outlier payments
for LTCH PPS standard Federal payment rate cases will be
approximately 8.5 percent of the estimated total LTCH PPS standard
Federal payment rate payments in FY 2020. Combined with our estimate
that FY 2021 high cost outlier payments for LTCH PPS standard
Federal payment rate cases will be 7.975 percent of estimated total
LTCH PPS standard Federal payment rate payments in FY 2021, this
will result in an estimated decrease in high cost outlier payments
of approximately 0.5 percent between FY 2020 and FY 2021. We note
that, consistent with past practice, in calculating these estimated
high cost outlier payments, we increased estimated costs by an
inflation factor of 5.4 percent (determined by the Office of the
Actuary) to update the FY 2019 costs of each case to FY 2021.
Table IV shows the estimated impact of the payment rate and
policy changes on LTCH PPS payments for LTCH PPS standard Federal
payment rate cases for FY 2021 by comparing estimated FY 2020 LTCH
PPS payments to estimated FY 2021 LTCH PPS payments. (As noted
earlier, our analysis does not reflect changes in LTCH admissions or
case-mix intensity.) We note that these impacts do not include LTCH
PPS site neutral payment rate cases for the reasons discussed in
section I.J.3. of this Appendix.
As we discuss in detail throughout this proposed rule, based on
the most recent available data, we believe that the provisions of
this proposed rule relating to the LTCH PPS, which are projected to
result in an overall increase in estimated aggregate LTCH PPS
payments, and the resulting LTCH PPS payment amounts will result in
appropriate Medicare payments that are consistent with the statute.

2. Proposed Impact on Rural Hospitals

For purposes of section 1102(b) of the Act, we define a small
rural hospital as a hospital that is located outside of an urban
area and has fewer than 100 beds. As shown in Table IV, we are
projecting a 1.8 percent increase in estimated payments for LTCH PPS
standard Federal payment rate cases for LTCHs located in a rural
area. This estimated impact is based on the FY 2019 data for the 17
rural LTCHs (out of 360 LTCHs) that were used for the impact
analyses shown in Table IV.

3. Anticipated Effects of LTCH PPS Payment Rate Changes and Policy
Changes

a. Proposed Budgetary Impact

Section 123(a)(1) of the BBRA requires that the PPS developed
for LTCHs ``maintain budget neutrality.'' We believe that the
statute's mandate for budget neutrality applies only to the first
year of the

[[Page 32964]]

implementation of the LTCH PPS (that is, FY 2003). Therefore, in
calculating the FY 2003 standard Federal payment rate under Sec.
412.523(d)(2), we set total estimated payments for FY 2003 under the
LTCH PPS so that estimated aggregate payments under the LTCH PPS
were estimated to equal the amount that would have been paid if the
LTCH PPS had not been implemented.
Section 1886(m)(6)(A) of the Act establishes a dual rate LTCH
PPS payment structure with two distinct payment rates for LTCH
discharges beginning in FY 2016. Under this statutory change, LTCH
discharges that meet the patient-level criteria for exclusion from
the site neutral payment rate (that is, LTCH PPS standard Federal
payment rate cases) are paid based on the LTCH PPS standard Federal
payment rate. LTCH discharges paid at the site neutral payment rate
are generally paid the lower of the IPPS comparable per diem amount,
reduced by 4.6 percent for FYs 2018 through 2026, including any
applicable HCO payments, or 100 percent of the estimated cost of the
case, reduced by 4.6 percent. The statute also establishes a
transitional payment method for cases that are paid at the site
neutral payment rate for LTCH discharges occurring in cost reporting
periods beginning during FY 2016 through FY 2019, under which the
site neutral payment rate cases are paid based on a blended payment
rate calculated as 50 percent of the applicable site neutral payment
rate amount for the discharge and 50 percent of the applicable LTCH
PPS standard Federal payment rate for the discharge.
As discussed in section I.J.2. of this Appendix, we project a
decrease in aggregate LTCH PPS payments in FY 2021 of approximately
$36 million. This estimated decrease in payments reflects the
projected increase in payments to LTCH PPS standard Federal payment
rate cases of approximately $69 million and the projected decrease
in payments to site neutral payment rate cases of approximately $105
million under the dual rate LTCH PPS payment rate structure required
by the statute beginning in FY 2016. (We note that these
calculations are based on unrounded numbers and thus may not sum as
expected.)
As discussed in section V.D. of the Addendum to this proposed
rule, our actuaries project cost and resource changes for site
neutral payment rate cases due to the site neutral payment rates
required under the statute. Specifically, our actuaries project that
the costs and resource use for cases paid at the site neutral
payment rate will likely be lower, on average, than the costs and
resource use for cases paid at the LTCH PPS standard Federal payment
rate, and will likely mirror the costs and resource use for IPPS
cases assigned to the same MS-DRG. While we are able to incorporate
this projection at an aggregate level into our payment modeling,
because the historical claims data that we are using in this
proposed rule to project estimated FY 2021 LTCH PPS payments (that
is, FY 2019 LTCH claims data) do not reflect this actuarial
projection, we are unable to model the impact of the change in LTCH
PPS payments for site neutral payment rate cases at the same level
of detail with which we are able to model the impacts of the changes
to LTCH PPS payments for LTCH PPS standard Federal payment rate
cases. Therefore, Table IV only reflects changes in LTCH PPS
payments for LTCH PPS standard Federal payment rate cases and,
unless otherwise noted, the remaining discussion in section I.J.3.
of this Appendix refers only to the impact on LTCH PPS payments for
LTCH PPS standard Federal payment rate cases. In the following
section, we present our proposed provider impact analysis for the
changes that affect LTCH PPS payments for LTCH PPS standard Federal
payment rate cases.

b. Proposed Impact on Providers

The basic methodology for determining a per discharge payment
for LTCH PPS standard Federal payment rate cases is currently set
forth under Sec. Sec. 412.515 through 412.533 and 412.535. In
addition to adjusting the LTCH PPS standard Federal payment rate by
the MS-LTC-DRG relative weight, we make adjustments to account for
area wage levels and SSOs. LTCHs located in Alaska and Hawaii also
have their payments adjusted by a COLA. Under our application of the
dual rate LTCH PPS payment structure, the LTCH PPS standard Federal
payment rate is generally only used to determine payments for LTCH
PPS standard Federal payment rate cases (that is, those LTCH PPS
cases that meet the statutory criteria to be excluded from the site
neutral payment rate). LTCH discharges that do not meet the patient-
level criteria for exclusion are paid the site neutral payment rate,
which we are calculating as the lower of the IPPS comparable per
diem amount as determined under Sec. 412.529(d)(4), reduced by 4.6
percent for FYs 2018 through 2026, including any applicable outlier
payments, or 100 percent of the estimated cost of the case as
determined under existing Sec. 412.529(d)(2). In addition, when
certain thresholds are met, LTCHs also receive HCO payments for both
LTCH PPS standard Federal payment rate cases and site neutral
payment rate cases that are paid at the IPPS comparable per diem
amount.
To understand the impact of the changes to the LTCH PPS payments
for LTCH PPS standard Federal payment rate cases presented in this
proposed rule on different categories of LTCHs for FY 2021, it is
necessary to estimate payments per discharge for FY 2020 using the
rates, factors, and the policies established in the FY 2020 IPPS/
LTCH PPS proposed rule and estimate payments per discharge for FY
2021 using the rates, factors, and the policies in this FY 2021
IPPS/LTCH PPS proposed rule (as discussed in section VII. of the
preamble of this proposed rule and section V. of the Addendum to
this proposed rule). As discussed elsewhere in this proposed rule,
these estimates are based on the best available LTCH claims data and
other factors, such as the application of inflation factors to
estimate costs for HCO cases in each year. The resulting analyses
can then be used to compare how our policies applicable to LTCH PPS
standard Federal payment rate cases affect different groups of
LTCHs.
For the following analysis, we group hospitals based on
characteristics provided in the OSCAR data, cost report data in
HCRIS, and PSF data. Hospital groups included the following:
Location: Large urban/other urban/rural.
Participation date.
Ownership control.
Census region.
Bed size.

