[Federal Register Volume 77, Number 170 (Friday, August 31, 2012)]
[Rules and Regulations]
[Pages 53258-53750]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-19079]
[[Page 53257]]
Vol. 77
Friday,
No. 170
August 31, 2012
Part II
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Parts 412, 413, 424, et al.
Medicare Program; Hospital Inpatient Prospective Payment Systems for
Acute Care Hospitals and the Long-Term Care Hospital Prospective
Payment System and Fiscal Year 2013 Rates; Hospitals' Resident Caps for
Graduate Medical Education Payment Purposes; Quality Reporting
Requirements for Specific Providers and for Ambulatory Surgical
Centers; Final Rule
Federal Register / Vol. 77 , No. 170 / Friday, August 31, 2012 /
Rules and Regulations
[[Page 53258]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 412, 413, 424, and 476
[CMS-1588-F]
RIN 0938-AR12
Medicare Program; Hospital Inpatient Prospective Payment Systems
for Acute Care Hospitals and the Long-Term Care Hospital Prospective
Payment System and Fiscal Year 2013 Rates; Hospitals' Resident Caps for
Graduate Medical Education Payment Purposes; Quality Reporting
Requirements for Specific Providers and for Ambulatory Surgical Centers
AGENCY: Centers for Medicare and Medicaid Services (CMS), HHS.
ACTION: Final rule.
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SUMMARY: We are revising the Medicare hospital inpatient prospective
payment systems (IPPS) for operating and capital-related costs of acute
care hospitals to implement changes arising from our continuing
experience with these systems. Some of the changes implement certain
statutory provisions contained in the Patient Protection and Affordable
Care Act and the Health Care and Education Reconciliation Act of 2010
(collectively known as the Affordable Care Act) and other legislation.
These changes will be applicable to discharges occurring on or after
October 1, 2012, unless otherwise specified in this final rule. We also
are updating the rate-of-increase limits for certain hospitals excluded
from the IPPS that are paid on a reasonable cost basis subject to these
limits. The updated rate-of-increase limits will be effective for cost
reporting periods beginning on or after October 1, 2012.
We are updating the payment policies and the annual payment rates
for the Medicare prospective payment system (PPS) for inpatient
hospital services provided by long-term care hospitals (LTCHs) and
implementing certain statutory changes made by the Affordable Care Act.
Generally, these changes will be applicable to discharges occurring on
or after October 1, 2012, unless otherwise specified in this final
rule.
In addition, we are implementing changes relating to determining a
hospital's full-time equivalent (FTE) resident cap for the purpose of
graduate medical education (GME) and indirect medical education (IME)
payments. We are establishing new requirements or revised requirements
for quality reporting by specific providers (acute care hospitals, PPS-
exempt cancer hospitals, LTCHs, and inpatient psychiatric facilities
(IPFs)) that are participating in Medicare. We also are establishing
new administrative, data completeness, and extraordinary circumstance
waivers or extension requests requirements, as well as a
reconsideration process, for quality reporting by ambulatory surgical
centers (ASCs) that are participating in Medicare.
We are establishing requirements for the Hospital Value-Based
Purchasing (VBP) Program and the Hospital Readmissions Reduction
Program.
DATES: Effective date: This final rule is effective on October 1, 2012.
FOR FURTHER INFORMATION CONTACT:
Tzvi Hefter, (410) 786-4487, and Ing-Jye Cheng, (410) 786-4548,
Operating Prospective Payment, MS-DRGs, Hospital Acquired Conditions
(HAC), Wage Index, New Medical Service and Technology Add-On Payments,
Hospital Geographic Reclassifications, Graduate Medical Education,
Capital Prospective Payment, Excluded Hospitals, Medicare
Disproportionate Share Hospital (DSH), and Postacute Care Transfer
Issues.
Michele Hudson, (410) 786-4487, and Judith Richter, (410) 786-2590,
Long-Term Care Hospital Prospective Payment System and MS-LTC-DRG
Relative Weights Issues.
Bridget Dickensheets, (410) 786-8670, Market Basket for LTCHs Issues.
Siddhartha Mazumdar, (410) 786-6673, Rural Community Hospital
Demonstration Program Issues.
James Poyer, (410) 786-2261, Hospital Inpatient Quality Reporting and
Hospital Value-Based Purchasing--Program Administration, Validation,
and Reconsideration Issues.
Shaheen Halim, (410) 786-0641, Hospital Inpatient Quality Reporting--
Measures Issues Except Hospital Consumer Assessment of Healthcare
Providers and Systems Issues; and Readmission Measures for Hospitals
Issues.
Elizabeth Goldstein, (410) 786-6665, Hospital Inpatient Quality
Reporting--Hospital Consumer Assessment of Healthcare Providers and
Systems Measures Issues.
Mary Pratt, (410) 786-6867, LTCH Quality Data Reporting Issues.
Kim Spalding Bush, (410) 786-3232, Hospital Value-Based Purchasing
Efficiency Measures Issues.
James Poyer, (410) 786-2261, and Barbara Choo, (410) 786-4449,
Inpatient Psychiatric Facility Quality Reporting Issues and PPS-Exempt
Cancer Hospital Quality Reporting Issues.
Anita Bhatia, (410) 786-7236, Ambulatory Surgical Center Quality
Reporting (ASCQR) Program Issues.
SUPPLEMENTARY INFORMATION:
Electronic Access
This Federal Register document is also available from the Federal
Register online database through the U.S. Government Printing Office
Web page at: http://www.gpo.gov/fdsys/browse/collection.action?collectionCode=FR. Free public access is available on
a Wide Area Information Server (WAIS) through the Internet and via
asynchronous dial-in. Internet users can access the database by using
the World Wide Web (the Superintendent of Documents' home Web page
address), by using local WAIS client software, or by telnet to
swais.access.gpo.gov, then login as guest (no password required). Dial-
in users should use communications software and modem to call (202)
512-1661; type swais, then login as guest (no password required).
Tables Available Only Through the Internet on the CMS Web Site
In the past, a majority of the tables referred to throughout this
preamble and in the Addendum to this final rule were published in the
Federal Register as part of the annual proposed and final rules.
However, beginning in FY 2012, some of the IPPS tables and LTCH PPS
tables are no longer published in the Federal Register. Instead, these
tables will be available only through the Internet. The IPPS tables for
this final rule are available only through the Internet on the CMS Web
site at: http://www.cms.hhs.gov/Medicare/medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. Click on the link on the left
side of the screen titled, ``FY 2013 IPPS Final Rule Home Page'' or
``Acute Inpatient--Files for Download''. The LTCH PPS tables for this
FY 2013 final rule are available only through the Internet on the CMS
Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/index.html under the list item for
Regulation Number CMS-1588-F. For complete details on the availability
of the tables referenced in this final rule, we refer readers to
section VI. of the Addendum to this final rule.
Readers who experience any problems accessing any of the tables
that are posted on the CMS Web sites identified above should contact
Nisha Bhat at (410) 786-4487.
[[Page 53259]]
Acronyms
3M 3M Health Information System
AAMC Association of American Medical Colleges
ACGME Accreditation Council for Graduate Medical Education
AHA American Hospital Association
AHIC American Health Information Community
AHIMA American Health Information Management Association
AHRQ Agency for Healthcare Research and Quality
ALOS Average length of stay
ALTHA Acute Long Term Hospital Association
AMA American Medical Association
AMGA American Medical Group Association
AOA American Osteopathic Association
APR DRG All Patient Refined Diagnosis Related Group System
ARRA American Recovery and Reinvestment Act of 2009, Public Law 111-
5
ASC Ambulatory Surgical Center
ASCA Administrative Simplification Compliance Act of 2002, Public
Law 107-105
ASCQR Ambulatory Surgical Center Quality Reporting
ASITN American Society of Interventional and Therapeutic
Neuroradiology
BBA Balanced Budget Act of 1997, Public Law 105-33
BBRA Medicare, Medicaid, and SCHIP [State Children's Health
Insurance Program] Balanced Budget Refinement Act of 1999, Public
Law 106-113
BIPA Medicare, Medicaid, and SCHIP [State Children's Health
Insurance Program] Benefits Improvement and Protection Act of 2000,
Public Law 106-554
BLS Bureau of Labor Statistics
CAH Critical access hospital
CARE [Medicare] Continuity Assessment Record & Evaluation
[Instrument]
CART CMS Abstraction & Reporting Tool
CBSAs Core-based statistical areas
CC Complication or comorbidity
CCR Cost-to-charge ratio
CDAC [Medicare] Clinical Data Abstraction Center
CDAD Clostridium difficile-associated disease
CDC Center for Disease Control and Prevention
CIPI Capital input price index
CMI Case-mix index
CMS Centers for Medicare & Medicaid Services
CMSA Consolidated Metropolitan Statistical Area
COBRA Consolidated Omnibus Reconciliation Act of 1985, Public Law
99-272
COLA Cost-of-living adjustment
CoP [Hospital] condition of participation
CPI Consumer price index
CRNA Certified Registered Nurse Anesthetist
CY Calendar year
DPP Disproportionate patient percentage
DRA Deficit Reduction Act of 2005, Public Law 109-171
DRG Diagnosis-related group
DSH Disproportionate share hospital
ECI Employment cost index
EDB [Medicare] Enrollment Database
EHR Electronic health record
EMR Electronic medical record
FAH Federation of Hospitals
FDA Food and Drug Administration
FFY Federal fiscal year
FQHC Federally qualified health center
FTE Full-time equivalent
FY Fiscal year
GAAP Generally Accepted Accounting Principles
GAF Geographic Adjustment Factor
GME Graduate medical education
HACs Hospital-acquired conditions
HCAHPS Hospital Consumer Assessment of Healthcare Providers and
Systems
HCFA Health Care Financing Administration
HCO High-cost outlier
HCRIS Hospital Cost Report Information System
HHA Home health agency
HHS Department of Health and Human Services
HICAN Health Insurance Claims Account Number
HIPAA Health Insurance Portability and Accountability Act of 1996,
Public Law 104-191
HIPC Health Information Policy Council
HIS Health information system
HIT Health information technology
HMO Health maintenance organization
HPMP Hospital Payment Monitoring Program
HSA Health savings account
HSCRC [Maryland] Health Services Cost Review Commission
HSRV Hospital-specific relative value
HSRVcc Hospital-specific relative value cost center
HQA Hospital Quality Alliance
HQI Hospital Quality Initiative
ICD-9-CM International Classification of Diseases, Ninth Revision,
Clinical Modification
ICD-10-CM International Classification of Diseases, Tenth Revision,
Clinical Modification
ICD-10-PCS International Classification of Diseases, Tenth Revision,
Procedure Coding System
ICR Information collection requirement
IGI IHS Global Insight, Inc.
IHS Indian Health Service
IME Indirect medical education
I-O Input-Output
IOM Institute of Medicine
IPF Inpatient psychiatric facility
IPPS [Acute care hospital] inpatient prospective payment system
IRF Inpatient rehabilitation facility
IQR Inpatient Quality Reporting
LAMCs Large area metropolitan counties
LOS Length of stay
LTC-DRG Long-term care diagnosis-related group
LTCH Long-term care hospital
LTCHQR Long-Term Care Hospital Quality Reporting
MA Medicare Advantage
MAC Medicare Administrative Contractor
MCC Major complication or comorbidity
MCE Medicare Code Editor
MCO Managed care organization
MCV Major cardiovascular condition
MDC Major diagnostic category
MDH Medicare-dependent, small rural hospital
MedPAC Medicare Payment Advisory Commission
MedPAR Medicare Provider Analysis and Review File
MEI Medicare Economic Index
MGCRB Medicare Geographic Classification Review Board
MIEA-TRHCA Medicare Improvements and Extension Act, Division B of
the Tax Relief and Health Care Act of 2006, Public Law 109-432
MIPPA Medicare Improvements for Patients and Providers Act of 2008,
Public Law 110-275
MMA Medicare Prescription Drug, Improvement, and Modernization Act
of 2003, Public Law 108-173
MMEA Medicare and Medicaid Extenders Act of 2010, Public Law 111-309
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Public
Law 110-173
MRHFP Medicare Rural Hospital Flexibility Program
MRSA Methicillin-resistant Staphylococcus aureus
MSA Metropolitan Statistical Area
MS-DRG Medicare severity diagnosis-related group
MS-LTC-DRG Medicare severity long-term care diagnosis-related group
NAICS North American Industrial Classification System
NALTH National Association of Long Term Hospitals
NCD National coverage determination
NCHS National Center for Health Statistics
NCQA National Committee for Quality Assurance
NCVHS National Committee on Vital and Health Statistics
NECMA New England County Metropolitan Areas
NHSN National Healthcare Safety Network
NQF National Quality Forum
NTIS National Technical Information Service
NTTAA National Technology Transfer and Advancement Act of 1991 (Pub.
L. 104-113)
NVHRI National Voluntary Hospital Reporting Initiative
OACT [CMS'] Office of the Actuary
OBRA 86 Omnibus Budget Reconciliation Act of 1986, Public Law 99-509
OES Occupational employment statistics
OIG Office of the Inspector General
OMB Executive Office of Management and Budget
OPM U.S. Office of Personnel Management
O.R. Operating room
OSCAR Online Survey Certification and Reporting [System]
PCH PPS-exempt cancer hospital
PCHQR PPS-exempt cancer hospital quality reporting
PMSAs Primary metropolitan statistical areas
POA Present on admission
PPI Producer price index
PPS Prospective payment system
PRM Provider Reimbursement Manual
[[Page 53260]]
ProPAC Prospective Payment Assessment Commission
PRRB Provider Reimbursement Review Board
PRTFs Psychiatric residential treatment facilities
PSF Provider-Specific File
PS&R Provider Statistical and Reimbursement (System)
QIG Quality Improvement Group, CMS
QIO Quality Improvement Organization
RCE Reasonable compensation equivalent
RHC Rural health clinic
RHQDAPU Reporting hospital quality data for annual payment update
RNHCI Religious nonmedical health care institution
RPL Rehabilitation psychiatric long-term care (hospital)
RRC Rural referral center
RTI Research Triangle Institute, International
RUCAs Rural-urban commuting area codes
RY Rate year
SAF Standard Analytic File
SCH Sole community hospital
SFY State fiscal year
SIC Standard Industrial Classification
SNF Skilled nursing facility
SOCs Standard occupational classifications
SOM State Operations Manual
SSO Short-stay outlier
TEFRA Tax Equity and Fiscal Responsibility Act of 1982, Public Law
97-248
TEP Technical expert panel
TMA TMA [Transitional Medical Assistance], Abstinence Education, and
QI [Qualifying Individuals] Programs Extension Act of 2007, Public
Law 110-90
TPS Total Performance Score
UHDDS Uniform hospital discharge data set
Table of Contents
I. Executive Summary and Background
A. Executive Summary
1. Purpose and Legal Authority
2. Summary of the Major Provisions
3. Summary of Costs and Benefits
B. Summary
1. Acute Care Hospital Inpatient Prospective Payment System
(IPPS)
2. Hospitals and Hospital Units Excluded From the IPPS
3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)
4. Critical Access Hospitals (CAHs)
5. Payments for Graduate Medical Education (GME)
C. Provisions of the Patient Protection and Affordable Care Act
(Pub. L. 111-148) and the Health Care and Education Reconciliation
Act of 2010 (Pub. L. 111-152) Applicable to FY 2013
D. Issuance of a Notice of Proposed Rulemaking
II. Changes to Medicare Severity Diagnosis-Related Group (MS-DRG)
Classifications and Relative Weights
A. Background
B. MS-DRG Reclassifications
C. Adoption of the MS-DRGs in FY 2008
D. FY 2013 MS-DRG Documentation and Coding Adjustment, Including
the Applicability to the Hospital-Specific Rates and the Puerto
Rico-Specific Standardized Amount
1. Background on the Prospective MS-DRG Documentation and Coding
Adjustments for FY 2008 and FY 2009 Authorized by Public Law 110-90
2. Prospective Adjustment to the Average Standardized Amounts
Required by Section 7(b)(1)(A) of Public Law 110-90
3. Recoupment or Repayment Adjustments in FYs 2010 through 2012
Required by Public Law 110-90
4. Retrospective Evaluation of FY 2008 and FY 2009 Claims Data
5. Prospective Adjustment for FY 2008 and FY 2009 Authorized by
Section 7(b)(1)(A) of Public Law 110-90 and Section 1886(d)(3)(vi)
of the Act
6. Recoupment or Repayment Adjustment Authorized by Section
7(b)(1)(B) of Public Law 110-90
7. Background on the Application of the Documentation and Coding
Adjustment to the Hospital-Specific Rates
8. Documentation and Coding Adjustment to the Hospital-Specific
Rates for FY 2011 and Subsequent Fiscal Years
9. Application of the Documentation and Coding Adjustment to the
Puerto Rico-Specific Standardized Amount
a. Background
b. Documentation and Coding Adjustment to the Puerto Rico-
Specific Standard Amount
10. Prospective Adjustments for FY 2010 Documentation and Coding
Effect
E. Refinement of the MS-DRG Relative Weight Calculation
1. Background
2. Summary of Policy Discussions in FY 2012
3. Discussion for FY 2013
F. Preventable Hospital-Acquired Conditions (HACs), Including
Infections
1. Background
2. HAC Selection
3. Present on Admission (POA) Indicator Reporting
4. HACs and POA Reporting in ICD-10-CM and ICD-10-PCS
5. Changes to the HAC Policy for FY 2013
a. Additional Diagnosis Codes to Existing HACs
b. New Candidate HAC Condition: Surgical Site Infection (SSI)
Following Cardiac Implantable Electronic Device (CIED) Procedures
c. New Candidate HAC Condition: Iatrogenic Pneumothorax With
Venous Catheterization
6. RTI Program Evaluation Summary
a. RTI Analysis of FY 2011 POA Indicator Reporting Across
Medicare Discharges
b. RTI Analysis of FY 2011 POA Indicator Reporting of Current
HACs
c. RTI Analysis of FY 2011 Frequency of Discharges and POA
Indicator Reporting for Current HACs
d. RTI Analysis of Circumstances When Application of HAC
Provisions Would Not Result in MS-DRG Reassignment for Current HACs
e. RTI Analysis of Coding Changes for HAC-Associated Secondary
Diagnoses for Current HACs
f. RTI Analysis of Estimated Net Savings for Current HACs
g. Previously Considered Candidate HACs--RTI Analysis of
Frequency of Discharges and POA Indicator Reporting
h. Current and Previously Considered Candidate HACs--RTI Report
on Evidence-Based Guidelines
i. Proposals Regarding Current HACs and Previously Considered
Candidate HACs
G. Changes to Specific MS-DRG Classifications
1. Pre-Major Diagnostic Categories (Pre-MDCs)
a. Ventricular Assist Device
b. Allogeneic Bone Marrow Transplant
2. MDC 4 (Diseases and Disorders of the Ear, Nose, Mouth and
Throat): Influenza With Pneumonia
3. MDC 5 (Diseases and Disorders of the Circulatory System)
a. Percutaneous Mitral Valve Repair With Implant
b. Endovascular Implantation of Branching or Fenestrated Grafts
in Aorta
4. MDC 10 (Endocrine, Nutritional, and Metabolic Diseases and
Disorders): Disorders of Porphyrin Metabolism
5. Medicare Code Editor (MCE) Changes
a. MCE New Length of Stay Edit for Continuous Invasive
Mechanical Ventilation for 96 Consecutive Hours or More
b. Sleeve Gastrectomy Procedure for Morbid Obesity
6. Surgical Hierarchies
7. Complications or Comorbidity (CC) Exclusions List
a. Background
b. CC Exclusions List for FY 2013
(1) No Revisions Based on Changes to the ICD-9-CM Diagnosis
Codes for FY 2013
(2) Suggested Changes to MS-DRG Severity Levels for Diagnosis
Codes for FY 2013
(A) Protein-Calorie Malnutrition
(B) Antineoplastic Chemotherapy Induced Anemia
(C) Cardiomyopathy and Congestive Heart Failure, Unspecified
(D) Chronic Total Occlusion of Artery of the Extremities
(E) Acute Kidney Failure With Other Specified Pathological
Lesion in Kidney
(F) Pressure Ulcer, Unstageable
8. Review of Procedure Codes in MS-DRGs 981 Through 983, 984
Through 986, and 987 Through 989
a. Moving Procedure Codes From MS-DRGs 981 Through 983 or MS-
DRGs 987 Through 989 Into MDCs
b. Reassignment of Procedures Among MS-DRGs 981 Through 983, 984
Through 986, and 987 Through 989
c. Adding Diagnosis or Procedure Codes to MDCs
9. Changes to the ICD-9-CM Coding System, Including Discussion
of the Replacement of the ICD-9-CM System With the ICD-10-CM and
ICD-10-PCS Systems in FY 2014
a. ICD-9-CM Coding System
b. Code Freeze
c. Processing of 25 Diagnosis Codes and 25 Procedure Codes on
Hospital Inpatient Claims
d. ICD-10 MS-DRGs
10. Public Comments on Issues Not Addressed in the Proposed Rule
[[Page 53261]]
H. Recalibration of MS-DRG Weights
1. Data Sources for Developing the Proposed Weights
2. Methodology for Calculation of the Proposed Relative Weights
3. Development of National Average CCRs
4. Bundled Payments for Care Improvement (BPCI) Initiative
a. Background
b. Treatment of Data from Hospitals Participating in the BPCI
Initiative
I. Add-On Payments for New Services and Technologies
1. Background
2. Public Input Before Publication of a Notice of Proposed
Rulemaking on Add-On Payments
3. FY 2013 Status of Technology Approved for FY 2012 Add-On
Payments: AutoLaser Interstitial Thermal Therapy
(AutoLITTTM)
4. FY 2013 Applications for New Technology Add-On Payments
a. Glucarpidase (Trade Brand Voraxaze[supreg])
b. DIFICIDTM (Fidaxomicin) Tablets
c. Zilver[supreg] PTX[supreg] Drug-Eluting Stent
d. Zenith[supreg] Fenestrated Abdominal Aortic Aneurysm (AAA)
Endovascular Graft
III. Changes to the Hospital Wage Index for Acute Care Hospitals
A. Background
B. Core-Based Statistical Areas for the Hospital Wage Index
C. Worksheet S-3 Wage Data for the FY 2013 Wage Index
1. Included Categories of Costs
2. Excluded Categories of Costs
3. Use of Wage Index Data by Providers Other Than Acute Care
Hospitals Under the IPPS
D. Verification of Worksheet S-3 Wage Data
E. Method for Computing the FY 2013 Unadjusted Wage Index
F. Occupational Mix Adjustment to the FY 2013 Wage Index
1. Development of Data for the FY 2013 Occupational Mix
Adjustment Based on the 2010 Occupational Mix Survey
2. Calculation of the Occupational Mix Adjustment for FY 2013
G. Analysis and Implementation of the Occupational Mix
Adjustment and the FY 2013 Occupational Mix Adjusted Wage Index
1. Analysis of the Occupational Mix Adjustment and the
Occupational Mix Adjusted Wage Index
2. Application of the Rural, Imputed, and Frontier Floors
a. Rural Floor
b. Imputed Floor and Proposal for an Alternative, Temporary
Methodology for Computing the Imputed Floor
c. Frontier Floor
3. FY 2013 Wage Index Tables
H. Revisions to the Wage Index Based on Hospital Redesignations
and Reclassifications
1. General Policies and Effects of Reclassification/
Redesignation
2. FY 2013 MGCRB Reclassifications
a. FY 2013 Reclassification Requirements and Approvals
b. Applications for Reclassifications for FY 2014
3. Redesignations of Hospitals Under Section 1886(d)(8)(B) of
the Act
4. Reclassifications Under Section 1886(d)(8)(B) of the Act
5. Reclassifications Under Section 508 of Public Law 108-173
6. Waiving Lugar Redesignation for the Out-Migration Adjustment
7. Cancellation of Acquired Rural Status Due to MDH Expiration
I. FY 2013 Wage Index Adjustment Based on Commuting Patterns of
Hospital Employees
J. Process for Requests for Wage Index Data Corrections
K. Labor-Related Share for the FY 2013 Wage Index
IV. Other Decisions and Changes to the IPPS for Operating Costs and
Graduate Medical Education (GME) Costs
A. Hospital Readmission Reduction Program
1. Statutory Basis for the Hospital Readmissions Reduction
Program
2. Overview
3. FY 2013 Proposed and Final Policies for the Hospital
Readmissions Reduction Program
a. Overview
b. Base Operating DRG Payment Amount, Including Special Rules
for SCHs and MDHs and Hospitals Paid Under Section 1814 of the Act
c. Adjustment Factor (Both the Ratio and Floor Adjustment
Factor)
d. Aggregate Payments for Excess Readmissions and Aggregate
Payment for All Discharges
e. Applicable Hospital
4. Limitations on Review
5. Reporting Hospital-Specific Information, Including
Opportunity To Review and Submit Corrections
B. Sole Community Hospitals (SCHs) (Sec. 412.92)
1. Background
2. Reporting Requirement and Clarification of Duration of
Classification for Hospitals Incorrectly Classified as Sole
Community Hospitals
3. Change to Effective Date of Classification for MDHs Applying
for SCH Status Upon the Expiration of the MDH Program
C. Rural Referral Centers (RRCs): Annual Update to Case-Mix
Index (CMI) and Discharge Criteria (Sec. 412.96)
1. Case-Mix Index (CMI)
2. Discharges
D. Payment Adjustment for Low-Volume Hospitals (Sec. 412.101)
1. Expiration of the Affordable Care Act Provision for FYs 2011
and 2012
2. Background
3. Affordable Care Act Provisions for FYs 2011 and 2012
4. Payment Adjustment for FY 2013 and Subsequent Years
E. Indirect Medical Education (IME) Adjustment (Sec. 412.105)
1. IME Adjustment Factor for FY 2013
2. Timely Filing Requirements under Fee-for-Service Medicare
a. IME and Direct GME
b. Nursing and Allied Health Education
c. Disproportionate Share Hospital (DSH) Payments
d. Summary of Public Comments, Our Responses, and Final Policies
3. Other Related Policy Changes
F. Payment Adjustment for Medicare Disproportionate Share
Hospitals (DSHs) and Indirect Medical Education (IME) (Sec. Sec.
412.105 and 412.106)
1. Background
2. Policy Change Relating to Treatment of Labor and Delivery
Beds in the Calculation of the Medicare DSH Payment Adjustment and
the IME Payment Adjustment
G. Expiration of the Medicare-Dependent, Small Rural Hospital
(MDH) Program (Sec. 412.108)
H. Changes in the Inpatient Hospital Update
1. FY 2013 Inpatient Hospital Update
2. FY 2013 Puerto Rico Hospital Update
I. Payment for Graduate Medical Education (GME) and Indirect
Medical Education (IME) Costs (Sec. Sec. 412.105, 413.75 through
413.83)
1. Background
2. Teaching Hospitals: Change in New Program Growth from 3 Years
to 5 Years
3. Policies and Clarifications Related to 5-Year Period
Following Implementation of Reductions and Increases to Hospitals'
FTE Resident Caps for GME Payment Purposes Under Section 5503 of the
Affordable Care Act
4. Preservation of Resident Cap Positions From Closed Hospitals
(Section 5506 of the Affordable Care Act)
a. Background
b. Change in Amount of Time Provided for Submitting Applications
Under Section 5506 of the Affordable Care Act
c. Change to the Ranking Criteria Under Section 5506
d. Effective Dates of Slots Awarded Under Section 5506
e. Clarification of Relationship Between Ranking Criteria One,
Two, and Three
f. Modifications to the Section 5506 CMS Evaluation Form
5. Notice of Closure of Teaching Hospitals and Opportunity to
Apply for Available Slots
a. Background
b. Notice of Closure of Teaching Hospitals
c. Application Process for Available Resident Slots
J. Changes to the Reporting Requirements for Pension Costs for
Medicare Cost-Finding Purposes
K. Rural Community Hospital Demonstration Program
1. Background
2. Budget Neutrality Offset Amount for FY 2013
L. Hospital Routine Services Furnished Under Arrangements
M. Technical Change
V. Changes to the IPPS for Capital-Related Costs
A. Overview
B. Additional Provisions
1. Exception Payments
2. New Hospitals
3. Hospitals Located in Puerto Rico
C. Prospective Adjustment for the FY 2010 Documentation and
Coding Effect
1. Background
[[Page 53262]]
2. Prospective Adjustment for the Effect of Documentation and
Coding in FY 2010
3. Documentation and Coding Adjustment to the Puerto Rico-
Specific Capital Rate
D. Changes for Annual Update for FY 2013
VI. Changes for Hospitals Excluded From the IPPS
A. Excluded Hospitals
B. Report of Adjustment (Exceptions) Payments
VII. Changes to the Long-Term Care Hospital Prospective Payment
System (LTCH PPS) for FY 2013
A. Background of the LTCH PPS
1. Legislative and Regulatory Authority
2. Criteria for Classification as a LTCH
a. Classification as a LTCH
b. Hospitals Excluded From the LTCH PPS
3. Limitation on Charges to Beneficiaries
4. Administrative Simplification Compliance Act (ASCA) and
Health Insurance Portability and Accountability Act (HIPAA)
Compliance
B. Medicare Severity Long-Term Care Diagnosis-Related Group (MS-
LTC-DRG) Classifications and Relative Weights for FY 2013
1. Background
2. Patient Classifications into MS-LTC-DRGs
a. Background
b. Changes to the MS-LTC-DRGs for FY 2013
3. Development of the FY 2013 MS-LTC-DRG Relative Weights
a. General Overview of the Development of the MS-LTC-DRG
Relative Weights
b. Development of the MS-LTC-DRG Relative Weights for FY 2013
c. Data
d. Hospital-Specific Relative Value (HSRV) Methodology
e. Treatment of Severity Levels in Developing the MS-LTC-DRG
Relative Weights
f. Low-Volume MS-LTC-DRGs
g. Steps for Determining the FY 2013 MS-LTC-DRG Relative Weights
C. Use of a LTCH-Specific Market Basket Under the LTCH PPS
1. Background
2. Overview of the FY 2009-Based LTCH-Specific Market Basket
3. Development of a LTCH-Specific Market Basket
a. Development of Cost Categories
b. Cost Category Computation
c. Selection of Price Proxies
d. Methodology for the Capital Portion of the FY 2009-Based
LTCH-Specific Market Basket
e. FY 2013 Market Basket for LTCHs
f. FY 2013 Labor-Related Share
D. Changes to the LTCH Payment Rates for FY 2013 and Other
Changes to the LTCH PPS for FY 2013
1. Overview of Development of the LTCH Payment Rates
2. FY 2013 LTCH PPS Annual Market Basket Update
a. Overview
b. Revision of Certain Market Basket Updates as Required by the
Affordable Care Act
c. Market Basket Under the LTCH PPS for FY 2013
d. Annual Market Basket Update for LTCHs for FY 2013
3. LTCH PPS Cost-of-Living Adjustment (COLA) for LTCHs Located
in Alaska and Hawaii
E. Expiration of Certain Payment Rules for LTCH Services and the
Moratorium on the Establishment of Certain Hospitals and Facilities
and the Increase in Number of Beds in LTCHs and LTCH Satellite
Facilities
1. Background
2. The 25-Percent Payment Adjustment Threshold
3. The ``IPPS Comparable Per Diem Amount'' Payment Option for
Very Short Stays Under the Short-Stay Outlier (SSO) Policy
4. One-Time Prospective Adjustment to the Standard Federal Rate
Under Sec. 412.523(d)(3)
a. Overview
b. Data Used to Estimate Aggregate FY 2003 TEFRA Payments
c. Data Used to Estimate Aggregate FY 2003 LTCH PPS Payments
d. Methodology to Evaluate Whether a One-Time Prospective
Adjustment Under Sec. 412.523(d)(3) is Warranted
e. Methodology to Estimate FY 2003 LTCH Payments Under the TEFRA
Payment System
f. Methodology to Estimate FY 2003 LTCH PPS Payments
g. Methodology for Calculating the One-Time Prospective
Adjustment Under Sec. 412.523(d)(3)
h. Public Comments and CMS' Responses
i. Final Policy Regarding the One-Time Prospective Adjustment
Under Sec. 412.523(d)(3)
VIII. Quality Data Reporting Requirements for Specific Providers and
Suppliers
A. Hospital Inpatient Quality Reporting (IQR) Program
1. Background
a. History of Measures Adopted for the Hospital IQR Program
b. Maintenance of Technical Specifications for Quality Measures
c. Public Display of Quality Measures
2. Removal and Suspension of Hospital IQR Program Measures
a. Considerations in Removing Quality Measures From the Hospital
IQR Program b. Hospital IQR Program Measures Removed in Previous
Rulemakings
c. Removal of Hospital IQR Program Measures for the FY 2015
Payment Determination and Subsequent Years
(1) Removal of One Chart-Abstracted Measure
(2) Removal of 16 Claims-Based Measures
d. Suspension of Data Collection for the FY 2014 Payment
Determination and Subsequent Years
3. Measures for the FY 2015 and FY 2016 Hospital IQR Program
Payment Determinations
a. Additional Considerations in Expanding and Updating Quality
Measures Under the Hospital IQR Program
b. Hospital IQR Program Measures for the FY 2015 Payment
Determination and Subsequent Years
(1) Process for Retention of Hospital IQR Program Measures
Adopted in Previous Payment Determinations
(2) Additional Hospital IQR Program Measures for FY 2015 Payment
Determination and Subsequent Years
c. Hospital IQR Program Quality Measures for the FY 2016 Payment
Determination and Subsequent Years
4. Possible New Quality Measures and Measure Topics for Future
Years
5. Form, Manner, and Timing of Quality Data Submission
a. Background
b. Procedural Requirements for the FY 2015 Payment Determination
and Subsequent Years
c. Data Submission Requirements for Chart-Abstracted Measures
d. Sampling and Case Thresholds Beginning With the FY 2015
Payment Determination
e. HCAHPS Requirements for the FY 2014, FY 2015, and FY 2016
Payment Determinations
f. Data Submission Requirements for Structural Measures
g. Data Submission and Reporting Requirements for Healthcare-
Associated Infection (HAI) Measures Reported via NHSN
6. Supplements to the Chart Validation Process for the Hospital
IQR Program for the FY 2015 Payment Determination and Subsequent
Years
a. Separate Processes for Sampling and Scoring for Chart-
Abstracted Clinical Process of Care and HAI Measures
(1) Background and Rationale
(2) Selection and Sampling of Clinical Process of Care Measures
for Validation
(3) Selection and Sampling of HAI Measures for Validation
(4) Validation Scoring for Chart-Abstract Clinical Process of
Care and HAI Measures
(5) Criteria to Evaluate Whether a Score Passes or Fails
b. Number and Manner of Selection for Hospitals Included in the
Base Annual Validation Random Sample
c. Targeting Criteria for Selection of Supplemental Hospitals
for Validation
7. Data Accuracy and Completeness Acknowledgement Requirements
for the FY 2015 Payment Determination and Subsequent Years
8. Public Display Requirements for the FY 2015 Payment
Determination and Subsequent Years
9. Reconsideration and Appeal Procedures for the FY 2015 Payment
Determination
10. Hospital IQR Program Disaster Extensions or Waivers
11. Electronic Health Records (EHRs)
a. Background
b. HITECH Act EHR Provisions
B. PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program
1. Statutory Authority
2. Covered Entities
3. Quality Measures for PCHs for FY 2014 Program and Subsequent
Program Years
a. Considerations in the Selection of the Quality Measures
[[Page 53263]]
b. PCHQR Program Quality Measures for FY 2014 Program and
Subsequent Program Years
(1) CDC/NHSN-Based Healthcare-Associated Infection (HAI)
Measures
(2) Cancer-Specific Measures
4. Possible New Quality Measure Topics for Future Years
5. Maintenance of Technical Specifications for Quality Measures
6. Public Display Requirements for the FY 2014 Program and
Subsequent Program Years
7. Form, Manner, and Timing of Data Submission for FY 2014
Program and Subsequent Program Years
a. Background
b. Procedural Requirements for FY 2014 Program and Subsequent
Program Years
c. Reporting Mechanisms for FY 2014 Program and Subsequent
Program Years
(1) Reporting Mechanism for the HAI Measures
(2) Reporting Mechanism for the Cancer-Specific Measures
d. Data Submission Timelines for FY 2014 Program and Subsequent
Program Years
e. Data Accuracy and Completeness Acknowledgement (DACA)
Requirements for the FY 2014 Program and Subsequent Program Years
C. Hospital Value-Based Purchasing (VBP) Program
1. Statutory Background
2. Overview of the FY 2013 Hospital VBP Program
3. FY 2014 Hospital VBP Program Measures
4. Other Previously Finalized Requirements for the Hospital VBP
Program
5. Hospital VBP Payment Adjustment Calculation Methodology
a. Definitions of the Term ``Base Operating DRG Payment Amount''
for Purposes of the Hospital VBP Program
b. Calculating the Funding Amount for Value-Based Incentive
Payments Each Year
c. Methodology To Calculate the Value-Based Incentive Payment
Adjustment Factor
d. Timing of the Base Operating DRG Payment Amount Reduction and
Value-Based Incentive Payment Adjustment for FY 2013 and Future
Hospital VBP Program Years
e. Process for Reducing the Base Operating DRG Payment Amount
and Applying the Value-Based Incentive Payment Adjustment for FY
2013
6. Review and Corrections Processes
a. Background
b. Review and Corrections Process for Claims-Based Measure Rates
c. Review and Corrections Process for Condition-Specific Scores,
Domain-Specific Scores, and Total Performance Scores
7. Appeal Process Under the Hospital VBP Program
a. Background
b. Appeal Process
8. Measures for the FY 2015 Hospital VBP Program
a. Relationship Between the National Strategy and the Hospital
VBP Program
b. FY 2015 Measures
c. General Process for Hospital VBP Program Measure Adoption for
Future Program Years
9. Measures and Domains for the FY 2016 Hospital VBP Program
a. FY 2016 Measures
b. Quality Measure Domains for the FY 2016 Hospital VBP Program
10. Performance Periods and Baseline Periods for the FY 2015
Hospital VBP Program
a. Clinical Process of Care Domain Performance Period and
Baseline Periods for FY 2015
b. Patient Experience of Care Domain Performance Period and
Baseline Period for FY 2015
c. Efficiency Domain Measure Performance Period and Baseline
Period for FY 2015
d. Outcome Domain Performance Periods for FY 2015
(1) Mortality Measures
(2) AHRQ PSI Composite Measure
(3) CLABSI Measure
e. Performance Periods for FY 2016 Measures
11. Performance Standards for the Hospital VBP Program for FY
2015 and FY 2016
a. Background
b. Performance Standards for the FY 2015 Hospital VBP Program
Measures
c. Performance Standards for FY 2016 Hospital VBP Program
Measures
d. Adopting Performance Periods and Standards for Future Program
Years
12. FY 2015 Hospital VBP Program Scoring Methodology
a. General Hospital VBP Program Scoring Methodology
b. Domain Weighting for the FY 2015 Hospital VBP Program for
Hospitals That Receive a Score on all Four Proposed Domains
c. Domain Weighting for Hospitals Receiving Scores on Fewer Than
Four Domains
13. Applicability of the Hospital VBP Program to Hospitals
a. Background
b. Exemption Request Process for Maryland Hospitals
14. Minimum Numbers of Cases and Measures for the FY 2015
Program
a. Background
b. Minimum Numbers of Cases and Measures for the FY 2015 Outcome
Domain
c. Medicare Spending Per Beneficiary Measure Case Minimum
15. Immediate Jeopardy Citations
D. Long-Term Care Hospital Quality Reporting (LTCHQR) Program
1. Statutory History
2. LTCH Program Measures for the FY 2014 Payment Determination
and Subsequent Fiscal Years Payment Determinations
a. Process for Retention of LTCHQR Program Measures Adopted in
Previous Payment Determinations
b. Process for Adopting Changes to LTCHQR Program Measures
3. CLABSI, CAUTI, AND Pressure Ulcer Measures
4. LTCHQR Program Quality Measures for the FY 2016 Payment
Determinations and Subsequent Fiscal Years Payment Determinations
a. Considerations in Updating and Expanding Quality Measures
Under the LTCHQR Program for FY 2016 and Subsequent Payment Update
Determinations
b. New LTCHQR Program Quality Measures Beginning With the FY
2016 Payment Determination
(1) Quality Measure 1 for the FY 2016 Payment
Determination and Subsequent Fiscal Years Payment Determinations:
Percent of Nursing Home Residents who Were Assessed and
Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF
0680)
(2) LTCH Quality Measure 2 for the FY 2016 Payment
Determination and Subsequent Fiscal Years Payment Determinations:
Percentage of Residents or Patients who Were Assessed and
Appropriately Given the Pneumococcal Vaccine (Short-Stay) (NQF
0682)
(3) LTCH Quality Measure 3 for the FY 2016 Payment
Determination and Subsequent Fiscal Years Payment Determinations:
Influenza Vaccination Coverage Among Healthcare Personnel (NQF
0431)
(4) LTCH Quality Measure 4 for the FY 2016 Payment
Determination and Subsequent Fiscal Years Payment Determinations:
Ventilator Bundle (Application of NQF 0302)
(5) LTCH Quality Measure 5 for the FY 2016 Payment
Determination and Subsequent Fiscal Years Payment Determinations:
Restraint Rate per 1,000 Patient Days
5. Timeline for Data Submission Under the LTCHQR Program for the
FY 2015 Payment Determination
6. Timeline for Data Submission Under the LTCHQR Program for the
FY 2016 Payment Determination
7. Public Display of Data Quality Measures
E. Quality Reporting Requirements Under the Ambulatory Surgical
Centers Quality Reporting (ASCQR) Program
1. Background
2. Requirements for Reporting Under the ASCQR Program
a. Administrative Requirements
(1) Requirements Regarding QualityNet Account and Administrator
for the CYs 2014 and 2015 Payment Determinations
(2) Requirements Regarding Participation Status for the CY 2014
Payment Determination and Subsequent Payment Determination Years
b. Requirements Regarding Form, Manner, and Timing for Claims-
Based Measures for CYs 2014 and 2015 Payment Determinations
(1) Background
(2) Minimum Threshold for Claims-Based Measures Using QDCs
c. ASCQR Program Validation of Claims-Based and Structural
Measures
3. Extraordinary Circumstances Extension or Waiver for the CY
2014 Payment Determination and Subsequent Payment Determination
Years
4. ASCQR Program Reconsideration Procedures for the CY 2014
Payment
[[Page 53264]]
Determination and Subsequent Payment Determination Years
F. Inpatient Psychiatric Facilities Quality Reporting (IPFQR)
Program
1. Statutory Authority
2. Application of the Payment Update Reduction for Failure To
Report for FY 2014 Payment Determination and Subsequent Years
3. Covered Entities
4. Quality Measures
a. Considerations in Selecting Quality Measures
b. Quality Measures Beginning With FY 2014 Payment Determination
and Subsequent Years
(1) HBIPS-2 (Hours of Physical Restraint Use)
(2) HBIPS-3 (Hours of Seclusion Use)
(3) HBIPS-4 (Patients Discharged on Multiple Antipsychotic
Medications)
(4) HBIPS-5 (Patients Discharged on Multiple Antipsychotic
Medications With Appropriate Justification)
(5) HBIPS-6 (Post Discharge Continuing Care Plan Created)
(6) HBIPS-7 (Post Discharge Continuing Care Plan Transmitted to
the Next Level of Care Provider Upon Discharge)
c. Maintenance of Technical Specifications for Quality Measures
5. Possible New Quality Measures for Future Years
6. Public Display Requirements for the FY 2014 Payment
Determination and Subsequent Years
7. Form, Manner, and Timing of Quality Data Submission for the
FY 2014 Payment Determination and Subsequent Years
a. Background
b. Procedural Requirements for the FY 2014 Payment Determination
and Subsequent Years
c. Reporting and Submission Requirements for the FY 2014 Payment
Determination
d. Reporting and Submission Requirements for the FY 2015 and FY
2016 Payment Determinations
e. Population, Sampling, and Minimum Case Threshold for FY 2014
and Subsequent Years
f. Data Accuracy and Completeness Acknowledgement Requirements
for the FY 2014 Payment Determination and Subsequent Years
8. Reconsideration and Appeals Procedure for the FY 2014 Payment
Determination and Subsequent Years
9. Waivers From Quality Reporting Requirements for the FY 2014
Payment Determination and Subsequent Years
10. Electronic Health Records (EHRs)
IX. MedPAC Recommendations and Other Related Reports and Studies for
the IPPS and LTCH PPS
A. MedPAC Recommendations for the IPPS for FY 2013
B. Studies and Reports on Reforming the Hospital Wage Index
1. Secretary's Report to Congress on Wage Index Reform
2. Institute of Medicine (IOM) Study on Medicare's Approach to
Measuring Geographic Variations in Hospitals' Wage Costs
X. Quality Improvement Organization (QIO) Regulation Changes
Relating to Provider and Practitioner Medical Record Deadlines and
Claim Denials
XI. Other Required Information
A. Requests for Data From the Public
B. Collection of Information Requirements
1. Statutory Requirement for Solicitation of Comments
2. ICRs for Add-On Payments for New Services and Technologies
3. ICRs for the Occupational Mix Adjustment to the FY 2013 Index
(Hospital Wage Index Occupational Mix Survey)
4. Hospital Applications for Geographic Reclassifications by the
MGCRB
5. ICRs for Application for GME Resident Slots
6. ICRs for the Hospital Inpatient Quality Reporting (IQR)
Program
7. ICRs for PPS-Exempt Cancer Hospital Quality Reporting (PCHQR)
Program
8. ICRs for Hospital Value-Based Purchasing (VBP) Program
9. ICRs for the Long-Term Care Hospital Quality Reporting
(LTCHQR) Program
10. ICRs for the Ambulatory Surgical Center (ASC) Quality
Reporting Program
11. ICRs for the Inpatient Psychiatric Facilities Quality
Reporting (IPFQR) Program
Regulation Text
Addendum--Schedule of Standardized Amounts, Update Factors, and
Rate-of-Increase Percentages Effective With Cost Reporting Periods
Beginning on or After October 1, 2012 and Payment Rates for LTCHs
Effective With Discharges Occurring on or After October 1, 2012
I. Summary and Background
II. Changes to the Prospective Payment Rates for Hospital Inpatient
Operating Costs for Acute Care Hospitals for FY 2013
A. Calculation of the Adjusted Standardized Amount
B. Adjustments for Area Wage Levels and Cost-of-Living
C. Calculation of the Prospective Payment Rates
III. Changes to Payment Rates for Acute Care Hospital Inpatient
Capital-Related Costs for FY 2013
A. Determination of Federal Hospital Inpatient Capital-Related
Prospective Payment Rate Update
B. Calculation of the Inpatient Capital-Related Prospective
Payments for FY 2013
C. Capital Input Price Index
IV. Changes to Payment Rates for Excluded Hospitals: Rate-of-
Increase Percentages for FY 2013
V. Changes to the Payment Rates for the LTCH PPS for FY 2013
A. LTCH PPS Standard Federal Rate for FY 2013
B. Adjustment for Area Wage Levels Under the LTCH PPS for FY
2013
1. Background
2. Geographic Classifications/Labor Market Area Definitions
3. LTCH PPS Labor-Related Share
4. LTCH PPS Wage Index for FY 2013
5. Budget Neutrality Adjustment for Changes to the Area Wage
Level Adjustment
C. LTCH PPS Cost-of-Living Adjustment for LTCHs Located in
Alaska and Hawaii
D. Adjustment for LTCH PPS High-Cost Outlier (HCO) Cases
E. Computing the Adjusted LTCH PPS Federal Prospective Payments
for FY 2013
VI. Tables Referenced in this Final Rulemaking and Available Through
the Internet on the CMS Web Site
Appendix A--Economic Analyses
I. Regulatory Impact Analysis
A. Introduction
B. Need
C. Objectives of the IPPS
D. Limitations of Our Analysis
E. Hospitals Included in and Excluded From the IPPS
F. Effects on Hospitals and Hospital Units Excluded From the
IPPS
G. Quantitative Effects of the Policy Changes Under the IPPS for
Operating Costs
1. Basis and Methodology of Estimates
2. Analysis of Table I
3. Impact Analysis of Table II
H. Effects of Other Policy Changes
1. Effects of Policy on HACs, Including Infections
2. Effects of Policy Relating to New Medical Service and
Technology Add-On Payments
3. Effects of Policy Changes Relating to SCHs
4. Effects of Payment Adjustment for Low-Volume Hospitals for FY
2013
5. Effects of Policy Changes Relating to Payment Adjustments for
Medicare Disproportionate Share Hospitals (DSHs) and Indirect
Medical Education (IME)
6. Effects of the Policy Changes Relating to Direct GME and IME
a. Effects of Clarification and Policy Regarding Timely Filing
Requirements for Claims for Medicare Advantage Enrollees Under Fee-
for-Service Medicare
b. Effects of Policy Changes Relating to New Teaching Hospitals:
New Program Growth From 3 Years to 5 Years
c. Effects of Changes Relating to 5-Year Period Following
Implementation of Reductions and Increases to Hospitals' FTE
Resident Caps for GME Payment Purposes Under Section 5503 of The
Affordable Care Act
d. Preservation of Resident Cap Positions From Closed Hospitals
(Section 5506 of the Affordable Care Act)
7. Effects of Changes Relating to the Reporting Requirements for
Pension Costs for Medicare Cost-Finding Purposes
8. Effects of Implementation of Rural Community Hospital
Demonstration Program
9. Effects of Change in Effective Date for Policies Relating to
Hospital Services Furnished Under Arrangements
I. Effects of Changes in the Capital IPPS
1. General Considerations
2. Results
J. Effects of Payment Rate Changes and Policy Changes Under the
LTCH PPS
1. Introduction and General Considerations
2. Impact on Rural Hospitals
[[Page 53265]]
3. Anticipated Effects of LTCH PPS Payment Rate Change and
Policy Changes
4. Effect on the Medicare Program
5. Effect on Medicare Beneficiaries
K. Effects of Requirements for Hospital Inpatient Quality
Reporting (IQR) Program
L. Effects of PPS-Exempt Cancer Hospital Quality Reporting
(PCHQR) Program
M. Effects of Hospital Value-Based Purchasing (VBP) Program
Requirements
N. Effects of New Measures Added to the LTCH Quality Reporting
(LTCHQR) Program
O. Effects of Quality Reporting Requirements for Ambulatory
Surgical Centers
P. Effects of Requirements for the Inpatient Psychiatric
Facilities Quality Reporting (IPFQR) Program
Q. Effects of Requirements for Provider and Practitioner Medical
Record Deadlines and Claims Denials
R. Alternatives Considered
S. Overall Conclusion
1. Acute Care Hospitals
2. LTCHs
II. Accounting Statements and Tables
A. Acute Care Hospitals
B. LTCHs
III. Regulatory Flexibility Act (RFA) Analysis
IV. Impact on Small Rural Hospitals
V. Unfunded Mandate Reform Act (UMRA) Analysis
VI. Executive Order 12866
Appendix B: Recommendation of Update Factors for Operating Cost
Rates of Payment for Inpatient Hospital Services
I. Background
II. Inpatient Hospital Update for FY 2013
A. FY 2013 Inpatient Hospital Update
B. Update for SCHs for FY 2013
C. FY 2013 Puerto Rico Hospital Update
D. Update for Hospitals Excluded From the IPPS
E. Update for LTCHs
III. Secretary's Recommendation
IV. MedPAC Recommendation for Assessing Payment Adequacy and
Updating Payments in Traditional Medicare
I. Executive Summary and Background
A. Executive Summary
1. Purpose and Legal Authority
This final rule makes payment and policy changes under the Medicare
inpatient prospective payment systems (IPPS) for operating and capital-
related costs of acute care hospitals as well as for certain hospitals
and hospital units excluded from the IPPS. In addition, it makes
payment and policy changes for inpatient hospital services provided by
long-term care hospitals (LTCHs) under the long-term care hospital
prospective payment system (LTCH PPS). It also makes policy changes to
programs associated with Medicare IPPS hospitals and LTCHs.
Under various statutory authorities, we are making changes to the
Medicare IPPS, to the LTCH PPS, and to other related payment
methodologies and programs for FY 2013. These statutory authorities
include, but are not limited to, the following:
Section 1886(d) of the Social Security Act (the Act),
which sets forth a system of payment for the operating costs of acute
care hospital inpatient stays under Medicare Part A (Hospital
Insurance) based on prospectively set rates. Section 1886(g) of the Act
requires that, instead of paying for capital-related costs of inpatient
hospital services on a reasonable cost basis, the Secretary use a
prospective payment system (PPS).
Section 1886(d)(1)(B) of the Act, which specifies that
certain hospitals and hospital units are excluded from the IPPS. These
hospitals and units are: Rehabilitation hospitals and units; LTCHs;
psychiatric hospitals and units; children's hospitals; and cancer
hospitals. Religious nonmedical health care institutions (RNHCIs) are
also excluded from the IPPS.
Sections 123(a) and (c) of Public Law 106-113 and section
307(b)(1) of Public Law 106-554 (as codified under section 1886(m)(1)
of the Act), which provide for the development and implementation of a
prospective payment system for payment for inpatient hospital services
of long-term care hospitals (LTCHs) described in section
1886(d)(1)(B)(iv) of the Act.
Sections 1814(l), 1820, and 1834(g) of the Act, which
specifies that payments are made to critical access hospitals (CAHs)
(that is, rural hospitals or facilities that meet certain statutory
requirements) for inpatient and outpatient services and that these
payments are generally based on 101 percent of reasonable cost.
Section 1886(d)(3)(A)(vi) of the Act, which authorizes us
to maintain budget neutrality by adjusting the national standardized
amount, to eliminate the estimated effect of changes in coding or
classification that do not reflect real changes in case-mix.
Section 1886(d)(4)(D) of the Act, which addresses certain
hospital-acquired conditions (HACs), including infections. Section
1886(d)(4)(D) of the Act specifies that, by October 1, 2007, the
Secretary was required to select, in consultation with the Centers for
Disease Control and Prevention (CDC), at least two conditions that: (a)
Are high cost, high volume, or both; (b) are assigned to a higher
paying MS-DRG when present as a secondary diagnosis (that is,
conditions under the MS-DRG system that are CCs or MCCs); and (c) could
reasonably have been prevented through the application of evidence-
based guidelines. Section 1886(d)(4)(D) of the Act also specifies that
the list of conditions may be revised, again in consultation with CDC,
from time to time as long as the list contains at least two conditions.
Section 1886(d)(4)(D)(iii) of the Act requires that hospitals,
effective with discharges occurring on or after October 1, 2007, submit
information on Medicare claims specifying whether diagnoses were
present on admission (POA). Section 1886(d)(4)(D)(i) of the Act
specifies that effective for discharges occurring on or after October
1, 2008, Medicare no longer assigns an inpatient hospital discharge to
a higher paying MS-DRG if a selected condition is not POA.
Section 1886(a)(4) of the Act, which specifies that costs
of approved educational activities are excluded from the operating
costs of inpatient hospital services. Hospitals with approved graduate
medical education (GME) programs are paid for the direct costs of GME
in accordance with section 1886(h) of the Act.
Section 1886(b)(3)(B)(viii) of the Act, which requires the
Secretary to reduce the applicable percentage increase in payments to a
subsection (d) hospital for a fiscal year if the hospital does not
submit data on measures in a form and manner, and at a time, specified
by the Secretary.
Section 1886(o) of the Act, which requires the Secretary
to establish a Hospital Value-Based Purchasing (VBP) Program under
which value-based incentive payments are made in a fiscal year to
hospitals meeting performance standards established for a performance
period for such fiscal year. Both the performance standards and the
performance period for a fiscal year are to be established by the
Secretary. Section 1886(o)(1)(B) of the Act directs the Secretary to
begin making value-based incentive payments under the Hospital
Inpatient VBP Program to hospitals for discharges occurring on or after
October 1, 2012.
Section 1886(q) of the Act, as added by section 3025 of
the Affordable Care Act and amended by section 10309 of the Affordable
Care Act, which establishes the ``Hospital Readmissions Reduction
Program'' effective for discharges from an ``applicable hospital''
beginning on or after October 1, 2012, under which payments to those
hospitals under section 1886(d) of the Act will be reduced to account
for certain excess readmissions.
[[Page 53266]]
2. Summary of the Major Provisions
a. MS-DRG Documentation and Coding Adjustment, Including the
Applicability to the Hospital-Specific Rates and the Puerto Rico-
Specific Standardized Amount
Section 7(b)(1)(A) of Public Law 110-90 requires that, if the
Secretary determines that implementation of the MS-DRG system resulted
in changes in documentation and coding that did not reflect real
changes in case-mix for discharges occurring during FY 2008 or FY 2009
that are different than the prospective documentation and coding
adjustments applied under section 7(a) of Public Law 110-90, the
Secretary shall make an appropriate prospective adjustment under
section 1886(d)(3)(A)(vi) of the Act.
Section 7(b)(1)(B) of Public Law 110-90 requires the Secretary to
make an additional one-time adjustment to the standardized amounts to
offset the estimated increase or decrease in aggregate payments for FYs
2008 and 2009 resulting from the difference between the estimated
actual documentation and coding effect and the documentation and coding
adjustment applied under section 7(a) of Public Law 110-90.
After accounting for adjustments made in FYs 2008 and 2009, we have
found a remaining documentation and coding effect of 3.9 percent. As we
have discussed, an additional cumulative adjustment of -3.9 percent
would be necessary to meet the requirements of section 7(b)(1)(A) of
Public Law 110-90. Without making this adjustment, our actuaries
estimated that annual aggregate payments would be increased by
approximately $4 billion. Furthermore, an additional one-time
adjustment of -5.8 percent would be required to fully recapture
overpayments (estimated at approximately $6.9 billion) due to
documentation and coding that occurred in FY 2008 and FY 2009, as
required by section 7(b)(1)(B) of Public Law 110-90.
CMS has thus far implemented a -2.0 percent (of a required -3.9
percent) prospective adjustment, and completed the full one-time -5.8
percent recoupment adjustment (-2.9 percent in both FYs 2011 and 2012).
In FY 2013, we are completing the remaining -1.9 percent prospective
adjustment, while also making a + 2.9 percent adjustment to remove the
effect of the FY 2012 one-time recoupment adjustment. We have also
determined that a cumulative adjustment of -5.4 percent is required to
eliminate the full effect of documentation and coding changes on future
payments to SCHs and MDHs. After accounting for adjustments made to the
hospital-specific rate in FY 2011 and FY 2012, an additional
prospective adjustment of -0.5 percent is necessary to complete the
full -5.4 adjustment. For FY 2013, we are making a full -0.5 percent
adjustment to the hospital-specific rate, in keeping with our policy of
applying equivalent adjustments, when applicable, to other subsection
(d) hospital payment systems.
In the FY 2013 IPPS/LTCH PPS proposed rule, we proposed to make an
additional adjustment to account for documentation and coding effects
that occurred in FY 2010. After review of comments and recommendations
from MedPAC, CMS analyzed FY 2010 claims using the same methodology as
previously applied to FYs 2008 and 2009 claims. CMS estimated that
there was a 0.8 percentage point effect due to documentation and coding
that did not reflect an actual increase in patient severity. However,
in light of public comments we received on the proposed rule, we are
not making an adjustment to account for this effect at this time.
Therefore, the total documentation and coding adjustment for FY 2013 is
a + 1.0 percent adjustment (-1.9 plus + 2.9) to the standardized amount
and a -0.5 percent adjustment to the hospital-specific rate.
b. Hospital-Acquired Conditions (HACs)
Section 1886(d)(4)(D) specifies that, by October 1, 2007, the
Secretary was required to select, in consultation with the Centers for
Disease Control and Prevention (CDC), at least two conditions that: (a)
Are high cost, high volume, or both; (b) are assigned to a higher
paying MS-DRG when present as a secondary diagnosis (that is,
conditions under the MS-DRG system that are CCs or MCCs); and (c) could
reasonably have been prevented through the application of evidence-
based guidelines. Section 1886(d)(4)(D) of the Act also specifies that
the list of conditions may be revised, again in consultation with CDC,
from time to time as long as the list contains at least two conditions.
In this final rule, we are adding two new conditions, Surgical Site
Infection (SSI) Following Cardiac Implantable Electronic Device (CIED)
Procedures and Pneumothorax with Venous Catheterization, for the HAC
payment provisions for FY 2013 under section 1886(d)(4)(D) of the Act.
We note that the SSI Following CEID Procedures condition will be a new
subcategory of the SSI HAC category. We also are adding diagnosis codes
999.32 (Bloodstream infection due to central venous catheter) and
999.33 (Local infection due to central venous catheter) to the existing
Vascular Catheter-Associated Infection HAC category for FY 2013.
c. Reduction of Hospital Payments for Excess Readmissions
We are finalizing a number of policies to implement section 1886(q)
of the Act, as added by section 3025 of the Affordable Care Act, which
establishes the Hospital Readmissions Reduction Program. The Hospital
Readmissions Reduction Program requires a reduction to a hospital's
base operating DRG payments to account for excess readmissions of
selected applicable conditions, which are acute myocardial infarction,
heart failure, and pneumonia. We are finalizing provisions related to
the applicable hospitals that are included in the Hospital Readmissions
Reduction Program, the methodology to calculate the adjustment factor,
the portion of the hospital's payment that is reduced by the adjustment
factor, and the process under which the hospitals have the opportunity
to review and submit corrections for their readmissions information
prior to the information being posted on the Hospital Compare Web site.
d. Long-Term Care Hospital-Specific Market Basket
We are updating LTCH payment rates with a separate market basket
comprised of data from only LTCHs, which we refer to as a ``LTCH-
specific market basket.'' We are implementing a stand-alone LTCH market
basket based on FY 2009 Medicare cost report data. The method used to
calculate the cost weights and the price proxies used are generally
similar to those used in the FY 2008-based RPL market basket that was
finalized for the FY 2012 IPPS/LTCH PPS final rule. The primary
difference is that we are using data from LTCH providers only.
e. Expiration of Certain Payment Rules for LTCH Services and the
Moratorium on the Establishment of Certain Hospitals and Satellite
Facilities and the Increase in the Number of Beds in LTCHs and LTCH
Satellite Facilities
Moratoria on the implementation of certain LTCH payment policies
and on the development of new LTCHs and LTCH satellite facilities and
on bed increases in existing LTCHs and LTCH satellite facilities
established under sections 114(c) and (d) of the MMSEA (Pub. L. 110-
173) as amended by section 4302 of the ARRA (Pub. L. 111-5) and further
amended by sections
[[Page 53267]]
3106 and 10312 of the Affordable Care Act are set to expire during CY
2012, under current law.
The moratoria established by these provisions delayed the full
implementation of the following policies for 5 years beginning at
various times in CY 2007:
The full application of the ``25-percent payment
adjustment threshold'' to certain LTCHs, including hospitals-within-
hospitals (HwHs) and LTCH satellite facilities for cost reporting
periods beginning on or after July 1, 2007, and before July 1, 2012, or
cost reporting periods beginning on or after October 1, 2007, and
before October 1, 2012, as applicable under the regulations at
Sec. Sec. 412.534 and 412.536.
The inclusion of an ``IPPS comparable per diem amount''
option for payment determinations under the short stay outlier (SSO)
adjustment at Sec. 412.529 of the regulations for LTCH discharges
occurring on or after December 29, 2007, but prior to December 29,
2012.
The application of any one-time budget neutrality
adjustment to the LTCH PPS standard Federal rate provided for in Sec.
412.523(d)(3) of the regulations from December 29, 2007, through
December 28, 2012.
In general, the development of new LTCHs and LTCH
satellite facilities, or increases in the number of beds in existing
LTCHs and LTCH satellite facilities from December 29, 2007, through
December 28, 2012, unless one of the specified exceptions to the
particular moratorium was met.
In this final rule, we are extending the existing delay of the full
implementation of the 25-percent payment adjustment threshold for an
additional year; that is, for cost reporting periods beginning on or
after October 1, 2012, and before October 1, 2013, as applicable. We
are providing a 1-year moratorium on the application of the ``25-
percent threshold'' payment adjustment for cost reporting periods
beginning on or after October 1, 2012, and before October 1, 2013.
However, the moratorium will expire for several types of LTCHs with
cost reporting periods beginning before July 1, 2012 and September 30,
2012, prior to the effective date of the moratorium finalized in this
rule. This gap in the continued application of the moratorium is a
result of the July 1, 2007 effective date of section 114(c)(1) of the
MMSEA, as amended by section 4302(a)(1) of the ARRA, which was based on
the former July 1 through June 30 regulatory cycle for the LTCH PPS. In
order to address this situation for this group of LTCHs, we are
finalizing a policy that applies a supplemental moratorium on a per
discharge basis beginning with discharges occurring on or after October
1, 2012, and continuing through the LTCH's cost reporting period.
We are providing for an additional 1-year extension in the delay of
the full application of the 25-percent payment adjustment threshold
policy because we believe that, based on a recent research initiative,
we could soon be in a position to propose revisions to our payment
policies that could render the 25-percent payment adjustment threshold
policy unnecessary. In light of this potential result, we believe it is
prudent to avoid requiring LTCHs (or CMS systems) to implement the full
reinstatement of the policy for what could be a relatively short period
of time.
We are not making any changes to the SSO policy as it currently
exists in the regulations at Sec. 412.529. Accordingly, consistent
with the existing regulations at Sec. 412.529(c)(3), for SSO
discharges occurring on or after December 29, 2012, the ``IPPS
comparable per diem amount'' option at Sec. 412.529(c)(3)(i)(D) will
apply to payment determinations for cases with a covered length of stay
that was equal to or less than one standard deviation from the
geometric average length of stay for the same MS-DRG under the IPPS
(that is, the ``IPPS comparable threshold'').
The moratoria on the development of new LTCHs or LTCH satellite
facilities and on an increase in the number of beds in existing LTCHs
or LTCH satellite facilities are set to expire on December 29, 2012,
under current law.
We are making a one-time prospective adjustment under Sec.
412.523(d)(3) of the regulations (which will not apply to payments for
discharges occurring on or before December 28, 2012, consistent with
the statute) and to transition the application of this adjustment over
a 3-year period. Regulations at Sec. 412.523(d)(3) provide for the
possibility of making a one-time prospective adjustment to the LTCH PPS
rates so that the effect of any significant difference between the data
used in the original computations of budget neutrality for FY 2003 and
more recent data to determine budget neutrality for FY 2003 is not
perpetuated in the prospective payment rates for future years.
f. Hospital Inpatient Quality Reporting (IQR) Program
Under section 1886(b)(3)(B)(viii) of the Act, hospitals are
required to report data on measures selected by the Secretary for the
Hospital IQR Program in order to receive the full annual percentage
increase. In past rules, we have established measures for reporting and
the process for submittal and validation of the data.
In this final rule, we are making programmatic changes to the
Hospital IQR Program for the FY 2015 payment determination and
subsequent years. These changes will streamline and simplify the
process for hospitals and reduce burden. We are reducing the number of
measures in the Hospital IQR Program from 72 to 59 for the FY 2015
payment determination. We are removing 1 chart-abstracted measure and
16 claims-based measures from the program for the FY 2015 payment
determination and subsequent years. We are removing these measures for
a number of reasons, including that these measures are losing NQF
endorsement, are included in an existing composite measure, are
duplicative of other measures in the Hospital IQR Program, or could
otherwise be reported on Hospital Compare in the future under the
authority of section 3008 of the Affordable Care Act. In addition, we
are adopting three claims-based measures, one chart-abstracted measure
and a survey-based measure regarding care transitions, which we will
collect using the existing HCAHPS survey, to the measure set for the FY
2015 payment determination and subsequent years. We are adopting a
structural measure for the FY 2016 payment determination and subsequent
years.
In an effort to streamline the rulemaking process, we are retaining
measures for all subsequent payment determinations, unless specifically
stated otherwise, through rulemaking. We are adopting a policy under
which we will use a subregulatory process to make nonsubstantive
updates to the Hospital IQR Program measures. To ensure that hospitals
that participate in the Hospital IQR Program are submitting data for a
full year, we are providing that hospitals that would like to
participate in the Hospital IQR Program for the first time, or that
previously withdrew from the Program and would like to participate
again, must submit a completed Notice of Participation by December 31
of the calendar year preceding the first quarter of the calendar year
in which chart-abstracted data submission is required for any given
fiscal year. In addition, if a hospital wishes to withdraw from the
program, it will have until May 15 prior to the start of the payment
year affected to do so. In order to reduce the burden associated with
validation, we are reducing the base annual validation sample from 800
to 400, with an
[[Page 53268]]
additional targeted sample of up to 200 hospitals. All hospitals
failing validation in a previous year will be included in the 200
hospital supplement, with a random sample drawn from hospitals meeting
one or more additional targeting criteria. We are calculating scores
for both the chart-abstracted clinical process of care and HAC measure
sets and then calculating a total score reflecting a weighted average
of each of the two individual scores. Hospitals must achieve a total
score of 75 percent to pass validation.
g. Hospital Value-Based Purchasing (VBP) Program
Section 1886(o)(1)(B) of the Act directs the Secretary to begin
making value-based incentive payments under the Hospital Inpatient VBP
Program to hospitals for discharges occurring on or after October 1,
2012. These incentive payments will be funded for FY 2013 through a
reduction to the FY 2013 base operating MS-DRG payment for each
discharge of 1 percent, as required by section 1886(o)(7)(B)(i) of the
Act. The applicable percentage for FY 2014 is 1.25 percent, for FY 2015
is 1.5 percent, for FY 2016 is 1.75 percent, and for FY 2017 and
subsequent years is 2 percent.
We previously published the requirements and related measures to
implement the Hospital Inpatient VBP Program in a final rule issued in
the Federal Register on April 29, 2011 (76 FR 26490, May 6, 2011), in
the FY 2012 IPPS/LTCH PPS final rule (76 FR 51653 through 51660), and
in the CY 2012 OPPS/ASC final rule (76 FR 74527 through 74547). In this
final rule, we are adding requirements for the Hospital VBP Program.
Specifically, we are adding for the FY 2015 program two additional
outcome measures--an AHRQ Patient Safety Indicators composite measure
and CLABSI: Central Line-Associated Blood Stream Infection. We are
adding a measure of Medicare Spending per Beneficiary in the Efficiency
domain. We are also finalizing a number of other requirements for the
program, including an appeals process, case minimums, a review and
corrections process for claims-based measures, and the scoring
methodology for FY 2015.
3. Summary of Costs and Benefits
FY 2013 Documentation and Coding Adjustment: Section
7(b)(1)(A) of Public Law 110-90 requires that, if the Secretary
determines that implementation of the MS-DRG system resulted in changes
in documentation and coding that did not reflect real changes in case-
mix for discharges occurring during FY 2008 or FY 2009 that are
different than the prospective documentation and coding adjustments
applied under section 7(a) of Public Law 110-90, the Secretary shall
make an appropriate prospective adjustment under section
1886(d)(3)(A)(vi) of the Act. Section 7(b)(1)(B) of Public Law 110-90
requires the Secretary to make an additional one-time adjustment to the
standardized amounts to offset the estimated increase or decrease in
aggregate payments for FYs 2008 and 2009 resulting from the difference
between the estimated actual documentation and coding effect and the
documentation and coding adjustment applied under section 7(a) of
Public Law 110-90.
After accounting for adjustments made in FYs 2008 and 2009, we have
found a remaining documentation and coding effect of 3.9 percent. As we
have discussed in prior rules, an additional cumulative adjustment of -
3.9 percent will be necessary to meet the requirements of section
7(b)(1)(A) of Public Law 110-90. Without making this adjustment, our
actuaries estimated that annual aggregate payments would be increased
by approximately $4 billion. Furthermore, an additional one-time
adjustment of -5.8 percent will be required to fully recapture
overpayments (estimated at approximately $6.9 billion) due to
documentation and coding that occurred in FY 2008 and FY 2009, as
required by section 7(b)(1)(B) of Public Law 110-90.
CMS has thus far implemented a -2.0 percent (of a required -3.9
percent) prospective adjustment, and completed the full one-time -5.8
percent recoupment adjustment (-2.9 percent in both FYs 2011 and 2012).
In FY 2013, we are completing the remaining -1.9 percent prospective
adjustment, while also making a +2.9 percent adjustment to remove the
effect of the FY 2012 one-time recoupment adjustment. We have also
determined that a cumulative adjustment of -5.4 percent is required to
eliminate the full effect of documentation and coding changes on future
payments to SCHs and MDHs. After accounting for adjustments made to the
hospital-specific rate in FY 2011 and FY 2012, an additional
prospective adjustment of -0.5 percent is necessary to complete the
full -5.4 percent adjustment. We are making a full -0.5 percent
adjustment to the hospital-specific rate, in keeping with our policy of
applying equivalent adjustments, when applicable, to other subsection
(d) hospital payment systems.
In addition, in the FY 2013 IPPS/LTCH PPS proposed rule, we
proposed to make an additional adjustment to account for documentation
and coding effects that occurred in FY 2010. After review of comments
and recommendations from MedPAC, CMS analyzed FY 2010 claims using the
same methodology as previously applied to FYs 2008 and 2009 claims. CMS
estimated that there was a 0.8 percentage point effect due to
documentation and coding that did not reflect an actual increase in
patient severity. However, in light of the public comments that we
received on the proposed rule, we are not making an adjustment to
account for this effect at this time. Therefore, the total IPPS
documentation and coding adjustment of +1.0 percent (-1.9 plus +2.9)
will increase total payments by approximately $1.069 billion. The total
adjustment to the hospital-specific rate will be -0.5, and will
decrease total payment by $22.7 million. The combined impact of the
final FY 2013 documentation and coding adjustments will increase total
payments by approximately $1.042 billion.
Hospital-Acquired Conditions (HACs). For FY 2013, we are
continuing to implement section 1886(d)(4)(D) of the Act that addresses
certain hospital-acquired conditions (HACs), including infections. We
are adding two additional conditions for FY 2013, Surgical Site
Infection (SSI) Following Cardiac Implantable Electronic Device (CIED)
Procedures and Iatrogenic Pneumothorax with Venous Catheterization. The
projected savings estimate for these two conditions is less than $1
million, with the total estimated savings from HACs for FY 2013
projected at $24 million dollars.
Reduction to Hospital Payments for Excess Readmissions. We
are making a number of policies to implement section 1886(q) of the
Act, as added by section 3025 of the Affordable Care Act, which
establishes the Hospital Readmissions Reduction Program. The Hospital
Readmissions Reduction Program requires a reduction to a hospital's
base operating DRG payment amount to account for excess readmissions of
selected applicable conditions, which are acute myocardial infarction,
heart failure, and pneumonia. This provision is not budget neutral. A
hospital's readmission payment adjustment is the higher of a ratio of a
hospital's aggregate dollars for excess readmissions to their aggregate
dollars for all discharges, or 0.99 (that is, or a 1-percent reduction)
for FY 2013. In this final rule, we estimate that the Hospital
Readmissions Reduction Program will result in a 0.3 percent decrease,
or approximately $280 million, in payments to hospitals.
[[Page 53269]]
Long-Term Care Hospital-Specific Market Basket.
The FY 2009-based LTCH-specific market basket update (as measured by
percentage increase) for FY 2013 is currently estimated to be 2.6
percent, which is slightly lower than the market basket update based on
the FY 2008-based RPL market basket at 2.7 percent (currently used
under the LTCH PPS). Therefore, we project that there will be no
significant fiscal impact on the LTCH PPS payment rates in FY 2013 as a
result of this policy. In addition, we are updating the labor-related
share under the LTCH PPS for FY 2013 based on the relative importance
of each labor-related cost category in the FY 2009-based LTCH-specific
market basket. Although this policy will result in a decrease in the
LTCH PPS labor-related share for FY 2013, we are projecting that there
will be no effect on aggregate LTCH PPS payments due to the regulatory
requirement that any changes to the LTCH area wage adjustment
(including the labor-related share) are adopted in a budget neutral
manner.
Update to the LTCH PPS Standard Federal Rate,
including the Expiration of Certain Payment Rules for LTCH Services and
the Moratorium on the Establishment of Certain Hospitals and Satellite
Facilities and the Increase in the Number of Beds in LTCHs and LTCH
Satellite Facilities. Based on the best available data for the 428
LTCHs in our database, we estimate that the changes we are presenting
in the preamble and Addendum of this final rule, including the update
to the standard Federal rate for FY 2013, the changes to the area wage
adjustment for FY 2013, and changes to short-stay outliers and high-
cost outliers will result in an increase in estimated payments from FY
2012 of approximately $92 million (or approximately 1.7 percent).
Although we generally project an increase in payments for all LTCHs in
FY 2013 as compared to FY 2012, we expect rural LTCHs to experience a
larger than average increase in payments (3.3 percent) primarily due to
the changes to the area wage level adjustment. Rural hospitals
generally have a wage index of less than 1; therefore, the decrease to
the labor-related share results in their wage index reducing a smaller
portion of the standard Federal rate, resulting in an estimated
increase in payments in FY 2013 as compared to FY 2012. In addition,
the effect of the extension of the moratorium on the application of the
``25 percent threshold'' payment adjustment policy, as provided by
section 114(c) of the MMSEA, as amended by section 4302(a) of the ARRA
and sections 3106(a) and 10312(a) of the Affordable Care Act, that is
generally effective for cost reporting periods beginning on or after
October 1, 2012, and before October 1, 2013, is estimated to result in
a payment impact of approximately $170 million to LTCHs. (We note that,
for certain LTCHs and LTCH satellite facilities with cost reporting
periods beginning or after July 1, 2012, and before October 1, 2012, we
are providing a supplemental moratorium for discharges beginning on or
after October 1, 2012, and through the end of the cost reporting
period. Overall, we estimate that the increase in aggregate LTCH PPS
payments in FY 2013 will be $262 million.
Hospital Inpatient Quality Reporting (IQR) Program. In
this final rule, we discuss our requirements for hospitals to report
quality data under the Hospital IQR Program in order to receive the
full annual percentage increase for FY 2015. We estimate that
approximately 95 hospitals may not receive the full annual percentage
increase in any fiscal year. However, at this time, information is not
available to determine the precise number of hospitals that will not
meet the requirements to receive the full annual percentage increase
for FY 2015.
We are adding supplements to the chart validation process for the
Hospital IQR Program. Starting with the FY 2015 payment determination,
we are finalizing a modest increase to the current Hospital IQR Program
validation sample of 18 cases per quarter to 27 cases per quarter in
order to capture data on CLABSI, CAUTI, and SSI measures. However, in
order not to increase the Hospital IQR validation program's overall
burden to hospitals, we are reducing the total sample size of hospitals
included in the annual validation sample from 800 eligible hospitals to
up to 600 eligible hospitals.