c. Proposed Calculation of LTCH PPS Payments for LTCH PPS Standard
Federal Payment Rate Cases

For purposes of this impact analysis, to estimate the per
discharge payment effects of our policies on payments for LTCH PPS
standard Federal payment rate cases, we simulated FY 2020 and
proposed FY 2021 payments on a case-by-case basis using historical
LTCH claims from the FY 2019 MedPAR files that met or would have met
the criteria to be paid at the LTCH PPS standard Federal payment
rate if the statutory patient-level criteria had been in effect at
the time of discharge for all cases in the FY 2019 MedPAR files. For
modeling FY 2020 LTCH PPS payments, we used the FY 2020 standard
Federal payment rate of $42,677.64 (or $41,844.90 for LTCHs that
failed to submit quality data as required under the requirements of
the LTCH QRP). Similarly, for modeling payments based on the
proposed FY 2021 LTCH PPS standard Federal payment rate, we used the
proposed FY 2021 standard Federal payment rate of $43,849.28 (or
$42,993.68 for LTCHs that failed to submit quality data as required
under the requirements of the LTCH QRP). In each case, we applied
the applicable adjustments for area wage levels and the COLA for
LTCHs located in Alaska and Hawaii. Specifically, for modeling FY
2020 LTCH PPS payments, we used the current FY 2020 labor-related
share (66.3 percent), the wage index values established in the
Tables 12A and 12B listed in the Addendum to the FY 2020 IPPS/LTCH
PPS proposed rule (which are available via the internet on the CMS
website), the FY 2020 HCO fixed-loss amount for LTCH PPS standard
Federal payment rate cases of $26,778 (as reflected in the FY 2020
IPPS/LTCH PPS final rule), and the FY 2020 COLA factors (shown in
the table in section V.C. of the Addendum to that final rule) to
adjust the FY 2020 nonlabor-related share (33.7 percent) for LTCHs
located in Alaska and Hawaii. Similarly, for modeling FY 2021 LTCH
PPS payments, we used the proposed FY 2021 LTCH PPS labor-related
share (68.0 percent), the proposed FY 2021 wage index values from
Tables 12A and 12B listed in section VI. of the Addendum to this
proposed rule (which are available via the internet on the CMS
website), the FY 2021 fixed-loss amount for LTCH PPS standard
Federal payment rate cases of $30,515 (as discussed in section
V.D.3. of the Addendum to this proposed rule), and the proposed FY
2021 COLA factors (shown in the table in section V.C. of the
Addendum to this proposed rule) to adjust the FY 2021 nonlabor-
related share (32.0 percent) for LTCHs located in Alaska and Hawaii.
We note that in modeling payments for HCO cases for LTCH PPS
standard Federal payment rate cases, we applied an inflation

[[Page 32965]]

factor of 2.5 percent (determined by the Office of the Actuary) to
update the FY 2019 costs of each case to FY 2020, and an inflation
factor of 5.4 percent (determined by the Office of the Actuary) to
update the FY 2019 costs of each case to FY 2021.
The impacts that follow reflect the estimated ``losses'' or
``gains'' among the various classifications of LTCHs from FY 2020 to
FY 2021 based on the payment rates and policy changes applicable to
LTCH PPS standard Federal payment rate cases presented in this
proposed rule. Table IV illustrates the estimated aggregate impact
of the change in LTCH PPS payments for LTCH PPS standard Federal
payment rate cases among various classifications of LTCHs. (As
discussed previously, these impacts do not include LTCH PPS site
neutral payment rate cases.)
The first column, LTCH Classification, identifies the
type of LTCH.
The second column lists the number of LTCHs of each
classification type.
The third column identifies the number of LTCH cases
expected to meet the LTCH PPS standard Federal payment rate
criteria.
The fourth column shows the estimated FY 2020 payment
per discharge for LTCH cases expected to meet the LTCH PPS standard
Federal payment rate criteria (as described previously).
The fifth column shows the estimated FY 2021 payment
per discharge for LTCH cases expected to meet the LTCH PPS standard
Federal payment rate criteria (as described previously).
The sixth column shows the percentage change in
estimated payments per discharge for LTCH cases expected to meet the
LTCH PPS standard Federal payment rate criteria from FY 2020 to FY
2021 due to the proposed annual update to the standard Federal rate
(as discussed in section V.A.2. of the Addendum to this proposed
rule).
The seventh column shows the percentage change in
estimated payments per discharge for LTCH PPS standard Federal
payment rate cases from FY 2020 to FY 2021 for changes due to the
proposed changes to the area wage level adjustment (that is, the
updated hospital wage data, proposed labor-related share, and the
proposed to the geographic labor-market area designations, including
the proposed 5-percent cap transition policy), and the application
of the proposed corresponding budget neutrality factor (as discussed
in section V.B.6. of the Addendum to this proposed rule).
The eighth column shows the percentage change in
estimated payments per discharge for LTCH PPS standard Federal
payment rate cases from FY 2020 (Column 4) to FY 2021 (Column 5) for
all proposed changes.
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d. Results

Based on the FY 2019 LTCH cases (from 360 LTCHs) that were used
for the analyses in this proposed rule, we have prepared the
following summary of the impact (as shown in Table IV) of the LTCH
PPS payment rate and proposed policy changes for LTCH PPS standard
Federal payment rate cases presented in this proposed rule. The
impact analysis in Table IV shows that estimated payments per
discharge for LTCH PPS

[[Page 32968]]

standard Federal payment rate cases are projected to increase 2.1
percent, on average, for all LTCHs from FY 2020 to FY 2021 as a
result of the payment rate and policy changes applicable to LTCH PPS
standard Federal payment rate cases presented in this proposed rule.
This estimated 2.1 percent increase in LTCH PPS payments per
discharge was determined by comparing estimated FY 2021 LTCH PPS
payments (using the proposed payment rates and factors discussed in
this proposed rule) to estimated FY 2020 LTCH PPS payments for LTCH
discharges which will be LTCH PPS standard Federal payment rate
cases if the dual rate LTCH PPS payment structure was or had been in
effect at the time of the discharge (as described in section I.J.3.
of this Appendix).
As stated previously, we are proposing to update the LTCH PPS
standard Federal payment rate for FY 2021 by 2.5 percent. For LTCHs
that fail to submit quality data under the requirements of the LTCH
QRP, as required by section 1886(m)(5)(C) of the Act, a 2.0
percentage point reduction is applied to the annual update to the
LTCH PPS standard Federal payment rate. In addition, we are applying
the incremental change in the one-time budget neutrality adjustment
factor of 0.991249 for the cost of eliminating the 25-percent
threshold policy in FY 2021 as discussed in section VII.D. of the
preamble of this proposed rule. Consistent with Sec. 412.523(d)(4),
we also are applying a proposed budget neutrality factor for
proposed changes to the area wage level adjustment of 1.0018755
(discussed in section V.B.6. of the Addendum to this proposed rule),
based on the best available data at this time, to ensure that any
proposed changes to the area wage level adjustment will not result
in any change (increase or decrease) in estimated aggregate LTCH PPS
standard Federal payment rate payments. As we also explained earlier
in this section, for most categories of LTCHs (as shown in Table IV,
Column 6), the estimated payment increase due to the proposed 2.5
percent annual update to the LTCH PPS standard Federal payment rate
is projected to result in approximately a 2.5 percent increase in
estimated payments per discharge for LTCH PPS standard Federal
payment rate cases for all LTCHs from FY 2020 to FY 2021. We note
our estimate of the changes in payments due to the update to the
LTCH PPS standard Federal payment rate also reflects estimated
payments for SSO cases that are paid using a methodology that is not
entirely affected by the update to the LTCH PPS standard Federal
payment rate. Consequently, for certain hospital categories, we
estimate that payments to LTCH PPS standard Federal payment rate
cases may increase by slightly less than 2.5 percent due to the
annual update to the LTCH PPS standard Federal payment rate for FY
2021.

(1) Location

Based on the most recent available data, the vast majority of
LTCHs are located in urban areas. Only approximately 5 percent of
the LTCHs are identified as being located in a rural area, and
approximately 4 percent of all LTCH PPS standard Federal payment
rate cases are expected to be treated in these rural hospitals. The
impact analysis presented in Table IV shows that the overall average
percent increase in estimated payments per discharge for LTCH PPS
standard Federal payment rate cases from FY 2020 to FY 2021 for all
hospitals is 2.1 percent. The projected increase for urban hospitals
is 2.1 percent for urban hospitals, while the projected increase for
rural hospitals is 1.8 percent. This smaller than average projected
increase for rural LTCHs is primarily due to the proposed changes to
the area wage adjustment, including the proposed changes to the
labor market areas.

(2) Participation Date

LTCHs are grouped by participation date into four categories:
(1) Before October 1983; (2) between October 1983 and September
1993; (3) between October 1993 and September 2002; and (4) October
2002 and after. Based on the most recent available data, the
categories of LTCHs with the largest expected percentage of LTCH PPS
standard Federal payment rate cases (approximately 41 percent and 43
percent, respectively) are in LTCHs that began participating in the
Medicare program between October 1993 and September 2002 and after
October 2002. These LTCHs are expected to experience an increase in
estimated payments per discharge for LTCH PPS standard Federal
payment rate cases from FY 2020 to FY 2021 of 2.0 percent and 2.1
percent, respectively. LTCHs that began participating in the
Medicare program between October 1983 and September 1993 are
projected to experience the largest percent increase, 2.2 percent,
in estimated payments per discharge for LTCH PPS standard Federal
payment rate cases from FY 2020 to FY 2021, as shown in Table IV.
Approximately 3 percent of LTCHs began participating in the
Medicare program before October 1983, and these LTCHs are projected
to experience an average percent increase of 1.9 percent in
estimated payments per discharge for LTCH PPS standard Federal
payment rate cases from FY 2020 to FY 2021. Approximately 40 percent
of LTCHs began participating in the Medicare program between October
1993 and September 2002, and these LTCHs are projected to experience
an increase of 2.0 percent in estimated payments for LTCH PPS
standard Federal payment rate cases from FY 2020 to FY 2021. LTCHs
that began participating in the Medicare program after October 1,
2002, which treat approximately 43 percent of all LTCH PPS standard
Federal payment rate cases, are projected to experience a 2.1
percent increase in estimated payments from FY 2020 to FY 2021.

(3) Ownership Control

LTCHs are grouped into three categories based on ownership
control type: Voluntary, proprietary, and government. Based on the
most recent available data, approximately 17 percent of LTCHs are
identified as voluntary (Table IV). The majority (approximately 80
percent) of LTCHs are identified as proprietary, while government
owned and operated LTCHs represent approximately 3 percent of LTCHs.
Based on ownership type, voluntary and proprietary LTCHs are each
expected to experience a 2.1 percent increase in payments to LTCH
PPS standard Federal payment rate cases. Government owned and
operated LTCHs, meanwhile, are expected to experience a 1.9 percent
increase in payments to LTCH PPS standard Federal payment rate cases
from FY 2020 to FY 2021.

(4) Census Region

Estimated payments per discharge for LTCH PPS standard Federal
payment rate cases for FY 2021 are projected to increase across all
census regions. LTCHs located in the Pacific region are projected to
experience the largest increase at 2.7 percent. The remaining
regions are projected to experience an increase in payments in the
range of 1.7 to 2.2 percent. These regional variations are primarily
due to the proposed changes to the area wage adjustment, including
the proposed changes to the labor market areas.

(5) Bed Size

LTCHs are grouped into six categories based on bed size: 0-24
beds; 25-49 beds; 50-74 beds; 75-124 beds; 125-199 beds; and greater
than 200 beds. We project that LTCHs with 0-24 beds will experience
the lowest increase in payments for LTCH PPS standard Federal
payment rate cases, 1.8 percent. The majority of LTCHs, that is
those with 25-49 beds, 75-124 beds, and with 200 or more beds, will
experience an increase in payments for LTCH PPS standard Federal
payment rate cases of 2.1 percent. LTCHs with 50-74 beds are
projected to experience the largest increase in payments of 2.2
percent.

5. Effect on the Medicare Program

As stated previously, we project that the provisions of this
proposed rule will result in an increase in estimated aggregate LTCH
PPS payments to LTCH PPS standard Federal payment rate cases in FY
2021 relative to FY 2020 of approximately $69 million (or
approximately 2.1 percent) for the 360 LTCHs in our database.
Although, as stated previously, the hospital-level impacts do not
include LTCH PPS site neutral payment rate cases, we estimate that
the provisions of this proposed rule will result in a decrease in
estimated aggregate LTCH PPS payments to site neutral payment rate
cases in FY 2021 relative to FY 2020 of approximately $105 million
(or approximately -21 percent) for the 360 LTCHs in our database.
(As noted previously, we estimate payments to site neutral payment
rate cases in FY 2021 represent approximately 10 percent of total
estimated FY 2021 LTCH PPS payments.) Therefore, we project that the
provisions of this proposed rule will result in a decrease in
estimated aggregate LTCH PPS payments for all LTCH cases in FY 2021
relative to FY 2020 of approximately $36 million (or approximately -
0.9 percent) for the 360 LTCHs in our database.

6. Effect on Medicare Beneficiaries

Under the LTCH PPS, hospitals receive payment based on the
average resources consumed by patients for each diagnosis. We do not
expect any changes in the quality of care or access to services for
Medicare beneficiaries as a result of this proposed rule, but we
continue to expect that paying prospectively for LTCH services will
enhance the efficiency of the Medicare program. As discussed
previously, we do not expect the

[[Page 32969]]

continued implementation of the site neutral payment system to have
a negative impact on access to or quality of care, as demonstrated
in areas where there is little or no LTCH presence, general short-
term acute care hospitals are effectively providing treatment for
the same types of patients that are treated in LTCHs.