We provide payment to hospitals for the cost of sending charts to
the CDAC contractor at the rate of 12 cents per page for copying and
approximately $4.00 per chart for postage. Our experience shows that
the average chart received by the CDAC contractor is approximately 275
pages. The requirement of an additional 9 charts per hospital submitted
for validation, combined with the decreased sample size, will result in
approximately 1,800 additional charts per quarter being submitted to
CMS by all selected hospitals. Thus, we estimate that we would expend
approximately $66,600 per quarter to collect the additional charts we
need to validate all measures.
Hospital VBP Program. The Hospital VBP Program is
statutorily mandated to be budget neutral. We believe that the
program's benefits will be seen in improved patient outcomes, safety,
and experience of care. We cannot estimate these benefits in actual
dollars and improved quality of care because the payment adjustments
based on hospital performance will not begin to be made until FY 2013.
B. Summary
1. Acute Care Hospital Inpatient Prospective Payment System (IPPS)
Section 1886(d) of the Social Security Act (the Act) sets forth a
system of payment for the operating costs of acute care hospital
inpatient stays under Medicare Part A (Hospital Insurance) based on
prospectively set rates. Section 1886(g) of the Act requires the
Secretary to use a prospective payment system (PPS) to pay for the
capital-related costs of inpatient hospital services for these
``subsection (d) hospitals.'' Under these PPSs, Medicare payment for
hospital inpatient operating and capital-related costs is made at
predetermined, specific rates for each hospital discharge. Discharges
are classified according to a list of diagnosis-related groups (DRGs).
The base payment rate is comprised of a standardized amount that is
divided into a labor-related share and a nonlabor-related share. The
labor-related share is adjusted by the wage index applicable to the
area where the hospital is located. If the hospital is located in
Alaska or Hawaii, the nonlabor-related share is adjusted by a cost-of-
living adjustment factor. This base payment rate is multiplied by the
DRG relative weight.
If the hospital treats a high percentage of certain low-income
patients, it receives a percentage add-on payment applied to the DRG-
adjusted base payment rate. This add-on payment, known as the
disproportionate share hospital (DSH) adjustment, provides for a
percentage increase in Medicare payments to hospitals that qualify
under either of two statutory formulas designed to identify hospitals
that serve a disproportionate share of low-income patients. For
qualifying hospitals, the amount of this adjustment varies based on the
outcome of the statutory calculations.
If the hospital is an approved teaching hospital, it receives a
percentage add-on payment for each case paid under the IPPS, known as
the indirect medical education (IME) adjustment. This percentage
varies, depending on the ratio of residents to beds.
Additional payments may be made for cases that involve new
technologies or medical services that have been approved for special
add-on payments.
[[Page 53270]]
To qualify, a new technology or medical service must demonstrate that
it is a substantial clinical improvement over technologies or services
otherwise available, and that, absent an add-on payment, it would be
inadequately paid under the regular DRG payment.
The costs incurred by the hospital for a case are evaluated to
determine whether the hospital is eligible for an additional payment as
an outlier case. This additional payment is designed to protect the
hospital from large financial losses due to unusually expensive cases.
Any eligible outlier payment is added to the DRG-adjusted base payment
rate, plus any DSH, IME, and new technology or medical service add-on
adjustments.
Although payments to most hospitals under the IPPS are made on the
basis of the standardized amounts, some categories of hospitals are
paid in whole or in part based on their hospital-specific rate, which
is determined from their costs in a base year. For example, sole
community hospitals (SCHs) receive the higher of a hospital-specific
rate based on their costs in a base year (the highest of FY 1982, FY
1987, FY 1996, or FY 2006) or the IPPS Federal rate based on the
standardized amount. Through and including FY 2006, a Medicare-
dependent, small rural hospital (MDH) received the higher of the
Federal rate or the Federal rate plus 50 percent of the amount by which
the Federal rate is exceeded by the higher of its FY 1982 or FY 1987
hospital-specific rate. As discussed below, for discharges occurring on
or after October 1, 2007, but before October 1, 2012, an MDH will
receive the higher of the Federal rate or the Federal rate plus 75
percent of the amount by which the Federal rate is exceeded by the
highest of its FY 1982, FY 1987, or FY 2002 hospital-specific rate. (We
note that the statutory provision for payments to MDHs expires at the
end of FY 2012, that is, after September 30, 2012.) SCHs are the sole
source of care in their areas, and MDHs are a major source of care for
Medicare beneficiaries in their areas. Specifically, section
1886(d)(5)(D)(iii) of the Act defines an SCH as a hospital that is
located more than 35 road miles from another hospital or that, by
reason of factors such as isolated location, weather conditions, travel
conditions, or absence of other like hospitals (as determined by the
Secretary), is the sole source of hospital inpatient services
reasonably available to Medicare beneficiaries. In addition, certain
rural hospitals previously designated by the Secretary as essential
access community hospitals are considered SCHs. Section
1886(d)(5)(G)(iv) of the Act defines an MDH as a hospital that is
located in a rural area, has not more than 100 beds, is not an SCH, and
has a high percentage of Medicare discharges (not less than 60 percent
of its inpatient days or discharges in its cost reporting year
beginning in FY 1987 or in two of its three most recently settled
Medicare cost reporting years). Both of these categories of hospitals
are afforded this special payment protection in order to maintain
access to services for beneficiaries.
Section 1886(g) of the Act requires the Secretary to pay for the
capital-related costs of inpatient hospital services ``in accordance
with a prospective payment system established by the Secretary.'' The
basic methodology for determining capital prospective payments is set
forth in our regulations at 42 CFR 412.308 and 412.312. Under the
capital IPPS, payments are adjusted by the same DRG for the case as
they are under the operating IPPS. Capital IPPS payments are also
adjusted for IME and DSH, similar to the adjustments made under the
operating IPPS. In addition, hospitals may receive outlier payments for
those cases that have unusually high costs.
The existing regulations governing payments to hospitals under the
IPPS are located in 42 CFR Part 412, Subparts A through M.
2. Hospitals and Hospital Units Excluded From the IPPS
Under section 1886(d)(1)(B) of the Act, as amended, certain
hospitals and hospital units are excluded from the IPPS. These
hospitals and units are: Rehabilitation hospitals and units; long-term
care hospitals (LTCHs); psychiatric hospitals and units; children's
hospitals; and cancer hospitals. Religious nonmedical health care
institutions (RNHCIs) are also excluded from the IPPS. Various sections
of the Balanced Budget Act of 1997 (BBA, Pub. L. 105-33), the Medicare,
Medicaid and SCHIP [State Children's Health Insurance Program] Balanced
Budget Refinement Act of 1999 (BBRA, Pub. L. 106-113), and the
Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act
of 2000 (BIPA, Pub. L. 106-554) provide for the implementation of PPSs
for rehabilitation hospitals and units (referred to as inpatient
rehabilitation facilities (IRFs)), LTCHs, and psychiatric hospitals and
units (referred to as inpatient psychiatric facilities (IPFs)). (We
note that the annual updates to the LTCH PPS are now included as part
of the IPPS annual update document. Updates to the IRF PPS and IPF PPS
are issued as separate documents.) Children's hospitals, cancer
hospitals, and RNHCIs continue to be paid solely under a reasonable
cost-based system subject to a rate-of-increase ceiling on inpatient
operating costs.
The existing regulations governing payments to excluded hospitals
and hospital units are located in 42 CFR Parts 412 and 413.
3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)
The Medicare prospective payment system (PPS) for LTCHs applies to
hospitals described in section 1886(d)(1)(B)(iv) of the Act effective
for cost reporting periods beginning on or after October 1, 2002. The
LTCH PPS was established under the authority of sections 123(a) and (c)
of Public Law 106-113 and section 307(b)(1) of Public Law 106-554 (as
codified under section 1886(m)(1) of the Act). During the 5-year
(optional) transition period, a LTCH's payment under the PPS was based
on an increasing proportion of the LTCH Federal rate with a
corresponding decreasing proportion based on reasonable cost
principles. Effective for cost reporting periods beginning on or after
October 1, 2006, all LTCHs are paid 100 percent of the Federal rate.
The existing regulations governing payment under the LTCH PPS are
located in 42 CFR Part 412, Subpart O. Beginning October 1, 2009, we
issue the annual updates to the LTCH PPS in the same documents that
update the IPPS (73 FR 26797 through 26798).
4. Critical Access Hospitals (CAHs)
Under sections 1814(l), 1820, and 1834(g) of the Act, payments are
made to critical access hospitals (CAHs) (that is, rural hospitals or
facilities that meet certain statutory requirements) for inpatient and
outpatient services are generally based on 101 percent of reasonable
cost. Reasonable cost is determined under the provisions of section
1861(v)(1)(A) of the Act and existing regulations under 42 CFR Parts
413 and 415.
5. Payments for Graduate Medical Education (GME)
Under section 1886(a)(4) of the Act, costs of approved educational
activities are excluded from the operating costs of inpatient hospital
services. Hospitals with approved graduate medical education (GME)
programs are paid for the direct costs of GME in accordance with
section 1886(h) of the Act. The amount of payment for direct GME costs
for a cost reporting period is based on the hospital's number of
residents in that period and the hospital's costs per resident in a
base year. The existing regulations governing payments to the
[[Page 53271]]
various types of hospitals are located in 42 CFR Part 413.
C. Provisions of the Patient Protection and Affordable Care Act (Pub.
L. 111-148) and the Health Care and Education Reconciliation Act of
2010 (Pub. L. 111-152) Applicable to FY 2013
The Patient Protection and Affordable Care Act (Pub. L. 111-148),
enacted on March 23, 2010, and the Health Care and Education
Reconciliation Act of 2010 (Pub. L. 111-152), enacted on March 30,
2010, made a number of changes that affect the IPPS and the LTCH PPS.
(Pub. L. 111-148 and Pub. L. 111-152 are collectively referred to as
the ``Affordable Care Act.'') A number of the provisions of the
Affordable Care Act affect the updates to the IPPS and the LTCH PPS and
providers and suppliers. The provisions of the Affordable Care Act that
were applicable to the IPPS and the LTCH PPS for FYs 2010, 2011, and
2012 were implemented in the June 2, 2010 Federal Register notice (75
FR 31118), the FY 2011 IPPS/LTCH PPS final rule (75 FR 50042) and the
FY 2012 IPPS/LTCH PPS final rule (76 FR 51476).
In this final rule, we are implementing, or continuing in FY 2013
to implement, the following provisions (or portions of the following
provisions) of the Affordable Care Act that are applicable to the IPPS,
the LTCH PPS, and PPS-exempt cancer hospitals:
Section 3001 of Public Law 111-148, which provides for
establishment of a hospital inpatient value-based purchasing program
under which value-based incentive payments will be made in a fiscal
year to hospitals that meet performance standards for the performance
period for that fiscal year.
Section 3004 of Public Law 111-148, which provides for the
submission of quality data for LTCHs in order to receive the full
annual update to the payment rates beginning with the FY 2014 rate
year.
Section 3005 of Public Law 111-148, which provides for the
establishment of a quality reporting program for PPS-exempt cancer
hospitals with respect to FY 2014, and for subsequent program years.
Section 3025 of Public Law 111-148, which establishes a
hospital readmissions reduction program and requires the Secretary to
reduce payments to applicable hospitals with excess readmissions
effective for discharges beginning on or after October 1, 2012.
Section 3125 and 10314 of Public Law 111-148, which
modified the definition of a low-volume hospital and the methodology
for calculating the payment adjustment for low-volume hospitals,
effective only for discharges occurring during FYs 2011 and 2012.
Beginning with FY 2013, the preexisting low-volume hospital qualifying
criteria and payment adjustment, as implemented in FY 2005, will
resume.
Section 3401 of Public Law 111-148, which provides for the
incorporation of productivity adjustments into the market basket
updates for IPPS hospitals and LTCHs.
Section 10324 of Public Law 111-148, which provides for a
wage adjustment for hospitals located in frontier States.
Sections 3401 and 10319 of Public Law 111-148 and section
1105 of Public Law 111-152, which revise certain market basket update
percentages for IPPS and LTCH PPS payment rates for FY 2013.
Section 3137 of Public Law 111-148, which requires the
Secretary to submit to Congress a report that includes a plan to
comprehensively reform the Medicare wage index under the IPPS. In
developing the plan, the Secretary was directed to take into
consideration the goals for reforming the wage index that were set
forth by MedPAC in its June 2007 Report to Congress and to consult with
relevant affected parties.
Section 5503 of Public Law 111-148, as amended by Public
Law 111-152 and section 203 of Public Law 111-309, which provides for
the reduction in FTE resident caps for direct GME under Medicare for
certain hospitals, and the ``redistribution'' of the estimated number
of FTE resident slots to other qualified hospitals. In addition,
section 5503 requires the application of these provisions to IME in the
same manner as the FTE resident caps for direct GME.
Section 5506 of Public Law 111-148, which added a
provision to the Act that instructs the Secretary to establish a
process by regulation under which, in the event a teaching hospital
closes, the Secretary will permanently increase the FTE resident caps
for hospitals that meet certain criteria up to the number of the closed
hospital's FTE resident caps. The Secretary is directed to ensure that
the aggregate number of FTE resident cap slots distributed is equal to
the amount of slots in the closed hospital's direct GME and IME FTE
resident caps, respectively.
D. Issuance of a Notice of Proposed Rulemaking
On May 11, 2012, we published in the Federal Register (77 FR
27870), a proposed rule that set forth proposed changes to the Medicare
IPPS for operating costs and for capital-related costs of acute care
hospitals in FY 2013. We also set forth proposed changes relating to
payments for IME costs and payments to certain hospitals that continue
to be excluded from the IPPS and paid on a reasonable cost basis. In
addition, in the proposed rule, we set forth proposed changes to the
payment rates, factors, and other payment rate policies under the LTCH
PPS for FY 2013.
Below is a summary of the major changes that we proposed to make:
1. Changes to MS-DRG Classifications and Recalibrations of Relative
Weights
In section II. of the preamble of the proposed rule, we include--
Proposed changes to MS-DRG classifications based on our
yearly review.
Proposed application of the documentation and coding
adjustment for FY 2013 resulting from implementation of the MS-DRG
system.
A discussion of the Research Triangle Institute,
International (RTI) reports and recommendations relating to charge
compression.
Proposed recalibrations of the MS-DRG relative weights.
Proposed changes to hospital-acquired conditions (HACs)
and a listing and discussion of HACs, including infections, that would
be subject to the statutorily required adjustment in MS-DRG payments
for FY 2013.
A discussion of the FY 2013 status of new technologies
approved for add-on payments for FY 2012 and a presentation of our
evaluation and analysis of the FY 2013 applicants for add-on payments
for high-cost new medical services and technologies (including public
input, as directed by Pub. L. 108-173, obtained in a town hall
meeting).
2. Changes to the Hospital Wage Index for Acute Care Hospitals
In section III. of the preamble to the proposed rule, we are
proposing revisions to the wage index for acute care hospitals and the
annual update of the wage data. Specific issues addressed include the
following:
The proposed FY 2013 wage index update using wage data
from cost reporting periods beginning in FY 2009.
Analysis and implementation of the proposed FY 2013
occupational mix adjustment to the wage index for acute care hospitals.
Proposed revisions to the wage index for acute care
hospitals based on hospital redesignations and reclassifications.
The proposed adjustment to the wage index for acute care
hospitals for
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FY 2013 based on commuting patterns of hospital employees who reside in
a county and work in a different area with a higher wage index.
The timetable for reviewing and verifying the wage data
used to compute the proposed FY 2013 hospital wage index.
Determination of the labor-related share for the proposed
FY 2013 wage index.
3. Other Decisions and Proposed Changes to the IPPS for Operating Costs
and GME Costs
In section IV. of the preamble of the proposed rule, we discussed
proposed changes or clarifications of a number of the provisions of the
regulations in 42 CFR Parts 412, 413, and 476, including the following:
The proposed rules for payment adjustments under the
Hospital Readmissions Reduction Program based on hospital readmission
measures and the process for hospital review and correction of those
rates.
Proposed clarification regarding the duration of the
classification status of SCHs.
The proposed updated national and regional case-mix values
and discharges for purposes of determining RRC status.
Proposed payment adjustment for low-volume hospitals for
FY 2013.
The statutorily required IME adjustment factor for FY
2013, a clarification of the requirements of timely filing of claims
for Medicare Advantage enrollees for IME, direct GME, and nursing and
allied health education payment purposes, and a proposal to apply the
timely filing requirements to the submission of no-pay bills for
purposes of calculating the DSH payment adjustment.
Proposal for counting labor and delivery beds in the
formula for determining the payment adjustment for disproportionate
share hospitals and IME payments.
Discussion of the expiration of the MDH program in FY
2012.
Proposed changes to the inpatient hospital update for FY
2013, including incorporation of a productivity adjustment.
Proposed changes relating to GME and IME payments,
including proposed changes in new growth period for new residency
programs from 3 years to 5 years for new teaching hospitals; proposals
and clarifications related to the 5-year period following
implementation of reductions and increases to hospitals' FTE resident
caps; and proposals and clarifications related to the preservation of
resident cap positions from closed hospitals.
Proposed conforming changes to regulations relating to
reporting requirements for pension costs for Medicare cost-finding
purposes.
Discussion of the Rural Community Hospital Demonstration
Program and a proposal for making a budget neutrality adjustment for
the demonstration program.
Proposed delay in the effective date of policies relating
to hospital routine services furnished under arrangements.
4. FY 2013 Policy Governing the IPPS for Capital-Related Costs
In section V. of the preamble to the proposed rule, we discussed
the proposed payment policy requirements for capital-related costs and
capital payments to hospitals for FY 2013 and the proposed MS-DRG
documentation and coding adjustment for FY 2013.
5. Changes to the Payment Rates for Certain Excluded Hospitals: Rate-
of-Increase Percentages
In section VI. of the preamble of the proposed rule, we discuss
proposed changes to payments to certain excluded hospitals.
6. Changes to the LTCH PPS
In section VII. of the preamble of the proposed rule, we set forth
proposed changes to the payment rates, factors, and other payment rate
policies under the LTCH PPS for FY 2013. Specifically, we proposed the
following major changes: A 1-year extension of the moratorium on the
full implementation of the ``25-percent threshold'' payment adjustment
at 42 CFR 412.534 and 412.536; a ``one-time prospective adjustment'' to
the standard Federal rate phased in over a 3-year period (which would
not be applicable to payments for discharges occurring on or before
December 28, 2012, consistent with the statute); an LTCH-specific
market basket; and annual updates to the LTCH PPS standard Federal rate
and to other payment factors.
7. Changes Relating to Quality Data Reporting for Specific Providers
and Suppliers
In section VIII. of the preamble of the proposed rule, we address--
Proposed requirements for the Hospital Inpatient Quality
Reporting (IQR) Program as a condition for receiving the full
applicable percentage increase.
The proposed establishment of a quality reporting program
for PPS-exempt cancer hospitals.
Proposed requirements for the Hospital Value-Based
Purchasing Program.
Proposed requirements for the quality reporting measures
under the LTCH Quality Reporting (LTCHQR) Program.
Proposed quality data reporting and other requirements for
the Ambulatory Surgical Center Quality Reporting (ASCQR) Program.
The establishment of the Inpatient Psychiatric Facility
Quality Reporting Program (IPFQRP).
8. Determining Prospective Payment Operating and Capital Rates and
Rate-of-Increase Limits for Acute Care Hospitals
In the Addendum to the proposed rule, we set forth proposed changes
to the amounts and factors for determining the proposed FY 2013
prospective payment rates for operating costs and capital-related costs
for acute care hospitals. We proposed to establish the threshold
amounts for outlier cases. In addition, we addressed the proposed
update factors for determining the rate-of-increase limits for cost
reporting periods beginning in FY 2013 for certain hospitals excluded
from the IPPS.
9. Determining Prospective Payment Rates for LTCHs
In the Addendum to the proposed rule, we set forth proposed changes
to the amounts and factors for determining the proposed FY 2013
prospective standard Federal rate. We proposed to establish the
adjustments for wage levels, the labor-related share, the cost-of-
living adjustment, and high-cost outliers, including the fixed-loss
amount, and the LTCH cost-to-charge ratios (CCRs) under the LTCH PPS.
10. Impact Analysis
In Appendix A of the proposed rule, we set forth an analysis of the
impact that the proposed changes would have on affected acute care
hospitals, LTCHs, ASCs, and IPFs.
11. Recommendation of Update Factors for Operating Cost Rates of
Payment for Hospital Inpatient Services
In Appendix B of the proposed rule, as required by sections
1886(e)(4) and (e)(5) of the Act, we provided our recommendations of
the appropriate percentage changes for FY 2013 for the following:
A single average standardized amount for all areas for
hospital inpatient services paid under the IPPS for operating costs of
acute care hospitals (and hospital-specific rates applicable to SCHs).
Target rate-of-increase limits to the allowable operating
costs of hospital inpatient services furnished by certain hospitals
excluded from the IPPS.
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The standard Federal rate for hospital inpatient services
furnished by LTCHs.
12. Discussion of Medicare Payment Advisory Commission Recommendations
Under section 1805(b) of the Act, MedPAC is required to submit a
report to Congress, no later than March 15 of each year, in which
MedPAC reviews and makes recommendations on Medicare payment policies.
MedPAC's March 2012 recommendations concerning hospital inpatient
payment policies address the update factor for hospital inpatient
operating costs and capital-related costs under the IPPS, for hospitals
and distinct part hospital units excluded from the IPPS. We addressed
these recommendations in Appendix B of the proposed rule. For further
information relating specifically to the MedPAC March 2012 report or to
obtain a copy of the report, contact MedPAC at (202) 220-3700 or visit
MedPAC's Web site at: http://www.medpac.gov.
We received approximately 436 timely pieces of correspondence from
the public in response to the FY 2013 IPPS/LTCH PPS proposed rule. We
summarize these public comments and present our responses under the
specific subject areas of this final rule.
II. Changes to Medicare Severity Diagnosis-Related Group (MS-DRG)
Classifications and Relative Weights
A. Background
Section 1886(d) of the Act specifies that the Secretary shall
establish a classification system (referred to as DRGs) for inpatient
discharges and adjust payments under the IPPS based on appropriate
weighting factors assigned to each DRG. Therefore, under the IPPS,
Medicare pays for inpatient hospital services on a rate per discharge
basis that varies according to the DRG to which a beneficiary's stay is
assigned. The formula used to calculate payment for a specific case
multiplies an individual hospital's payment rate per case by the weight
of the DRG to which the case is assigned. Each DRG weight represents
the average resources required to care for cases in that particular
DRG, relative to the average resources used to treat cases in all DRGs.
Congress recognized that it would be necessary to recalculate the
DRG relative weights periodically to account for changes in resource
consumption. Accordingly, section 1886(d)(4)(C) of the Act requires
that the Secretary adjust the DRG classifications and relative weights
at least annually. These adjustments are made to reflect changes in
treatment patterns, technology, and any other factors that may change
the relative use of hospital resources.
B. MS-DRG Reclassifications
For general information about the MS-DRG system, including yearly
reviews and changes to the MS-DRGs, we refer readers to the previous
discussions in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR
43764 through 43766), the FY 2011 IPPS/LTCH PPS final rule (75 FR 50053
through 50055), and the FY 2012 IPPS/LTCH PPS final rule (76 FR 51485
through 51487).
C. Adoption of the MS-DRGs in FY 2008
For information on the adoption of the MS-DRGs in FY 2008, we refer
readers to the FY 2008 IPPS final rule with comment period (72 FR 47140
through 47189).
D. FY 2013 MS-DRG Documentation and Coding Adjustment, Including the
Applicability to the Hospital-Specific Rates and the Puerto Rico-
Specific Standardized Amount
1. Background on the Prospective MS-DRG Documentation and Coding
Adjustments for FY 2008 and FY 2009 Authorized by Public Law 110-90
In the FY 2008 IPPS final rule with comment period (72 FR 47140
through 47189), we adopted the MS-DRG patient classification system for
the IPPS, effective October 1, 2007, to better recognize severity of
illness in Medicare payment rates for acute care hospitals. The
adoption of the MS-DRG system resulted in the expansion of the number
of DRGs from 538 in FY 2007 to 745 in FY 2008. (Currently, there are
751 MS-DRGs. By increasing the number of MS-DRGs and more fully taking
into account patient severity of illness in Medicare payment rates for
acute care hospitals, MS-DRGs encourage hospitals to improve their
documentation and coding of patient diagnoses.
In the FY 2008 IPPS final rule with comment period (72 FR 47175
through 47186), we indicated that the adoption of the MS-DRGs had the
potential to lead to increases in aggregate payments without a
corresponding increase in actual patient severity of illness due to the
incentives for additional documentation and coding. In that final rule
with comment period, we exercised our authority under section
1886(d)(3)(A)(vi) of the Act, which authorizes us to maintain budget
neutrality by adjusting the national standardized amount, to eliminate
the estimated effect of changes in coding or classification that do not
reflect real changes in case-mix. Our actuaries estimated that
maintaining budget neutrality required an adjustment of -4.8 percent to
the national standardized amount. We provided for phasing in this -4.8
percent adjustment over 3 years. Specifically, we established
prospective documentation and coding adjustments of -1.2 percent for FY
2008, -1.8 percent for FY 2009, and -1.8 percent for FY 2010.
On September 29, 2007, Congress enacted the TMA [Transitional
Medical Assistance], Abstinence Education, and QI [Qualifying
Individuals] Programs Extension Act of 2007, Public Law 110-90. Section
7(a) of Public Law 110-90 reduced the documentation and coding
adjustment made as a result of the MS-DRG system that we adopted in the
FY 2008 IPPS final rule with comment period to -0.6 percent for FY 2008
and -0.9 percent for FY 2009, and we finalized the FY 2008 adjustment
through rulemaking, effective October 1, 2007 (72 FR 66886).
For FY 2009, section 7(a) of Public Law 110-90 required a
documentation and coding adjustment of -0.9 percent, and we finalized
that adjustment through rulemaking (73 FR 48447). The documentation and
coding adjustments established in the FY 2008 IPPS final rule with
comment period, which reflected the amendments made by Public Law 110-
90, are cumulative. As a result, the -0.9 percent documentation and
coding adjustment for FY 2009 was in addition to the -0.6 percent
adjustment for FY 2008, yielding a combined effect of -1.5 percent.
2. Prospective Adjustment to the Average Standardized Amounts Required
by Section 7(b)(1)(A) of Public Law 110-90
Section 7(b)(1)(A) of Public Law 110-90 requires that, if the
Secretary determines that implementation of the MS-DRG system resulted
in changes in documentation and coding that did not reflect real
changes in case-mix for discharges occurring during FY 2008 or FY 2009
that are different than the prospective documentation and coding
adjustments applied under section 7(a) of Public Law 110-90, the
Secretary shall make an appropriate adjustment under section
1886(d)(3)(A)(vi) of the Act. Section 1886(d)(3)(A)(vi) of the Act
authorizes adjustments to the average standardized amounts for
subsequent fiscal years in order to eliminate the effect of such coding
or classification changes. These adjustments are intended to ensure
that future annual
[[Page 53274]]
aggregate IPPS payments are the same as the payments that otherwise
would have been made had the prospective adjustments for documentation
and coding applied in FY 2008 and FY 2009 reflected the change that
occurred in those years.
3. Recoupment or Repayment Adjustments in FYs 2010 Through 2012
Required by Public Law 110-90
If, based on a retroactive evaluation of claims data, the Secretary
determines that implementation of the MS-DRG system resulted in changes
in documentation and coding that did not reflect real changes in case-
mix for discharges occurring during FY 2008 or FY 2009 that are
different from the prospective documentation and coding adjustments
applied under section 7(a) of Public Law 110-90, section 7(b)(1)(B) of
Public Law 110-90 requires the Secretary to make an additional
adjustment to the standardized amounts under section 1886(d) of the
Act. This adjustment must offset the estimated increase or decrease in
aggregate payments for FYs 2008 and 2009 (including interest) resulting
from the difference between the estimated actual documentation and
coding effect and the documentation and coding adjustment applied under
section 7(a) of Public Law 110-90. This adjustment is in addition to
making an appropriate adjustment to the standardized amounts under
section 1886(d)(3)(A)(vi) of the Act as required by section 7(b)(1)(A)
of Public Law 110-90. That is, these adjustments are intended to recoup
(or repay, in the case of underpayments) spending in excess of (or less
than) spending that would have occurred had the prospective adjustments
for changes in documentation and coding applied in FY 2008 and FY 2009
precisely matched the changes that occurred in those years. Public Law
110-90 requires that the Secretary only make these recoupment or
repayment adjustments for discharges occurring during FYs 2010, 2011,
and 2012.
4. Retrospective Evaluation of FY 2008 and FY 2009 Claims Data
In order to implement the requirements of section 7 of Public Law
110-90, we performed a retrospective evaluation of the FY 2008 data for
claims paid through December 2008 using the methodology first described
in the FY 2009 IPPS/LTCH PPS final rule (73 FR 43768 and 43775) and
later discussed in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR
43768 through 43772). We performed the same analysis for FY 2009 claims
data using the same methodology as we did for FY 2008 claims (75 FR
50057 through 50068). The results of the analysis for the FY 2011
proposed and final rules, and subsequent evaluations in FY 2012,
supported that the 5.4 percent estimate accurately reflected the FY
2009 increases in documentation and coding under the MS-DRG system. We
were persuaded by both MedPAC's analysis (as discussed in the FY 2011
IPPS/LTCH PPS final rule (75 FR 50064 through 50065)) and our own
review of the methodologies recommended by various commenters that the
methodology we employed to determine the required documentation and
coding adjustments was sound.
5. Prospective Adjustments for FY 2008 and FY 2009 Authorized by
Section 7(b)(1)(A) of Public Law 110-90 and Section 1886(d)(3)(A)(vi)
of the Act
In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43767
through 43777), we opted to delay the implementation of any
documentation and coding adjustment until a full analysis of case-mix
changes based on FY 2009 claims data could be completed. We refer
readers to the FY 2010 IPPS/RY LTCH PPS final rule for a detailed
description of our proposal, responses to comments, and finalized
policy. After analysis of the FY 2009 claims data for the FY 2011 IPPS/
LTCH PPS final rule (75 FR 50057 through 50073), we found a total
prospective documentation and coding effect of 1.054 percent. After
accounting for the -0.6 percent and the -0.9 percent documentation and
coding adjustments in FYs 2008 and 2009, we found a remaining
documentation and coding effect of 3.9 percent. As we have discussed,
an additional cumulative adjustment of -3.9 percent would be necessary
to meet the requirements of section 7(b)(1)(A) of Public Law 110-90 to
make an adjustment to the average standardized amounts in order to
eliminate the full effect of the documentation and coding changes that
do not reflect real changes in case-mix on future payments. Unlike
section 7(b)(1)(B) of Public Law 110-90, section 7(b)(1)(A) does not
specify when we must apply the prospective adjustment, but merely
requires us to make an ``appropriate'' adjustment. Therefore, as we
stated in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50061), we
believe we have some discretion as to the manner in which we apply the
prospective adjustment of -3.9 percent. We indicated that applying the
full prospective adjustment of -3.9 percent for FY 2011, in combination
with the proposed recoupment adjustment of -2.9 percent in FY 2011
(discussed below) would require an aggregate adjustment of -6.8
percent. As we discussed extensively in the FY 2011 IPPS/LTCH PPS final
rule, it has been our practice to moderate payment adjustments when
necessary to mitigate the effects of significant downward adjustments
on hospitals, to avoid what could be widespread, disruptive effects of
such adjustments on hospitals. Therefore, we stated that we believed it
was appropriate to not implement the -3.9 percent prospective
adjustment in FY 2011 because we finalized a -2.9 percent recoupment
adjustment for that year. Accordingly, we did not propose a prospective
adjustment under section 7(b)(1)(A) of Public Law 110-90 for FY 2011
(75 FR 23868 through 23870). We note that, as a result, payments in FY
2011 (and in each future year until we implement the requisite
adjustment) would be 3.9 percent higher than they would have been if we
had implemented an adjustment under section 7(b)(1)(A) of Public Law
110-90. Our actuaries estimate that this 3.9 percentage point increase
will result in an aggregate payment of approximately $4 billion. We
also noted that payments in FY 2010 were also expected to be 3.9
percent higher than they would have been if we had implemented an
adjustment under section 7(b)(1)(A) of Public Law 110-90, which our
actuaries estimated increased aggregate payments by approximately $4
billion in FY 2010.
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51489 and 51497), we
indicated that because further delay of this prospective adjustment
will result in a continued accrual of unrecoverable overpayments, it
was imperative that we implement a prospective adjustment for FY 2012,
while recognizing CMS' continued desire to mitigate the effects of any
significant downward adjustments to hospitals. Therefore, we
implemented a -2.0 percent prospective adjustment (a reduction of a
proposed -3.15 percent adjustment) to the standardized amount to
partially eliminate the full effect of the documentation and coding
changes that do not reflect real changes in case-mix on future
payments.
In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27887), for FY
2013, we proposed to complete the prospective portion of the adjustment
required under section 7(b)(1)(B) of Public Law 110-90. We proposed a -
1.9 percent adjustment to the standardized amount for FY 2013. We
stated that this adjustment would remove the remaining effect of the
documentation and coding changes that do not reflect real changes in
case-mix that occurred in FY 2008 and FY 2009.
[[Page 53275]]
We indicated we believe it is imperative to implement the full
remaining adjustment, as any further delay would result in an
overstated standardized amount in FY 2013 and any future years until a
full adjustment is made. We believe that the offsetting nature of the
FY 2012 recoupment adjustment (described in section II.D.6. of the
proposed rule (77 FR 27887 through 27888) and the preamble of this
final rule) will mitigate any negative financial impacts of this
prospective adjustment.
Comment: MedPAC submitted a comment fully supporting the proposed
documentation and coding adjustments, citing its 2011 comment letter
regarding the FY 2012 IPPS/LTCH PPS proposed rule for its support of
the CMS methodology and the calculation of documentation and coding
effect estimates. MedPAC reiterated its recommendation that Congress
grant the Secretary the authority to recapture overpayments due to
documentation and coding effects that occurred after FY 2009.
Response: We appreciate MedPAC's analysis and continued support of
the methodology to calculate the impact of documentation and coding on
hospital payments. As stated in the proposed rule, at this point, we
only have the authority to prospectively adjust the standardized amount
to prevent future overpayments due to the effects of documentation and
coding. We believe that any overpayments made in FY 2008 and FY 2009
have already been recaptured, and any additional past overpayments
cannot be recovered without additional statutory authority.
Comment: Many commenters, including national hospital associations,
continue to argue that the methodology employed by CMS significantly
overstated the impact of documentation and coding changes. Commenters
believed that the CMS methodology assumes that case-mix index has held
constant over several fiscal years, and they view this as a flawed
assumption. Commenters submitted a case-mix trend analysis, noting that
this analysis was updated for new claims data and revised relative to
similar analyses submitted as public comment on documentation and
coding in prior IPPS rulemaking. According to the commenters, their
case-mix trend analysis indicated only a 3.5 percent documentation and
coding increase, which equals the total adjustment already implemented
by CMS. These commenters argued that no further cuts are necessary to
the standardized amount, and that the proposed adjustments are
excessive.
Response: We disagree that the presented trend analysis provides a
more accurate estimate of the documentation and coding effect. We
continue to believe that the proposed methodology, which removes real-
case mix growth from the calculation, yields a more straightforward and
direct estimate. We also believe that the estimates obtained using our
methodology are consistent with real case-mix growth as demonstrated by
MedPAC in its 2011 public comment submitted on the FY 2012 IPPS/LTCH
PPS proposed rule. We refer readers to our response in the FY 2012
IPPS/LTCH PPS final rule (76 FR 51494-51496) for a more detailed
response.
Comment: One commenter, a national hospital association, disagreed
with CMS' response from prior year rulemaking that ``changes in case-
mix do not necessarily follow a consistent pattern over time.'' The
commenter indicated that the simple linear regression of case-mix
growth it submitted was the most conservative estimate of potential
documentation and coding effect, and that more advanced, nonlinear
statistical methods were better statistical fits, and suggested an even
smaller impact due to documentation and coding.
Response: We are not convinced that further statistical testing of
a case-mix trend based analysis would yield more accurate results, nor
did we intend to suggest that nonlinear regression of case-mix growth
would be a more appropriate measure of documentation and coding
effects. The estimates submitted by the commenter presented a
theoretical documentation and coding effect ranging from +3.5 percent
to -1.9 percent. As discussed in prior year rulemaking, the inclusion
of additional years in the suggested CMI trend based analysis caused
documentation and coding effect estimates to vary significantly, and
now the commenter argues that different statistical interpretations
also may cause large fluctuations. With respect to the trend analysis,
we continue to believe that the determination of an appropriate
historical trend is less straightforward than our proposed methodology,
which removes real case-mix growth from the calculation. Again, we
refer readers to our more detailed response to public comments in the
FY 2012 IPPS/LTCH PPS final rule (76 FR 51494 through 51496).
Comment: One commenter stated that coding offsets exceeding total
case-mix growth duplicate the productivity adjustment mandated by the
Affordable Care Act and should not be implemented. The commenter stated
that decreases in real case-mix represent an improvement in
productivity already adjusted for in the productivity adjustment.
Response: Section 3401(a) of the Affordable Care Act requires that
the IPPS operating market basket update be adjusted by changes in
economy-wide productivity for FY 2012 (and each subsequent fiscal
year). The statute defines the productivity adjustment to be equal to
the 10-year moving average of changes in annual economy-wide private
nonfarm business multifactor productivity (as projected by the
Secretary for the 10-year period ending with the applicable fiscal
year, cost reporting period, or other annual period). We disagree with
the commenter that this statutory provision somehow interacts with our
documentation and coding adjustment authority. This statutory provision
does not in any way reference our statutory documentation and coding
adjustment authority, nor does our documentation and coding authority
in any way reference the market basket adjustment for economy-wide
productivity. The methodology used for determining the IPPS rates, and
specifically our methodology for estimating documentation and coding
effects was made available to the general public (through notice and
comment rulemaking) prior to the enactment of the Affordable Care Act.
However the law did not reference nor change our authority in light of
the productivity adjustment.
In addition, as we have previously indicated, our methodology for
estimating documentation and coding removes changes in real case-mix
from the calculation. Although we disagree that decreases in real case-
mix represent an improvement in productivity in the context of section
3401(a), even if for purposes of discussion one were to accept this
assertion, this is not a documentation and coding adjustment issue. The
proper place for any offset would be to the productivity adjustment.
Section 3401(a) of the Affordable Care Act provides no authority for
such an adjustment for decreases in real case-mix.
After consideration of the public comments we received, we do not
believe that any alternative methodologies would produce more accurate
estimates of documentation and coding effects. We are finalizing, as
proposed, a -1.9 percent documentation and coding adjustment to the
standardized amount. This adjustment will complete our statutory
obligation to account for remainder of documentation and coding that
did not reflect real changes in case-mix for
[[Page 53276]]
discharges occurring during FY 2008 or FY 2009.
6. Recoupment or Repayment Adjustment Authorized by Section 7(b)(1)(B)
of Public Law 110-90
As discussed in section II.D.3. of this preamble, section
7(b)(1)(B) of Public Law 110-90 requires the Secretary to make an
adjustment to the standardized amounts under section 1886(d) of the Act
to offset the estimated increase or decrease in aggregate payments for
FY 2008 and FY 2009 (including interest) resulting from the difference
between the estimated actual documentation and coding effect and the
documentation and coding adjustments applied under section 7(a) of
Public Law 110-90. This determination must be based on a retrospective
evaluation of claims data. Our actuaries estimated that this 5.8
percentage point increase resulted in an increase in aggregate payments
of approximately $6.9 billion. Therefore, as discussed in the FY 2011
IPPS/LTCH PPS final rule (75 FR 50062 through 50067), we determined
that an aggregate adjustment of -5.8 percent in FYs 2011 and 2012 would
be necessary in order to meet the requirements of section 7(b)(1)(B) of
Public Law 110-90 to adjust the standardized amounts for discharges
occurring in FYs 2010, 2011, and/or 2012 to offset the estimated amount
of the increase in aggregate payments (including interest) in FYs 2008
and 2009.