K. Effects of Proposed Requirements for the Hospital Inpatient
Quality Reporting (IQR) Program

In section VIII.A. of the preamble of this proposed rule, we
discuss our proposed requirements for hospitals to report quality
data under the Hospital IQR Program in order to receive the full
annual percentage increase for the FY 2022 payment determination and
subsequent years.
In this proposed rule, we are proposing reporting, submission,
and public display requirements for eCQMs, including policies to:
(1) Progressively increase the numbers of quarters of eCQM data
reported, from one self-selected quarter of data to four quarters of
data over a 3-year period, by requiring hospitals to report: (a) Two
quarters of data for the CY 2021 reporting period/FY 2023 payment
determination for each of the four self-selected eCQMs; (b) three
quarters of data for the CY 2022 reporting period/FY 2024 payment
determination for three self-selected eCQMS and the Safe Use of
Opioids eCQM; and (c) four quarters of data beginning with the CY
2023 reporting period/FY 2025 payment determination and for
subsequent years, while continuing to allow hospitals to report: (i)
Three self-selected eCQMs, and (ii) the Safe Use of Opioids eCQM;
and (2) begin public display of eCQM data beginning with data
reported by hospitals for the CY 2021 reporting period and for
subsequent years. The Hospital IQR Program eCQM-related proposals
are in alignment with proposals under the Promoting Interoperability
Program. We also are proposing to expand the requirement to use EHR
technology certified to the 2015 Edition for submitting data on not
only the previously finalized Hybrid Hospital-Wide Readmission
measure, but all hybrid measures in the Hospital IQR Program. While
we believe there would be no change to the information collection
burden estimate due to public display of eCQM data, we acknowledge
that there is other burden associated with this proposal. For
example, there is burden associated with the optional reviewing of
hospital-specific reports during the public reporting preview;
however, we believe this burden is nominal because hospitals already
review these reports with respect to other types of measures for the
Hospital IQR Program.
We also are proposing to make several changes to streamline
validation processes under the Hospital IQR Program. We are
proposing to: (1) Require the use of electronic file submissions via
a CMS-approved secure file transmission process and no longer allow
the submission of paper copies of medical records or copies on
digital portable media such as CD, DVD, or flash drive starting with
validation affecting the FY 2024 payment determination; (2) combine
the validation processes for chart-abstracted measures and eCQMs for
validation affecting the FY 2024 payment determination by: (a)
Aligning data submission quarters; (b) combining hospital selection,
including: (i) Reducing the pool of hospitals randomly selected for
chart-abstracted measure validation; and (ii) integrating and
applying targeting criteria for eCQM validation; (c) removing
previous exclusion criteria; and (d) combining scoring processes by
providing one combined validation score for the validation of chart-
abstracted measures and eCQMs with the eCQM portion of the combined
score weighted at zero; and (3) formalize the process for conducting
educational reviews for eCQM validation affecting the FY 2023
payment determination in alignment with current processes for
providing feedback for chart-abstracted validation results.
We estimate a total information collection burden increase for
3,300 IPPS hospitals of 6,533 hours (6,600 hours-67 hours)
associated with our proposed policies and updated burden estimates
and a total cost increase related to this information collection of
approximately $253,480 ($38.80 hourly wage x 6,533 hours) (which
also reflects use of an updated hourly wage rate), across a 4-year
period from the CY 2021 reporting period/FY 2023 payment
determination through the CY 2024 reporting period/FY 2026 payment
determination, compared to our currently approved information
collection burden estimates. We refer readers to section XI.B.7. of
the preamble of this proposed rule (information collection
requirements) for a detailed discussion of the calculations
estimating the changes to the information collection burden for
submitting data to the Hospital IQR Program.
With regard to our proposal to combine the hospital selection
process, including the reduction of the pool of hospitals randomly
selected for chart-abstracted measure validation from 400 hospitals
to up to 200 hospitals, while we expect no change to the information
collection burden for the Hospital IQR Program as discussed in
section XI.B.7.b. of this preamble of this proposed rule because we
directly reimburse hospitals for medical records, we believe there
may be other cost savings beyond information collection burden due
to 200 fewer hospitals being selected for Hospital IQR Program
validation each year.
Historically, 100 hospitals, on average, that participate in the
Hospital IQR Program do not receive the full annual percentage
increase in any fiscal year due to the failure to meet all
requirements of this Program. We anticipate that the number of
hospitals not receiving the full annual percentage increase will be
approximately the same as in past years.

L. Effects of Requirements for the PPS-Exempt Cancer Hospital
Quality Reporting (PCHQR) Program

In section VIII.B. of the preamble of this proposed rule, we
discuss our proposed policies for the quality data reporting program
for PPS-exempt cancer hospitals (PCHs), which we refer to as the
PPS-exempt Cancer Hospital Quality Reporting (PCHQR) Program. The
PCHQR Program is authorized under section 1866(k) of the Act, which
was added by section 3005 of the Affordable Care Act. There is no
financial impact to PCH Medicare reimbursement if a PCH does not
submit data.
In section VIII.B.4. of the preamble of this proposed rule, we
are proposing to adopt refined versions of two existing measures:
The Catheter-Associated Urinary Tract Infection (CAUTI) Outcome
Measure and the Central Line-Associated Bloodstream Infection
(CLABSI) Outcome Measure, beginning with the FY 2023 program year.
As explained in section XI.B.8. of the preamble of this proposed
rule, we do not anticipate any change in burden hours on the PCHs
associated with our proposal to refine the CAUTI and CLABSI measures
beginning with the FY 2023 program year because there are no changes
to the data submission requirements for CAUTI and CLABSI.

M. Effects of Proposed Requirements for the Long-Term Care Hospital
Quality Reporting Program (LTCH QRP)

We are not proposing any new policies for the LTCH QRP in this
proposed rule.

N. Effects of Proposed Requirements Regarding the Promoting
Interoperability Programs

In section VIII.D. of the preamble of this proposed rule, we
discuss our proposed requirements for eligible hospitals and CAHs
participating in the Medicare and Medicaid Promoting
Interoperability Programs. Specifically, we are proposing the
following changes for eligible hospitals and CAHs that attest to CMS
under the Medicare Promoting Interoperability Program: (1) An EHR
reporting period of a minimum of any continuous 90-day period in CY
2022 for new and returning participants (eligible hospitals and
CAHs); (2) to maintain the Electronic Prescribing Objective's Query
of PDMP measure as optional and worth 5 bonus points in CY 2021; (3)
to modify the name of the Support Electronic Referral Loops by
Receiving and Incorporating Health Information measure; (4) to
progressively increase the number of quarters for which hospitals
are required to report eCQM data, from the current requirement of
one self-selected calendar quarter of data, to four calendar
quarters of data, over a three year period. Specifically, we propose
to require: (a) 2 self-selected calendar quarters of data for the CY
2021 reporting period; (b) 3 self-selected calendar quarters of data
for the CY 2022 reporting period; and (c) 4 self-selected calendar
quarters of data beginning with the CY 2023 reporting period, where
the proposed submission period for the Medicare Promoting
Interoperability Program would be the 2 months following the close
of the CY 2023 (ending February 28, 2024); (5) to begin publicly
reporting eCQM performance data beginning with the eCQM data
reported by eligible hospitals and CAHs for the reporting period in
CY 2021 on the Hospital Compare and/or data.medicare.gov websites or
successor websites; (6) to correct errors and amend regulation text
under Sec. 495.104(c)(5)(viii)(B) through (D) regarding transition
factors under section 1886(n)(2)(E)(i) for the incentive payments
for Puerto Rico eligible hospitals; and (7) to correct errors and
amend regulation text

[[Page 32970]]

under Sec. 495.20(e)(5)(iii) and (l)(11)(ii)(C)(1) for regulatory
citations for the ONC certification criteria. We are amending our
regulation texts as necessary to incorporate these proposed changes.
For the EHR reporting period in CY 2021, the proposals summarized
here are mainly continuations of existing policies. However, two
updated instances of a previous miscalculation and an updated Bureau
of Labor Statistics wage rate will result in both a minor reduction
of program burden hours (-44) as well as a small increase in total
cost (+$24,024) for CY 2021.

O. Alternatives Considered

This proposed rule contains a range of policies. It also
provides descriptions of the statutory provisions that are
addressed, identifies the proposed policies, and presents rationales
for our decisions and, where relevant, alternatives that were
considered.

1. Proposed Implementation of Revised Labor Market Area Delineations

As discussed in section III.A.2. of the preamble of this
proposed rule, the wage index is calculated and assigned to
hospitals on the basis of the labor market area in which the
hospital is located. Under section 1886(d)(3)(E) of the Act,
beginning with FY 2005, we delineate hospital labor market areas
based on OMB-established Core-Based Statistical Areas (CBSAs).
Generally, OMB issues major revisions to statistical areas every 10
years, based on the results of the decennial census. However, OMB
occasionally issues minor updates and revisions to statistical areas
in the years between the decennial censuses through OMB Bulletins.
On September 14, 2018, OMB issued OMB Bulletin No. 18-04. While OMB
Bulletin No. 18-04 is not based on new census data, it includes some
material changes to the OMB statistical area delineations.
Specifically, under the revised OMB delineations, there would be
some new CBSAs, urban counties that would become rural, rural
counties that would become urban, and existing CBSAs would be split
apart. In addition, the revised OMB delineations would affect
various hospital reclassifications, the out-migration adjustment
(established by section 505 of Public Law 108-173), and treatment of
hospitals located in certain rural counties (that is, ``Lugar''
hospitals) under section 1886(d)(8)(B) of the Act.
We considered whether we should propose to implement the revised
OMB delineations as described in OMB Bulletin No. 18-04, beginning
with the FY 2021 IPPS wage index, or whether we should wait to
propose to implement any further changes to the hospital labor
market areas until OMB issues revisions to the statistical areas
based on the results of the upcoming decennial census. We believe it
is important for the IPPS to use the latest labor market area
delineations as soon as reasonably possible in order to maintain a
more accurate and up-to-date payment system that reflects the
reality of population shifts and labor market conditions.
Furthermore, we believe that using the most current delineations
will increase the integrity of the IPPS wage index system by
creating a more accurate representation of geographic variations in
wage levels. Therefore, we decided not to wait until OMB issues
revisions to the statistical areas based on the results of the
upcoming decennial census, but are proposing to implement the
revised OMB delineations as described in the September 14, 2018 OMB
Bulletin No. 18-04, effective October 1, 2020 beginning with the FY
2021 IPPS wage index. We note that as described in section
III.A.2.c. of the preamble of this proposed rule, we are proposing a
transition for hospitals that would see a decrease of more than 5
percent in their FY 2021 wage index compared to their FY 2020 wage
index.

2. Market-Based MS-DRG Relative Weight Estimation Data Collection and
Potential Change in Methodology for Calculating MS-DRG Relative Weights

In section IV.P.2.c. of the preamble of this proposed rule, we
are proposing that hospitals would report on the Medicare cost
report: (1) The median payer-specific negotiated charge that the
hospital has negotiated with all of its Medicare Advantage (MA)
organizations (also referred to as MA organizations) payers, by MS-
DRG; and (2) the median payer-specific negotiated charge the
hospital has negotiated with all of its third-party payers, which
would include MA organizations, by MS-DRG. The market-based rate
information we are proposing to collect on the Medicare cost report
would be the median of the payer-specific negotiated charges by MS-
DRG, as described previously, for a hospital's MA organization
payers and all of its third party payers. The payer-specific
negotiated charges used by hospitals to calculate these medians
would be the payer-specific negotiated charges for service packages
that hospitals are required to make public under the requirements we
finalized in the Hospital Price Transparency final rule (84 FR
65524) that can be cross-walked to an MS-DRG. We note that we may
also consider finalizing the collection of alternative market-based
data, such as the median negotiated reimbursement amount as
explained in section IV.P.2.c. of this proposed rule, or any
refinements to the definition of median payer-specific negotiated
charge, based on review of public comments. We are also considering
a modification to the market based data collection proposal, to
require only the reporting of the median payer-specific negotiated
charge for MA organizations on the Medicare cost report. We are
inviting public comments on our proposed data collection, as well as
on these or other alternative data collections of payer-specific
negotiated charges or other market-based information on the Medicare
cost report, which we may consider finalizing in the FY 2021 IPPS/
LTCH PPS final rule for cost reporting periods ending on or after
January 1, 2021, after consideration of the comments received.
In section IV.P.2.d. of the preamble of this proposed rule, we
are requesting comments on a potential new market-based methodology
for estimating the MS-DRG relative weights, beginning in FY 2024,
and which we may consider adopting in the FY 2021 IPPS/LTCH PPS
final rule. This potential new market-based methodology would be
based on the proposed median payer-specific negotiated charge
information collected on the Medicare cost report. In this
methodology, we are also considering alternatives to this approach,
such as the use of the median payer-specific negotiated charge for
all third-party payers (instead of the median payer-specific
negotiated charge for all MA organizations), or other alternative
collections of payer-specific negotiated charges or other market-
based information such as a median negotiated reimbursement amount
that a hospital negotiates with its MA organizations or third party
payers (as described further in section IV.P.2.c of the preamble of
this proposed rule), within the MS-DRG relative weight methodology.
The same relative weight calculation described in section
IV.P.2.d. would be used if an alternative to the median payer-
specific negotiated charge was collected on the Medicare cost
report, as further described in that section. We are requesting
comments on this potential new market-based methodology for
estimating the MS-DRG relative weights beginning in FY 2024,
including comments on any suggested refinements to this potential
methodology or alternative approaches, which we may consider
adopting in the FY 2021 IPPS/LTCH final rule. Within Step Two of the
potential MS-DRG relative weight methodology described in section
IV.P.2.d. of the preamble of this proposed rule, we note that we are
considering alternative weighting factors such as using the
unadjusted Medicare case counts, or other alternative approaches
based on the review of public comments. In Step Three of the
potential methodology we also reference that if an alternative
weighting factor to the Medicare transfer adjusted case counts was
used in Step Two we would use that same alternative weight factor in
Step Three.
If we were to finalize a change in the IPPS FY 2021 rulemaking
to incorporate payer-specific negotiated charges within the MS-DRG
relative weight methodology, effective for FY 2024, we are open to
adjusting any finalized policy, through future rulemaking, prior to
the FY 2024 effective date. Should we finalize our data collection
proposal, we would conduct further analysis based on the data
received and provide an opportunity for public comment on that
analysis, prior to the FY 2024 effective date.

P. Reducing Regulation and Controlling Regulatory Costs

Executive Order 13771, titled Reducing Regulation and
Controlling Regulatory Costs, was issued on January 30, 2017. This
proposed rule is considered to be an E.O. 13771 regulatory action.
We estimate that this rule generates approximately $2.4 million in
annualized costs, discounted at 7 percent relative to fiscal year
2016, over a perpetual time horizon.
We discuss the estimated burden and costs for the Hospital IQR
Program in section XI.B.7. of the preamble of this proposed rule,
and estimate that the impact of these changes is an increase in
costs of approximately $253,480 (which also reflects use of an
updated hourly wage rate), across a 4-year period from the CY 2021
reporting period/FY

[[Page 32971]]

2023 payment determination through the CY 2024 reporting period/FY
2026 payment determination, or $77 per hospital across the 4-year
period.
We discuss the estimated burden and costs for the PCHQR Program
in section XI.B.8. of the preamble of this proposed rule, and
estimate that the impact of these changes is an increase in costs of
approximately $86,388 across all PPS-exempt cancer hospitals. This
estimate reflects an updated hourly wage. There are no estimated
changes to the estimated number of burden hours under the program.
We do not anticipate an increase or decrease in burden and costs
for the Long-Term Care Hospital Quality Reporting Program as there
are no new proposed policies in this proposed rule.
We discuss the estimated burden for the Hospital-Acquired
Condition Reduction Program in section XI.B.6. of the preamble of
this proposed rule and estimate the impact of these changes is a
decrease in costs of approximately -$558,720 (which also reflects
use of an updated hourly wage rate) across all subsection (d)
hospitals annually.
We do not anticipate an increase or decrease in burden and costs
for the Hospital Readmissions Reduction Program or the Hospital
Value-Based Purchasing Program based on the proposed policies in
this proposed rule.
Also, as noted in section I.R. of this Appendix, the regulatory
review cost for this proposed rule is $16,090,234. Section I.H.11.
of this Appendix discusses annual savings of $14.4 million, but this
amount has not yet been incorporated into E.O. 13771 accounting,
pending the estimation of associated transition costs.
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Q. Overall Conclusion

1. Acute Care Hospitals

Acute care hospitals are estimated to experience an increase of
approximately $2.067 billion in FY 2021, including operating,
capital, and new technology changes as modeled for this proposed
rule. The estimated change in operating payments is approximately
$1.978 billion (discussed in section I.G. and I.H. of this
Appendix). The estimated change in capital payments is approximately
$0.036 billion (discussed in section I.I. of this Appendix). The
estimated change in new technology add-on payments is approximately
$0.053 billion as discussed in section I.H. of this Appendix. The
change in new technology add-on payments reflects the net impact of
continuing and expiring current new technology add on payments.
Total may differ from the sum of the components due to rounding.
Table I. of section I.G. of this Appendix also demonstrates the
estimated redistributional impacts of the IPPS budget neutrality
requirements for the proposed MS-DRG and wage index changes, and for
the wage index reclassifications under the MGCRB.
We estimate that hospitals would experience a 0.4 percent
increase in capital payments per case, as shown in Table III. of
section I.I. of this Appendix. We project that there would be a $36
million increase in capital payments in FY 2021 compared to FY 2020.
The discussions presented in the previous pages, in combination
with the remainder of this proposed rule, constitute a regulatory
impact analysis.