It is often our practice to phase in rate adjustments over more
than one year in order to moderate the effect on rates in any one year.
Therefore, consistent with the policies that we have adopted in many
similar cases, in the FY 2011 IPPS/LTCH PPS final rule, we made an
adjustment to the standardized amount of -2.9 percent, representing
approximately half of the aggregate adjustment required under section
7(b)(1)(B) of Public Law 110-90, for FY 2011. An adjustment of this
magnitude allowed us to moderate the effects on hospitals in one year
while simultaneously making it possible to implement the entire
adjustment within the timeframe required under section 7(b)(1)(B) of
Public Law 110-90 (that is, no later than FY 2012).
As we stated in prior rulemaking, a major advantage of making the -
2.9 percent adjustment to the standardized amount in FY 2011 was that,
because the required recoupment adjustment is not cumulative, we
anticipated removing the FY 2011 -2.9 percent adjustment from the rates
(in other words, making a positive 2.9 percent adjustment to the rates)
in FY 2012, at the same time that the law required us to apply the
remaining approximately -2.9 percent adjustment required by section
7(b)(1)(B) of Public Law 110-90.
Therefore, for FY 2012, in accordance with the timeframes set forth
by section 7(b)(1)(B) of Public Law 110-90, and consistent with the
discussion in the FY 2011 IPPS/LTCH PPS final rule, we completed the
recoupment adjustment by implementing the remaining -2.9 percent
adjustment, in addition to removing the effect of the -2.9 percent
adjustment to the standardized amount finalized for FY 2011 (76 FR
51489 and 51498). Because these adjustments, in effect, balanced out,
there was no year-to-year change in the standardized amount due to this
recoupment adjustment for FY 2012.
The -2.9 percent adjustment in each of the two previous fiscal
years completed the required recoupment for overpayments due to
documentation and coding effects on discharges occurring in FYs 2008
and 2009. In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27888), we
proposed to make a final +2.9 percent adjustment to the standardized
amount. This adjustment would remove the effect of the one-time -2.9
percent adjustment implemented in FY 2012. As stated in the proposed
rule, we continue to believe that this is a reasonable and fair
approach that satisfies the requirements of the statute while
substantially moderating the financial impact on hospitals.
We did not receive any specific public comments regarding this
adjustment. We did receive public comments requesting an additional
+0.72 percent adjustment to account for cumulative overestimates of
documentation and coding effects. We will address these comments in a
later section. We are finalizing a +2.9 percent adjustment, as
proposed, completing the recoupment portion of section 7(b)(1)(B) of
Public Law 110-90. We note that with this positive adjustment,
according to our estimates, all overpayments made in FY 2008 and FY
2009 have been fully recaptured with appropriate interest, and the
standardized amount has been returned to the appropriate baseline.
7. Background on the Application of the Documentation and Coding
Adjustment to the Hospital-Specific Rates
Under section 1886(d)(5)(D)(i) of the Act, SCHs are paid based on
whichever of the following rates yields the greatest aggregate payment:
the Federal rate; the updated hospital-specific rate based on FY 1982
costs per discharge; the updated hospital-specific rate based on FY
1987 costs per discharge; the updated hospital-specific rate based on
FY 1996 costs per discharge; or the updated hospital-specific rate
based on FY 2006 costs per discharge. Under section 1886(d)(5)(G) of
the Act, MDHs are paid based on the Federal national rate or, if
higher, the Federal national rate plus 75 percent of the difference
between the Federal national rate and the updated hospital-specific
rate based on the greatest of the FY 1982, FY 1987, or FY 2002 costs
per discharge. (We note that, under current law, the MDH program
expires at the end of FY 2012, as discussed in section IV.G. of this
final rule.) In the FY 2008 IPPS final rule with comment period (72 FR
47152 through 47188), we established a policy of applying the
documentation and coding adjustment to the hospital-specific rates. In
that final rule with comment period, we indicated that because SCHs and
MDHs use the same DRG system as all other hospitals, we believe they
should be equally subject to the budget neutrality adjustment that we
are applying for adoption of the MS-DRGs to all other hospitals. In
establishing this policy, we relied on section 1886(d)(3)(A)(vi) of the
Act, which provides us with the authority to adjust ``the standardized
amount'' to eliminate the effect of changes in documentation and coding
that do not reflect real changes in case-mix.
However, in the final rule that appeared in the Federal Register on
November 27, 2007 (72 FR 66887 through 67888), we rescinded the
application of the documentation and coding adjustment to the hospital-
specific rates effective October 1, 2007. In that final rule, we
indicated that, while we still believe it would be appropriate to apply
the documentation and coding adjustment to the hospital-specific rates,
upon further review, we decided that the application of the
documentation and coding adjustment to the hospital-specific rates is
not consistent with the plain meaning of section 1886(d)(3)(A)(vi) of
the Act, which only mentions adjusting ``the standardized amount''
under section 1886(d) of the Act and does not mention adjusting the
hospital-specific rates.
In the FY 2009 IPPS proposed rule (73 FR 23540), we indicated that
we continued to have concerns about this issue. Because hospitals paid
based on the hospital-specific rate have their Medicare claims grouped
using the same MS-DRG system as other IPPS hospitals, we believe they
have the potential to realize increased payments from documentation and
coding changes that do not reflect real increases in patient severity
of illness. In section 1886(d)(3)(A)(vi) of the Act, Congress
stipulated that hospitals paid based on the standardized amount should
not
[[Page 53277]]
receive additional payments based on the effect of documentation and
coding changes that do not reflect real changes in case-mix. Similarly,
we believe that hospitals paid based on the hospital-specific rates
should not have the potential to realize increased payments due to
documentation and coding changes that do not reflect real increases in
patient severity of illness. While we continue to believe that section
1886(d)(3)(A)(vi) of the Act does not provide explicit authority for
application of the documentation and coding adjustment to the hospital-
specific rates, we believe that we have the authority to apply the
documentation and coding adjustment to the hospital-specific rates
using our special exceptions and adjustment authority under section
1886(d)(5)(I)(i) of the Act. The special exceptions and adjustment
provision authorizes us to provide ``for such other exceptions and
adjustments to [IPPS] payment amounts * * * as the Secretary deems
appropriate.'' In the FY 2009 IPPS final rule (73 FR 48448 through
48449), we indicated that, for the FY 2010 rulemaking, we planned to
examine our FY 2008 claims data for hospitals paid based on the
hospital-specific rate. We further indicated that if we found evidence
of significant increases in case-mix for patients treated in these
hospitals that do not reflect real changes in case-mix, we would
consider proposing application of the documentation and coding
adjustments to the FY 2010 hospital-specific rates under our authority
in section 1886(d)(5)(I)(i) of the Act.
In response to public comments received on the FY 2009 IPPS
proposed rule, we stated in the FY 2009 IPPS final rule that we would
consider whether such a proposal was warranted for FY 2010. To gather
information to evaluate these considerations, we indicated that we
planned to perform analyses on FY 2008 claims data to examine whether
there has been a significant increase in case-mix for hospitals paid
based on the hospital-specific rate. If we found that application of
the documentation and coding adjustment to the hospital-specific rates
for FY 2010 was warranted, we indicated that we would propose to make
such an adjustment in the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule.
8. Documentation and Coding Adjustment to the Hospital-Specific Rates
for FY 2011 and Subsequent Fiscal Years
In the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule and final rule,
we discussed our retrospective evaluation of the FY 2008 claims data
for SCHs and MDHs using the same methodology described earlier for
other IPPS hospitals. We found that, independently for both SCHs and
MDHs, the change due to documentation and coding that did not reflect
real changes in case-mix for discharges occurring during FY 2008
slightly exceeded the proposed 2.5 percent result discussed earlier for
other IPPS hospitals, but did not significantly differ from that
result. We refer readers to those FY 2010 proposed and final rules for
a more complete discussion (74 FR 24098 through 24100 and 74 FR 43775
through 43776, respectively).
As we have noted previously, because hospitals paid on the basis of
their hospital-specific rate, including SCHs (and MDHs until the end of
FY 2012), use the same MS-DRG system as all other IPPS hospitals, we
believe they have the potential to realize increased payments from
documentation and coding changes that do not reflect real increases in
patient severity of illness. Therefore, we believe they should be
equally subject to a prospective budget neutrality adjustment that we
are applying for adoption of the MS-DRGs to all other hospitals. We
believe the documentation and coding estimates for all subsection (d)
hospitals should be the same. While the findings for the documentation
and coding effect for all IPPS hospitals are similar to the effect for
SCHs (and were slightly different to the effect for MDHs), we continue
to believe that this is the appropriate policy so as to neither
advantage or disadvantage different types of providers. Our best
estimate, based on the most recently available data, is that a
cumulative adjustment of -5.4 percent is required to eliminate the full
effect of the documentation and coding changes on future payments to
hospitals paid on the basis of their hospital-specific rate. We note
that, for FY 2013, this adjustment would only apply to the SCHs because
the MDH program expires in FY 2012 (as discussed in section IV.G. of
this preamble). Unlike the case of standardized amounts paid to IPPS
hospitals, prior to FY 2011, we had not made any previous adjustments
to the hospital-specific rates paid to SCHs (and MDHs) to account for
documentation and coding changes. Therefore, the entire -5.4 percent
adjustment needed to be made, as opposed to a -3.9 percent remaining
adjustment for IPPS hospitals.
After finalizing a -2.9 percent prospective adjustment in FY 2011
(75 FR 50067 through 50071), we finalized a prospective adjustment to
the hospital-specific rate of -2.0 percent for FY 2012 (76 FR 51499)
instead of our proposed adjustment of -2.5 percent. Making this level
of adjustment allowed CMS to maintain, for FY 2012, consistency in
payment rates for different IPPS hospitals paid using the MS-DRG. We
indicated in the final rule that because this -2.0 percent adjustment
no longer reflects the entire remaining required adjustment amount of -
2.5 percent, an additional -0.5 percent adjustment to the hospital-
specific payment rates would be required in future rulemaking.
In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27889), we
proposed to complete the remaining prospective adjustment to account
for the documentation and coding effect that occurred in FY 2008 and FY
2009 by applying a -0.5 percent adjustment to the hospital-specific
rate. We continue to believe that SCHs had the same opportunity to
benefit from improvements in documentation and coding that did not
reflect an increase in patient severity, and we continue to believe
that any resulting adjustments should be applied similarly to all
subsection (d) hospitals, when possible. For FY 2013, we proposed a
prospective adjustment of -1.9 percent to the standardized amount.
Therefore, we stated in the proposed rule (77 FR 27889) that we
believed it was also appropriate to propose a -0.5 percent adjustment
to the hospital-specific rate for FY 2013.
Comment: Commenters questioned CMS' statutory authority to apply
documentation and coding adjustments to hospitals receiving the
hospital-specific rate. The commenters stated that section
1886(d)(3)(A)(vi) of the Act specifically required the Secretary to
determine if overpayments were made, and make appropriate adjustments
to the standardized amount. The commenters contended that the broad
authority granted under section 1886(d)(5)(I)(i) of the Act is not so
broad as to permit CMS to extend the scope of a legislative directive
that was specifically limited to hospitals paid under a prospective
payment system.
Response: We continue to disagree that we do not have the authority
to make prospective documentation and coding adjustments to the
hospital-specific rate. We refer readers to the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51499) for further discussion on our authority
granted under section 1886(d)(5)(I)(i) of the Act. We do not believe
that specific discretionary authority under section 1886(d)(3)(A)(iv)
of the Act creates a limit on the broad authority granted under section
1886(d)(5)(I) of the Act. In this final rule, we are finalizing a
[[Page 53278]]
prospective -0.5 percent adjustment to the hospital-specific rate to
account for documentation and coding effects for discharges occurring
in FY 2008 and FY 2009.
9. Application of the Documentation and Coding Adjustment to the Puerto
Rico-Specific Standardized Amount
a. Background
Puerto Rico hospitals are paid based on 75 percent of the national
standardized amount and 25 percent of the Puerto Rico-specific
standardized amount. As noted previously, the documentation and coding
adjustment we adopted in the FY 2008 IPPS final rule with comment
period relied upon our authority under section 1886(d)(3)(A)(vi) of the
Act, which provides the Secretary the authority to adjust ``the
standardized amounts computed under this paragraph'' to eliminate the
effect of changes in documentation and coding that do not reflect real
changes in case-mix. Section 1886(d)(3)(A)(vi) of the Act applies to
the national standardized amounts computed under section 1886(d)(3) of
the Act, but does not apply to the Puerto Rico-specific standardized
amount computed under section 1886(d)(9)(C) of the Act.
While section 1886(d)(3)(A)(vi) of the Act is not applicable to the
Puerto Rico-specific standardized amount, we believe that we have the
authority to apply the documentation and coding adjustment to the
Puerto Rico-specific standardized amount using our special exceptions
and adjustment authority under section 1886(d)(5)(I)(i) of the Act.
Similar to SCHs that are paid based on the hospital-specific rate, we
believe that Puerto Rico hospitals that are paid based on the Puerto
Rico-specific standardized amount should not have the potential to
realize increased payments due to documentation and coding changes that
do not reflect real increases in patient severity of illness.
Consistent with the approach described for SCHs and MDHs in the FY 2009
IPPS final rule (73 FR 48449), we indicated that we planned to examine
our FY 2008 claims data for hospitals in Puerto Rico. We indicated in
the FY 2009 IPPS proposed rule (73 FR 23541) that if we found evidence
of significant increases in case-mix for patients treated in these
hospitals, we would consider proposing to apply documentation and
coding adjustments to the FY 2010 Puerto Rico-specific standardized
amount under our authority in section 1886(d)(5)(I)(i) of the Act.
b. Documentation and Coding Adjustment to the Puerto Rico-Specific
Standardized Amount
As discussed in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50071
through 50073), using the same methodology we applied to estimate
documentation and coding changes under IPPS for non-Puerto Rico
hospitals, our best estimate was that, for documentation and coding
that occurred over FY 2008 and FY 2009, a cumulative adjustment of -2.6
percent was required to eliminate the full effect of the documentation
and coding changes that do not reflect real changes in case-mix on
future payments from the Puerto Rico-specific rate. As we stated above,
we believe it is important to maintain both consistency and equity
among all hospitals paid on the basis of the same MS-DRG system. At the
same time, however, we recognize that the estimated cumulative impact
on aggregate payment rates resulting from implementation of the MS-DRG
system was smaller for Puerto Rico hospitals as compared to IPPS
hospitals and SCHs. In the FY 2011 IPPS/LTCH PPS final rule (75 FR
50072 through 50073), we stated that we believed that a full
prospective adjustment was the most appropriate means to take into full
account the effect of documentation and coding changes on payments,
while maintaining equity as much as possible between hospitals paid on
the basis of different prospective rates.
Because the Puerto Rico-specific rate received a full prospective
adjustment of -2.6 percent in FY 2011, we proposed no further
adjustment in the proposed rule for FY 2012. For FY 2013, in the FY
2013 IPPS/LTCH PPS proposed rule (77 FR 27889), we also did not propose
any adjustment to the Puerto Rico-specific rate.
10. Prospective Adjustments for FY 2010 Documentation and Coding Effect
Section 7(b)(1)(A) of Public Law 110-90 required CMS to make
prospective documentation and coding adjustments under section
1886(d)(3)(A)(iv) of the Act if, based upon a review of FY 2008 and FY
2009 discharges, we determined that implementation of the MS-DRG system
resulted in changes in documentation and coding that did not reflect
real changes in case-mix during FY 2008 or FY 2009 and that were
different than the prospective documentation and coding adjustments
applied under section 7(a) of Public Law 110-90. However, section
1886(d)(3)(A)(vi) of the Act authorizes adjustments to the average
standardized amounts if the Secretary determines such adjustments to be
necessary for any subsequent fiscal years in order to eliminate the
effect of coding or classification changes that do not reflect real
changes in case-mix. After review of comments and recommendations
received in a FY 2012 comment letter from MedPAC (available on the
Internet at: http://www.medpac.gov/documents/06172011_FY12IPPS_MedPAC_COMMENT.pdf), we analyzed claims data in FY 2010 to determine
whether any additional adjustment would be required to ensure that the
introduction of MS-DRGs was implemented in a budget neutral manner.
While we expect that the impacts of documentation and coding behavior
in response to the introduction of MS-DRGs in FY 2008 will eventually
decline to insignificant levels, we analyzed FY 2010 data on claims
paid through December 2011 using the same claims-based methodology as
described in previous rulemaking (73 FR 43768 and 43775). We determined
a total prospective documentation and coding effect of 1.008 for FY
2010. Our actuaries have estimated that this 0.8 percentage point
increase resulted in an increase in aggregate payments of approximately
$1.19 billion in FY 2010. Therefore, in the FY 2013 IPPS/LTCH PPS
proposed rule (77 FR 27890), we proposed an additional -0.8 percent
adjustment to account for the effects of documentation and coding
changes that did not reflect real changes in case-mix in FY 2010.
In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27890), we stated
that the combined total prospective adjustment to the standardized
amount proposed for FY 2013 under Public Law 110-90 to account for
documentation and coding effects in FY 2008 and FY 2009 and under
section 1886(d)(3)(A)(vi) of the Act to account for documentation and
coding effect in FY 2010 was -2.7 percent (-1.9 percent plus -0.8
percent). We indicated that the proposed adjustment would eliminate the
effect of documentation and coding that did not reflect real changes in
case-mix for discharges occurring during FYs 2008, 2009, and 2010.
While we did not make proposals regarding future fiscal years in the
proposed rule, we plan to continue to monitor and analyze additional
claims data and make adjustments, when necessary, as authorized under
section 1886(d)(3)(A)(vi) of the Act. We noted that the proposed total
adjustment to the proposed FY 2013 standardized amount would be +0.2
percent because these prospective adjustments will be offset by the
completion of the recoupment
[[Page 53279]]
adjustment under section 7(b)(1)(B) of Public Law 110-90, as discussed
below.
In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27890), we noted
that while we have decided to review FY 2010 claims data to determine
whether additional prospective adjustments are necessary (as discussed
earlier), section 7(b)(1)(B) of Public Law 110-90 does not authorize
CMS to calculate any retrospective adjustment for overpayments made in
FY 2010, nor to recover any related overpayments beyond FY 2012. The
Secretary's authority under section 1886(d)(3)(A)(vi) of the Act is
limited to prospective adjustments.
Consistent with our proposal for IPPS hospitals paid on the basis
of the standardized amount, our special exceptions and adjustment
authority under section 1886(d)(5)(I)(i) of the Act, and based upon our
review of FY 2010 claims data, in the FY 2013 IPPS/LTCH PPS proposed
rule (77 FR 27890), we also proposed an additional -0.8 percent
adjustment to the hospital-specific rate to account for documentation
and coding changes in FY 2010 that did not reflect real changes in
case-mix. We indicated that we believed that a full prospective
adjustment for hospitals paid based on the hospital-specific rate is
the most appropriate means to take into account the effect of
documentation and coding changes on payments, while maintaining equity
as much as possible between hospitals paid on the basis of different
prospective rates. Therefore, we proposed a combined adjustment of -1.3
percent (-0.5 percent + -0.8 percent) to the hospital-specific rate,
accounting for all documentation and coding effects observed between FY
2008 though FY 2010.
Based upon our analysis of FY 2010 claims data, we found no
significant additional effect of documentation and coding in FY 2010
that would warrant any additional adjustment to the Puerto Rico-
specific rate.
Comment: Numerous comments objected to the CMS proposal to make an
adjustment under section 1886(d)(3)(A)(vi) of the Act to account for
payment increases due to documentation and coding that did not reflect
real changes in case-mix for discharges occurring during FY 2010.
Commenters pointed to MedPAC's analysis in its public comment letter in
response to the FY 2011 IPPS/LTCH PPS proposed rule that suggested that
``negative documentation and coding'' may have occurred under the CMS-
DRGs, creating an overestimation of documentation and coding due to the
introduction of MS-DRGs. MedPAC estimated that the magnitude of this
effect could reach 0.36 percent in FY 2008, 0.36 percent in FY 2009,
and 0.25 percent in FY 2010. CMS responded to these findings in the FY
2011 IPPS/LTCH PPS final rule by stating that MedPAC characterized this
impact of any potential overestimate as ``small'' and could not be
corroborated with any specific examples or analysis. Commenters
indicated that they did not consider the potential impacts to be
``small'' and pointed out that if such estimates are true, hospitals
would be due an additional +0.72 percent adjustment to account for
overestimated recoupments (as well as similar positive adjustments to
the hospital-specific and Puerto Rico-specific rate). Some commenters
asserted that there are numerous examples of changes in documentation
and coding that may have decreased the CMI under the CMS-DRGs, and
provided five specific examples.
One commenter, compared the FY 2007 CC list to the FY 2008 CC list,
identifying examples of chronic conditions that were CCs under the CMS-
DRGs, but are no longer considered CCs or MCCs under the MS-DRGs, and
that would also necessarily result in a lower MS-DRG assignment because
more specific codes related to that condition were not developed. The
commenter expressed surprise that CMS' medical coding experts were
unable to do the same. The commenter identified the following common,
chronic conditions which were CCs under the CMS-DRGs, but are not a CC
or MCC under the MS-DRGs: atrial fibrillation; chronic blood loss
anemia; mitral valve disorder; and aortic valve disorder. The commenter
stated that removing these chronic conditions from the CC list under
the MS-DRGs led to a substantial decrease in the reporting of these
conditions as a secondary diagnosis when the MS-DRGs were implemented
in FY 2008.
Specifically, after 10 years in which the proportion of IPPS cases
that included atrial fibrillation as a secondary diagnosis increased
each year, the proportion decreased by 20 percent immediately upon
implementation of the MS-DRGs in FY 2008. This decrease in coding of
atrial fibrillation would cause the CMI as measured by the FY 2007 DRG
GROUPER to go down, while having no effect on the CMI as measured by
the MS-DRG GROUPER. The commenter stated that if this negative
documentation and coding effect is not taken into account in CMS'
analysis, it will inappropriately increase CMS' estimate of
documentation and coding change. The commenter also found that the
secondary diagnoses of chronic blood loss anemia, mitral valve disorder
and aortic valve disorder decreased in proportion immediately upon
implementation of the MS-DRGs in FY 2008.
In addition, the commenter stated that hyperpotassemia was a CC
under the CMS-DRGs, but is not a CC or MCC under the MS-DRGs. Because
of this, there was a substantial decrease in the reporting of
hyperpotassemia as a secondary diagnosis when the MS-DRGs were
implemented in FY 2008. Specifically, after 9 consecutive years in
which the proportion of IPPS cases that included hyperpotassemia as a
secondary diagnosis increased, the proportion decreased by 37 percent
immediately upon implementation of the MS-DRGs in FY 2008.
In responding to MedPAC's analysis, the commenter stated that CMS
concluded that it did not believe it would be appropriate to revise its
estimates based solely on MedPAC's analysis without knowing of any
specific examples. Given that the commenter is now providing such
specific examples, the commenter urged the agency to revise its
analysis to account for what the commenter believed to be
overestimation of documentation and coding as identified by MedPAC and
the AHA. Specifically, the commenter recommended that CMS subtract 0.25
percentage points from its estimate of a 6.2 percent cumulative
documentation and coding effect; which yields a revised cumulative
effect of 5.95 percent. Under this methodology, because CMS has already
implemented documentation and coding cuts of 3.5 percent, the commenter
stated that the cut remaining is actually only 2.45 percent, instead of
the 2.7 percent the agency proposed.
Response: We disagree with the commenter's suggestion that the
removal of the codes for the chronic conditions of atrial fibrillation,
chronic blood loss anemia, mitral valve disorder and aortic valve
disorder from the CC list upon the implementation of MS-DRGs and the
subsequent decrease in hospital reporting are examples of a
``negative'' documentation and coding effect. We note that what the
commenter provided are examples of an immediate change in coding and
reporting practices based on incentives under the MS-DRGs. It did not
suggest that patients had fewer occurrences of the chronic conditions
identified. They do suggest that hospitals were immediately aware of
the incentives provided by the CC and MCC lists under MS-DRGs and began
focusing on identifying and
[[Page 53280]]
reporting codes on the MS-DRG CC and MCC lists.
We believe the commenters' suggestions of immediate changes in
coding and reporting based on incentives provided by the MS-DRGs CC and
MCC lists support our view that coding practices have changed in
response to incentives, which we have shown lead to increases in the
case-mix index that were not based on actual changes in patient
severity.
We further believe that while the MedPAC analysis suggested that a
potential overestimate could have, in theory, occurred in the
methodology, the estimates are theoretical maximums. It is not clear at
this time, based on the information submitted, to what extent the five
examples provided by commenters substantiate these theoretical maximums
or any change in adjustments.
Nonetheless, we recognize that the methodological issues that
surround this question are complex, and may merit further
consideration. Therefore, we are not finalizing the proposed -0.8
percent adjustment to the standardized amount and the hospital-specific
rate at this time until more analysis can be completed.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Removal of Combined
Remaining Prospective Prospective onetime documentation &
prospective adjustment for adjustment for recoupment coding
adjustment for FY 2010 FY 2013 adjustment in FY adjustment for
FYs 2008-2009 2013 FY 2013
--------------------------------------------------------------------------------------------------------------------------------------------------------
Level of Adjustments..................................... -1.9% -0.0% -1.9% +2.9% +1.0%
--------------------------------------------------------------------------------------------------------------------------------------------------------
As in prior years, the FY 2008, FY 2009, and FY 2010 MedPAR files
are available to the public to allow independent analysis of the FY
2008 and FY 2009 documentation and coding effects. Interested
individuals may still order these files through the Web site at: http://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/LimitedDataSets/ by clicking on MedPAR Limited Data Set (LDS)--Hospital
(National). This Web page describes the file and provides directions
and further detailed instructions for how to order.
Persons placing an order must send the following: a Letter of
Request, the LDS Data Use Agreement and Research Protocol (refer to the
Web site for further instructions), the LDS Form, and a check for
$3,655 to:
Mailing address if using the U.S. Postal Service: Centers for Medicare
& Medicaid Services, RDDC Account, Accounting Division, P.O. Box 7520,
Baltimore, MD 21207-0520.
Mailing address if using express mail: Centers for Medicare & Medicaid
Services, OFM/Division of Accounting--RDDC, 7500 Security Boulevard,
C3-07-11, Baltimore, MD 21244-1850.
E. Refinement of the MS-DRG Relative Weight Calculation
1. Background
Beginning in FY 2007, we implemented relative weights for DRGs
based on cost report data instead of charge information. We refer
readers to the FY 2007 IPPS final rule (71 FR 47882) for a detailed
discussion of our final policy for calculating the cost-based DRG
relative weights and to the FY 2008 IPPS final rule with comment period
(72 FR 47199) for information on how we blended relative weights based
on the CMS-DRGs and MS-DRGs.
As we implemented cost-based relative weights, some public
commenters raised concerns about potential bias in the weights due to
``charge compression,'' which is the practice of applying a higher
percentage charge markup over costs to lower cost items and services,
and a lower percentage charge markup over costs to higher cost items
and services. As a result, the cost-based weights would undervalue
high-cost items and overvalue low-cost items if a single CCR is applied
to items of widely varying costs in the same cost center. To address
this concern, in August 2006, we awarded a contract to the Research
Triangle Institute, International (RTI) to study the effects of charge
compression in calculating the relative weights and to consider methods
to reduce the variation in the cost-to-charge ratios (CCRs) across
services within cost centers. For a detailed summary of RTI's findings,
recommendations, and public comments that we received on the report, we
refer readers to the FY 2009 IPPS/LTCH PPS final rule (73 FR 48452
through 48453).
In the FY 2009 IPPS/LTCH PPS final rule (73 FR 48458 through
48467), in response to the RTI's recommendations concerning cost report
refinements, we discussed our decision to pursue changes to the cost
report to split the cost center for Medical Supplies Charged to
Patients into one line for ``Medical Supplies Charged to Patients'' and
another line for ``Implantable Devices Charged to Patients.'' We
acknowledged, as RTI had found, that charge compression occurs in
several cost centers that exist on the Medicare cost report. However,
as we stated in the FY 2009 IPPS/LTCH PPS final rule, we focused on the
CCR for Medical Supplies and Equipment because RTI found that the
largest impact on the MS-DRG relative weights could result from
correcting charge compression for devices and implants. In determining
the items that should be reported in these respective cost centers, we
adopted the commenters' recommendations that hospitals should use
revenue codes established by the AHA's National Uniform Billing
Committee to determine the items that should be reported in the
``Medical Supplies Charged to Patients'' and the ``Implantable Devices
Charged to Patients'' cost centers. Accordingly, a new subscripted line
55.30 for ``Implantable Devices Charged to Patients'' was created in
July 2009 as part of CMS' Transmittal 20 update to the cost report Form
CMS-2552-96. This new subscripted cost center has been available for
use for cost reporting periods beginning on or after May 1, 2009.
As we discussed in the FY 2009 IPPS final rule (73 FR 48458) and in
the CY 2009 OPPS/ASC final rule with comment period (73 FR 68519
through 68527), in addition to the findings regarding implantable
devices, RTI also found that the costs and charges of computed
tomography (CT) scans, magnetic resonance imaging (MRI), and cardiac
catheterization differ significantly from the costs and charges of
other services included in the standard associated cost center. RTI
also concluded that both the IPPS and the OPPS relative weights would
better estimate the costs of those services if CMS were to add standard
cost centers for CT scans, MRI, and cardiac catheterization in order
for hospitals to report separately the costs and charges for those
services and in order for CMS to calculate unique CCRs to estimate the
costs from charges on claims data. In the FY 2011 IPPS/LTCH PPS final
rule (75 FR 50075 through 50080), we finalized
[[Page 53281]]
our proposal to create standard cost centers for CT scans, MRI, and
cardiac catheterization, and to require that hospitals report the costs
and charges for these services under new cost centers on the revised
Medicare cost report Form CMS 2552-10. (We refer readers to the FY 2011
IPPS/LTCH PPS final rule (75 FR 50075 through 50080) for a detailed
discussion of the reasons for the creation of standard cost centers for
CT scans, MRI, and cardiac catheterization.) The new standard cost
centers for CT scans, MRI, and cardiac catheterization are effective
for cost report periods beginning on or after May 1, 2010, on the
revised cost report Form CMS-2552-10.
2. Summary of Policy Discussion in FY 2012
In the FY 2009 IPPS final rule (73 FR 48468), we stated that, due
to what is typically a 3-year lag between the reporting of cost report
data and the availability for use in ratesetting, we anticipated that
we might be able to use data from the new ``Implantable Devices Charged
to Patients'' cost center to develop a CCR for Implantable Devices
Charged to Patients in the FY 2012 or FY 2013 IPPS rulemaking cycle.
However, as noted in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74
FR 43782), due to delays in the issuance of the revised cost report CMS
2552-10, we determined that a new CCR for Implantable Devices Charged
to Patients might not be available before FY 2013. Similarly, when we
finalized the decision in the FY 2011 IPPS/LTCH PPS final rule to add
new cost centers for CT scans, MRI, and cardiac catheterization, we
explained that data from any new cost centers that may be created will
not be available until at least 3 years after they are first used (75
FR 50077).
Accordingly, during the FY 2012 IPPS rulemaking (76 FR 51502), we
assessed the availability of data in the ``Implantable Devices Charged
to Patients'' cost center. In order to develop a robust analysis
regarding the use of cost data from the ``Implantable Devices Charged
to Patients'' cost center, it was necessary to have a critical mass of
cost reports filed with data in this cost center. We checked the
availability of data in the ``Implantable Devices Charged to Patients''
cost center on the FY 2009 cost reports, but we did not believe that
there was a sufficient amount of data from which to generate a
meaningful analysis in this particular situation. Therefore, we did not
propose to use data from the ``Implantable Devices Charged to
Patients'' cost center to create a distinct CCR for ``Implantable
Devices Charged to Patients'' for use in calculating the MS-DRG
relative weights for FY 2012. We indicated that we would reassess the
availability of data for the ``Implantable Devices Charged to
Patients'' cost center for the FY 2013 IPPS/LTCH PPS rulemaking cycle
and, if appropriate, we would propose to create a distinct CCR at that
time.
3. Discussion for FY 2013
To calculate the MS-DRG relative weights, we use two data sources:
the MedPAR file as the claims data source and the HCRIS as the cost
data source. We adjust the charges from the claims to costs by applying
the 15 national average CCRs developed from the cost reports. In the
past several years, we have made progress in changing the cost report
to add the ``Implantable Devices Charged to Patients'' cost center. At
the time of development of the FY 2013 IPPS/LTCH PPS proposed rule,
there was a sizeable number of hospitals in the FY 2010 HCRIS that had
reported data for ``Implantable Devices Charged to Patients'' on their
cost reports beginning during FY 2010. However, during the development
of the proposed rule, we were able to access only those cost reports in
the FY 2010 HCRIS with fiscal year begin dates on or after October 1,
2009, and before May 1, 2010. This is because cost reports with fiscal
year begin dates of May 1, 2010, through September 30, 2010, were filed
on the new cost report Form 2552-10, and cost reports filed on the Form
2552-10 were not accessible in the HCRIS. Normally, we pull the HCRIS
dataset that is 3 years prior to the IPPS fiscal year (that is, for the
FY 2013 relative weights, we would use the FY 2010 HCRIS, which
includes data from cost reports that begin on or after October 1, 2009,
and before October 1, 2010). However, because data from the Form 2552-
10 cost reports were not available, to ensure that the relative weights
are calculated with a data set that is as comprehensive and accurate as
possible, in the proposed rule, we proposed to calculate the FY 2013
relative weights with data from FY 2010 cost reports for providers with
fiscal year begin dates of on or after October 1, 2009, and before May
1, 2010, and to back fill with data from FY 2009 cost reports for those
providers that have fiscal year begin dates on or after May 1, 2010
through September 30, 2010. Further complicating matters was that, due
to additional unforeseen technical difficulties, the corresponding
information regarding charges for implantable devices on hospital
claims was not yet available to us in the MedPAR file. Without the
breakout in the MedPAR file of charges associated with implantable
devices to correspond to the costs of implantable devices on the cost
report, we believed that we had no choice but to propose to continue
computing the relative weights with the current CCR that combines the
costs and charges for supplies and implantable devices. We stated in
the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27892) that when we do
have the necessary supplies and implantable device data on the claims
in the MedPAR file to create distinct CCRs for supplies and implantable
devices, perhaps for FY 2014, we also hoped that we would have data for
an analysis of creating distinct CCRs for MRI, CT scans, and cardiac
catheterization. Prior to proposing to create these CCRs, we would
first thoroughly analyze and determine the impacts of the data.
Distinct CCRs for implantable devices, MRIs, and CT scans would be used
in the calculation of the relative weights only if they were first
finalized through rulemaking.
Comment: Commenters expressed concern that CMS had proposed not to
use the data available from the new ``Implantable Devices Charged to
Patients'' cost center for FY 2013. The commenters were concerned about
the continued delays in the utilization of the new cost center data,
and stated that such delays only prolong the payment inaccuracies
associated with charge compression. Two commenters suggested a short-
term fix to account for the lack of data and to create a CCR for
implantable devices. The commenters suggested that CMS calculate a DRG-
by-DRG estimate of the split of standardized supplies charges into
implantable devices and routine supplies. They stated that once
supplies charges are apportioned in each DRG, separate national average
CCRs for implantable devices and other supplies could be applied, based
on the existing cost reports. The commenters recommended using the CY
2010 Inpatient Standard Analytic File (SAF) to calculate the DRG-level
factors for apportioning the supplies charges, as the file has
information on charges by revenue center, allowing implantable devices
to be split from routine supplies. They further suggested that CMS
could calculate the CY 2010 ratios of routine supply charges to
implantable device charges by DRG, apply those ratios to the FY 2011
MedPAR supplies charges, and then utilize the separate CCRs for
supplies and implantable devices to estimate costs within each DRG. The
commenters added that the remainder of the DRG weight
[[Page 53282]]
calculation would proceed at this point, now with 16 CCRs, including
the implantable devices CCR. The commenters stated that CMS has
information required for DRG assignment, and could run the data through
the latest MS-DRG GROUPER if MS-DRG definition changes are an issue.
Several commenters requested that CMS adopt a regression-based CCR
for implantable devices due to the delay in using the cost report and
claims data to calculate an implantable device CCR. The commenters
suggested that CMS implement this approach, which was a recommendation
made by RTI and MedPAC, to the statistical disaggregation of CCRs in
the ``Medical Supplies Charged to Patients'' cost center, as it would
immediately address charge compression until data from the new cost
centers become available.
One commenter requested that CMS use the data from the hospitals
that are compliant in using the ``Implantable Devices Charged to
Patients'' cost center data to establish an implantable device CCR for
establishing FY 2013 relative weights. The commenter suggested that,
despite data limitations of the current data, CMS continue to revise
this CCR in subsequent years, as the agency does for all cost centers
as more robust data are available, without further delaying needed
improvements in the interim period.
Response: We acknowledge the commenters' concern that we did not
propose a distinct CCR for implantable devices charged to patients for
FY 2013. Nevertheless, we believe it would be inappropriate to finalize
a specific CCR for implantable devices charged to patients for FY 2013
(using SAF data, a regression-based methodology, or the limited
implantable devices cost report data that we do have), without an
opportunity for the public to review and comment on our analysis.
Rather, we believe that it is appropriate to wait until FY 2014, when
we hope to be able to provide a proper impact analysis of the addition
of a CCR for implantable devices charged to patients in the relative
weights calculation. Accordingly, we are not implementing a regression-
based CCR for implantable devices at this time, nor are we implementing
any new CCRs for use in the relative weights calculation for FY 2013.
Comment: Several commenters expressed concern that CMS may not have
sufficient data to establish an implantable device cost center to use
in the calculation of the relative weights for FY 2014. Two commenters
requested that CMS develop and discuss in this FY 2013 IPPS final rule
an action plan for ensuring that FY 2011 HCRIS and MedPAR data will be
available for allowing the ``Implantable Devices Charged to Patients''
cost center to be used for calculating MS-DRG relative weights for FY
2014. Another commenter requested that, rather than waiting for the
next rulemaking cycle, CMS should determine if it will have the
necessary data available prior to the FY 2014 proposed rule and inform
stakeholders if there continues to be administrative issues with the
data. The commenter believed that this will allow stakeholders to weigh
in on potential solutions to avoid another year of delay in
establishing the implantable device CCR.
Response: We understand the commenters' desire for reassurance that
the FY 2014 rulemaking cycle will not present further unanticipated
delays in the availability of both HCRIS and MedPAR data required to
create distinct CCRs for implantable devices charged to patients and
supplies charged to patients, respectively. We expect to have the
necessary data available to begin modeling the additional CCRs before
the end of calendar year 2012. Therefore, we are optimistic that, for
the FY 2014 proposed rule, we will be able to provide a detailed impact
analysis of the relative weights using distinct CCRs for implantable
devices, MRIs, CT scans, and cardiac catheterization. If, for some
reason, additional delays are encountered toward the end of calendar
year 2012, we will consider informing stakeholders of this delay, if
appropriate, and hosting a national conference call, so that
alternative solutions to establishing additional CCRs can be considered
in a timely fashion.