2. LTCHs

Overall, LTCHs are projected to experience an increase in
estimated payments per discharge in FY 2021. In the impact analysis,
we are using the proposed rates, factors, and policies presented in
this proposed rule based on the best available claims and CCR data
to estimate the change in payments under the LTCH PPS for FY 2021.
Accordingly, based on the best available data for the 360 LTCHs in
our database, we estimate that overall FY 2021 LTCH PPS payments
will decrease approximately $36 million relative to FY 2020
primarily as a result of the end of the statutory transition period
for site neutral payment rate cases.

R. Regulatory Review Costs

If regulations impose administrative costs on private entities,
such as the time needed to read and interpret a rule, we should
estimate the cost associated with regulatory review. Due to the
uncertainty involved with accurately quantifying the number of
entities that would review the proposed rule, we assumed that the
total number of timely pieces of correspondence on last year's
proposed rule would be the number of reviewers of the proposed rule.
We acknowledge that this assumption may understate or overstate the
costs of reviewing the rule. It is possible that not all commenters
reviewed last year's rule in detail, and it is also possible that
some reviewers chose not to comment on the proposed rule. For those
reasons, and consistent with our approach in previous rulemakings
(83 FR 41777 and 84 FR 42697), we believe that the number of past
commenters would be a fair estimate of the number of reviewers of
the proposed rule. We welcome any public comments on the approach in
estimating the number of entities that will review this proposed
rule.
We also recognize that different types of entities are in many
cases affected by mutually exclusive sections of the proposed rule.
Therefore, for the purposes of our estimate, and consistent with our
approach in previous rulemaking (83 FR 41777 and 84 FR 42697), we
assume that each reviewer read approximately 50 percent of the
proposed rule. We welcome public comments on this assumption.
We have used the number of timely pieces of correspondence on
the FY 2020 proposed rule as our estimate for the number of
reviewers of this proposed rule. We continue to acknowledge the
uncertainty involved with using this number, but we believe it is a
fair estimate due to the variety of entities affected and the
likelihood that some of them choose to rely (in full or in part) on
press releases, newsletters, fact sheets, or other sources rather
than the comprehensive review of preamble and regulatory text. Using
the wage information from the BLS for medical and health service
managers (Code 11-9111), we estimate that the cost of reviewing the
proposed rule is $109.36 per hour, including overhead and fringe
benefits (https://www.bls.gov/oes/current/oes_nat.htm). Assuming an
average reading speed, we estimate that it would take approximately
18.76 hours for the staff to review half of this proposed rule. For
each IPPS hospital or LTCH that reviews this proposed rule, the
estimated cost is $2,051 (18.76 hours x $109.36). Therefore, we
estimate that the total cost of reviewing this proposed rule is
$16,090,234 ($2,051 x 7,844 reviewers).

II. Accounting Statements and Tables

A. Acute Care Hospitals

As required by OMB Circular A-4 (available at https://obamawhitehouse.archives.gov/omb/circulars_a-004_a-4/ and https://georgewbush-whitehouse.archives.gov/omb/circulars/a004/a-4.html), in
Table V. of this Appendix, we have prepared an accounting statement
showing the classification of the expenditures associated with the
provisions of this proposed rule as they relate to acute care
hospitals. This table provides our best estimate of the change in
Medicare payments to providers as a result of the proposed changes
to the IPPS presented in this proposed rule. All expenditures are
classified as transfers to Medicare providers.
As shown in Table V. of this Appendix, the net costs to the
Federal Government associated with the proposed policies in this
proposed rule are estimated at $2.067 billion.

[[Page 32972]]

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B. LTCHs

As discussed in section I.J. of this Appendix, the impact
analysis of the proposed payment rates and factors presented in this
proposed rule under the LTCH PPS is projected to result in a
decrease in estimated aggregate LTCH PPS payments in FY 2021
relative to FY 2020 of approximately $36 million based on the data
for 360 LTCHs in our database that are subject to payment under the
LTCH PPS. Therefore, as required by OMB Circular A-4 (available at:
https://obamawhitehouse.archives.gov/omb/circulars_a004_a-4/ and
https://georgewbush-whitehouse.archives.gov/omb/circulars/a004/a-4.html), in Table VI. of this Appendix, we have prepared an
accounting statement showing the classification of the expenditures
associated with the provisions of this proposed rule as they relate
to the changes to the LTCH PPS. Table VI. of this Appendix provides
our best estimate of the estimated change in Medicare payments under
the LTCH PPS as a result of the proposed payment rates and factors
and other provisions presented in this proposed rule based on the
data for the 360 LTCHs in our database. All expenditures are
classified as transfers to Medicare providers (that is, LTCHs).
As shown in Table VI. of this Appendix, the net cost to the
Federal Government associated with the policies for LTCHs in this
proposed rule are estimated at -$36 million.
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III. Regulatory Flexibility Act (RFA) Analysis

The RFA requires agencies to analyze options for regulatory
relief of small entities. For purposes of the RFA, small entities
include small businesses, nonprofit organizations, and small
government jurisdictions. We estimate that most hospitals and most
other providers and suppliers are small entities as that term is
used in the RFA. The great majority of hospitals and most other
health care providers and suppliers are small entities, either by
being nonprofit organizations or by meeting the SBA definition of a
small business (having revenues of less than $7.5 million to $38.5
million in any 1 year). (For details on the latest standards for
health care providers, we refer readers to page 36 of the Table of
Small Business Size Standards for NAIC 622 found on the SBA website
at: http://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf.)
For purposes of the RFA, all hospitals and other providers and
suppliers are considered to be small entities. Individuals and
States are not included in the definition of a small entity. We
believe that the provisions of this proposed rule relating to acute
care hospitals will have a significant impact on small entities as
explained in this Appendix. For example, because all hospitals are
considered to be small entities for purposes of the RFA, the
hospital impacts described in this proposed rule are impacts on
small entities. For example, we refer readers to ``Table I.--Impact
Analysis of Proposed Changes to the IPPS for Operating Costs for FY
2021.'' Because we lack data on individual hospital receipts, we
cannot determine the number of small proprietary LTCHs. Therefore,
we are assuming that all LTCHs are considered small entities for the
purpose of the analysis in section I.J. of this Appendix. MACs are
not considered to be small entities because they do not meet the SBA
definition of a small business. Because we acknowledge that many of
the affected entities are small entities, the analysis discussed
throughout the preamble of this proposed rule constitutes our
regulatory flexibility analysis. This proposed rule contains a range
of proposed policies. It provides descriptions of the statutory
provisions that are addressed, identifies the proposed policies, and
presents rationales for our decisions and, where relevant,
alternatives that were considered.
For purposes of the RFA, as stated previously, all hospitals and
other providers and suppliers are considered to be small entities.
We estimate the provisions of this proposed rule would result in an
estimated $1.98 billion increase in FY 2021 payments to IPPS
hospitals, primarily driven by the proposed applicable percentage
increase to the IPPS rates in conjunction with other proposed
payment changes including uncompensated care payments, capital
payments, new technology add-on payments, and low-volume hospital
payments, as discussed in section I.B. of this Appendix. As
discussed in section I.J. of this Appendix, the impact analysis of
the proposed payment rates and factors presented in this proposed
rule under the LTCH PPS is projected to result in a decrease in
estimated aggregate LTCH PPS payments in FY 2021 relative to FY 2020
of approximately $36 million. We are soliciting public comments on
our estimates and analysis of the impact of our proposals on those
small entities. Any public comments that we received and our
responses will be presented throughout the final rule.