Comment: Some commenters supported our proposal of not making major
refinements in the MS-DRG relative weight methodology.
Response: We appreciate the commenters' support for our proposal of
not making major refinements to the MS-DRG relative weights.
Comment: One commenter recommended that, despite the delay in the
implementation of the ``Implantable Devices Charged to Patients'' cost
center for the IPPS relative weights, CMS should proceed with the
implementation of the implantable devices cost center in the
calculation of OPPS rates for CY 2013. The commenter requested that CMS
work toward a solution to combine data from the two different cost
reporting forms in the HCRIS data so that OPPS rates can be calculated
using the cost difference reported in the ``Implantable Devices Charged
to Patients'' cost center.
Response: We note that the CY 2013 OPPS/ASC proposed rule, which
went on public display at the Office of the Federal Register on July 6,
2012 (available at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices-Items/CMS-1589-P.html), in fact, includes a proposal to use
data from the ``Implantable Devices Charged to Patients'' cost center
to create a distinct CCR for use in calculating the OPPS relative
weights for CY 2013.
Comment: Two commenters expressed continued concern about the
accuracy of establishing new CT and MRI cost centers using cost report
and claims data. The commenters were concerned that the data reported
in the CT and MRI cost centers will not represent hospitals' full cost
of providing CT and MRI for some time. The commenters stated that a
large portion of the capital costs for CT and MRI equipment may have
been allocated across the entire hospital, rather than to the radiology
cost center, which would result in the understatement of costs of CT
and MRI reported in the radiology cost center.
Response: We received similar comments regarding the allocation of
capital costs for radiology equipment on the FY 2011 IPPS/LTCH PPS
proposed rule. In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50078),
we provided a detailed response for CMS' longstanding policy on the
proper reporting of such capital costs. Specifically, we stated that
``section 104 of the PRM-I contains definitions of buildings (section
104.2), building equipment (section 104.3), major moveable equipment
(section 104.4), and minor equipment (section 104.5) that apply for
purposes of cost report completion. We believe that it is clear that CT
and MRI equipment are `major moveable equipment' and are neither a
building cost nor a building equipment cost. Specifically, section
104.4 of the PRM-I defines `major moveable equipment' as follows: `The
general characteristics of this equipment are: (a) a relatively fixed
location in the building; (b) capable of being moved, as distinguished
from building equipment; (c) a unit cost sufficient to justify ledger
control; (d) sufficient size and identity to make control feasible by
means of identification tags; and (e) a minimum life of approximately
three years. Major moveable equipment includes such items as accounting
machines, beds, wheelchairs, desks, vehicles, x-ray machines, etc.' In
addition to this longstanding instruction, we believe
[[Page 53283]]
that our view that CT scanning and MRI equipment are major moveable
equipment is supported by the 2008 edition of `Estimated Useful Lives
of Depreciable Hospital Assets,' which states that the estimated useful
life of a CT scanner is 5 years, an MRI is 5 years, and an X-ray unit
is 7 years. Therefore, we believe that our longstanding policy makes it
clear that CT scanning and MRI equipment [are] major moveable equipment
and should be reported as such on the cost report. As major moveable
equipment, the costs should be reported together with the rest of the
hospital's major moveable equipment cost in the `Capital Related Costs-
Moveable Equipment' cost center(s) on Worksheet A (lines 2 and 4 [on
the CMS Form 2552-96 and line 2 on the CMS Form 2552-10]). The costs in
this cost center are allocated to all the hospital's cost centers that
use major moveable equipment (including CT and MRI) using `dollar
value' or `square feet' if the provider obtained the contractor's
approval under Provider Reimbursement Manual Part II (PRM-II), Section
3617, to use the simplified cost allocation methodology. However, a
hospital that is concerned that this method of allocation may result in
inaccurate CCRs (on Worksheet C, Part I) for the CT scan, MRI, and
other ancillary cost centers may request contractor approval under
Section 2307 of the PRM-I to directly assign the cost of moveable
equipment to all of the hospital's cost centers that use moveable
equipment, including CT scans and MRIs. If the hospital meets all of
the criteria in Section 2307 of the PRM-I, the contractor may approve
the direct assignment method. This would ensure that the high cost of
the CT scanning and MRI equipment would be reflected in the CCR that
would be calculated for those departments and that would be used to
estimate the cost of CT scanning and MRI services. In any case,
hospitals with accounting systems that include the cost of CT scanning
and MRI equipment in the `Capital Related Costs--Building and Fixtures'
cost center should correct their cost reporting practices to come into
compliance with CMS' longstanding policy in this regard. Reporting of
costs and charges on the Medicare cost report must be compliant with
Medicare cost reporting principles, regardless of differing payment
structures and incentives of other payers or State reporting
requirements'' (75 FR 50078). Hospitals that still need to correct
their cost reporting practices in this regard should do so soon, so
that when we propose distinct CCRs for MRI and CT scans, hopefully for
FY 2014, these CCRs will represent fairly accurately the costs of these
radiology services.
In summary, in this final rule, we are finalizing our proposal to
continue to use the existing 15 CCRs to calculate the MS-DRG relative
weights for FY 2013. For this final rule, as we did for the proposed
rule, because data from the CMS Form 2552-10 continue to be
unavailable, we are using data from FY 2010 cost reports for providers
with fiscal year begin dates of on or after October 1, 2009, and before
May 1, 2010, and we are backfilling with data from FY 2009 cost reports
for those providers that have fiscal year begin dates on or after May
1, 2010 through September 30, 2010. Depending on the availability of
necessary data, we hope to be able to propose, if appropriate, for FY
2014 to use distinct CCRs for implantable devices charged to patients
and supplies charged to patients, and possibly distinct CCRs for MRI,
CT scans, and cardiac catheterization as well.
F. Preventable Hospital-Acquired Conditions (HACs), Including
Infections
1. Background
Section 1886(d)(4)(D) of the Act addresses certain hospital-
acquired conditions (HACs), including infections. This provision is
part of an array of Medicare tools that we are using to promote
increased quality and efficiency of care. Under the IPPS, hospitals are
encouraged to treat patients efficiently because they receive the same
DRG payment for stays that vary in length and in the services provided,
which gives hospitals an incentive to avoid unnecessary costs in the
delivery of care. In some cases, conditions acquired in the hospital do
not generate higher payments than the hospital would otherwise receive
for cases without these conditions. To this extent, the IPPS encourages
hospitals to avoid complications.
However, the treatment of certain conditions can generate higher
Medicare payments in two ways. First, if a hospital incurs
exceptionally high costs treating a patient, the hospital stay may
generate an outlier payment. Because the outlier payment methodology
requires that hospitals experience large losses on outlier cases before
outlier payments are made, hospitals have an incentive to prevent
outliers. Second, under the MS-DRG system that took effect in FY 2008
and that has been refined through rulemaking in subsequent years,
certain conditions can generate higher payments even if the outlier
payment requirements are not met. Under the MS-DRG system, there are
currently 261 sets of MS-DRGs that are split into 2 or 3 subgroups
based on the presence or absence of a CC or an MCC. The presence of a
CC or an MCC generally results in a higher payment.
Section 1886(d)(4)(D) specifies that, by October 1, 2007, the
Secretary was required to select, in consultation with the Centers for
Disease Control and Prevention (CDC), at least two conditions that: (a)
Are high cost, high volume, or both; (b) are assigned to a higher
paying MS-DRG when present as a secondary diagnosis (that is,
conditions under the MS-DRG system that are CCs or MCCs); and (c) could
reasonably have been prevented through the application of evidence-
based guidelines. Section 1886(d)(4)(D) of the Act also specifies that
the list of conditions may be revised, again in consultation with CDC,
from time to time as long as the list contains at least two conditions.
Effective for discharges occurring on or after October 1, 2008,
pursuant to the authority of section 1886(d)(4)(D) of the Act, Medicare
no longer assigns an inpatient hospital discharge to a higher paying
MS-DRG if a selected condition is not present on admission (POA). Thus,
if a selected condition that was not POA manifests during the hospital
stay, it is considered a HAC and the case is paid as though the
secondary diagnosis was not present. However, even if a HAC manifests
during the hospital stay, if any nonselected CC/MCC appears on the
claim, the claim will be paid at the higher MS-DRG rate. In addition,
Medicare continues to assign a discharge to a higher paying MS-DRG if a
selected condition is POA. When a HAC is not POA, payment can be
effected in a manner shown in the diagram below.
[[Page 53284]]
[GRAPHIC] [TIFF OMITTED] TR31AU12.000
2. HAC Selection
Beginning in FY 2007, we have set forth proposals, and solicited
and responded to public comments, to implement section 1886(d)(4)(D) of
the Act through the IPPS annual rulemaking process. For specific
policies addressed in each rulemaking cycle, including a detailed
discussion of the collaborative interdepartmental process and public
input regarding selected and potential candidate HACs, we refer readers
to the following rules: the FY 2007 IPPS proposed rule (71 FR 24100)
and final rule (71 FR 48051 through 48053); the FY 2008 IPPS proposed
rule (72 FR 24716 through 24726) and final rule with comment period (72
FR 47200 through 47218); the FY 2009 IPPS proposed rule (73 FR 23547)
and final rule (73 FR 48471); the FY 2010 IPPS/RY 2010 LTCH PPS
proposed rule (74 FR 24106) and final rule (74 FR 43782); the FY 2011
IPPS/LTCH PPS proposed rule (75 FR 23880) and final rule (75 FR 50080);
and the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25810 through 25816)
and final rule (76 FR 51504 through 51522). A complete list of the 10
current categories of HACs is included on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/Hospital-Acquired_Conditions.html.
In the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25813 through
25814) and FY 2012 IPPS/LTCH PPS final rule (76 FR 51507 through
50509), we proposed but did not finalize the candidate condition
Contrast-Induced Acute Kidney Injury. Instead, we deferred the decision
making on this condition as a selected HAC until future rulemaking and
such a time when improved coding for the condition is available.
3. Present on Admission (POA) Indicator Reporting
Collection of POA indicator data is necessary to identify which
conditions were acquired during hospitalization for the HAC payment
provision as well as for broader public health uses of Medicare data.
In previous rulemaking, we provided both CMS and CDC Web site resources
that are available to hospitals for assistance in this reporting
effort. For detailed information regarding these sites and materials,
including the application and use of POA indicators, we refer the
reader to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51506 through
51507).
As discussed in previous IPPS proposed and final rules, there are
five POA indicator reporting options, as defined by the ICD-9-CM
Official Guidelines for Coding and Reporting. Under the HAC policy, we
treat HACs coded with ``Y'' and ``W'' indicators as POA and allow the
condition on its own to cause an increased payment at the CC/MCC level.
We treat HACs coded with ``N'' and ``U'' indicators as Not Present on
Admission (NPOA) and do not allow the condition on its own to cause an
increased payment at the CC/MCC level. We refer readers to the
following rules for a detailed discussion: the FY 2009 IPPS proposed
rule (73 FR 23559) and final rule (73 FR 48486 through 48487); the FY
2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24106) and final rule
(74 FR 43784 through 43785); the FY 2011 IPPS/LTCH PPS proposed rule
(75 FR 23881 through 23882) and final rule (75 FR 50081 through 50082);
and the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25812 through 25813)
and final rule (76 FR 51506 through 51507).
------------------------------------------------------------------------
Indicator Descriptor
------------------------------------------------------------------------
Y............................ Indicates that the condition was present
on admission.
W............................ Affirms that the hospital has determined
that, based on data and clinical
judgment, it is not possible to document
when the onset of the condition
occurred.
N............................ Indicates that the condition was not
present on admission.
U............................ Indicates that the documentation is
insufficient to determine if the
condition was present at the time of
admission.
1............................ Signifies exemption from POA reporting.
CMS established this code as a
workaround to blank reporting on the
electronic 4010A1. A list of exempt ICD-
9-CM diagnosis codes is available in the
ICD-9-CM Official Guidelines for Coding
and Reporting.
------------------------------------------------------------------------
[[Page 53285]]
Beginning on or after January 1, 2011, hospitals were required to
begin reporting POA indicators using the 5010 electronic transmittal
standards format. The 5010 format removes the need to report a POA
indicator of ``1'' for codes that are exempt from POA reporting. We
have issued CMS instructions on this reporting change as a One-Time
Notification, Pub. No. 100-20, Transmittal No. 756, Change Request
7024, effective on August 13, 2010, which can be located at the
following link on the CMS Web site: http://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/downloads/R756OTN.pdf. However, for
claims that continue to be submitted using the 4010 electronic
transmittal standards format, the POA indicator of ``1'' is still
necessary because of reporting restrictions from the use of the 4010
electronic transmittal standards format.
In addition, as discussed in section II.G.9. of the preamble of
this final rule, the 5010 format allows the reporting and, effective
January 1, 2011, the processing of up to 25 diagnoses and 25 procedure
codes. As such, it is necessary to report a valid POA indicator for
each diagnosis code, including the principal and all secondary
diagnoses up to 25.
4. HACs and POA Reporting in ICD-10-CM and ICD-10-PCS
As we stated in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51506
and 51507) and in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR
27894), in preparation for the transition to the ICD-10-CM and ICD-10-
PCS code sets, further information regarding the use of the POA
indicator with the ICD-10-CM/ICD-10-PCS classifications as they pertain
to the HAC policy will be discussed in future rulemaking.
At the March 5, 2012 meeting of the ICD-9-CM Coordination and
Maintenance Committee, an announcement was made with regard to the
availability of the ICD-9-CM HAC list translation to ICD-10-CM and ICD-
10-PCS code sets. Participants were informed that the list of the
current ICD-9-CM selected HACs has been translated into codes using the
ICD-10-CM and ICD-10-PCS classification system. It was recommended that
the public review this list of ICD-10-CM/ICD-10-PCS code translations
of the current selected HACs. The translation list is available on the
CMS Web page at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/icd10_hacs.html. We encourage the public to
submit comments on these translations through the HACs Web page using
the CMS ICD-10-CM/PCS HAC Translation Feedback Mailbox that has been
set up for this purpose under the Related Links section titled ``CMS
HAC Feedback.'' The final HAC list translation from ICD-9-CM to ICD-10-
CM/ICD-10-PCS will be subject to formal rulemaking.
In the meantime, we continue to encourage readers to review the
educational materials and draft code sets currently available for ICD-
10-CM/ICD-10-PCS on the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/index.html. In addition, the draft ICD-10-CM/ICD-10-PCS
coding guidelines can be viewed on the CDC Web site at: http://www.cdc.gov/nchs/icd/icd10cm.html.
Comment: Commenters expressed appreciation for CMS' decision to
make this crosswalk available. Commenters noted that they would
continue to review the crosswalk and provide additional comments, as
warranted.
Response: We appreciate the commenters' support and continued
feedback.
5. Changes to the HAC Policy for FY 2013
a. Additional Diagnosis Codes to Existing HACs
As discussed in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR
27894), as changes to diagnosis codes and new diagnosis codes have been
proposed and finalized for the list of CCs and MCCs, we have modified
the list of selected HACs to reflect these changes. While there were
not any new diagnosis codes proposed for FY 2013, there were new and
revised diagnosis codes effective October 1, 2011 (FY 2012) that were
not finalized in time for inclusion in the FY 2012 IPPS rulemaking.
Therefore, in the proposed rule (77 FR 27894), we proposed to add two
of these codes to an existing HAC category. We proposed to add
diagnosis codes 999.32 (Bloodstream infection due to central venous
catheter) and 999.33 (Local infection due to central venous catheter)
to the Vascular Catheter-Associated Infection HAC category for FY 2013.
These codes were created in response to a request discussed at the
March 9-10, 2011 ICD-9-CM Coordination and Maintenance Committee
meeting to better identify specific types of infections (systemic
versus local) that occur as a result of central venous catheter
placement.
Previously, there was only one existing HAC code (999.31 (Infection
due to central venous catheter)) in the Vascular Catheter-Associated
Infection HAC category. With the creation of codes 999.32 and 999.33,
effective October 1, 2011, the title for code 999.31 was revised to
``Other and unspecified infection due to central venous catheter.''
Therefore, codes 999.32 and 999.33 provide further specificity as to
the type of infection due to a central venous catheter. We refer
readers to page 45 of the topic packet found at the following link on
the CDC ICD-9-CM Web page at http://www.cdc.gov/nchs/data/icd9/TopicpacketforMarch2011_HA1.pdf for further information.
Shown in the table below are the two diagnosis codes that we
proposed with their corresponding descriptions and their CC/MCC
designations.
------------------------------------------------------------------------
CC/MCC
ICD-9-CM Code Code descriptor Designation
------------------------------------------------------------------------
999.32........................ Bloodstream infection CC
due to central
venous catheter.
999.33........................ Local infection due CC
to central venous
catheter.
------------------------------------------------------------------------
We invited public comments on the proposed adoption of these two
ICD-9-CM diagnosis codes designated as CC/MCCs that are listed above,
to be added to the Vascular Catheter-Associated Infection HAC category
as indicated for FY 2013.
Comment: Several commenters supported the addition of these two
codes. One commenter, a State program, indicated that it uses these
codes in a statewide HAC payment incentive program.
Response: We appreciate the commenters' support.
Comment: Some commenters opposed the addition of these two
diagnosis codes. Commenters also urged CMS to remove the one existing
HAC code (999.31) in the Vascular Catheter-Associated Infection HAC
category. They stated that CMS is proposing to add a quality measure on
central line associated bloodstream infection (CLABSI), which would
capture vascular catheter-associated infections
[[Page 53286]]
and asserted that ``this could penalize hospitals twice for the same
event.'' (We note that the commenters may be referring to two different
CMS programs, the Hospital IQR Program and the Hospital VBP Program.)
Commenters stated that their opposition to the proposed inclusion of
the two codes is not specific to the particular codes that were
proposed, but that their opposition is predicated on the ``expansion of
this HAC [Vascular Catheter-Associated Infection].'' Commenters also
stated that they supported reducing the incidence of CLABSI as a
patient safety goal and urged CMS to ``select only one program in which
to measure hospital performance for vascular catheter-associated
infection.''
Response: The HAC-POA Program is part of an array of tools used by
the Medicare program to promote increased quality and efficiency of
care. These tools include quality measurement as well as payment
adjustments. Because of their importance, HACs have been included in
multiple tools used by the Medicare program to measure quality of
services provided and performance, and to determine payment
adjustments. Under the IPPS, hospitals are encouraged to treat patients
efficiently because they receive the same DRG payment for stays that
vary in length and in the services provided, which gives hospitals an
incentive to avoid unnecessary costs in the delivery of care. In some
cases, such as when any nonselected CC/MCC appears on the claim,
conditions acquired in the hospital do not generate higher payments
than the hospital would otherwise receive for cases without these
conditions. To this extent, the IPPS encourages hospitals to avoid
complications and would not generally ``penalize hospitals twice.''
Because of their importance, measures of HACs have historically
been included in the Hospital IQR Program and are simultaneously
monitored by different CMS programs. The HAC/POA policy authorized
under section 1886(D)(4)(d) of the Act is a claims-based payment
policy, and in many cases, even if a HAC manifests during a hospital
stay, if any nonselected CC/MCC appears on the claim, the claim will be
paid at the higher MS-DRG rate.
Comment: One commenter supported the addition of diagnosis code
999.32, Bloodstream infection due to central venous catheter, to the
Vascular Catheter-Associated Infection HAC category, however, the
commenter expressed concern with the inclusion of diagnosis code
999.33, Local infection due to central venous catheter, as a condition
under this same HAC category to be subject to the HAC payment policy.
According to the commenter, diagnosis code 999.33 identifies and
describes local infections related to the soft tissues versus
infections in the central bloodstream. As such, the commenter asserted
that the Vascular Catheter-Associated Infection HAC category should
only include central bloodstream infections. Therefore, the commenter
did not support the addition of code 999.33 to the Vascular Catheter-
Associated Infection HAC category.
In addition, this same commenter recommended that CMS publish data
analyses for the Vascular Catheter-Associated Infection HAC category.
Specifically, the commenter requested that volume and cost data be made
publicly available for diagnosis codes 999.31, Other and unspecified
infection due to central venous catheter; 999.32, Bloodstream infection
due to central venous catheter; and 999.33, Local infection due to
central venous catheter. The commenter reiterated that they do not
support the inclusion of code 999.33 as a condition under the Vascular
Catheter-Associated Infection HAC category, however, the commenter
stated the additional information would assist in identifying potential
shifts in volume among the newer, more specific codes of 999.32 and
999.33.
Response: We appreciate the commenter's support for the addition of
diagnosis code 999.32, Bloodstream infection due to central venous
catheter, to the Vascular Catheter-Associated Infection HAC category.
With respect to the concern expressed regarding diagnosis code 999.33,
Local infection due to central venous catheter, we believe the
commenter may be confused. The title of the HAC category is Vascular
Catheter-Associated Infection; therefore, the emphasis is on the fact
that the patient had a central venous catheter placed and subsequently
developed an infection due to the presence of that catheter. We
acknowledge there is widespread interest particularly in bloodstream
infections due to central venous catheters, as several initiatives have
been undertaken focusing on surveillance and prevention. However, for
this HAC payment provision, it is our belief that local infections
resulting from a central venous catheter are also of importance and
deserve similar efforts among the provider community and healthcare
industry with regard to surveillance and prevention, as do the other
selected HAC conditions. While the condition being described by
diagnosis code 999.33, Local infection due to central venous catheter
is a local infection, it identifies the fact that a patient acquired
the infection as a result of a central venous catheter. Therefore, we
continue to believe it is appropriate to finalize this code for
inclusion in this HAC category.
In response to the recommendation that CMS conduct and publish data
analyses to provide further detailed information related to volume and
cost for codes 999.31, 999.32 and 999.33, we note that we have provided
the results for each selected condition within each HAC category
beginning with FY 2009 data analysis presented in FY 2011. We refer the
commenter and readers to the RTI evaluation of the HAC-POA program for
years FY 2009 through FY 2011 on the following Web site: http://www.rti.org/reports/cms/. As codes 999.32 and 999.33 became effective
October 1, 2011 (FY 2012), results of the FY 2012 data analysis are not
currently available.
After consideration of the public comments we received, we are
finalizing our proposal to add diagnosis codes 999.32 (Bloodstream
infection due to central venous catheter) and 999.33 (Local infection
due to central venous catheter) to the Vascular Catheter-Associated
Infection HAC category for discharges occurring on or after October 1,
2012.
b. New Candidate HAC Condition: Surgical Site Infection (SSI) Following
Cardiac Implantable Electronic Device (CIED) Procedures
In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27894 through
27896), we discussed our rationale for proposing a new condition,
Surgical Site Infection (SSI) Following Cardiac Implantable Electronic
Device (CIED) Procedures, for selection for FY 2013 as a HAC under
section 1886(d)(4)(D) of the Act. As described in more detail in
section II.F.1. of this preamble, each HAC must be: (1) High cost, high
volume, or both; (2) assigned to a higher paying MS-DRG when present as
a secondary diagnosis (that is, conditions under the MS-DRG system that
are CCs or MCCs); and (3) could reasonably have been prevented through
the application of evidence-based guidelines. We also discuss other
considerations relating to the selection of a HAC, including any
administrative or operational issues associated with a proposed
condition. For example, the condition may only be able to be identified
by multiple codes, thereby requiring the development of special GROUPER
logic to also exclude similar or related ICD-9-CM codes from being
classified as a CC or an MCC. Similarly, a condition acquired during a
hospital stay may arise from another condition that the patient had
prior to
[[Page 53287]]
admission, making it difficult to determine whether the condition was
reasonably preventable. In the proposed rule, we invited public comment
on the degree to which these conditions fulfill these statutory
requirements, as well as clinical, coding, and prevention issues on our
proposal to add SSI Following CIED Procedures as a condition subject to
the HAC payment provision for discharges occurring on or after October
1, 2012.
CIED therapy reduces morbidity and mortality in selected patients
with cardiac rhythm disturbances.\1\ More than 500,000 CIEDs are
implanted each year in the United States and 70 percent of CIED
recipients are age 65 or older.\2\ However, this benefit with regard to
the treatment of cardiac rhythm disturbances is somewhat reduced by
complications following device placement, including infections.
Patients can present with early or late infections because of CIED
placement.\3\ Two-thirds of these infections are caused by
Staphylococcus aureus and coagulase-negative Staphylococcus species.
Treatment of these infections usually entails surgical explantation of
the device, sometimes under general anesthesia and a prolonged course
of intravenous antibiotics, along with external electrical support in a
monitored intensive care setting. The rate of CIED infection is
increasing faster than the rate of CIED implantation,\4\ and there are
published data on the mortality and cost associated with CIED infection
or the relationship of these outcomes to different CIED types.
---------------------------------------------------------------------------
\1\ Epstein, A. E., J. P. DiMarco, et al. (2008). ``ACC/AHA/HRS
2008 Guidelines for Device-Based Therapy of Cardiac Rhythm
Abnormalities: a report of the American College of Cardiology/
American Heart Association Task Force on Practice Guidelines
(Writing Committee to Revise the ACC/AHA/NASPE 2002 Guideline Update
for Implantation of Cardiac Pacemakers and Antiarrhythmia Devices):
developed in collaboration with the American Association for
Thoracic Surgery and Society of Thoracic Surgeons.'' Circulation
117(21): e350-408.
\2\ Zhan, C., W. B. Baine, et al. (2007). ``Cardiac device
implantation in the United States from 1997 through 2004: a
population-based analysis.'' J Gen Intern Med, 23 Suppl 1: 13-19.
\3\ Baddour, L. M., A. E. Epstein, et al. (2010). ``Update on
cardiovascular implantable electronic device infections and their
management: a scientific statement from the American Heart
Association.'' Circulation, 121(20048212): 458-477.
Baddour, L. M., A. E. Epstein, et al. (2010). ``Update on
Cardiovascular Implantable Electronic Device Infections and Their
Management: A Scientific Statement From the American Heart
Association.'' Circulation, 121(3): 458-477.
\4\ Greenspon, A. J., J. D. Patel, et al. (2011). ``16-Year
Trends in the Infection Burden for Pacemakers and Implantable
Cardioverter-Defibrillators in the United States 1993 to 2008.''
Journal of the American College of Cardiology 58(10): 1001-1006.
---------------------------------------------------------------------------
There is not a unique code that identifies SSI Following CIED
Procedures. However, the condition can be identified as a subset of
discharges with ICD-9-CM diagnosis code 996.61 (Infection and
inflammatory reaction due to cardiac device, implant and graft) or
998.59 (Other postoperative infection). Our clinical advisors believe
that diagnosis code 996.61 or 998.59, in combination with the
associated procedure codes below, can accurately identify SSI Following
CIED Procedures. The procedure codes are:
00.50 (Implantation of cardiac resynchronization pacemaker
without mention of defibrillation, total system [CRT-P]);
00.51 (Implantation of cardiac resynchronization
defibrillator, total system [CRT-D]);
00.52 (Implantation or replacement of transvenous lead
[electrode] into left ventricular coronary venous system);
00.53 (Implantation or replacement of cardiac
resynchronization pacemaker pulse generator only [CRT-P]);
00.54 (Implantation or replacement of cardiac
resynchronization defibrillator pulse generator device only [CRT-D]);
37.80 (Insertion of permanent pacemaker, initial or
replacement, type of device not specified);
37.81 (Initial insertion of single-chamber device, not
specified as rate responsive);
37.82 (Initial insertion of single-chamber device, rate
responsive);
37.83 (Initial insertion of dual-chamber device);
37.85 (Replacement of any type pacemaker device with
single-chamber device, not specified as rate responsive);
37.86 (Replacement of any type of pacemaker device with
single-chamber device, rate responsive);
37.87 (Replacement of any type pacemaker device with dual-
chamber device);
37.94 (Implantation or replacement of automatic
cardioverter/defibrillator, total system [AICD]);
37.96 (Implantation of automatic cardioverter/
defibrillator pulse generator only);
37.98 (Replacement of automatic cardioverter/defibrillator
pulse generator only);
37.74 (Insertion or replacement of epicardial lead
[electrode] into epicardium);
37.75 (Revision of lead [electrode]);
37.76 (Replacement of transvenous atrial and/or
ventricular lead(s) [electrode]);
37.77 (Removal of lead(s) [electrode] without
replacement);
37.79 (Revision or relocation of cardiac device pocket);
and
37.89 (Revision or removal of pacemaker device).
In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27894 through
27896), we proposed to identify SSI Following CIED Procedures with
diagnosis code 996.61 or 998.59 in combination with one or more of the
above associated procedure codes. We believe the condition meets the
three criteria for inclusion on the HAC list, as discussed in greater
detail below.
First, the condition is one that is high cost and high volume. We
reviewed Medicare claims data in the FY 2011 MedPAR file. For FY 2011,
we found that there were 859 inpatient discharges coded with SSI
Following CIED Procedures as specified by diagnosis code 996.61 or
998.59 when reported with one or more of the above cited associated
procedure codes submitted through Medicare claims. The cases had an
average cost of $51,795 for the entire hospital stay. We found that
there were 583 inpatient discharges coded with SSI Following CIED
Procedures as specified by diagnosis code 996.61 or 998.59 when
reported with one or more of the above cited associated procedure codes
submitted through Medicare claims reported as POA. These POA cases had
an average cost of $41,999. We also found that there were 276 inpatient
discharges coded with SSI Following CIED Procedures as specified by
diagnosis code 996.61 or 998.59 when reported with one or more of the
above cited associated procedure codes submitted through Medicare
claims reported as NPOA. These NPOA cases had an average cost of
$72,485. We note that these data are consistent with other data
presented for current HACs. Therefore, we believe this condition is
high cost and high volume.
In addition, we reviewed the literature regarding this condition.
Infection associated with CIED procedures resulted in a substantial
incremental increase in admission mortality and long-term mortality and
varies with the type of CIED. For the purposes of the proposal, we
considered CIED procedures in the aggregate. Several large studies
showed CIED infection associated with an approximately 5 percent to 8
percent inhospital mortality as well as a 17.5 percent to 35.1 percent
one year mortality.\5\ Additionally, there is a significant cost impact
for patients who
[[Page 53288]]
suffer infections after CIED implantation. A recent large analysis of
2007 data on over 200,000 Medicare beneficiaries demonstrated the mean
hospital cost of CIED infections ranges from $28,676 to $53,349,
compared with a mean hospital cost ranging from $12,468 to $36,851 for
beneficiaries without infection.\6\ This additional information
supports our conclusion from our analysis of data in the MedPAR file
that this condition is high cost.
---------------------------------------------------------------------------
\5\ Tarakji, K. G., E. J. Chan, et al. (2010). ``Cardiac
implantable electronic device infections: Presentation, management,
and patient outcomes.'' Heart Rhythm 7(8): 1043-1047.
\6\ Sohail, M. R., C. A. Henrikson, et al. (2011). ``Mortality
and cost associated with cardiovascular implantable electronic
device infections.'' Arch Intern Med 171(20): 1821-1828.
---------------------------------------------------------------------------
Second, the condition of SSI Following CIED Procedures, as
specified in our proposal, is a CC under the MS-DRG system. We did not
identify any additional administrative or operational difficulties
associated with proposing this condition as a HAC.
Third, because there are widely recognized guidelines for the
prevention of SSI Following CIED Procedures, we believe the condition
is reasonably preventable through application of evidence-based
guidelines. A large randomized controlled trial demonstrated that
prophylactic preoperative antibiotics reduced CIED infection by 81
percent in patients who received them.\7\ Well-accepted guidelines for
the prevention and prophylaxis of CIED infection now exist supporting
the use of prophylactic antibiotics.
---------------------------------------------------------------------------
\7\ de Oliveira, J. C., M. Martinelli, et al. (2009). ``Efficacy
of Antibiotic Prophylaxis Before the Implantation of Pacemakers and
Cardioverter-Defibrillators: Results of a Large, Prospective,
Randomized, Double-Blinded, Placebo-Controlled Trial.'' Circ
Arrhythm Electrophysiol, 2(1): 29-34.
---------------------------------------------------------------------------
In the proposed rule, we invited public comment on whether SSI
Following CIED Procedures meets the requirements set forth under
section 1886(d)(4)(D) of the Act, as well as other coding and
prevention issues associated with our proposal to add this condition as
a proposed condition subject to the HAC payment provision for FY 2013
(for discharges occurring on or after October 1, 2012). We indicated
that we were particularly interested in receiving comments on the
degree to which SSI Following CIED Procedures is reasonably preventable
through the application of evidence-based guidelines.
Comment: The majority of commenters supported SSI Following CIED
Procedures as a new addition to the HAC/POA condition list, citing its
clinical relevance to the Medicare beneficiary population and concerns
about the increasing incidence of these infections in conjunction with
increased morbidity and mortality, and the associated costs with these
infections. One commenter, a State program, indicated that it uses
these codes in a statewide HAC payment incentive program.
Response: We appreciate the commenters' support.
Comment: Some commenters raised concerns that the inclusion of SSI
Following CIED Procedures as a HAC candidate does not meet the
statutory conditions of section 1886(d)(4)(D) of the Act because ``CMS
points out that there were only 859 cases of SSI Following CIED
Procedures during FY 2011. This constitutes only 0.25 percent of all
CIED cases.'' These commenters asserted that the HAC candidate
condition does not meet the high-volume criterion and, therefore,
should not be included as a HAC.
Response: We appreciate the commenters' concern regarding whether
this candidate condition meets the standards of the statutory criteria.
We note that we consider all cases where HAC codes are on the claim as
a secondary diagnosis, regardless of their POA indicator, in evaluating
conditions based on cost and volume and also use external data sources
when available. With regard to cost, the proposed rule included data
analyses that showed that the average cost per case of SSI Following
CIED Procedures is $51,795 and also included literature that describes
the increase in the mean cost of admissions with CIED infection to
those CIED placements without infection. Therefore, we reiterate our
belief that this condition meets the high-cost criterion. As discussed
previously, section 1886(d)(4)(D) of the Act specifies that a condition
on the HAC list may be high-volume or high-cost or both. It does not
require the condition to be both, and a condition that is only high-
cost would meet this statutory criterion. Therefore, we believe that
the statutory criterion has been met.
In the proposed rule, we characterized this condition as ``high-
cost and high-volume'' and described an analysis that showed 859 cases.
While 859 cases may seem like a small number of cases as the commenters
pointed out, we note that, in past rules, we have had similar numbers
for HACs, such as in FY 2008, where we stated that there were ``764
cases reported of Medicare patients who had an object left in during
surgery reported as a secondary diagnosis'' (72 FR 24720). Therefore, a
volume of 859 cases is not as high as the volume for some other HACs
and is higher than the volume for some HACs.
Comment: Some commenters were opposed to the SSI Following CIED
Procedures becoming a HAC because they believed that this HAC selection
``will result in hospitals dedicating time and effort to avoiding this
extremely low-incidence adverse event (when resources could have been
devoted to more highly prevalent safety concerns).''
Response: We appreciate and understand the concern of the
commenters. We note that SSIs are an established HAC category and that
a similar condition has been identified by public commenters in prior
rulemaking. In the FY 2008 IPPS final rule with comment period (72 FR
47213), SSIs were identified as a broad category for consideration.
However, at the time, we determined that coding of SSI with only ICD-9-
CM code 998.59 (Other postoperative infection) did not meet the
statutory criteria for being subject to the provision because it does
not uniquely identify SSIs. We stated that we would explore ways to
identify SSIs and would reevaluate the condition in FY 2009. In
response to public comment in the FY 2008 final rule with comment
period, we finalized one SSI, mediastinitis after coronary artery
bypass graft (CABG) surgery, and continued to ask for public input so
that further specific SSIs could be identified.
In FY 2009, we expanded our selection of the SSI for elective
procedures as HACs. In the FY 2009 IPPS final rule (73 FR 48477 through
48479), we discussed how, in response to commenters' suggestions, we
selected certain orthopedic procedures in the HAC SSI category using
ICD-9-CM diagnosis code 996.67 (Infection and inflammatory reaction due
to other orthopedic device and implant graft) or 998.59 (Other
postoperative infection) and selected 81.XX orthopedic ICD-9-CM
procedure codes. Another SSI condition that was proposed and finalized
during FY 2009 based on public comment was ``Surgical Site Infection
Following Bariatric Surgery for Obesity.'' The ICD-9-CM codes that are
used to describe ``Surgical Site Infection Following Bariatric Surgery
for Obesity'' are: 278.01 (Morbid Obesity) and 998.59 (Other
postoperative infection), and procedure code 44.38 (Laparoscopic
gastroenterostomy) or 44.39 (Other gastroenterostomy), or 44.95
(Laparoscopic gastri restrictive procedure).
As discussed in that same final rule for FY 2009 (73 FR 48478
through 48479), a commenter recommended adding Surgical Site Infection
following Implantation of Cardiac Devices as a HAC. The commenter
provided the
[[Page 53289]]
following information regarding this recommended HAC:
A recent estimate that approximately 300,000 pacemaker
implants had been performed in 2007.
A reference stating that the estimated rate of infection
following cardiac device implantation is 4 percent and that the cost to
treat each pacemaker infection is approximately $25,000.
Evidence-based guidelines for preventing these infections.
Our response in that FY 2009 final rule was that ``surgical site
infection following certain cardiac device procedures is a strong
candidate HAC.'' We stated the condition is high-cost, high-volume,
triggers a higher-paying MS-DRG, and may be considered reasonably
preventable through the application of evidence-based guidelines. We
further explained that we did not propose this specific condition in
the FY 2009 IPPS proposed rule; however, we expect to propose surgical
site infection following certain cardiac device procedures, as well as
surgical site infection following other types of device procedures, as
future candidates. We also stated that we looked forward to working
with stakeholders to identify additional procedures, such as device
procedures, in which SSIs could be considered reasonably preventable
through the application of evidence-based guidelines. We continue to
agree with public commenters from FY 2009 that SSI Following
Implantation of Cardiac Device Procedures is a strong candidate and
made this specific proposal for FY 2013 for that reason.
In light of the public comments we received, and given our prior
establishment of a broad HAC category for SSIs in relation to HACs and
historical discussion of SSI following certain cardiac device
procedures as a strong candidate, in this final rule, we are modifying
our proposal so that, rather than this procedure being a new HAC
category, we are finalizing SSI Following CIED Procedures as a new
subcategory under SSIs (for example, HAC 9D Surgical Site Infection
Following Cardiac Implantation).
Comment: Some commenters opposed the use of administrative/claims
data to identify HAIs in the HAC/POA Program and noted that the
proposed rule stated that there is no unique code that identifies SSI
Following CIED procedures, and thus CMS proposed to use a combination
of codes to capture these data. The commenters believed the use of
claims data for the determination of HAIs/HACs has limited value in
improving patient care because claims data do not provide precise
identification of HAIs, nor do they provide information in a timely
manner to provide effective treatment.
Response: We appreciate the commenters' concern that administrative
data may not provide the most precise identification of HAIs and their
comments about the codes used to identify the conditions proposed for
addition to the HAC list. However, we point out that the statute
establishes this policy as a payment policy, which is implemented on a
per claim basis by adjusting the MS-DRG assignment. The statute further
requires that the conditions on the HAC list must be identifiable
through ICD-9-CM codes. The conditions identified on the HAC list and
the corresponding codes or combinations of codes used to make a payment
adjustment are not intended to provide information in a timely manner
to provide treatment to any particular individual. The statute
establishes a payment adjustment that can encourage hospitals to make
improvements with regard to a limited number of conditions that, if
they did not occur, could have otherwise resulted in an increased
payment for a reasonably avoidable complication.
Comment: One commenter did not believe that punitive payment
mechanisms coupled with the lack of risk adjustment for the conditions
on the HACs list is the most appropriate or effective method to reduce
complications. Commenters also asserted that CMS is expanding the HAC
program ``without fully understanding the impact of appropriate risk
adjustment.''
Response: We appreciate the commenters' response, but disagree with
their assumptions. We received similar comments regarding the addition
of two new codes to another existing HAC category. We note that our
response is similar. The HAC/POA Program is part of an array of tools
used by the Medicare program to promote increased quality and
efficiency of care. These tools include quality measurement, as well as
payment adjustments. Because of their importance, HACs have been
included in multiple tools used by Medicare to measure quality of
services provided and performance, and to determine payment
adjustments. Under the IPPS, hospitals are encouraged to treat patients
efficiently because they receive the same DRG payment for stays that
vary in length and in the services provided, which gives hospitals an
incentive to avoid unnecessary costs in the delivery of care. In some
cases, such as when a nonselected CC/MCC appears on a claim, conditions
acquired in the hospital do not generate higher payments than the
hospital would otherwise receive for cases without these conditions. To
this extent, the IPPS encourages hospitals to avoid complications.
With regard to risk adjustment, risk adjustment is not a
requirement under section 1886(d)(4)(D) of the Act for inclusion of a
condition on the HAC list for payment adjustment. We believe the
commenters may be confusing the HAC payment adjustment policy with
quality measurement policies, where risk adjustment is sometimes used.
We believe meeting the statutory criteria as specified encourages
hospitals to promote measures to protect all patients from reasonably
preventable HACs.
Comment: One commenter stated: ``It is inappropriate for CMS to
deny payment for HAC related complications without taking into
consideration whether a patient did, in fact, receive optimal evidence-
based care given that the rates of many of the HACs cannot reach
zero.''
Response: We appreciate the commenter's response. We believe that,
although it may be difficult to reduce the incidence of conditions on
the HAC list to zero, the incidence of conditions can be significantly
reduced in cases where evidence-based guidelines for the prevention of
the condition exist and are used. Additionally, we point out that
payment is not denied, but could be made at a lower paying MS-DRG rate.
If any nonselected CC/MCC appears on the claim when a HAC is not
present on admission, the claim will be paid at the higher MS-DRG rate,
so the hospital would not receive a lower payment. Finally, in
accordance with 42 CFR 412.60(d), hospitals may appeal the DRG
assignment on a claim within 60 days of the initial notice of the DRG
assignment. This may be of interest to the public, as the commenter
expressed concern about those cases where a HAC occurs and a lower
paying MS-DRG assignment is made.
After consideration of the public comments we received, in this
final rule, we are modifying our proposal to add SSI Following CIED
Procedures as a HAC condition. Our final policy makes SSI following
CIED Procedures a sub-HAC condition within the SSI HAC category subject
to the HAC payment provision for discharges occurring on or after
October 1, 2012.
c. New Candidate HAC Condition: Iatrogenic Pneumothorax With Venous
Catheterization
In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27896 through
[[Page 53290]]
27897), we discussed our rationale for proposing a new condition,
Iatrogenic Pneumothorax with Venous Catheterization, for selection as a
HAC for FY 2013 under section 1886(d)(4)(D) of the Act. We previously
proposed Iatrogenic Pneumothorax more generally as a HAC in the FY 2009
IPPS rulemaking (73 FR 48485).
In the FY 2009 IPPS final rule (73 FR 48485), we considered
Iatrogenic Pneumothorax as a condition but did not finalize it due to
commenters' concerns about the preventability of the condition when
following the evidence-based guidelines. Most commenters opposed the
selection of Iatrogenic Pneumothorax as a HAC and indicated that the
evidence-based guidelines often acknowledge that Iatrogenic
Pneumothorax is a known relatively common risk for certain procedures.
Further, with regard to evidence-based guidelines, many commenters
opposed designation of this condition as a HAC due to a lack of
consensus within the medical community regarding its preventability.\8\
Some commenters offered suggestions to exclude certain procedures or
situations, including central line placement, thoracotomy, and the use
of a ventilator, if Iatrogenic Pneumothorax were to be selected as a
HAC. In that rule, we noted that we would continue to review the
development of evidence-based guidelines for the prevention of
Iatrogenic Pneumothorax if evidence warranted and consider Iatrogenic
Pneumothorax as a HAC in the future. We refer readers to that final
rule for a more detailed discussion (73 FR 48485). To address concerns
raised by commenters in FY 2009, we reviewed changes in the standard of
care and evidence-based guidelines to identify specific situations
where Iatrogenic Pneumothorax would be considered reasonably
preventable and identified venous catheterization as one such instance.
---------------------------------------------------------------------------
\8\ Ahan, et al.: Accidental Iatrogenic Pneumothorax in
Hospitalized Patients, Medical Care, 44(2):182-6, Feb. 2006.
---------------------------------------------------------------------------
Pneumothorax is defined as the presence of air or gas in the
pleural cavity, which is the space between the covering of the tissue
of the lung and parietal pleura, or the part of the pleura that lines
the chest wall. The presence of air in this space partially or
completely collapses the lung and is life threatening. Air can enter
the intrapleural space through a passage through the chest wall.
Iatrogenic Pneumothorax is a type of traumatic pneumothorax that
results from incursion into the pleural space secondary to diagnostic
or therapeutic medical intervention, such as needle placement for
central line catheter guidance.
There is no unique code that identifies Iatrogenic Pneumothorax
with Venous Catheterization. However, Iatrogenic Pneumothorax with
Venous Catheterization can be identified as a subset of discharges with
ICD-9-CM diagnosis code 512.1 (Iatrogenic pneumothorax). Our clinical
advisors believe that diagnosis code 512.1, in combination with the
associated procedure code 38.93 (Venous catheterization NEC), can
accurately identify Iatrogenic Pneumothorax with Venous
Catheterization. In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR
27896 through 27897), we proposed to identify Iatrogenic Pneumothorax
with Venous Catheterization reported in combination with diagnosis code
512.1 (Iatrogenic pneumothorax) and procedure code 38.93 (Venous
catheterization NEC). We recognize that, in quality measurement such as
with the Agency for Healthcare Research and Quality (AHRQ) Patient
Safety Indicator (PSI) Number 6 (Iatrogenic Pneumothorax Rate),
exclusion criteria are used to increase the accuracy of identifying
these cases. We believe that, by limiting our proposal to include
Iatrogenic Pneumothorax as a HAC only in the context of venous
catheterization, we have improved our ability to accurately identify
these cases. While we did not propose exclusion criteria, we welcomed
public comment in this regard. In addition, we believe this more
narrowly tailored condition meets the three criteria for inclusion on
the HAC list, as discussed in greater detail below.
First, the condition is one that is high cost and high volume. We
reviewed Medicare claims data in the FY 2011 MedPAR file. We found that
there were 4,467 inpatient discharge cases coded for Iatrogenic
Pneumothorax with Venous Catheterization as specified by diagnosis code
512.1 reported with procedure code 38.93. The cases had an average cost
of $39,128 for the entire hospital stay. We found that there were 612
inpatient discharge cases coded for Iatrogenic Pneumothorax with Venous
Catheterization as specified by diagnosis code 512.1 reported with
procedure code 38.93 submitted through Medicare claims reported as POA.
These POA cases had an average cost of $26,693. We also found that
there were 3,855 inpatient discharge cases coded for Iatrogenic
Pneumothorax with Venous Catheterization as specified by diagnosis code
512.1 reported with procedure code 38.93 submitted through Medicare
claims reported as NPOA. These NPOA cases had an average cost of
$41,102. We note that these data are consistent with other data
presented for current HACs. Therefore, we believe this condition is
high cost and high volume.
In addition, we reviewed the literature regarding this condition.
The cannulation of veins (that is, insertion of a catheter) with
central venous catheterization is an important aspect of patient care
for the administration of fluids and medications and for monitoring
purposes. Eight percent of hospitalized patients receive a central
venous catheter, and more than 5 million central venous catheters are
inserted in the United States each year. Indwelling catheters have
several known complications and side effects associated with their use,
such as infections or vessel damage. Additionally, there are risks
associated with the placement of central venous catheters including the
risk of pneumothorax for central catheters placed in the upper area of
the patient's neck or chest when placed in the internal jugular or
subclavian veins. Mechanical complications associated with Iatrogenic
Pneumothorax are reported to occur in 5 to 19 percent of patients.\9\
---------------------------------------------------------------------------
\9\ McGee, D. C. and M. K. Gould (2003). ``Preventing
Complications of Central Venous Catheterization.'' New England
Journal of Medicine, 348(12): 1123-1133.
---------------------------------------------------------------------------
Second, the condition of Iatrogenic Pneumothorax with Venous
Catheterization as specified in our proposal is a CC under the MS-DRGs.
Third, there are widely recognized guidelines that address the
prevention of Iatrogenic Pneumothorax with Venous Catheterization, and
we believe that Iatrogenic Pneumothorax in the context of venous
catheterization is reasonably preventable through application of these
evidence-based guidelines.
In terms of guidelines, the AHRQ, in a 2001 report ``Making Health
Care Safer: A Critical Analysis of Patient Safety Practices'' (AHRQ
Publication No. 01-EO58) recommended the use of ultrasound for the
placement of all central venous catheters as one of its 11 practices
aimed at improving patient care. Current standard placement techniques
for these venous catheters rely on the knowledge of anatomic landmarks
and other indicators to guide the initial cannulation of the vein. The
increase in the number of small, advanced, and portable 2D ultrasound
devices has inspired the use of these newer ultrasound devices in
central venous line placement, as now direct visualization of the
target vessel can be
[[Page 53291]]
achieved, making it easier to avoid these complications.
Recommendations for the use of ultrasound as an adjunct to central
venous line placement now exist and are based on supportive literature
Category A (Randomized controlled trials report statistically
significant (P > .01) differences between clinical interventions for a
specified clinical outcome) with a Level 1 weight of scientific
evidence (multiple randomized controlled trials with the aggregated
findings supported by meta-analysis).\10\ Several studies have shown a
decrease in the mechanical complication rate with the use of ultrasound
during line placement.\11\ Guidelines for performing ultrasound guided
vascular cannulation have been recently published.\12\
---------------------------------------------------------------------------
\10\ Echoc, A. U. R. b. t. A. S. o. A. a. t. S. o. C. A. T. F.
o. T. (2010). ``Practice Guidelines for Perioperative
Transesophageal Echocardiography.'' Anesthesiology, 112(5): 1084-
1096 1010.1097/ALN.1080b1013e3181c1051e1090.
\11\ Hind, D.: ``Ultrasonic device for central venous
cannulation: Meta-analysis.'' BJM, 2003, vol. 327, 7411:361-364; and
Troianos, C. A., G. S. Hartman, et al. (2012). ``Guidelines for
Performing Ultrasound Guided Vascular Cannulation: Recommendations
of the American Society of Echocardiography and the Society of
Cardiovascular Anesthesiologists.'' Anesthesia and Analgesia,
114(1): 46-72.
\12\ Troianos, C. A., G. S. Hartman, et al. (2012). ``Guidelines
for Performing Ultrasound Guided Vascular Cannulation:
Recommendations of the American Society of Echocardiography and the
Society of Cardiovascular Anesthesiologists.'' Anesthesia and
Analgesia, 114(1): 46-72.
---------------------------------------------------------------------------
We believe new evidence-based guidelines provide substantial
clinical guidance for reasonable prevention when this condition occurs
in the context of venous catheterization. In the proposed rule, we
invited public comment on whether Iatrogenic Pneumothorax with Venous
Catheterization meets the requirements set forth under section
1886(d)(4)(D) of the Act, as well as other coding and prevention issues
associated with our proposal to add this proposed condition, as a
condition subject to the HAC payment provision for discharges occurring
on or after October 1, 2012. We stated that we were particularly
interested in public comment on how limiting the condition to
situations in which it occurs in conjunction with venous
catheterization influences preventability, and whether additional
limits should be considered in the context of venous catheterization.
Comment: Some commenters supported CMS' proposal to include
Iatrogenic Pneumothorax with Venous Catheterization as a candidate
condition for the HAC list. Some commenters noted that this proposal
aligns with and encourages use of ``widely recognized'' guidelines
based in research evidence, including AHRQ's 2001 published report,
``Making Healthcare Safer: A Critical Analysis of Patient Safety
Practices'' (AHRQ Publication No. 01-E058), that shows iatrogenic
pneumothorax can be a reasonably preventable complication when
performing the venous catheterization using an ultrasound. One
commenter stated, ``Recent studies have highlighted the cost savings
and increased quality of care that ultrasound guided catheterization
can provide * * * [and that] fewer complications from needle placement
result in improved patient outcomes and greater clinician
efficiency.''Another commenter listed additional guidelines, such as
the 2002 guidance from CDC regarding the use of ultrasound and the
prevention of intravascular catheter-related complications, the 2002
guidance from the National Institute for Health and Clinical Excellence
(NICE) on the use of ultrasound for placing central venous catheters,
the 2001 (revised in 2008) guidance from the American College of
Emergency Physicians which represents the first specialty specific
comprehensive guidelines for the use of ultrasound in emergency
medicine, and the 2012 practice guideline from the American Society of
Anesthesiologists (ASA) Taskforce on Central Venous Access for central
venous access defined as placement of a catheter such that the catheter
is inserted into a venous great vessel.
Another commenter noted that ``Since 2001, controlled trials have
been published evaluating ultrasound guided central venous
catheterization in various types of patient populations * * * and found
significantly higher success rates and reduced complication rates in
all studies.''
Response: We agree with commenters' input and appreciate the
commenters' support.
Comment: One commenter encouraged CMS to add exclusion criteria
``to prevent reporting errors'' of the Iatrogenic Pneumothorax with
Venous Catheterization HAC. Another commenter recommended that CMS add
the following exclusion codes to distinguish iatrogenic and spontaneous
pneumothorax; pneumothorax and air leaks: ICD-9-CM codes 512.2
(Postoperative air leak), 512.81 (Primary Spontaneous Pneumothorax),
512.82 (Secondary spontaneous pneumothorax), 512.83 Chronic
pneumothorax), 512.84 (Other air leak), and 512.89 (Other
Pneumothorax). One of the commenters noted that Iatrogenic Pneumothorax
does not have an ICD-9-CM code.
Response: We thank the commenters for their response. At this time,
we continue to believe that, by limiting our proposal to include
Iatrogenic Pneumothorax as a HAC only in the context of venous
catheterization, we have improved our ability to accurately identify
these cases and that no further exclusion criteria are needed. We
believe that the commenter may have misunderstood our proposed policy
in offering the specific suggestions for exclusion codes. First, the
commenter is mistaken about there not being a code for Iatrogenic
Pneumothorax in ICD-9-CM. The condition is indexed clearly to diagnosis
code 512.1 (Iatrogenic pneumothorax). Also, as specified, this HAC
would not include the codes for spontaneous pneumothorax because it is
not a complication as a result of a medical intervention and,
therefore, is not iatrogenic. ICD-9-CM diagnosis code 512.1 is specific
enough to capture those complications that have been caused through
medical intervention in the context of venous catheterization.
Comment: Some commenters opposed the addition of the Iatrogenic
Pneumothorax with Venous Catheterization condition ``because it puts
hospitals at risk of being penalized twice for the same event.''
Commenters pointed out that CMS proposed to add a patient safety
composite measure that includes Iatrogenic Pneumothorax with Venous
Catheterization to the Hospital VBP Program. In the commenters' view,
this penalizes hospitals twice for the same event. The commenters noted
that they supported reducing iatrogenic pneumothorax as a patient
safety goal for CMS, and urged CMS to ``select only one program in
which to measure hospitals' performance on IPs with venous
catheterization.'' In addition, the commenters stated that ``CMS has
continued to add additional components to the HAC list without fully
understanding the impact of appropriate risk adjustment.''
Response: We received similar public comments regarding our
proposal to include SSI Following CIED Procedures in the existing HAC
category, and, similarly, we appreciate the commenters' response but
disagree with their assumptions. As we responded above with regard to
the SSI Following CIED Procedures condition, the HAC/POA program is
part of an array of tools used by the Medicare program to promote
increased quality and efficiency of care. These tools include quality
measurement, as well as payment adjustments. Because of their
importance, HACs have been included in multiple tools used by the
Medicare program to measure quality of services
[[Page 53292]]
provided and performance, and to determine payment adjustments. Under
the IPPS, hospitals are encouraged to treat patients efficiently
because they receive the same DRG payment for stays that vary in length
and in the services provided, which gives hospitals an incentive to
avoid unnecessary costs in the delivery of care. In some cases, such as
when a nonselected CC/MCC appears on a claim, conditions acquired in
the hospital do not generate higher payments than the hospital would
otherwise receive for cases without these conditions. To this extent,
the IPPS encourages hospitals to avoid complications and would not
generally ``penalize hospitals twice.''
With regard to risk adjustment, risk adjustment is not a
requirement under section 1886(d)(4)(D) of the Act for inclusion of a
condition on the HAC list for payment adjustment. We believe the
commenters may be confusing the HAC payment adjustment policy with
quality measurement policies, where risk adjustment is sometimes used.
We believe meeting the statutory criteria as specified encourages
hospitals to promote measures to protect all patients from reasonably
preventable hospital-acquired conditions.
Comment: Some commenters opposed the inclusion of Iatrogenic
Pneumothorax with Venous Catheterization as a HAC candidate condition
because they did not believe that this proposed HAC condition is high-
volume.
Response: We received similar comments with regard to our proposal
to include SSI Following CIED Procedures as a HAC candidate condition.
We similarly point out that our proposal characterized this condition
as ``high-cost and high-volume'' and described analysis that showed
4,467 cases and an average cost of $39,128. Furthermore, as discussed
previously, section 1886(d)(4)(D) of the Act specifies that a condition
on the HAC list may be high-volume or high-cost or both. It does not
require the condition to be both and a condition that was only high-
cost would still meet this statutory criterion.
Comment: Other commenters ``recommended that CMS work with CDC and
other quality organizations to identify more robust measures for HAC[s]
prior to implementing these two proposed conditions, as their inclusion
is not currently endorsed by national quality organizations.''
Response: In establishing the HAC payment policy under section
1886(d)(4)(D) of the Act, our experts have worked closely with the
public health and infectious disease professionals from across the
Department of Health and Human Services to identify the candidate
preventable HACs. New HAC proposals are made in consultation with the
CDC to ensure the clinical soundness of the proposal.
Comment: A few commenters stated that ``For many conditions on the
HAC list, occurrence rates cannot be reduced to zero or near zero even
when the evidence-based guidelines are followed.'' In addition, one
commenter stated ``We believe that effective preventive measures make
Iatrogenic Pneumothorax reducible but not 100 percent preventable.
However, the same report states that these prevention strategies may
reduce the incidence but not necessarily eliminate it. CMS should
recognize the reality that a target rate of zero (``never event'') is
perhaps not attainable with this condition at this time.''
Response: We appreciate the commenters' response. We believe that,
although it may be difficult to reduce the incidence of conditions on
the HAC list to zero, the incidence of conditions can be significantly
reduced in cases where evidence-based guidelines for the prevention of
the condition exist and are used. For Iatrogenic Pneumothorax with
Venous Catheterization, the use of the improved newly published
evidence-based guidelines has shown the complication rate can be
markedly reduced in the placement of the venous catheter into the
internal jugular vein.
Comment: A few commenters expressed that the inclusion of the
Iatrogenic Pneumothorax with Venous Catheterization condition may have
unintended and deleterious consequences, which may lead providers
toward using alternative sites for central line placement that are less
prone to pneumothorax, but carry increased risk of mechanical and
infectious complications. They indicated that alternative sites could
be the internal jugular or femoral veins. Because of these
consequences, these commenters did not support the addition of
Iatrogenic Pneumothorax with Venous Catheterization to the HAC list.
Response: We believe the commenters may have misunderstood our
proposal. The new HAC condition will apply to a population of patients
who have iatrogenic pneumothorax as a complication of central venous
placement of a catheter in the internal jugular vein. We do not believe
hospitals will be led to consider alternative, suboptimal sites for
central venous access because of this new addition to the HAC list.
Comment: Some commenters expressed concerns regarding the use of
ultrasound in academic medical centers and Level 1 Trauma Centers for
venous catheter placement versus the use of ultrasound for venous
catheter placement in small community hospitals. They stated that
``there is little to no data on how often ultrasound guidance is used
in small community medical centers.'' Furthermore, they stated that
``ultrasound guidance is less commonly used in procedures involving
central venous access via the subclavian vein, and is often impossible
to use in trauma cases.''
Response: We believe that, in applying evidence-based guidelines,
hospitals will have appropriately trained hospital personnel. Also, we
point out that the lesser paying MS-DRG is not assigned when additional
nonselected CC/MCCs appear on a claim, and that trauma cases may likely
involve additional nonselected CC/MCCs.
As we indicated in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR
27897), with the exception of the condition of Iatrogenic Pneumothorax
with Venous Catheterization, at this time, we do not believe that
additional analysis exists that would require us to change our previous
determinations regarding the previously considered candidate HACs in
the FY 2008 IPPS final rule with comment period (72 FR 47200 through
47218), the FY 2009 IPPS final rule (73 FR 48471 through 48491), the FY
2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43782 through 43785), and
the FY 2012 IPPS/LTCH PPS final rule (76 FR 51510 through 51511). We
refer readers to these rules for a detailed discussion that supports
our determination regarding each of the previously considered candidate
HACs and continue to encourage public dialogue about refinements to the
HAC list.
After consideration of the public comments we received, we are
finalizing our proposal to add Iatrogenic Pneumothorax with Venous
Catheterization with the codes specified above as a condition subject
to the HAC payment provision for discharges occurring on or after
October 1, 2012.
6. RTI Program Evaluation Summary
On September 30, 2009, a contract was awarded to Research Triangle
Institute, International (RTI) to evaluate the impact of the Hospital-
Acquired Condition-Present on Admission (HAC-POA) provisions on the
changes in the incidence of selected conditions, effects on Medicare
payments, impacts on coding accuracy, unintended consequences, and
infection and event
[[Page 53293]]
rates. This is an intra-agency project with funding and technical
support coming from CMS, the Office of Public Health and Science
(OPHS), AHRQ, and CDC. The evaluation will also examine the
implementation of the program and evaluate additional conditions for
future selection.
RTI's evaluation of the HAC-POA provisions is divided into several
parts. The evaluation includes conditions that are currently treated as
HACs and also previously considered candidate conditions. We refer
readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50085 through
50101) and the FY 2012 IPPS/LTCH PPS final rule (76 FR 51512 through
51522) for a fuller description of this evaluation and findings to date
regarding analysis of FY 2009 and FY 2010 data, respectively. Summary
and detailed data were made publicly available on the CMS Web site at:
http://www.cms.gov/HospitalAcqCond/01_Overview.asp and the RTI Web
site at: http://www.rti.org/reports/cms/.
RTI's analysis of the FY 2011 MedPAR data file for the HAC-POA
program evaluation is included as follows in this FY 2013 IPPS/LTCH PPS
final rule. These summary and detailed data are available on the CMS
Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/Hospital-Acquired_Conditions.html and the RTI
Web site at: http://www.rti.org/reports/cms/.
a. RTI Analysis of FY 2011 POA Indicator Reporting Across Medicare
Discharges
To better understand the impact of HACs on the Medicare program, it
is necessary to first examine the incidence of POA indicator reporting
across all eligible Medicare discharges. As mentioned previously, only
IPPS hospitals are required to submit POA indicator data for all
diagnosis codes on Medicare claims. Therefore, all non-IPPS hospitals
were excluded, as well as providers in waiver States (Maryland) and
territories other than Puerto Rico.
Using MedPAR claims data from October 2010 through September 2011,
RTI found a total of approximately 89.3 million secondary diagnoses
across approximately 8.94 million discharges. As shown in Chart A
below, the majority of all secondary diagnoses (77.57 percent) were
reported with a POA indicator of ``Y,'' meaning the condition was POA.
Chart A--POA Code Distribution Across All Secondary Diagnoses
------------------------------------------------------------------------
------------------------------------------------------------------------
Number Percentage
------------------------------------------------------------------------
Total Discharges in Final File 8,941,507 ..............
------------------------------------------------------------------------
Total Number of Secondary Diagnoses 89,252,194 100.00
Across Total Discharges
------------------------------------------------------------------------
POA Indicator Description .............. ..............
Y................ Condition present on 69,231,189 77.57
admission.
W................ Status cannot be 21,796 0.02
clinically
determined.
N................ Condition not present 5,748,769 6.44
on admission.
U................ Documentation not 207,258 0.23
adequate to
determine if
condition was
present on admission.
1................ Exempted ICD-9-CM 14,043,182 15.73
code.
------------------------------------------------------------------------
Source: RTI Analysis of MedPAR IPPS Claims, October 2010 through
September 2011.
b. RTI Analysis of FY 2011 POA Indicator Reporting of Current HACs
Following the initial analysis of POA indicator reporting for all
secondary diagnoses, RTI evaluated POA indicator reporting for specific
HAC-associated secondary diagnoses. The term ``HAC-associated secondary
diagnosis'' refers to those diagnoses that are on the selected HAC list
and were reported as a secondary diagnosis. Chart B below shows a
summary of the HAC categories with the frequency in which each HAC was
reported as a secondary diagnosis and the corresponding POA indicators
assigned on the claims. It is important to note that, because more than
one HAC-associated diagnosis code can be reported per discharge (that
is, on a single claim), the frequency of HAC-associated diagnosis codes
may be more than the actual number of discharges that have a HAC-
associated diagnosis code reported as a secondary diagnosis. Below we
discuss the frequency of each HAC-associated diagnosis code and the POA
indicators assigned to those claims.
RTI analyzed the frequency of each reported HAC-associated
secondary diagnosis (across all 8.94 million discharges) and the POA
indicator assigned to the claim. Chart B below shows that the most
frequently reported conditions were in the Falls and Trauma HAC
category, with a total of 181,157 HAC-associated diagnosis codes being
reported for that HAC category. Of these 181,157 diagnoses, 4,738
reported a POA indicator of ``N'' for not POA and 175,831 diagnoses
reported a POA indicator of ``Y'' for POA. The lowest frequency appears
in the Blood Incompatibility HAC category with only 22 HAC-associated
secondary diagnosis codes reported.
Chart B--POA Status of Current HACS: October 2010 Through September 2011
--------------------------------------------------------------------------------------------------------------------------------------------------------
Not present on admission Present on admission
Frequency ---------------------------------------------------------------------------------------
Selected HAC as a POA = N POA = U POA = Y POA = W
secondary ---------------------------------------------------------------------------------------
diagnosis Number Percent Number Percent Number Percent Number Percent
--------------------------------------------------------------------------------------------------------------------------------------------------------
1. Foreign Object Retained After Surgery (CC)...... 606 283 46.7 1 0.2 321 53.0 1 0.2
2. Air Embolism (MCC).............................. 45 34 75.6 0 0.0 11 24.4 0 0.0
3. Blood Incompatibility (CC)...................... 22 10 45.5 1 4.5 11 50.0 0 0.0
4. Pressure Ulcer Stages III & IV (MCC)............ 102,172 1,742 1.7 75 0.1 100,328 98.2 27 0.0
[[Page 53294]]
5. Falls and Trauma (MCC & CC)..................... 181,157 4,738 2.6 510 0.3 175,831 97.1 78 0.0
6. Catheter-Associated UTI (CC).................... 16,807 3,906 23.2 32 0.2 12,835 76.4 34 0.2
7. Vascular Catheter-Associated Infection (CC)..... 11,324 5,910 52.2 25 0.2 5,366 47.4 23 0.2
8. Poor Glycemic Control (MCC)..................... 15,360 612 4.0 7 0.0 14,734 95.9 7 0.0
9A. Surgical Site Infection Mediastinitis CABG (CC) 58 50 86.2 0 0.0 8 13.8 0 0.0
9B. Surgical Site Infection Following Certain 356 247 69.4 0 0.0 109 30.6 0 0.0
Orthopedic Procedures (CC)........................
9C. Surgical Site Infection Following Bariatric 25 24 96.0 0 0.0 1 4.0 0 0.0
Surgery for Obesity (CC)..........................
10. Pulmonary Embolism & DVT Orthopedic (MCC)...... 3,368 2,715 80.6 20 0.6 611 18.1 22 0.7
----------------------------------------------------------------------------------------------------
Total *........................................ 331,300 20,271 6.1 671 0.2 310,166 93.6 192 0.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
* More than one HAC-associated diagnosis code can be reported per discharge; therefore, frequency of HAC-associated diagnosis codes may be more than the
actual number of discharges that have a HAC-associated diagnosis code reported as a secondary diagnosis.
In the FY 2009 IPPS final rule (73 FR 48486 through 48487), we
adopted as final our proposal to: (1) pay the CC/MCC MS-DRGs for those
HACs coded with ``Y'' and ``W'' indicators; and (2) not pay the CC/MCC
MS-DRGs for those HACs coded with ``N'' and ``U'' indicators. We also
discussed the comments we received urging CMS to strongly consider
changing the policy and to pay for those HACs assigned a POA indicator
of ``U'' (documentation is insufficient to determine if the condition
was present at the time of admission). We stated we would monitor the
extent to which and under what circumstances the ``U'' POA reporting
option is used. In the FY 2010 IPPS/RY 2010 LTCH PPS final rule, we
also discussed and responded to comments regarding HACs coded with the
``U'' indicator (74 FR 43784 and 43785). As shown in Chart B above,
RTI's analysis provides data on a total of 671 HAC-associated secondary
diagnoses reported with a POA indicator of ``U.'' Of those diagnoses,
510 (0.3 percent) were assigned to the Falls and Trauma HAC category.
We continue to believe that better documentation will result in
more accurate public health data. We did not propose to change our
policy under which CMS does not pay at the higher CC/MCC amount when a
selected HAC diagnosis code is reported with a POA indicator of ``U.''
We encourage readers to further review the RTI detailed report
which demonstrates the frequency of each individual HAC-associated
diagnosis code within the HAC categories. For example, in the Foreign
Object Retained After Surgery HAC category, there are two unique ICD-9-
CM diagnosis codes to identify that condition: Code 998.4 (Foreign body
accidentally left during a procedure) and code 998.7 (Acute reaction to
foreign substance accidentally left during a procedure). In the
detailed RTI report, readers can view that code 998.4 was reported 591
times and code 998.7 was reported 15 times, across all MS-DRGs, for a
total of 606 times. The RTI detailed report is available at the
following Web site: http://www.rti.org/reports/cms/.
c. RTI Analysis of FY 2011 Frequency of Discharges and POA Indicator
Reporting for Current HACs
RTI further analyzed the effect of the HAC provision by studying
the frequency in which a HAC-associated diagnosis was reported as a
secondary diagnosis with a POA indicator of ``N'' or ``U'' and, of that
number, how many resulted in MS-DRG reassignment. In Chart C below,
Column A shows the number of discharges for each HAC category where the
HAC-associated diagnosis was reported as a secondary diagnosis. For
example, there were 45 discharges that reported Air Embolism as a
secondary diagnosis. Column C shows the number of discharges for each
HAC reported with a POA indicator of ``N'' or ``U.'' Continuing with
the example of Air Embolism, the chart shows that, of the 45 reported
discharges, 34 discharges (75.56 percent) had a POA indicator of ``N''
or ``U'' and were identified as a HAC discharge. There were a total of
34 discharges to which the HAC policy applied and that could,
therefore, have had an MS-DRG reassignment. Column E shows the number
of discharges where an actual MS-DRG reassignment occurred. As shown in
Column E, the number of discharges with an Air Embolism that resulted
in actual MS-DRG reassignments was 14 (41.18 percent of the 34
discharges with a POA indicator of ``N'' or ``U''). Thus, while there
were 34 discharges (75.56 percent of the original 45) with an Air
Embolism reported with a POA indicator of ``N'' or ``U'' identified as
a HAC discharge that could have caused MS-DRG reassignment, the end
result was 14 (41.18 percent) actual MS-DRG reassignments. There are a
number of reasons why a selected HAC reported with a POA indicator of
``N'' or ``U'' will not result in MS-DRG reassignment. These reasons
were illustrated with the diagram in section II.F.1. of the preamble of
this final rule and will be discussed in further detail in section
II.F.3.e. of this preamble.
Chart C below also shows that, of the 287,993 discharges with a
HAC-associated diagnosis as a secondary diagnosis, 3,006 discharges
ultimately resulted in MS-DRG reassignment. As will be discussed below,
there were 15
[[Page 53295]]
claims that resulted in MS-DRG reassignment where 2 HACs were reported
on the same admission. The four HAC categories that had the most
discharges resulting in MS-DRG reassignment were: (1) Falls and Trauma;
(2) Pulmonary Embolism and DVT Orthopedic (Orthopedic PE/DVT); (3)
Pressure Ulcer Stages III & IV; and (4) Catheter-Associated Urinary
Tract Infection (CAUTI). Codes falling under the Falls and Trauma HAC
category were the most frequently reported secondary diagnoses with
143,920 discharges. Of these 143,920 discharges, 4,555 (3.16 percent)
were coded as not POA and identified as HAC discharges. This category
also contained the greatest number of discharges that resulted in an
MS-DRG reassignment. Of the 4,555 discharges within this HAC category
that were not POA, 1,241 (27.24 percent) resulted in an MS-DRG
reassignment.
Of the 287,993 total discharges reporting HAC-associated diagnoses
as a secondary diagnosis, 3,044 discharges were coded with a secondary
diagnosis of Orthopedic PE/DVT. Of these 3,044 discharges, 2,473 (81.24
percent) were coded as not POA and identified as HAC discharges. This
category contained the second greatest number of discharges resulting
in an MS-DRG reassignment. Of the 2,473 discharges in this HAC category
that were not POA, 1,082 discharges (43.75 percent) resulted in an MS-
DRG reassignment.
The Pressure Ulcer Stages III & IV category had the second most
frequently coded secondary diagnoses, with 96,646 discharges. Of these
discharges, 1,770 (1.83 percent) were coded as not POA and identified
as HAC discharges. This category contained the third greatest number of
discharges resulting in an MS-DRG reassignment. Of the 1,770 discharges
in this HAC category that were not POA, 286 discharges (16.16 percent)
resulted in an MS-DRG reassignment.
The Catheter-Associated UTI category had the third most frequently
coded secondary diagnoses, with 16,807 discharges. Of these discharges,
3,918 (23.31 percent) were coded as not POA and identified as HAC
discharges. This category contained the fourth greatest number of
discharges resulting in an MS-DRG reassignment. Of the 3,918 discharges
in this HAC category that were not POA, 160 discharges (4.08 percent)
resulted in an MS-DRG reassignment.
The remaining 6 HAC categories only had 237 discharges that
ultimately resulted in MS-DRG reassignment. We note that, even in cases
where a large number of HAC-associated secondary diagnoses were coded
as not POA, this finding did not necessarily translate into a large
number of discharges that resulted in MS-DRG reassignment. For example,
only 20 of the 5,921 Vascular Catheter-Associated Infection secondary
diagnoses that were coded as not POA and identified as HAC discharges
resulted in an MS-DRG reassignment.
There were a total of 431 discharges with a HAC-associated
secondary diagnosis reporting a POA indicator of ``N'' or ``U'' that
were excluded from acting as a HAC discharge (subject to MS-DRG
reassignment) due to the CC Exclusion List logic within the GROUPER.
The CC Exclusion List identifies secondary diagnosis codes designated
as a CC or an MCC that are disregarded by the GROUPER logic when
reported with certain principal diagnoses. For example, a claim with a
principal diagnosis code of 250.83 (Diabetes with other specified
manifestations, type 1 [juvenile type], uncontrolled) and a secondary
diagnosis code of 250.13 (Diabetes with ketoacidosis, type 1, [juvenile
type], uncontrolled) with a POA indicator of ``N'' would result in the
HAC-associated secondary diagnosis code 250.13 being ignored as a CC.
According to the CC Exclusion List, code 250.13 is excluded from acting
as a CC when code 250.83 is the principal diagnosis. As a result, the
HAC logic would not be applicable to that case. For a detailed
discussion on the CC Exclusion List, we refer readers to section
II.G.9. of this preamble.
Discharges where the HAC logic was not applicable due to the CC
Exclusion List occurred among the following 5 HAC categories: Pressure
Ulcer Stages III and IV (30 cases), Falls and Trauma (303 cases),
Catheter-Associated UTI (20 cases), Vascular Catheter-Associated
Infection (14 cases), and Manifestations of Poor Glycemic Control (64
cases). Further information regarding the specific number of cases that
were excluded for each HAC-associated secondary diagnosis code within
each of the above mentioned HAC categories is also available. We refer
readers to the RTI detailed report at the following Web site: http://www.rti.org/reports/cms/.
In summary, Chart C below demonstrates that there were a total of
287,993 discharges with a reported HAC-associated secondary diagnosis.
Of the total 287,993 discharges, 19,839 (6.54 percent) discharges were
HACs reported with a POA indicator of ``N'' or ``U'' that were
identified as a HAC discharge. Of these 19,839 discharges, the number
of discharges resulting in MS-DRG reassignments was 3,006 (15.96
percent).
Chart C--Discharge Frequencies of Current CMS HACS October 2010 Through September 2011
----------------------------------------------------------------------------------------------------------------
Discharges with this Discharges Identified as Discharges that change
condition as secondary a HAC MS-DRG due to HAC
diagnosis ---------------------------------------------------
Selected HAC category --------------------------
Number Percent \2\ Number Percent \3\ Number Percent \4\
(column A) (column B) (column C) (column D) (column E) (column F)
----------------------------------------------------------------------------------------------------------------
1. Foreign Object Retained After 606 0.01 284 46.86 37 13.03
Surgery..........................
2. Air Embolism................... 45 0.00 34 75.56 14 41.18
3. Blood Incompatibility.......... 22 0.00 11 50.00 1 9.09
4. Pressure Ulcer Stages III & IV. 96,646 1.08 1,770 1.83 286 16.16
5. Falls and Trauma............... 147,684 1.65 4,596 3.11 1,259 27.39
a. Fracture................... 128,065 1.43 3,829 2.99 996 26.01
b. Dislocation................ 1,014 0.01 22 2.17 2 9.09
c. Intracranial Injury........ 15,478 0.17 694 4.48 258 37.18
d. Crushing Injury............ 55 0.00 1 1.82 0 0.00
e. Burn....................... 2,147 0.02 42 1.96 3 7.14
f. Electric Shock............. 925 0.01 8 0.86 0 0.00
Less: Discharges with multiple 3,764 0.04 41 1.09 18 43.90
Falls & Trauma...................
5. Falls & Trauma: Unduplicated 143,920 1.61 4,555 3.16 1,241 27.24
Total............................
6. Catheter-Associated UTI........ 16,807 0.19 3,918 23.31 160 4.08
7. Vascular Catheter-Associated 11,324 0.13 5,921 52.29 20 0.34
Infection........................
[[Page 53296]]
8. Poor Glycemic Control.......... 15,145 0.17 555 3.66 152 27.39
9a. SSI Mediastinitis CABG........ 58 0.07 50 86.21 5 10.00
9b. SSI Orthopedic................ 351 0.31 244 69.52 6 2.44
9c. SSI Bariatric................. 25 0.19 24 96.00 2 8.33
10. Pulmonary Embolism & DVT 3,044 0.76 2,473 81.24 1,082 43.75
Orthopedic.......................
-----------------------------------------------------------------------------
Total \1\................. 287,993 3.22 19,839 6.54 3,006 15.96
----------------------------------------------------------------------------------------------------------------
\1\ Discharges can appear in more than one row. The total figure is not adjusted for the 207 discharges with
more than one HAC that appear as secondary diagnoses (15 of these resulted in MS-DRG reassignment).