IV. Impact on Small Rural Hospitals

Section 1102(b) of the Act requires us to prepare a regulatory
impact analysis for any proposed or final rule that may have a
significant impact on the operations of a substantial number of
small rural hospitals. This analysis must conform to the provisions
of section 604 of the RFA. With the exception of hospitals located
in certain New England counties, for purposes of section 1102(b) of
the Act, we define a small rural hospital as a hospital that is
located outside of an urban area and has fewer than 100 beds.
Section 601(g) of the Social Security Amendments of 1983 (Pub. L.
98-21) designated hospitals in certain New England counties as
belonging to the adjacent urban area. Thus, for purposes of the IPPS
and the LTCH PPS, we continue to classify these hospitals as urban
hospitals. (As shown in Table I. in section I.G. of this Appendix,
rural IPPS hospitals with 0-49 beds and 50-99 beds are expected to
experience an increase in payments from FY 2020 to FY 2021 of 2.0
percent and 2.3 percent, respectively. We refer readers to Table I.
in section I.G. of this Appendix for additional information on the
quantitative effects of the proposed policy changes under the IPPS
for operating costs.)

V. Unfunded Mandates Reform Act Analysis

Section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L.
104-4) also requires that agencies assess anticipated costs and
benefits before issuing any rule whose

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mandates require spending in any 1 year of $100 million in 1995
dollars, updated annually for inflation. In 2020, that threshold
level is approximately $156 million. This proposed rule would not
mandate any requirements for State, local, or tribal governments,
nor would it affect private sector costs.

VI. Executive Order 13175

Executive Order 13175 directs agencies to consult with Tribal
officials prior to the formal promulgation of regulations having
tribal implications. Section 1880(a) of the Act states that a
hospital of the Indian Health Service, whether operated by such
Service or by an Indian tribe or tribal organization, is eligible
for Medicare payments so long as it meets all of the conditions and
requirements for such payments which are applicable generally to
hospitals. Consistent with section 1880(a) of the Act, this proposed
rule contains general provisions also applicable to hospitals and
facilities operated by the Indian Health Service or Tribes or Tribal
organizations under the Indian Self-Determination and Education
Assistance Act.
As discussed in section IV.G.4. of the preamble of this proposed
rule, we are seeking comment on a potential restructuring of
Medicare DSH and uncompensated care payments for IHS and Tribal
hospitals beginning in FY 2022. Consistent with Executive Order
13175, we have engaged in initial consultation with Tribal officials
on this issue. We intend to consider input received from further
consultation with Tribal officials, as well as the comments on this
proposed rule on this issue, and may revisit our policies for FY
2022 either in the final rule or through future rulemaking.

VII. Executive Order 12866

In accordance with the provisions of Executive Order 12866, the
Executive Office of Management and Budget reviewed this proposed
rule.

Appendix B: Recommendation of Update Factors for Operating Cost Rates
of Payment for Inpatient Hospital Services

I. Background

Section 1886(e)(4)(A) of the Act requires that the Secretary,
taking into consideration the recommendations of MedPAC, recommend
update factors for inpatient hospital services for each fiscal year
that take into account the amounts necessary for the efficient and
effective delivery of medically appropriate and necessary care of
high quality. Under section 1886(e)(5) of the Act, we are required
to publish update factors recommended by the Secretary in the
proposed and final IPPS rules. Accordingly, this Appendix provides
the recommendations for the update factors for the IPPS national
standardized amount, the hospital-specific rate for SCHs and MDHs,
and the rate-of-increase limits for certain hospitals excluded from
the IPPS, as well as LTCHs. In prior years, we made a recommendation
in the IPPS proposed rule and final rule for the update factors for
the payment rates for IRFs and IPFs. However, for FY 2021,
consistent with our approach for FY 2020, we are including the
Secretary's recommendation for the update factors for IRFs and IPFs
in separate Federal Register documents at the time that we announce
the annual updates for IRFs and IPFs. We also discuss our response
to MedPAC's recommended update factors for inpatient hospital
services.

II. Inpatient Hospital Update for FY 2021

A. Proposed FY 2021 Inpatient Hospital Update

As discussed in section IV.B. of the preamble to this proposed
rule, for FY 2021, consistent with section 1886(b)(3)(B) of the Act,
as amended by sections 3401(a) and 10319(a) of the Affordable Care
Act, we are setting the applicable percentage increase by applying
the following adjustments in the following sequence. Specifically,
the applicable percentage increase under the IPPS is equal to the
rate-of-increase in the hospital market basket for IPPS hospitals in
all areas, subject to a reduction of one-quarter of the applicable
percentage increase (prior to the application of other statutory
adjustments; also referred to as the market basket update or rate-
of-increase (with no adjustments)) for hospitals that fail to submit
quality information under rules established by the Secretary in
accordance with section 1886(b)(3)(B)(viii) of the Act and a
reduction of three-quarters of the applicable percentage increase
(prior to the application of other statutory adjustments; also
referred to as the market basket update or rate-of-increase (with no
adjustments)) for hospitals not considered to be meaningful
electronic health record (EHR) users in accordance with section
1886(b)(3)(B)(ix) of the Act, and then subject to an adjustment
based on changes in economy-wide productivity (the multifactor
productivity (MFP) adjustment). Section 1886(b)(3)(B)(xi) of the
Act, as added by section 3401(a) of the Affordable Care Act, states
that application of the MFP adjustment may result in the applicable
percentage increase being less than zero. (We note that section
1886(b)(3)(B)(xii) of the Act required an additional reduction each
year only for FYs 2010 through 2019.)
We note that, in compliance with section 404 of the MMA, in the
FY 2018 IPPS/LTCH PPS final rule (82 FR 38158 through 38175), we
replaced the FY 2010-based IPPS operating and capital market baskets
with the rebased and revised 2014-based IPPS operating and capital
market baskets effective beginning in FY 2018.
In this FY 2021 IPPS/LTCH PPS proposed rule, in accordance with
section 1886(b)(3)(B) of the Act, we are proposing to base the
proposed FY 2021 market basket update used to determine the
applicable percentage increase for the IPPS on IGI's fourth quarter
2019 forecast of the 2014-based IPPS market basket rate-of-increase
with historical data through third quarter 2019, which is estimated
to be 3.0 percent. In accordance with section 1886(b)(3)(B) of the
Act, as amended by section 3401(a) of the Affordable Care Act, in
section IV.B. of the preamble of this FY 2021 IPPS/LTCH PPS proposed
rule, based on IGI's fourth quarter 2019 forecast, we are proposing
a MFP adjustment of 0.4 percent for FY 2021. We also are proposing
that if more recent data subsequently become available, we would use
such data, if appropriate, to determine the FY 2021 market basket
update and MFP adjustment for the final rule.
Therefore, based on IGI's fourth quarter 2019 forecast of the
2014-based IPPS market basket and the MFP adjustment, depending on
whether a hospital submits quality data under the rules established
in accordance with section 1886(b)(3)(B)(viii) of the Act (hereafter
referred to as a hospital that submits quality data) and is a
meaningful EHR user under section 1886(b)(3)(B)(ix) of the Act
(hereafter referred to as a hospital that is a meaningful EHR user),
we are proposing four possible applicable percentage increases that
could be applied to the standardized amount, as shown in the
following table.

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B. Proposed Update for SCHs and MDHs for FY 2021

Section 1886(b)(3)(B)(iv) of the Act provides that the FY 2021
applicable percentage increase in the hospital-specific rate for
SCHs and MDHs 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). Under current law,
the MDH program is effective for discharges through September 30,
2022, as discussed in the FY 2019 IPPS/LTCH PPS final rule (83 FR
41429 through 41430).
As previously mentioned, the update to the hospital specific
rate for SCHs and MDHs is subject to section 1886(b)(3)(B)(i) of the
Act, as amended by sections 3401(a) and 10319(a) of the Affordable
Care Act. Accordingly, depending on whether a hospital submits
quality data and is a meaningful EHR user, we are proposing the same
four possible applicable percentage increases in the preceding table
for the hospital-specific rate applicable to SCHs and MDHs.