\2\ Percent computed relative to total discharges ``at risk'' for this HAC. For HACs 1-8, this is 8,941,507. For
HAC 9a, this is 77,744. For HAC 9b, this is 112,951. For HAC 9c, this is 13,404. For HAC 10, this is 401,246.
\3\ Percent computed relative to discharges with condition as a secondary diagnosis.
\4\ Percent computed relative to discharges with this HAC (Column C).
Source: RTI Analysis of MedPAR IPPS Claims, October 2010 through September 2011.
A small number of discharges had multiple HAC categories reported
during the same stay. In reviewing the 8.94 million claims, RTI found
207 cases in which at least two different HAC categories were reported
on the same discharge. Chart D below summarizes these cases. The
Vascular Catheter-Associated Infection HAC category had the highest
number of discharges involving another HAC category with 126 total
discharges. Of these 126 discharges, 47 involved a code from the
Pressure Ulcer Stages III & IV HAC category and 62 discharges involved
a code from the Catheter-Associated UTI HAC category.
Some of these cases with multiple HACs reported had both HAC codes
ignored in the MS-DRG assignment. Of these 207 claims, 15 did not
receive higher payments based on the presence of these reported HACs
and we describe these claims below in section II.F.3.f.(2) of this
preamble. Depending on the MS-DRG to which the cases were originally
assigned, ignoring the HAC codes would have led to a MS-DRG
reassignment if there were no other MCCs or CCs reported, if the MS-DRG
was subdivided into severity levels, and if the case were not already
in the lowest severity level prior to ignoring the HAC codes.
Chart D--Claims With More Than One HAC Secondary Diagnosis October 2010 Through September 2011
--------------------------------------------------------------------------------------------------------------------------------------------------------
1. Foreign
object 4. Pressure 7. Vascular 8. Poor
retained ulcer 5. Falls 6. Catheter- catheter- glycemic
HAC after Stages III and trauma associated associated control Total
surgery & IV (MCC) (MCC & CC) UTI (CC) infection (MCC)
(CC) (CC)
--------------------------------------------------------------------------------------------------------------------------------------------------------
3. Blood Incompatibility (CC)................................ ........... 1 ........... ........... ........... ........... 1
5. Falls and Trauma (MCC & CC)............................... ........... 8 ........... ........... ........... ........... 8
6. Catheter-Associated UTI (CC).............................. 1 17 8 ........... ........... ........... 26
7. Vascular Catheter-Associated Infection (CC)............... 2 47 15 62 ........... ........... 126
8. Poor Glycemic Control (MCC)............................... 1 2 1 4 5 ........... 13
9A. Surgical Site Infection Mediastinities CABG (CC)......... ........... 1 1 ........... 3 ........... 5
9B. Surgical Site Infection Following Certain Orthopedic ........... 1 ........... 3 2 ........... 6
Procedures (CC).............................................
10. Pulmonary Embolism & DVT Orthopedic (MCC)................ ........... ........... 10 7 ........... 1 18
------------------------------------------------------------------------------------------
Total Discharges with 2 HACs *............................... 4 77 35 76 10 1 203
--------------------------------------------------------------------------------------------------------------------------------------------------------
*In total, there were 207 discharges with more than one HAC secondary diagnosis. However, there were 4 discharges involving 3 HAC secondary diagnoses.
These discharges included the following HAC secondary diagnoses:
Discharge 1: Pressure Ulcer Stages III & IV (MCC & CC), Catheter-Associated Infection (CC), and Vascular Catheter-Associated Infection (CC);
Discharge 2: Pressure Ulcer Stages III & IV (MCC & CC), Catheter-Associated Infection (CC), and Vascular Catheter Associated Infection (CC);
Discharge 3: Pressure Ulcer Stages III & IV (MCC & CC), Catheter-Associated Infection (CC), and Vascular Catheter Associated Infection (CC);
Discharge 4: Catheter-Associated Infection (CC), Vascular Catheter Associated Infection (CC), and Poor Glycemic Control (MCC).
[[Page 53297]]
d. RTI Analysis of Circumstances When Application of HAC Provisions
Would Not Result in MS-DRG Reassignment for Current HACs
As discussed in section II.F.1. and illustrated in the diagram in
section II.F.1. of this preamble, there are instances when the MS-DRG
assignment does not change even when a HAC-associated secondary
diagnosis has a POA indicator of either ``N'' or ``U.'' In analyzing
our claims data, RTI identified four main reasons why an MS-DRG
assignment would not change despite the presence of a HAC. Those four
reasons are described below and are shown in Chart E below. Column A
shows the frequency of discharges that included a HAC-associated
secondary diagnosis. Column B shows the frequency of discharges where
the HAC-associated secondary diagnosis was coded as not POA and
identified as a HAC discharge. Column C shows the frequency of
discharges in which the HAC-associated secondary diagnosis coded as not
POA resulted in a change in MS-DRG. Columns D, E, F, and G show the
frequency of discharges in which the HAC-associated secondary diagnosis
coded as not POA did not result in a change in MS-DRG assignment.
Columns D, E, F, and G are explained in more detail below.
(1) Other MCCs/CCs Prevent Reassignment
Column D (Other MCC/CCs that Prevent Reassignment) in Chart E below
indicates the number of cases reporting a HAC-associated secondary
diagnosis code that did not have an MS-DRG reassignment because of the
presence of other secondary diagnoses on the MCC or CC list. A claim
that is coded with a HAC-associated secondary diagnosis and a POA
status of either ``N'' or ``U'' may have other secondary diagnoses that
are classified as an MCC or a CC. In such cases, the presence of these
other MCC and CC diagnoses will still lead to the assignment of a
higher severity level, despite the fact that the GROUPER software is
disregarding the ICD-9-CM code that identifies the selected HAC in
making the MS-DRG assignment for that claim. For example, there were
175 cases in which the ICD-9-CM codes for the Foreign Object Retained
After Surgery HAC category were present, but the presence of other
secondary diagnoses that were MCCs or CCs resulted in no change to the
MS-DRG assignment. Chart E shows that a total of 12,335 cases did not
have a change in the MS-DRG assignment because of the presence of other
reported MCCs and CCs.
(2) Two Severity Levels Where HAC Does Not Impact MS-DRG Assignment
Column E (Number of MS-DRGs with Two Severity Levels Where HAC Does
Not Impact MS-DRG Assignment) shows the frequency with which discharges
with a HAC as a secondary diagnosis coded as not POA did not result in
an MS-DRG change because the MS-DRG is subdivided solely by the
presence or absence of an MCC. A claim with a HAC and a POA indicator
of either ``N'' or ``U'' may be assigned to an MS-DRG that is
subdivided solely by the presence or absence of an MCC. In such cases,
removing a HAC ICD-9-CM CC code will not lead to further changes in the
MS-DRG assignment. Examples of these MS-DRG subdivisions are shown in
the footnotes to the chart and include the following examples:
MS-DRGs 100 and 101 (Seizures with or without MCC,
respectively); and
MS-DRGs 102 and 103 (Headaches with or without MCC,
respectively).
The codes that fall under the HAC category of Foreign Object
Retained After Surgery are CCs. If this case were assigned to an MS-DRG
with an MCC subdivision such as MS-DRGs 100 and 101, the presence of
the HAC code would not affect the MS-DRG severity level assignment. In
other words, if the Foreign Object Retained After Surgery code was the
only secondary diagnosis reported, the case would be assigned to MS-DRG
101. If the POA indicator was ``N,'' the HAC Foreign Object Retained
After Surgery code would be ignored in the MS-DRG assignment logic.
Despite the fact that the code was ignored, the case would still be
assigned to the same lower severity level MS-DRG. Therefore, there
would be no impact on the MS-DRG assignment.
Column E in Chart E below shows that there were 1,922 cases where
the HAC code was ``N'' or ``U'' and the MS-DRG assignment did not
change because the case was already assigned to the lowest severity
level.
(3) No Severity Levels
Column F (Number of MS-DRGs with No Severity Levels) shows the
frequency with which discharges with a HAC as a secondary diagnosis
coded as not POA did not result in an MS-DRG change because the MS-DRG
is not subdivided by severity levels. A claim with a HAC and a POA of
``N'' or ``U'' may be assigned to an MS-DRG with no severity levels.
For instance, MS-DRG 311 (Angina Pectoris) has no severity level
subdivisions; this MS-DRG is not split based on the presence of an MCC
or a CC. If a patient assigned to this MS-DRG develops a secondary
diagnosis such as a Stage III pressure ulcer after admission, the
condition would be considered to be a HAC. The code for the Stage III
pressure ulcer would be ignored in the MS-DRG assignment because the
condition developed after the admission (the POA indicator was ``N'').
Despite the fact that the ICD-9-CM code for the HAC Stage III pressure
ulcer was ignored, the MS-DRG assignment would not change. The case
would still be assigned to MS-DRG 311. Chart E below shows that 2,570
cases reporting a HAC-associated secondary diagnosis did not undergo a
change in the MS-DRG assignment based on the fact that the case was
assigned to an MS-DRG that had no severity subdivisions (that is, the
MS-DRG is not subdivided based on the presence or absence of an MCC or
a CC, rendering the presence of the HAC irrelevant for payment
purposes).
(4) MS-DRG Logic
Column G (MS-DRG Logic Issues) shows the frequency with which a HAC
as a secondary diagnosis coded as not POA did not result in an MS-DRG
change because of MS-DRG assignment logic. There were six discharges
where the HAC criteria were met and the HAC logic was applied, however,
due to the structure of the MS-DRG logic, these cases did not result in
MS-DRG reassignment. These cases may appear similar to those discharges
where the MS-DRG is subdivided into two severity levels by the presence
or absence of an MCC and did not result in MS-DRG reassignment;
however, these discharges differ slightly in that the MS-DRG logic also
considers specific procedures that were reported on the claim. In other
words, for certain MS-DRGs, a procedure may be considered the
equivalent of an MCC or CC. The presence of the procedure code dictates
the MS-DRG assignment despite the presence of the HAC-associated
secondary diagnosis code with a POA indicator of ``N'' or ``U.''
For example, a claim with a principal diagnosis code of 724.02
(Spinal stenosis, lumbar region, without neurogenic claudication) with
a HAC-associated secondary diagnosis code of 996.64 (Infection and
inflammatory reaction due to indwelling urinary catheter) and diagnosis
code 599.0 (Urinary tract infection, site not specified), having POA
indicators of ``Y,'' ``N,'' and ``N,'' respectively, and procedure code
84.80 (Insertion or replacement of interspinous process device(s))
results in an assignment to MS-DRG 490 (Back and Neck Procedures Except
Spinal Fusion with CC/MCC or Disc Device/
[[Page 53298]]
Neurostimulator). In this case, the disc device (code 84.80) is what
dictated the MS-DRG assignment and the presence of the HAC-associated
secondary diagnosis code, 996.64, did not affect the MS-DRG assigned.
Other examples of MS-DRGs that are subdivided in this same manner are
as follows:
MS-DRG 029 (Spinal procedures with CC or Spinal
Neurostimulators);
MS-DRG 129 (Major Head & Neck Procedures with CC/MCC or
Major Device); and
MS-DRG 246 (Percutaneous Cardiovascular Procedure with
Drug-Eluting Stent with MCC or 4+ Vessels/Stents).
Column G in the chart below shows that three of the six cases that
did not result in MS-DRG reassignment due to the MS-DRG logic were in
the Catheter-Associated UTI HAC category, two cases were in the Falls
and Trauma HAC Category, and one case was in the Vascular Catheter-
Associated Infection HAC Category.
In conclusion, a total of 16,833 cases (12,335 + 1,922 +2,570 + 6)
did not have a change in MS-DRG assignment, regardless of the presence
of a HAC. The reasons described above explain why only 3,006 cases had
a change in MS-DRG assignment despite the fact that there were 19,839
HAC cases with a POA of ``N'' or ``U.''
Chart E--Reasons HAC Did Not Change MS-DRG Assignment
[October 2010 through September 2011]
--------------------------------------------------------------------------------------------------------------------------------------------------------
HAC discharges that do not change MS-DRG
---------------------------------------------------------------
Number of Number of HAC Number of MS-
discharges Number of discharges DRGs with two
Selected HAC category with this discharges that change MS- Number of severity Number of MS- Other MS-DRG
condition as identified as DRG due to HAC other MCCs/CCs levels where DRGs with No logic issues
secondary a HAC that prevent HAC does not Severity **
diagnosis reassignment impact MS-DRG Levels
Assignment*
(Column A) (Column B) (Column C) (Column D) (Column E) (Column F) (Column G)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1. Foreign Object Retained After 606 284 37 175 56 16 0
Surgery--CC............................
2. Air Embolism--MCC.................... 45 34 14 17 0 3 0
3. Blood Incompatibility--CC............ 22 11 1 7 1 2 0
4. Pressure Ulcer Stages III & IV--MCC.. 96,646 1,770 286 991 0 493 0
5. Falls and Trauma--MCC & CC........... 143,920 4,555 1,241 2,449 488 375 2
6. Catheter-Associated UTI-CC........... 16,807 3,918 160 2,952 424 379 3
7. Vascular Catheter-Associated 11,324 5,921 20 4,551 158 1,191 1
Infection--CC..........................
8. Poor Glycemic Control--MCC & CC...... 15,145 555 152 358 0 45 0
9A. Surgical Site Infection, 58 50 5 28 0 17 0
Mediastinitis, Following Coronary
Artery Bypass Graft (CABG)--MCC........
9B. Surgical Site Infection Following 351 244 6 155 67 16 0
Certain Orthopedic Procedures--CC......
9C. Surgical Site Infection Following 25 24 2 19 0 3 0
Bariatric Surgery for Obesity--CC......
10. Pulmonary Embolism & DVT Orthopedic-- 3,044 2,473 1,082 633 728 30 0
MCC & CC...............................
---------------------------------------------------------------------------------------------------------------
Total\1\............................ 287,993 19,839 3,006 12,335 1,922 2,570 6
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Discharges can appear in more than one row. The total figure is not adjusted for the 207 discharges with more than one HAC that appear as secondary
diagnoses (15 of these resulted in MS-DRG reassignment).
*Examples where an HAC classified as a CC would not impact the DRG assignment if it were removed. The MS-DRG is subdivided by the presence or absence of
an MCC. A CC would not impact this DRG assignment.
MS-DRGs 100 and 101 (Seizures with or without MCC, respectively).
MS-DRGs 102 and 103 (Headaches with or without MCC, respectively).
**Cases where HAC did not change MS-DRG assignment because of the MS-DRG logic.
MS-DRG 029 (Spinal Procedures with CC or Spinal Neurostimulators).
MS-DRG 129 (Major Head & Neck Procedures with CC/MCC or Major Device).
[[Page 53299]]
Source: RTI Analysis of MedPAR IPPS Claims, October 2010 through September 2011.
e. RTI Analysis of Coding Changes for HAC-Associated Secondary
Diagnoses for Current HACs
In addition to studying claims from October 2010 through September
2011 (FY 2011), RTI evaluated claims data from 4 years prior to
determine if there were significant changes in the number of discharges
with a HAC being reported as a secondary diagnosis. RTI examined claims
from FY 2007 through FY 2010 and compared these data to the FY 2011
data.
We refer readers to the RTI detailed report for all the conditions
in each fiscal year (FY 2007 through FY 2011) as described above at the
following Web site: http://www.rti.org/reports/cms/.
f. RTI Analysis of Estimated Net Savings for Current HACs
RTI determined estimates of the net savings generated by the HAC
payment policy based on MedPAR claims from October 2010 through
September 2011.
(1) Net Savings Estimation Methodology
The payment impact of a HAC is the difference between the IPPS
payment amount under the initially assigned MS-DRG and the amount under
the reassigned MS-DRG. The amount for the reassigned MS-DRG appears on
the MedPAR files. To construct this, RTI modeled the IPPS payments for
each MS-DRG following the same approach that we use to model the impact
of IPPS annual rule changes. Specifically, RTI replicated the payment
computations carried out in the IPPS PRICER program using payment
factors for IPPS providers as identified in various CMS downloaded
files. The files used are as follows:
Version 28 of the Medicare Severity GROUPER software
(applicable to discharges between October 1, 2010 and September 30,
2011). IPPS MedPAR claims were run through this file to obtain needed
HAC-POA output variables.
The FY 2011 MS-DRG payment weight file. This file includes
the weights, geometric mean length of stay (GLOS), and the postacute
transfer payment indicators.
CMS standardized operating and capital rates. Tables 1A
through 1C, as downloaded from the Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download-Items/CMS1255464.html, include the full
update and reduced update amounts, as well as the information needed to
compute the blended amount for providers located in Puerto Rico.
The IPPS impact files for FY 2011, also as downloaded from
the Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download-Items/CMS1255464.html. This file includes the wage index and geographic
adjustment factors in effect at the start of FY 2011, plus the provider
type variable to identify providers qualifying for alternative
hospital-specific amounts and their respective hospital-specific rates.
The IPPS impact files for FY 2012, as downloaded from the
Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download-Items/CMS1255464.html. This file is created for a subsequent payment year,
but the file includes IME and DSH percent adjustments that were in
effect as of March 2011. For providers that did not appear in the FY
2012 file, we defaulted to the IME and DSH rates from the FY 2011 file.
CMS historical provider-specific files (PSF). This
includes the indicator to identify providers subject to the full or
reduced standardized rates and the applicable operating and capital
CCRs. A SAS version was downloaded from the Web site at: http://www.cms.hhs.gov/ProspMedicareFeeSvcPmtGen/04_psf_SAS.asp.
There were three providers with discharges in the final HAC
analysis file that did not appear in either of the impact files. For
these providers, we identified the geographic CBSA from the historical
PSF and assigned the wage index using values from Tables 4A and 4C as
downloaded from the Web site at: http://www.cms.hhs.gov/AcuteInpatientPPS/IPPS2009/List.asp. These three providers were not
eligible for IME or DSH adjustments.
The steps for estimating the HAC payment impact are as follows:
Step 1: Re-run the Medicare Severity GROUPER on all records in the
analysis file. This is needed to obtain information on actual HAC-
related MS-DRG reassignments in the file, and to identify the CCs and
MCCs that contribute to each MS-DRG assignment.
Step 2: Model the base payment and outlier amounts associated with
the initial MS-DRG (including all secondary diagnoses in the file)
using the computations laid out in the CMS file ``Outlier Example FY
2007 new.xls,'' as downloaded from the Web site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html?redirect=/04_outlier/ASP#TopOfPage, and
modified to accommodate FY 2011 factors. RTI's first round of
computations treated all claims as though paid under standard IPPS
rules without adjusting for short-stay transfers or HSP amounts.
Step 3: Model the base payment and outlier amounts associated with
the final MS-DRG (excluding the HAC-related secondary diagnoses) using
the computations laid out in the CMS file ``Outlier Example FY 2007
new.xls,'' as downloaded from the Web site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Payment/AcuteInpatientPPS/index.html?redirect=/04_outlier.asp#TopOfPage and modified to
accommodate FY 2011 factors. RTI's first round of computations treated
all claims as though paid under standard IPPS rules without adjusting
for short-stay transfers or hospital-specific amounts.
Step 4: Compute MS-DRG base savings as the difference between the
nonoutlier payments for the initial and final MS-DRGs. Compute outlier
amounts as the difference in outlier amounts due under the initial and
final reassigned MS-DRG. Compute net savings due to HAC reassignment as
the sum of base savings plus outlier amounts.
Step 5: Adjust the model to incorporate short-stay transfer payment
adjustments.
Step 6: Adjust the model to incorporate hospital-specific payments
for qualifying rural providers receiving the hospital-specific payment
rates.
It is important to mention that using the methods described above,
the MS-DRG and outlier payment amounts that are modeled for the final
assigned MS-DRG do not always match the DRG price and outlier amounts
that appear in the MedPAR record. There are several reasons for this.
Some discrepancies are caused by using single wage index, IME and DSH
factors for the full period covered by the discharges, when in practice
these payment factors can be adjusted for individual providers during
the course of the fiscal year. In addition, RTI's approach disregards
any Part A coinsurance amounts owed by individual beneficiaries with
greater than sixty covered days in a spell of illness. Ten percent of
all FY 2011 HAC
[[Page 53300]]
discharges showed at least some Part A coinsurance amount due from the
beneficiary, although less than 2 percent of reassigned discharges (43
cases in the analysis file) showed Part A coinsurance amounts due. Any
Part A coinsurance payments would reduce the actual savings incurred by
the Medicare program.
There are also a number of less common special IPPS payment
situations that are not factored into RTI's modeling. These could
include new technology add-on payments, payments for blood clotting
factors, reductions for replacement medical devices, adjustments to the
capital rate for new providers, and adjustments to the capital rate for
certain classes of providers who are subject to a minimum payment level
relative to capital cost.
(2) Net Savings Estimate
Chart F below summarizes the estimated net savings of current HACs
based on MedPAR claims from October 2010 through September 2011, based
on the methodology described above. Column A shows the number of
discharges where an MS-DRG reassignment for each HAC category occurred.
For example, there were 14 discharges with an Air Embolism that
resulted in an actual MS-DRG reassignment. Column B shows the total net
savings caused by MS-DRG reassignments for each HAC category.
Continuing with the example of Air Embolism, the chart shows that the
14 discharges with an MS-DRG reassignment resulted in a total net
savings of $124,620. Column C shows the net savings per discharge for
each HAC category. For the Air Embolism HAC category, the net savings
per discharge is $8,901.
Chart F--Estimated Net Savings of Current HACs
[October 2010 Through September 2011]
----------------------------------------------------------------------------------------------------------------
Number of
discharges that Net savings (in Net savings per
Selected HAC change MS-DRG dollars) discharge (in
due to HAC dollars)
(Column A) (Column B) (Column C)
----------------------------------------------------------------------------------------------------------------
1. Foreign Object Retained After Surgery.................. 37 $167,818 $4,536
2. Air Embolism........................................... 14 124,620 8,901
3. Blood Incompatibility.................................. 1 7,115 0
4. Pressure Ulcer Stages III & IV......................... 286 1,846,449 6,456
5. Falls and Trauma:
a. Fracture........................................... 996 6,232,020 6,257
b. Dislocation........................................ 2 9,075 4,538
c. Intracranial Injury................................ 258 1,222,290 4,738
d. Crushing Injury.................................... 0 0 0
e. Burn............................................... 3 4,583 1,528
f. Other injuries..................................... 0 0 0
Less: Discharges with multiple Falls & Trauma......... -18 -105,430 -5,857
5. Falls & Trauma: Unduplicated Total..................... 1,241 7,362,538 5,933
6. Catheter-Associated UTI................................ 160 491,053 3,069
7. Vascular Catheter-Associated Infection................. 20 92,100 4,605
8. Poor Glycemic Control.................................. 152 1,002,378 6,595
9a. SSI Mediastinitis CABG................................ 5 60,438 12,088
9b. SSI Orthopedic........................................ 6 41,503 6,917
9c. SSI Bariatric......................................... 2 3,312 0
10. Pulmonary Embolism & DVT Orthopedic................... 1,082 8,313,098 7,683
-----------------------------------------------------
Total \1\............................................. 3,006 19,512,422 6,491
Less: Discharges with Multiple HACs \2\........... -15 -136,645 -9,110
-----------------------------------------------------
Unduplicated Total............................ 2,991 19,375,777 6,478
----------------------------------------------------------------------------------------------------------------
\1\ Discharges can have more than one Falls and Trauma subcategory HAC and therefore appear in more than one
row.
\2\ Total net savings is adjusted by $136,645 for 15 claims that have multiple HACs.
Source: RTI Analysis of MedPAR IPPS Claims, October 2010 through September 2011.
As shown in Chart F above, the total net savings calculated for
October 2010 through September 2011 was roughly $19.4 million. The
three HACs with the largest number of discharges resulting in MS-DRG
reassignment, Falls and Trauma, Orthopedic PE/DVT, and Pressure Ulcer
Stages III & IV, generated $17.5 million of net savings for the fiscal
year. Estimated net savings for FY 2011 associated with the Falls and
Trauma category were $7.4 million. Estimated net savings associated
with Orthopedic PE/DVT for the fiscal year were $8.3 million and for
Pressure Ulcer Stages III & IV were $1.85 million.
The mean net savings per discharge calculated for October 2010
through September 2011 was roughly $6,478. The HAC category of SSI,
Mediastinitis, Following Coronary Artery Bypass Graft (CABG) had the
highest net savings per discharge, but represented a small proportion
of total net savings because the number of discharges that resulted in
MS-DRG reassignment for this HAC was low. The HAC categories of Blood
Incompatibility, where only one discharge resulted in MS-DRG
reassignment, and SSI Following Bariatric Surgery for Obesity, where
only two discharges resulted in MS-DRG reassignment had the lowest net
savings per discharge. We refer readers to the RTI detailed report
available at the following Web site: http://www.rti.org/reports/cms/.
As we discuss in section II.F.1. of this preamble, implementation
of this policy is part of an array of Medicare VBP tools that we are
using to promote increased quality and efficiency of care. We point
[[Page 53301]]
out that a decrease over time in the number of discharges where these
conditions are not POA is a desired consequence. We recognize that
estimated net savings would likely decline as the number of such
discharges decline. However, we believe that the sentinel effect
resulting from CMS identifying these conditions is critical. It is our
intention to continue to monitor trends associated with the frequency
of these HACs and the estimated net payment impact through RTI's
program evaluation and possibly beyond.
As mentioned previously, a small number of cases analyzed by RTI
for FY 2011 had multiple HACs during the same stay. In reviewing our
8.94 million claims, RTI found 207 cases where at least two HACs were
reported on the same admission as noted in section II.F.3.g.(2) of this
preamble. Of these 207 claims, 15 resulted in MS-DRG reassignment.
Chart G below summarizes these cases. There were 15 cases that had two
HACs not POA that resulted in an MS-DRG reassignment. Of these, seven
discharges involved Orthopedic PE/DVT, while four discharges involved
the Pressure Ulcer Stages III & IV and Falls and Trauma HAC categories.
Chart G--Claims With More Than One HAC Secondary Diagnosis Where MS-DRG Reassignment Occurred
[October 2010 Through September 2011]
----------------------------------------------------------------------------------------------------------------
10. Pulmonary
4. Pressure 5. Falls and embolism & DVT
Selected HAC ulcer stages trauma--MCC & orthopedic Total
III & IV--MCC CC (MCC)
----------------------------------------------------------------------------------------------------------------
5. Falls and Trauma--MCC & CC................... 1 .............. 3 4
6. Catheter-Associated Urinary Tract Infection 2 3 3 8
(UTI)--CC......................................
7. Vascular Catheter-Associated Infection--CC... 1 1 .............. 2
8. Poor Glycemic Control (MCC).................. .............. .............. 1 1
---------------------------------------------------------------
Total....................................... 4 4 7 15
----------------------------------------------------------------------------------------------------------------
g. Previously Considered Candidate HACs--RTI Analysis of Frequency of
Discharges and POA Indicator Reporting
RTI evaluated the frequency of conditions previously considered,
but not adopted as HACs in prior rulemaking, that were reported as
secondary diagnoses (across all 8.94 million discharges) as well as the
POA indicator assignments for these conditions. Chart H below indicates
that the three previously considered candidate conditions most
frequently reported as a secondary diagnosis were: (1) Clostridium
Difficile-Associated Disease (CDAD), which demonstrated the highest
frequency, with a total of 90,347 secondary diagnoses codes being
reported for that condition, of which 30,176 reported a POA indicator
of ``N''; (2) Methicillin Resistant Staphylococcus aureus, with a total
of 83,976 secondary diagnosis codes being reported for that condition,
with 3,498 of those reporting a POA indicator of ``N''; and (3)
Iatrogenic Pneumothorax, with a total of 20,309 secondary diagnoses
codes being reported for that condition, with 17,828 of those reporting
a POA indicator of ``N.'' As these three conditions had the most
significant impact for reporting a POA indicator of ``N,'' it is
reasonable to believe that these same three conditions would have the
greatest number of potential MS-DRG reassignments. The frequency of
discharges for the previously considered HACs that could lead to
potential changes in MS-DRG assignment is discussed in the next
section. We take this opportunity to remind readers that, because more
than one previously considered HAC diagnosis code can be reported per
discharge (on a single claim), the frequency of these diagnosis codes
may be more than the actual number of discharges with a previously
considered candidate condition reported as a secondary diagnosis.
Chart H--POA Status of Previously Considered ``Candidate'' HAC Conditions--October 2010 Through September 2011
--------------------------------------------------------------------------------------------------------------------------------------------------------
Not present on admission Present on admission
Frequency ---------------------------------------------------------------------------------------
Previously considered HAC condition as a POA = N POA = U POA = Y POA = W
secondary ---------------------------------------------------------------------------------------
diagnosis Number Percent Number Percent Number Percent Number Percent
--------------------------------------------------------------------------------------------------------------------------------------------------------
1. Clostridium Difficile-Associated Disease (CDAD). 90,347 30,176 33.40 354 0.39 59,700 66.08 117 0.13
2. Delirium........................................ 752 246 32.71 2 0.27 504 67.02 0 0.00
3. Legionnaire's Disease........................... 520 29 5.58 3 0.58 488 93.85 0 0.00
4. Staphylococcus aureus Septicemia................ 18,844 4,043 21.46 37 0.20 14,736 78.20 28 0.15
5. Methicillin-Resistant Staphylococcus aureus..... 83,976 3,498 4.17 173 0.21 80,280 95.60 25 0.03
6. Iatrogenic Pneumothorax......................... 20,309 17,828 87.78 5 0.02 1,476 7.27 0 0.00
7. Ventilator-Associated Pneumonia................. 4,715 3,634 77.07 4 0.08 1,074 22.78 3 0.06
--------------------------------------------------------------------------------------------------------------------------------------------------------
In Chart I below, Column A shows the number of discharges for each
previously considered candidate HAC category when the condition was
reported as a secondary diagnosis. For example, there were 90,347
discharges
[[Page 53302]]
that reported CDAD as a secondary diagnosis. Previously considered
candidate HACs reported with a POA indicator of ``N'' or ``U'' may
cause MS-DRG reassignment (which would result in reduced payment to the
facility). Column C shows the discharges for each previously considered
candidate HAC reported with a POA indicator of ``N'' or ``U.''
Continuing with the example of CDAD, Chart I shows that, of the 90,347
discharges, 30,530 discharges (33.79 percent) had a POA indicator of
``N'' or ``U.'' Therefore, there were a total of 30,530 discharges that
could potentially have had an MS-DRG reassignment. Column E shows the
number of discharges where an actual MS-DRG reassignment could have
occurred; the number of discharges with CDAD that could have resulted
in actual MS-DRG reassignments is 784 (2.57 percent). Thus, while there
were 30,530 discharges with CDAD reported with a POA indicator of ``N''
or ``U'' that could potentially have had an MS-DRG reassignment, the
result was 784 (2.57 percent) potential MS-DRG reassignments. As
discussed above, there are a number of reasons why a condition reported
with a POA indicator of ``N'' or ``U'' would not result in an MS-DRG
reassignment.
In summary, Chart I below demonstrates there were a total of
219,397 discharges with a previously considered candidate HAC reported
as a secondary diagnosis. Of those, 60,025 discharges were reported
with a POA indicator of ``N'' or ``U.'' The total number of discharges
that could have resulted in MS-DRG reassignments is 3,544.
Chart I--Previously Considered ``Candidate'' HAC Discharge Frequencies--October 2010 Through September 2011
----------------------------------------------------------------------------------------------------------------
Discharges with this Discharges with this Cases that could change
condition as secondary condition not present on MS-DRG due to previously
diagnosis \2\ admission (POA = ``N'' considered candidate HAC
Previously considered HAC -------------------------- or ``U'') \3\ \4\
condition ---------------------------------------------------
Number Percent Number Percent Number Percent
(Column A) (Column B) (Column C) (Column D) (Column E) (Column F)
----------------------------------------------------------------------------------------------------------------
1. Clostridium Difficile- 90,347 1.01 30,530 33.79 784 2.57
Associated Disease (CDAD)........
2. Delirium....................... 752 0.01 248 32.98 18 7.26
3. Legionnaire's Disease.......... 520 0.01 32 6.15 3 9.38
4. Staphylococcus aureus 18,806 0.21 4,073 21.66 84 2.06
Septicemia.......................
5. Methicillin-Resistant 83,948 0.94 3,671 4.37 1 0.03
Staphylococcus aureus (MRSA).....
6. Iatrogenic Pneumothorax........ 20,309 0.23 17,833 87.81 2,652 14.87
7. Ventilator-Associated Pneumonia 4,715 0.05 3,638 77.16 2 0.05
-----------------------------------------------------------------------------
Total \1\..................... 219,397 2.45 60,025 27.36 3,544 5.90
----------------------------------------------------------------------------------------------------------------
\1\ Discharges can appear in more than one row.
\2\ Percent computed relative to total cases ``at risk,'' which is 8,941,507 for all candidate conditions.
\3\ Percent computed relative to discharges with condition as a secondary diagnosis.
\4\ Percent computed relative to discharges with condition as a secondary diagnosis and identified as a
previously considered HAC (that is, coded as not present on admission).
Source: RTI Analysis of MedPAR IPPS Claims, October 2010 through September 2011.
h. Current and Previously Considered Candidate HACs--RTI Report on
Evidence-Based Guidelines
The RTI program evaluation includes a report that provides
references for all evidence-based guidelines available for each of the
selected and previously considered candidate HACs that provide
recommendations for the prevention of the corresponding conditions.
Guidelines were primarily identified using the AHRQ National Guidelines
Clearing House (NGCH) and the CDC, along with relevant professional
societies. Guidelines published in the United States were used, if
available. In the absence of U.S. guidelines for a specific condition,
international guidelines were included.
Evidence-based guidelines that included specific recommendations
for the prevention of the condition were identified for each of the 10
selected conditions. In addition, evidence-based guidelines were also
found for the previously considered candidate conditions.
RTI prepared a final report to summarize its findings regarding
evidence-based guidelines, which can be found on the Web site at:
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/Hospital-Acquired_Conditions.html.
i. Proposals Regarding Current HACs and Previously Considered Candidate
HACs
We believe that the RTI analysis summarized above does not provide
additional information that would require us to change our previous
determinations regarding current HACs. We refer readers to section
II.F.6. of the FY 2008 IPPS final rule with comment period (72 FR 47202
through 47218) and to section II.F.7. of the FY 2009 IPPS final rule
(73 FR 48474 through 48491) for detailed discussion supporting our
determination regarding each of these conditions.
In the FY 2013 IPPS/LTCH PPS proposed rule, we discussed our
rationale for proposing two new conditions, Surgical Site Infection
(SSI) Following Cardiac Implantable Electronic Device (CIED) procedures
(77 FR 27894 through 27896), and Iatrogenic Pneumothorax with Venous
Catheterization (77 FR 27896 through 27897) for selection as HACs under
section 1886(d)(4)(D) of the Act. (We previously proposed Iatrogenic
Pneumothorax more generally as a HAC in the FY 2009 IPPS rulemaking (73
FR 48485).) We also discussed a proposal to revise the Vascular
Catheter-Associated Infection HAC category with the addition of two new
diagnosis codes 999.32 (Bloodstream infection due to central venous
catheter), and 999.33 (Local infection due to central venous catheter)
(77 FR 27894). Accordingly, we are finalizing those proposals as
discussed in section II.F.5. of this preamble.
In addition to the evaluation of HAC and POA MedPAR claims data,
RTI has conducted analyses on readmissions due to HACs and the
incremental costs of HACs to the health care system, a study of
spillover effects and
[[Page 53303]]
unintended consequences, as well as an analysis on the accuracy of
coding of HACs and POA indicators. Reports on these analyses are
publicly available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/Hospital-Acquired_Conditions.html.
Comment: Commenters encouraged CMS to more carefully evaluate this
program and its potential for unintended consequences, and to explore
how information learned from POA coding could be used to better
understand and prevent HACs before it considers the inclusion of any
additional categories of HACs.
Response: We appreciate the commenters' response. We routinely,
either internally or through our contractors, review the significant
aspects of the HAC/POA Program.
G. Changes to Specific MS-DRG Classifications
In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27898), we
invited public comment on each of the MS-DRG classification proposed
changes described below, as well as our proposals to maintain certain
existing MS-DRG classifications, which are also discussed below. In
some cases, we proposed changes to the MS-DRG classifications based on
our analysis of claims data. In other cases, we proposed to maintain
the existing MS-DRG classification based on our analysis of claims
data.
CMS encourages input from our stakeholders concerning the annual
IPPS updates when that input is made available to us by December of the
year prior to the next annual proposed rule update. For example, to be
considered for any updates or changes in FY 2013, comments and
suggestions should have been submitted by early December 2011. The
comments that were submitted in a timely manner are discussed below in
this section.
Below we summarize the public comments we received on the FY 2013
proposed rule, if any, present our responses, and state our final
policies.
1. Pre-Major Diagnostic Categories (Pre-MDCs)
a. Ventricular Assist Devices (VADs)
A ventricular assist device (VAD) is a mechanical circulatory
device or pump that is used to partially or completely support heart
function and blood flow in patients with a damaged or weakened heart.
The device takes blood from the ventricles of the heart and helps pump
the blood to the rest of the body.
Some VADs are intended for short-term use, often for patients who
are recovering from heart attacks or heart surgery, while other VADs
are intended for long-term use (months to years and, in some cases, for
life). VADs are not the same device as artificial hearts, which are
designed to completely take over cardiac function and generally require
the removal of the patient's native heart.
VADs are designed to assist the ventricles, either the right (RVAD)
or the left (LVAD), and, in some cases, both ventricles at once
(BiVAD). The type of VAD used depends on the patient's underlying heart
disease and the pulmonary arterial resistance that determines the load
on the right ventricle. LVADs are the most commonly used, but when
pulmonary arterial resistance is high, right ventricular assistance
becomes necessary and an RVAD may be inserted. Long-term VADs are
normally used to help maintain a patient's quality of life while he or
she awaits a heart transplant. This process is known as a ``bridge to
transplant.'' However, sometimes the insertion of an LVAD becomes the
final treatment for the patient, which is known as ``destination
therapy.'' In this case, the VAD is a permanent implant, and no heart
transplantation occurs. In a smaller number of cases, the implantation
of a VAD, combined with pharmaceutical therapy, has enabled the native
heart to recover sufficiently to allow the VAD to be explanted, a
``bridge to recovery.''
CMS has issued a national coverage determination (NCD) entitled
``Artificial Hearts and Related Devices'' under Section 20.9 of the
Medicare Coverage Manual (Pub. No. 100-3). This NCD, which describes
CMS' requirements for coverage of medical services provided to Medicare
beneficiaries for the insertion of VADs, can be found at the CMS Web
site at: https://www.cms.gov/medicare-coverage-database/details/ncd-details.aspx?NCDId=246&ncdver=5&NCAId=211&ver=20&NcaName=Artificial+Hearts&bc=ACAAAAAAIAAA&. We refer readers to this Web page for the complete
viewing of the NCD for the insertion of VADs.