C. Proposed FY 2021 Puerto Rico Hospital Update

As discussed in the FY 2017 IPPS/LTCH PPS final rule (81 FR
56939), prior to January 1, 2016, Puerto Rico hospitals were paid
based on 75 percent of the national standardized amount and 25
percent of the Puerto Rico-specific standardized amount. Section 601
of Public Law 114-113 amended section 1886(d)(9)(E) of the Act to
specify that the payment calculation with respect to operating costs
of inpatient hospital services of a subsection (d) Puerto Rico
hospital for inpatient hospital discharges on or after January 1,
2016, shall use 100 percent of the national standardized amount.
Because Puerto Rico hospitals are no longer paid with a Puerto Rico-
specific standardized amount under the amendments to section
1886(d)(9)(E) of the Act, there is no longer a need for us to make
an update to the Puerto Rico standardized amount. Hospitals in
Puerto Rico are now paid 100 percent of the national standardized
amount and, therefore, are subject to the same update to the
national standardized amount discussed under section IV.B.1. of the
preamble of this proposed rule. Accordingly, for FY 2021, we are
proposing to establish an applicable percentage increase of 2.6
percent to the standardized amount for hospitals located in Puerto
Rico.

D. Proposed Update for Hospitals Excluded From the IPPS for FY 2021

Section 1886(b)(3)(B)(ii) of the Act is used for purposes of
determining the percentage increase in the rate-of-increase limits
for children's hospitals, cancer hospitals, and hospitals located
outside the 50 States, the District of Columbia, and Puerto Rico
(that is, short-term acute care hospitals located in the U.S. Virgin
Islands, Guam, the Northern Mariana Islands, and America Samoa).
Section 1886(b)(3)(B)(ii) of the Act sets the percentage increase in
the rate-of-increase limits equal to the market basket percentage
increase. In accordance with Sec. 403.752(a) of the regulations,
RNHCIs are paid under the provisions of Sec. 413.40, which also use
section 1886(b)(3)(B)(ii) of the Act to update the percentage
increase in the rate-of-increase limits. Currently, children's
hospitals, PPS-excluded cancer hospitals, RNHCIs, and short-term
acute care hospitals located in the U.S. Virgin Islands, Guam, the
Northern Mariana Islands, and American Samoa are among the remaining
types of hospitals still paid under the reasonable cost methodology,
subject to the rate-of-increase limits. In addition, in accordance
with Sec. 412.526(c)(3) of the regulations, extended neoplastic
disease care hospitals (described in Sec. 412.22(i) of the
regulations) also are subject to the rate-of-increase limits. As
discussed in section VI. of the preamble of this proposed rule, in
the FY 2018 IPPS/LTCH PPS final rule, we finalized the use of the
percentage increase in the 2014-based IPPS operating market basket
to update the target amounts for children's hospitals, PPS-excluded
cancer hospitals, RNHCIs, and short-term acute care hospitals
located in the U.S. Virgin Islands, Guam, the Northern Mariana
Islands, and American Samoa for FY 2018 and subsequent fiscal years.
In addition, as discussed in section IV.B. of the preamble of this
proposed rule, the update to the target amount for extended
neoplastic disease care hospitals for FY 2021 would be the
percentage increase in the 2014-based IPPS operating market basket.
Accordingly, for FY 2021, the rate-of-increase percentage to be
applied to the target amount for these children's hospitals, cancer
hospitals, RNHCIs, extended neoplastic disease care hospitals, and
short-term acute care hospitals located in the U.S. Virgin Islands,
Guam, the Northern Mariana Islands, and American Samoa would be the
FY 2021 percentage increase in the 2014-based IPPS operating market
basket. For this proposed rule, the current estimate of the IPPS
operating market basket percentage increase for FY 2021 is 3.0
percent.

E. Proposed Update for LTCHs for FY 2021

Section 123 of Public Law 106-113, as amended by section 307(b)
of Public Law 106-554 (and codified at section 1886(m)(1) of the
Act), provides the statutory authority for updating payment rates
under the LTCH PPS.
As discussed in section V.A. of the Addendum to this proposed
rule, we are proposing to update to the LTCH PPS standard Federal
payment rate for FY 2021 by 2.5 percent, consistent with section
1886(m)(3) of the Act which provides that any annual update be
reduced by the productivity adjustment described in section
1886(b)(3)(B)(xi)(II) of the Act (that is, the MFP adjustment).
Furthermore, in accordance with the LTCHQR Program under section
1886(m)(5) of the Act, we are proposing to reduce the annual update
to the LTCH PPS standard Federal rate by 2.0 percentage points for
failure of a LTCH to submit the required quality data. Accordingly,
we are proposing to establish an update factor of 1.025 in
determining the LTCH PPS standard Federal rate for FY 2021. For
LTCHs that fail to submit quality data for FY 2021, we are proposing
an annual update to the LTCH PPS standard Federal rate of 0.5
percent (that is, the proposed annual update for FY 2021 of 2.5
percent less 2.0 percentage points for failure to submit the
required quality data in accordance with section 1886(m)(5)(C) of
the Act and our rules) by applying a proposed update factor of 1.005
in determining the LTCH PPS standard Federal rate for FY 2021. (We
note that, as discussed in section VII.D. of the preamble of this
proposed rule, the proposed update to the LTCH PPS standard Federal
payment rate of 2.5 percent for FY 2021 does not reflect any
proposed budget neutrality factors.)

III. Secretary's Recommendations

MedPAC is recommending an inpatient hospital update of 2.0
percent. Consistent with current law, depending on whether a
hospital submits quality data and is a meaningful EHR user, we are
recommending

[[Page 32975]]

the four applicable percentage increases to the standardized amount
listed in the table under section II. of this Appendix B. We are
recommending that the same applicable percentage increases apply to
SCHs and MDHs.
In addition to making a recommendation for IPPS hospitals, in
accordance with section 1886(e)(4)(A) of the Act, we are
recommending update factors for certain other types of hospitals
excluded from the IPPS. Consistent with our policies for these
facilities, we are recommending an update to the target amounts for
children's hospitals, cancer hospitals, RNHCIs, short-term acute
care hospitals located in the U.S. Virgin Islands, Guam, the
Northern Mariana Islands, and American Samoa and extended neoplastic
disease care hospitals of 3.0 percent.
For FY 2021, consistent with policy set forth in section VII. of
the preamble of this proposed rule, for LTCHs that submit quality
data, we are recommending an update of 2.5 percent to the LTCH PPS
standard Federal rate. For LTCHs that fail to submit quality data
for FY 2021, we are recommending an annual update to the LTCH PPS
standard Federal rate of 0.5 percent.

IV. MedPAC Recommendation for Assessing Payment Adequacy and Updating
Payments in Traditional Medicare

In its March 2020 Report to Congress, MedPAC assessed the
adequacy of current payments and costs, and the relationship between
payments and an appropriate cost base. MedPAC recommended an update
to the hospital inpatient rates by 2 percent with the difference
between this and the update amount specified in current law to be
used to increase payments under MedPAC's proposed Medicare quality
program, the ``Hospital Value Incentive Program (HVIP).'' MedPAC
stated that together, these recommendations, paired with the
recommendation to eliminate the current hospital quality program
incentives, would increase hospital payments by increasing the base
payment rate and by increasing the average rewards hospitals receive
under MedPAC's proposed Medicare HVIP. We refer readers to the March
2020 MedPAC report, which is available for download at
www.medpac.gov, for a complete discussion on these recommendations.
Response: With regard to MedPAC's recommendation of an update to
the hospital inpatient rates equal to 2 percent, with the remainder
of the 2.6 percent to be used to fund its recommended Medicare HVIP,
section 1886(b)(3)(B) of the Act sets the requirements for the FY
2021 applicable percentage increase. Therefore, consistent with the
statute, we are proposing an applicable percentage increase for FY
2021 of 2.6 percent, provided the hospital submits quality data and
is a meaningful EHR user consistent with these statutory
requirements. Furthermore, we appreciate MedPAC's recommendation
concerning a new HVIP. We agree that continual improvement motivated
by quality programs is an important incentive of the IPPS.
We note that, because the operating and capital payments in the
IPPS remain separate, we are continuing to use separate updates for
operating and capital payments in the IPPS. The proposed update to
the capital rate is discussed in section III. of the Addendum to
this proposed rule.

[FR Doc. 2020-10122 Filed 5-11-20; 4:15 pm]
BILLING CODE 4120-01-P