The assignment of procedure codes used to describe the insertion of
VADs has been discussed repeatedly in IPPS rulemaking, for the CMS-DRGs
(in effect prior to FY 2008) and more recently for the MS-DRGs (FY 2008
to present). We refer readers to the FY 2003 IPPS final rule (67 FR
49989) for a complete discussion of the assignment of these procedure
codes up to that date. In addition, the topic was discussed in FY 2005;
we refer readers to the FY 2005 IPPS final rule (69 FR 48927 through
48930) for a complete discussion regarding the assignment of these
procedure codes for FY 2005. Specifically, for FY 2005, we moved ICD-9-
CM procedure code 37.66 (Insertion of implantable heart assist system)
from CMS-DRG 525 (Other Heart Assist System Implant) to CMS-DRG 103
(Heart Transplant). When we adopted the MS-DRG classification system in
FY 2008, former CMS-DRG 103 remained in the Pre-MDC section but was
renamed and subdivided into MS-DRG 001 (Heart Transplant or Implant of
Heart Assist System with MCC) and MS-DRG 002 (Heart Transplant or
Implant of Heart Assist System without MCC).
For FY 2013, we received a request to restructure MS-DRGs 001 and
002 by removing all of the procedure codes that describe the insertion
of a device, leaving only procedure codes 33.6 (Combined heart-lung
transplantation) and 37.51 (Heart transplantation) in the heart
transplant DRGs. The requestor further asked that the remaining device
codes be assigned to newly created MS-DRGs. The requestor believed
that, within the existing MS-DRG grouping, CMS is underpaying for
services to patients who have a VAD implanted and overpaying for
services to patients who have heart transplantations. The requestor
believed that the recommended restructuring ``would allow defined
grouping of cases with the higher level of resource [sic] required
reflected in payment.''
In the FY 2013 IPPS/LTCH PPS proposed rule, we indicated that we
had reviewed data in the September 2011 update of the FY 2011 MedPAR
file and found that the average length of stay for heart
transplantations and VAD implantation cases are very similar (35.1 days
for heart transplantations and 36.63 days for VAD implantations). We
also found that the average cost for VAD implantation cases alone is
higher than the average cost of heart transplantation cases. The table
below includes our findings.
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average cost
----------------------------------------------------------------------------------------------------------------
MS-DRG 001--All Cases........................................ 1,235 36.97 $164,846
[[Page 53304]]
MS-DRG 001--Cases with Heart Transplant without VAD.......... 384 35.1 123,472
MS-DRG 001--Cases with VAD Insertion Alone................... 811 36.85 181,915
MS-DRG 002--All Cases........................................ 313 19.66 89,818
MS-DRG 002--Cases with Heart Transplant without VAD.......... 172 15.1 58,890
MS-DRG 002--Cases with VAD Insertion Alone................... 140 25.31 128,069
----------------------------------------------------------------------------------------------------------------
We believe that this higher average cost could be attributable to
the cost of the device itself. There are very few VADs approved by FDA;
therefore, we believe this small group of manufacturers is able to set
their own charges in the market. We pointed out that the IPPS is not
designed to pay solely for the cost of devices. The MS-DRG
classification system (and more importantly, the IPPS) is not based
solely on the cost of devices.
Rather, the MS-DRG system is a patient classification system that
provides an average means of relating the type of patients a hospital
treats (that is, case-mix) to the costs incurred by the hospital. We
have previously stated that, ``Central to the success of the Medicare
inpatient hospital prospective payment system is that DRGs have
remained a clinical description of why the patient required
hospitalization. We believe it would be undesirable to transform DRGs
into detailed descriptions of the technology and processes used by the
hospital to treat the patient. If such a transformation were to happen,
the DRGs would become largely a repackaging of fee-for-service without
the management and communication benefits. The separation of the
clinical and payment weight methodologies allows a stable clinical
methodology to be maintained, while the payment weights evolve in
response to changing practice patterns. The packaging of all services
associated with the care of a particular type of patient into a single
payment amount provides the incentive for efficiency inherent in a DRG-
based prospective payment system. Substantial disaggregation of the
DRGs into smaller units of payment, or a substantial number of cases
receiving extra payments, would undermine the incentives and
communication value in the DRG system.'' (66 FR 46904)
The results of our review of the claims data for MS-DRGs 001 and
002 are summarized in the following table.
------------------------------------------------------------------------
Description of Number of
Code code(s) cases
------------------------------------------------------------------------
MS-DRG 001 (Heart Transplant or Implant of Heart Assist System with MCC)
------------------------------------------------------------------------
All codes........................... .................. 1,235
33.6 or 37.51....................... Combined heart- 384
lung
transplantation
or Heart
transplantation.
33.6 or 37.51 with 37.66............ Combined heart- 11
lung
transplantation
or Heart
transplantation
with Insertion of
implantable heart
assist system
(VAD).
37.52............................... Implantation of 2
total internal
biventricular
heart replacement
system
(Artificial
heart).
37.66............................... Insertion of 811
implantable heart
assist system
(VAD).
37.60 with 37.64.................... Implantation or 1
insertion of
biventricular
external heart
assist system +
Removal of
external heart
assist system(s)
or device(s).
37.63 with 37.64.................... Repair of heart 0
assist system +
Removal of
external heart
assist system(s)
or device(s).
37.64 with 37.65.................... Removal of 22
external heart
assist system(s)
or device(s) +
plant of single
ventricular
(extracorporeal)
external heart
assist system.
Multiple VADs 22
without heart
transplant.
------------------------------------------------------------------------
MS-DRG 002 (Heart Transplant or Implant of Heart Assist System without
MCC)
------------------------------------------------------------------------
All codes........................... .................. 313
33.6 or 37.51....................... Combined heart- 172
lung
transplantation
or Heart
transplantation.
33.6 or 37.51 with 37.66............ Combined heart- 0
lung
transplantation
or Heart
transplantation
with Insertion of
implantable heart
assist system
(VAD).
37.52............................... Implantation of 0
total internal
biventricular
heart replacement
system
(Artificial
heart).
37.66............................... Insertion of 140
implantable heart
assist system
(VAD).
37.60 with 37.64.................... Implantation or 0
insertion of
biventricular
external heart
assist system
plus Removal of
external heart
assist system(s)
or device(s).
37.63 with 37.64.................... Repair of heart 0
assist system +
Removal of
external heart
assist system(s)
or device(s).
37.64 with 37.65.................... Removal of 1
external heart
assist system(s)
or device(s) +
plant of single
ventricular
(extracorporeal)
external heart
assist system.
Multiple VADs 4
without heart
transplant.
------------------------------------------------------------------------
In the proposed rule, we stated that we believe that the IPPS
should accurately recognize differences in utilization for clinically
distinct procedures. However, we also reiterated the language in the FY
2009 IPPS final rule that the payments under a prospective payment
system are predicated on averages (73 FR 48443). We believe that to
create a new MS-DRG specific to VAD implantation would require basing
that MS-DRG almost exclusively on the presence of procedure code 37.66,
representing a single procedure and currently one manufacturer with FDA
approval. Currently, other manufacturers are reported to be in clinical
trials with their VADs. We indicated that this approach negates our
longstanding method of grouping like procedures and diminishes the
concept of averaging. Further, we are concerned that ignoring the
structure of the MS-DRG system solely for the purpose of increasing
payment for one device would set an unwarranted precedent for defining
all
[[Page 53305]]
of the other MS-DRGs in the system (73 FR 48497 and 48498).
The commenter requested that we create two new MS-DRGs for the VADs
and that the requested MS-DRGs be divided based on the presence or
absence of an MCC. We pointed out that the final rule establishing the
MS-DRGs sets forth five criteria, all five of which are required to be
met in order to warrant creation of a CC or an MCC subgroup within a
base MS-DRG. The criteria can be found in the FY 2008 IPPS final rule
with comment period (72 FR 47169). The original criteria were based on
average charges; we now use average costs (FY 2007 IPPS final rule (71
FR 47882)). To reiterate, these criteria are as follows:
A reduction in variance of costs of at least 3 percent.
At least 5 percent of the patients in the MS-DRG fall
within the CC or MCC subgroup.
At least 500 cases are in the CC or MCC subgroup.
There is at least a 20-percent difference in average costs
between subgroups.
There is a $2,000 difference in average cost between
subgroups.
As procedure code 37.66 predominates in our claims data for VAD
implantations, as we did in the proposed rule, we are including the
following table to demonstrate the cost difference between MS-DRG 001
and MS-DRG 002.
------------------------------------------------------------------------
Number of
MS-DRG cases Average cost
------------------------------------------------------------------------
001--Cases with procedure code 37.66.... 811 $181,915
002--Cases with procedure code 37.66.... 140 128,069
------------------------------------------------------------------------
As stated in the FY 2008 IPPS final rule with comment period, all
five criteria must be met in order to subdivide an MS-DRG into MCC and
non-MCC severity levels. In this instance, the number of cases in MS-
DRG 002 containing procedure code 37.66 is 140, not the minimum number
of 500 cases as established by the MS-DRG severity criteria. Therefore,
even if we were to create a new MS-DRG for VAD implantation, unless we
further divided the MS-DRG based on the presence of an MCC, we would
substantially overpay approximately 15 percent of total VAD cases.
However, we could not create multiple MS-DRGs for VAD implantation
without ignoring our rules for subdividing MS-DRGs.
For these reasons, for FY 2013, we did not propose to make any
changes to the structure of MS-DRGs 001 and 002. We invited public
comment on our proposal.
Comment: Several commenters stated that they had no objections to
CMS' proposal to maintain the current structure of MS-DRG 001 and MS-
DRG 002 and not create separate MS-DRGs for VAD and heart transplants.
The commenters stated that this proposal seems reasonable given the
data and information provided.
One commenter stated that MS-DRG weights should reflect the overall
costs of all of the services involved in an admission and that it would
be inappropriate to bifurcate these MS-DRGs solely due to the cost of a
single device, especially when that device is currently distributed by
a single manufacturer. The commenter agreed with our proposal to
maintain the existing structure of MS-DRGs 001 and 002, but urged CMS
to continue to monitor the composition and costs of these MS-DRGs
moving forward, especially as new VAD devices are approved for
implantation.
Response: We appreciate the commenters' support for our proposal to
maintain the existing structure of MS-DRG 001 and MS-DRG 002 for FY
2013. We will continue to monitor the composition and costs of these
MS-DRGs as new VAD devices are approved for implantation.
Comment: One commenter stated that keeping the existing MS-DRG 001
and MS-DRG 002 structure may ultimately be a deterrent for appropriate
provision of care to Medicare beneficiaries because of the discrepancy
of cost between cardiac transplantation and implantation of VADs. The
commenter stated that the cost of the VAD implantation is commonly more
than $50,000 greater than the cost of a cardiac transplantation. The
commenter stated that providing two MS-DRGs for heart transplants and
two for VAD implantations will assure access to the best available
technology.
Response: We acknowledge the commenter's concern about the
potential for problems with future beneficiary access to VAD
implantations and heart transplants. There are currently a limited
number of FDA-approved VADs on the market. We will continue to monitor
these MS-DRGs as additional VADs come onto the market and technologies
change. We believe that creating separate MS-DRGs for VAD implantations
and heart transplants could lead to significant reductions in the
payment for heart transplants. Considering the limited number of FDA-
approved VADs and the negative impact that creating separate MS-DRGs
for VAD implantations and heart transplants would have on heart
transplant cases, we do not believe the creation of separate MS-DRGs
for VAD implantations and heart transplants is appropriate at this
time.
After consideration of the public comments we received, we are
finalizing our proposal to make no changes to MS-DRG 001 and MS-DRG 002
for FY 2013.
b. Allogeneic Bone Marrow Transplant
In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50101), we deleted
MS-DRG 009 (Bone Marrow Transplant) and created two new MS-DRGs: MS-DRG
014 (Allogeneic Bone Marrow Transplant) and MS-DRG 015 (Autologous Bone
Marrow Transplant). We created MS-DRGs 014 and 015 because of
differences in costs associated with the procedures in these two MS-
DRGs. In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51525 through
51526), we further subdivided MS-DRG 015 into two severity levels, by
deleting MS-DRG 015 and creating MS-DRG 016 (Autologous Bone Marrow
Transplant with CC/MCC); and MS-DRG 017 (Autologous Bone Marrow
Transplant without CC/MCC). We created MS-DRGs 014 and 015 as these
groups meet all five criteria for subdivision by severity level that we
established in the FY 2008 IPPS final rule with comment period (72 FR
47169). As we discussed in the FY 2012 IPPS/LTCH PPS final rule, MS-DRG
014 did not meet the criteria for subdivision by severity level.
During the comment period for the FY 2012 IPPS/LTCH PPS proposed
rule, we received a public comment regarding related and unrelated
allogeneic bone marrow transplants (which are captured in MS-DRG 014)
that had not been the subject of a proposal in that proposed rule. This
issue was referred to briefly in the FY 2012 IPPS/LTCH PPS final rule
(76 FR 51557), but we did not address the issue because we considered
[[Page 53306]]
the comment to be out of the scope of provisions of the proposed rule.
However, we addressed this issue in the FY 2013 proposed rule. The
commenter recommended that MS-DRG 014 be subdivided into two MS-DRGs
based on related and unrelated transplant donor source.
Allogeneic bone marrow transplantation utilizes the blood stem
cells in bone marrow, umbilical cord blood, or peripheral blood from a
donor that is either biologically related (sibling or other
biologically close family member) or biologically unrelated (not a
biologically close family member of the recipient) in the treatment of
certain cancers and bone marrow diseases. Allogeneic transplant
recipients must have a tissue type that matches the donor. According to
the commenter, a related donor will typically be managed by the
transplant facility from human leukocyte antigen (HLA) molecular typing
through mobilization and collection, while an unrelated donor requires
the use of donor registry for searching and collection process.
According to the commenter, the unrelated donor setting adds
significant costs to the transplant that would not be incurred in the
related transplant setting.
Currently, there are three ICD-9-CM procedure codes that identify
the transplant donor source:
00.91 (Transplant from live related donor)
00.92 (Transplant from live non-related donor)
00.93 (Transplant from cadaver)
In our analysis of data in the FY 2011 MedPAR file, we found 467
cases assigned to MS-DRG 014 with average costs of approximately
$64,403 and an average length of stay of approximately 24.8 days. There
were 125 cases that reported procedure code 00.91 on the claim as the
related transplant donor source with average costs of approximately
$55,969 and an average length of stay of approximately 24.1 days. In
our analysis of the unrelated donor source, we included the cases
reported with the transplant from a cadaver donor source (code 00.93)
with the transplant from a live nonrelated donor source (code 00.92).
There were 213 cases that reported either code 00.92 or 00.93 as the
transplant donor source with average costs of approximately $64,837 and
an average length of stay of approximately 23 days. There were 129
cases that did not report a transplant donor source with average costs
of approximately $71,859 and an average length of stay of approximately
28.5 days. The following table illustrates our findings:
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 014--All cases.......................................... 467 24.8 $64,403
MS-DRG 014--Live related donor (code 00.91).................... 125 24.1 55,969
MS-DRG 014--Live nonrelated donor (code 00.92) or cadaver (code 213 23 64,837
00.93)........................................................
MS-DRG 014--No donor source.................................... 129 28.5 71,859
----------------------------------------------------------------------------------------------------------------
As we noted in the proposed rule, one quarter of the cases (129 out
of 467 cases) that did not report a transplant donor source code had
the highest average costs of approximately $71,859, compared to $55,969
for live related donors and $64,837 for live nonrelated or cadaver
donors and $64,403 for the overall average cost of cases within MS-DRG
014. The cases without a transplant donor source code also had a longer
length of stay (28.5 days) than the live-related donor cases (24.1
days), the live nonrelated or cadaver cases (23 days), and the overall
cases (24.8 days) assigned to MS-DRG 014.
Based on these findings, we stated that we believe that it would
not be advisable to include cases without a transplant donor source
code with the live nonrelated or cadaver donor cases, as we believe it
would encourage providers not to report the transplant donor source
code. All possible options must be included in any MS-DRG
reconfiguration. Therefore, cases with no reported transplant donor
source code must be included in the updated logic because this is the
group with the highest average costs. Our clinical advisors reviewed
this issue and do not support splitting MS-DRG 014 into two MS-DRGs
because a quarter of the cases did not provide a transplant donor
source. Therefore, we concluded that the cases reported with a
transplant donor source code are appropriately assigned to MS-DRG 014
and that MS-DRG does not warrant further subdivision. Without more
complete information on donor source, we did not propose that MS-DRG
014 be subdivided in the proposed rule. We invited public comment on
our proposal not to subdivide MS-DRG 014 into two MS-DRGs based on
related and unrelated donor source.
Comment: Several commenters stated that they had no objections to
CMS' proposal to maintain the current structure of MS-DRG 014. The
commenters stated that the proposal seems reasonable based on the data
and information provided. One commenter supported the subdivision to
distinguish between related and unrelated allogeneic bone marrow
transplants. However, the commenter stated that if CMS continues to
believe that there is not sufficient data to support a split, CMS
should require data collection of search and procurement costs. The
commenter suggested that CMS establish a specific revenue code or line
item on the hospital cost report to require hospitals to document the
search and procurement costs in order to receive payment.
Response: We agree with the commenters that stated that, based on
data and our analysis, we should not subdivide MS-DRG 014 without more
complete information on the donor source. As stated previously, one
quarter of the cases (129 out of 467 cases) did not report a transplant
donor source code. We believe that we have sufficient methods of
reporting donor source on the claim by reporting ICD-9-CM code 00.91,
00.92, or 00.93 and associated costs.
After consideration of the public comments we received, we are not
making any changes to MS-DRG 014 for FY 2013.
2. MDC 4 (Diseases and Disorders of the Ear, Nose, Mouth and Throat):
Influenza With Pneumonia
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51557), we discussed
a public comment that we considered out of the scope of the FY 2012
proposed rule. Therefore, we did not address the issues in the final
rule. The commenter requested that we consider reassigning cases with a
combined diagnosis of influenza with pneumonia from a set of simple
pneumonia MS-DRGs to a set of MS-DRGs that captures a more severe type
of pneumonia. The specific request involves cases now assigned to MS-
DRGs 193 (Simple Pneumonia and Pleurisy with MCC), 194 (Simple
Pneumonia and Pleurisy with CC), and 195 (Simple Pneumonia and Pleurisy
without MCC/CC) being moved to MS-DRGs 177 (Respiratory Infections and
[[Page 53307]]
Inflammations with MCC), 178 (Respiratory Infections and Inflammations
with CC), and 179 (Respiratory Infections and Inflammations without
MCC/CC).
For the FY 2013 proposed rule, we examined data in the FY 2011
MedPAR file on cases that reported diagnosis code 487.0 (Influenza with
pneumonia) as the principal diagnosis with an additional secondary
diagnosis code for one of the following types of pneumonia:
482.0 (Pneumonia due to Klebsiella pneumoniae)
482.1 (Pneumonia due to Pseudomonas)
482.40 (Pneumonia due to Staphylococcus, unspecified)
482.41 (Methicillin susceptible pneumonia due to
Staphylococcus aureus)
482.42 (Methicillin resistant pneumonia due to Staphylococcus
aureus)
482.49 (Other Staphylococcus pneumonia)
482.81 (Pneumonia due to anaerobes)
482.82 (Pneumonia due to Escherichia coli [E. coli])
482.83 (Pneumonia due to other gram-negative bacteria)
482.84 (Pneumonia due to Legionnaires' disease)
482.89 (Pneumonia due to other specified bacteria)
Currently, when one of the pneumonia codes listed above is reported
as a principal diagnosis, the case is assigned to MS-DRG 177, 178, or
179. However, when the patient has been diagnosed with one of these
types of pneumonia and also has influenza, the ICD-9-CM coding book
directs the coder to report diagnosis code 487.0 as the principal
diagnosis and to assign an additional secondary code to describe the
specific type of pneumonia. This reporting results in cases with
diagnoses of both influenza and specific types of pneumonia being
assigned to MS-DRG 193, 194, or 195 (Simple Pneumonia and Pleurisy with
MCC, with CC, or without CC/MCC, respectively), instead of MS-DRG 177,
178, or 179. The commenter requested that we reassign cases reporting
code 487.0 as the principal diagnosis with one of the specific
pneumonia codes listed above as a secondary diagnosis to MS-DRGs 177,
178, and 179.
We analyzed data from the MedPAR file on cases with patients with
pneumonia and found the following:
----------------------------------------------------------------------------------------------------------------
Number of Average length of
MS-DRG cases stay Average cost
----------------------------------------------------------------------------------------------------------------
MS-DRG 177--All cases........................................ 69,128 8.20 $13,002
MS-DRG 178--All cases........................................ 59,559 6.40 9,193
MS-DRG 179--All cases........................................ 14,108 4.65 6,365
MS-DRG 193--All cases........................................ 125,892 6.28 9,589
MS-DRG 193--Cases with principal diagnosis code 487.0 and 57 9.3 15,867
with a secondary diagnosis code of 482.0, 482.1, 482.40,
482.41, 482.42, 482.49, 482.81, 482.82, 482.83, 482.84, or
482.89......................................................
MS-DRG 193--Cases with principal diagnosis code 487.0 and 1,320 6.93 10,416
without a secondary diagnosis code of 482.0, 482.1, 482.40,
482.41, 482.42, 482.49, 482.81, 482.82, 482.83, 482.84, or
482.89......................................................
MS-DRG 194--All cases........................................ 191,030 4.73 6,524
MS-DRG 194--Cases with principal diagnosis code 487.0 and 59 6.9 9,752
with a secondary diagnosis code of 482.0, 482.1, 482.40,
482.41, 482.42, 482.49, 482.81, 482.82, 482.83, 482.84, or
482.89......................................................
MS-DRG 194--Principal diagnosis code 487.0 and without a 2,088 5.16 6,871
secondary diagnosis code of 482.0, 482.1, 482.40, 482.41,
482.42, 482.49, 482.81, 482.82, 482.83, 482.84, or 482.89...
MS-DRG 195--All cases........................................ 80,253 3.53 4,660
MS-DRG 195--Cases with a principal diagnosis code 487.0 and a 12 4.8 5,842
secondary diagnosis code of 482.0, 482.1, 482.40, 482.41,
482.42, 482.49, 482.81, 482.82, 482.83, 482.84, or 482.89...
MS-DRG 195--Cases with principal diagnosis code 487.0 and 1,065 3.78 4,580
without a secondary diagnosis code of 482.0, 482.1, 482.40,
482.41, 482.42, 482.49, 482.81, 482.82, 482.83, 482.84, or
482.89......................................................
----------------------------------------------------------------------------------------------------------------
The data showed that cases reporting a principal diagnosis code
487.0 with one of the pneumonia codes listed above as a secondary
diagnosis have significantly higher average costs ($15,867 in MS-DRG
193, $9,752 in MS-DRG 194, and $5,842 in MS-DRG 195) than those cases
reported without one of the pneumonia codes listed above as a secondary
diagnosis ($10,416 in MS-DRG 193, $6,871 in MS-DRG 194, and $4,580 in
MS-DRG 195), and also the overall average costs for all cases in MS-
DRGs 193, 194, and 195 ($9,589, $6,524, and $4,660, respectively). The
influenza and pneumonia cases had average costs that more closely align
with the average costs of cases currently assigned to MS-DRGs 177, 178,
and 179 ($13,002, $9,193, and $6,365, respectively).
As a result of our analysis, the data support the commenter's
request that we reassign cases reporting a principal diagnosis code
487.0 and an additional secondary diagnosis code for one of the
pneumonia codes listed above, from MS-DRGs 193, 194, and 195 to MS-DRGs
177, 178, and 179. Our clinical advisors also support reassigning these
cases to MS-DRGs 177, 178, and 179. Therefore, for FY 2013, we proposed
to reassign cases with a principal diagnosis code 487.0 and an
additional secondary diagnosis code of one of the following pneumonia
codes listed as a secondary diagnosis codes from MS-DRGs 193, 194, and
195 to MS-DRGs 177, 178, and 179: 482.0; 482.1; 482.40; 482.41; 482.42;
482.49; 482.81; 482.82; 482.83; 482.84; and 482.89.
We invited public comment on our proposal for FY 2013.
Comment: Commenters supported our proposal to reassign cases with a
principal diagnosis code of 487.0 with an additional secondary
diagnosis code for the specified types of pneumonia from MS-DRGs 193
and 195 to MS-DRGs 177, 178, and 179. The commenters stated that these
proposed reassignments better capture the more severe type of pneumonia
that results in significantly higher average costs. Other commenters
stated the proposed reassignments were reasonable, given the data and
information provided.
[[Page 53308]]
Response: We appreciate the commenters' support of our proposals.
After consideration of the public comments we received, we are
finalizing our proposal of reassigning cases with a principal diagnosis
code of 487.0 and an additional secondary diagnosis code of one of the
following pneumonia codes as a secondary diagnosis code from MS-DRGs
193, 194, and 195 to MS-DRGs 177, 178, and 179: 482.0; 482.1, 482.40,
482.41, 482.42; 482.49; 482.81; 482.82; 482.83, 482.84; and 482.89.
3. MDC 5 (Diseases and Disorders of the Circulatory System)
a. Percutaneous Mitral Valve Repair With Implant
We received a request to reassign procedure code 35.97
(Percutaneous mitral valve repair with implant) to the following MS-
DRGs:
MS-DRG 216 (Cardiac Valve & Other Major Cardiothoracic
Procedures with Cardiac with MCC);
MS-DRG 217 (Cardiac Valve & Other Major Cardiothoracic
Procedures with Cardiac with CC);
MS-DRG 218 (Cardiac Valve & Other Major Cardiothoracic
Procedures with Cardiac without CC/MCC);
MS-DRG 219 (Cardiac Valve & Other Major Cardiothoracic
Procedures without Cardiac with MCC);
MS-DRG 220 (Cardiac Valve & Other Major Cardiothoracic
Procedures without Cardiac with CC); and
MS-DRG 221 (Cardiac Valve & Other Major Cardiothoracic
Procedures without Cardiac without CC/MCC).
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51528 through
51529), we discussed reassigning procedure code 35.97 from MS-DRGs 231
and 232 (Coronary Bypass with PTCA with MCC and without MCC,
respectively) and MS-DRGs 246 (Percutaneous Cardiovascular Procedure
with Drug-Eluting Stent with MCC or 4+ Vessels/Stents), 247
(Percutaneous Cardiovascular Procedure with Drug-Eluting Stent without
MCC), 248 (Percutaneous Cardiovascular Procedure with Non-Drug-Eluting
Stent with MCC or 4+ Vessels/Stents), 249 (Percutaneous Cardiovascular
Procedure with Non-Drug-Eluting Stent without MCC), 250 (Percutaneous
Cardiovascular Procedure without Coronary Artery Stent or AMI with
MCC), and 251 (Percutaneous Cardiovascular Procedure without Coronary
Artery Stent or AMI without MCC). In that final rule, we stated that we
did not have sufficient claims data on which to base and evaluate any
proposed changes to the current MS-DRG assignment. Procedure code 35.97
was created for use beginning October 1, 2010 (FY 2011) after the
concept of percutaneous valve repair was presented at the March 2010
ICD-9-CM Coordination and Maintenance Committee meeting. Procedure code
35.97 was created at that time to describe the MitraClipTM
device and any other percutaneous mitral valve repair devices currently
on the market. This procedure code was assigned to the following MS-
DRGs: 231 and 232 (Coronary Bypass with PTCA with MCC and without MCC,
respectively); 246 (Percutaneous Cardiovascular Procedure with Drug-
Eluting Stent with MCC or 4+ Vessels/Stents); 247 (Percutaneous
Cardiovascular Procedure with Drug-Eluting Stent without MCC); 248
(Percutaneous Cardiovascular Procedure with Non-Drug-Eluting Stent with
MCC or 4+ Vessels/Stents); 249 (Percutaneous Cardiovascular Procedure
with Non-Drug-Eluting Stent without MCC); 250 (Percutaneous
Cardiovascular Procedure without Coronary Artery Stent or AMI with
MCC); and 251 (Percutaneous Cardiovascular Procedure without Coronary
Artery Stent or AMI without MCC).
According to the Food and Drug Administration's (FDA's) terms of
the clinical trial for MitraClipTM, the device is to be
implanted in patients without any additional surgeries performed.
Therefore, based on these terms, we stated that while the procedure
code is assigned to MS-DRGs 246 through 251, the most likely MS-DRG
assignments would be MS-DRGs 250 and 251, as described above. As we
stated in the FY 2012 IPPS/LTCH PPS final rule, because procedure code
35.97 had only been in use since October 1, 2010, there were no claims
data in the most recent update of the MedPAR file at that time to
evaluate any alternative MS-DRG assignments. Therefore, we did not make
any MS-DRG assignment changes for procedure code 35.97 for FY 2012.
For the FY 2013 proposed rule, we analyzed claims data from the FY
2011 MedPAR file on the procedure that describes mitral valve repair
with implant and found the following:
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 216--All Cases........................................... 9,624 16.44 $61,015
MS-DRG 217--All Cases........................................... 5,655 10.24 41,324
MS-DRG 218--All Cases........................................... 995 7.43 34,587
MS-DRG 219--All Cases........................................... 15,336 12.53 50,176
MS-DRG 220--All Cases........................................... 18,455 7.53 34,150
MS-DRG 221--All Cases........................................... 4,719 5.59 29,082
MS-DRG 231--All Cases........................................... 1,170 12.17 49,728
MS-DRG 231--Cases with Procedure Code 35.97..................... 4 13.75 35,409
MS-DRG 232--All Cases........................................... 1,010 9.16 37,820
MS-DRG 232--Cases with Procedure Code 35.97..................... 9 13.56 46,008
MS-DRG 246--All Cases........................................... 29,299 5.20 20,725
MS-DRG 247--All Cases........................................... 109,661 2.39 13,014
MS-DRG 248--All Cases........................................... 13,562 6.35 19,785
MS-DRG 248--Cases with Procedure Code 35.97..................... 1 32.00 110,262
MS-DRG 249--All Cases........................................... 35,100 2.86 11,806
MS-DRG 250--All Cases........................................... 8,313 7.07 19,673
MS-DRG 250--Cases with Procedure Code 35.97..................... 39 9.77 29,753
MS-DRG 251--All Cases........................................... 31,316 2.92 12,658
MS-DRG 251--Cases with Procedure Code 35.97..................... 98 2.69 18,651
----------------------------------------------------------------------------------------------------------------
We note that most of the cases were found in MS-DRGs 250 and 251,
as we predicted in the FY 2012 IPPS/LTCH PPS final rule based on FDA's
terms of the clinical trial for MitraClipTM. As stated
earlier, the device is to be implanted in patients without any
additional surgeries performed. There were 39 cases in MS-DRG 250 with
[[Page 53309]]
average costs of $29,753 (which includes cases with an MCC). These
average costs are significantly lower than the average costs of $61,015
for cases in MS-DRG 216, and the average costs of $50,176 for cases in
MS-DRG 219 (which includes cases with an MCC). There were 98 cases in
MS-DRG 251 (without MCC) with average costs of $18,651. These average
costs also are lower than the average costs of comparable cases in MS-
DRGs 217, 218, 220, and 221, whose average costs range from a high of
$41,324 to a low of $29,082. While the average costs of mitral valve
repair cases are higher than the average costs of other cases assigned
to MS-DRGs 250 and 251, they are significantly less than the average
costs of cardiac valve replacement cases assigned to MS-DRGs 216
through 221. Our analysis of the claims data does not support
reassigning the procedure that describes percutaneous mitral valve
repair with implant from MS-DRGs 250 and 251 to MS-DRGs 216 through
221. Our clinical advisors also support maintaining the current
assignment of this procedure in MS-DRGs 250 and 251. Therefore, based
on our findings, we did not propose to reassign procedure code 35.97
from MS-DRGs 250 and 251 to MS-DRGs 216 through 221.
We invited public comment on our proposal to maintain the current
assignment of procedure code 35.97 in MS-DRGs 250 and 251 and not to
reassign the procedure code to MS-DRGs 217 through 221.
Comment: Several commenters supported our proposal not to make any
MS-DRG modifications for procedure code 35.97 cases, which are
currently assigned to MS-DRGs 250 and 251. The commenters stated that
the proposal was reasonable, given the data and information provided.
Response: We appreciate the commenters' support for our proposal
for FY 2013.
Comment: A number of commenters recommended that CMS reassign code
35.97 to MS-DRGs 216, 217, and 218. The commenters stated that
percutaneous mitral valve repair offers an alternative to open surgery
and is used in high risk patients. The commenters believed that the
current payment is too low and that their hospitals may decide not to
perform these procedures if the payment is not increased. The
commenters stated that MS-DRGs 216, 217, and 218 more accurately
reflect the associated comorbidities and the intensity of resources
required to perform percutaneous mitral valve repairs with implant.
Commenters also stated that the procedure is complex and requires a
complex team of surgeon, imaging specialist, anesthesiologist, and
interventionalist. Given this team approach, complexity, and lengthy
procedure time, the commenters stated that MS-DRGs 216, 217, and 218
were more appropriate MS-DRG assignments.
One commenter, a manufacturer of a mitral valve repair device,
echoed the comments above. The manufacturer also expressed concern that
CMS' claims data may not fully reflect the costs of the mitral valve
repair devices. The manufacturer stated that the data analyzed may have
included some mitral valve repair cases that were performed in clinical
trials and reflected trial-only device prices that were much lower than
the planned commercial device prices.
Response: We note that MS-DRGs 216, 217, 218 currently include the
requirement that a cardiac catheterization be performed during the
hospital stay. We assume that the commenters meant to include the
complete range of MS-DRGs for cardiac valve and other major
cardiothoracic procedures (that is, MS-DRG 219 (Cardiac Valve & Other
Major Cardiothoracic Procedures without Cardiac with MCC), MS-DRG 220
(Cardiac Valve & Other Major Cardiothoracic Procedures without Cardiac
with CC), and MS-DRG 221 (Cardiac Valve & Other Major Cardiothoracic
Procedures without Cardiac without CC/MCC), in addition to MS-DRGs 216,
217, and 218). MS-DRGs 216, 217, and 218 include the provision of
cardiac catheterizations, while MS-DRGs 219, 220, and 221 do not
include the use of a cardiac catheterization.
The claims data do not support adding percutaneous mitral valve
repairs with implant to MS-DRGs 216, 217, and 218 (those with cardiac
catheterizations) or to the complete range of DRGs that includes both
those with and without cardiac catheterization (MS-DRGs 216 through
221). As stated earlier, there were 39 cases in MS-DRG 250 with average
costs of $29,753 (which includes an MCC). These average costs are
significantly lower than the $61,015 average costs for cases in MS-DRG
216 and the $50,176 average costs for cases in MS-DRG 219, which
includes an MCC. There were 98 cases in MS-DRG 251 (without MCC) with
average costs of $18,651. These average costs are also lower than the
average costs of comparable cases in MS-DRG 217, 218, 220, and 221
whose average costs range from a high of $41,324 to a low of $29,082.
While the average costs for these cases are higher than for others in
MS-DRGs 250 and 251, they are significantly less than those cardiac
replacement valve cases assigned to MS-DRGs 216 through 221. Our data
indicate that the average cost for this procedure, including the
significant cost of the devices, is much closer to the average cost of
the percutaneous procedures that comprise the remaining 99 percent of
the claims in the MS-DRGs 250 and 251 than it is to the proposed MS-
DRGs, where payments are twice the reported cost of this procedure.
In this case it is true that costs of the percutaneous mitral valve
implantations are more than the average for MS-DRGs 250 and 251.
However it is a fundamental principle of an averaged payment system
that half of the procedures in a group will have above average costs.
It is expected that there will be higher cost and lower cost subsets,
especially when a subset has low numbers. In this case the other
ninety-nine percent of the claims that make up the assigned DRG will be
expected to continue to include cases with similar costs but also
include many cases with below average costs. In an average payment
system, the ``profit'' of low-cost cases balances the ``loss'' of the
high-cost cases, and hospitals and manufacturers cannot expect to see
``profit'' on every possible subset of cases in a DRG.
Our clinical advisors state that the current MS-DRG assignment is
reasonable because the operating room resource utilizations of
percutaneous procedures, such as those found in MS-DRGs 250 and 251,
tend to group together, and are generally less costly than open
procedures, such as those found in MS-DRGs 216 through 221.
Percutaneous procedures by organ system represent groupings that are
reasonably clinically coherent. More significantly, our clinical
advisors state that postoperative resource utilization is significantly
higher for open procedures with the much greater morbidity and
consequent recovery needs. Because the equipment, technique, staff,
patient populations and physician specialty all tend to group by type
of procedure (percutaneous versus open), separately grouping
percutaneous and open procedures is more clinically consistent.
Therefore, our clinical advisors recommend that we not move
percutaneous mitral valve repairs with implants into MS-DRGs 216
through 221. Based on the claims data and the advice of our clinical
advisors, we do not believe the findings warrant moving code 35.97 from
MS-DRGs 250 and 251 to MS-DRGs 216 though 221.
[[Page 53310]]
After consideration of the public comments we received, we are
finalizing our proposal to not make any MS-DRG modifications for
procedure code 35.97 cases, which currently are assigned to MS-DRGs 250
and 251, for FY 2013.
b. Endovascular Implantation of Branching or Fenestrated Grafts in
Aorta
The fenestrated (with holes) graft device is designed to treat
patients with abdominal aortic aneurysms (AAA). Current treatment
options for patients with AAAs include open surgical repair,
endovascular repair using stent-grafts, or medical management.
Aneurysmal disease that extends proximally to the level of the
renal arteries is usually indicative of more extensive aortic disease
and comorbidities. As a result, many of these patients are at a higher
overall risk when undergoing open surgical repair. In addition, these
patients are often not suitable for endovascular treatment with
currently available endografts because the length of healthy aorta is
insufficient to provide an adequate seal at the proximal end. The
indications for use for many of the standard endografts call for an
aortic neck length greater than or equal to 15 millimeters.
Published industry reports estimate that 8 percent to 30 percent of
patients with AAAs that need repair have aortic necks of less than 15
millimeters in length. One institution has reported that over half of
its patients with AAAs were considered ineligible for endovascular
aneurysm repair or endovascular aortic repair (EVAR) due to an
inadequate length of nondiseased aorta. These patients also were
predominantly contraindicated for open repair.
Prior to the development of a fenestrated graft device, the only
treatment option available to a large number of these high-risk
patients would have been medical management. Open surgical repair is
too challenging to frail patients, as it requires supraceliac clamping
of the aorta and may result in renal ischemia, mesenteric ischemia, or
atheroembolization of the visceral vessels of the aorta. EVAR with a
standard endograft is not a viable option either because the shortened
neck precludes an adequate proximal end seal, which can lead to type I
endoleaks (leaking of blood around the device into the aneurysm
resulting in continued pressurization of the aneurysm). Medical
management alone leaves these patients at high risk for AAA-related
morbidity and mortality. These suboptimal choices led to the creation
of fenestrated endografts that can seal above the renal arteries while
maintaining access and uninterrupted blood flow to branch vessels of
the aorta.
The fenestrated graft is currently under clinical trial in the
United States. Effective April 4, 2012, the Zenith[supreg] Fenestrated
AAA Endovascular Graft (Cook[supreg] Medical) received FDA approval.
Another manufacturer of fenestrated grafts expects to receive FDA
approval for its device within 3 years.
At the September 15, 2010 meeting of the ICD-9-CM Coordination and
Maintenance Committee, the topic of fenestrated graft was presented
with a request for a unique procedure code. As a result of that
meeting, and additional meetings with manufacturers throughout the
year, procedure code 39.78 (Endovascular implantation of branching or
fenestrated graft(s) in aorta) was created for use beginning October 1,
2011 (FY 2012). This code is assigned to MS-DRGs 252, 253, and 254
(Other Vascular Procedures with MCC, with CC, and without CC/MCC,
respectively).
We have received a request from a manufacturer to reassign
procedure code 39.78 from MS-DRGs 252, 253, and 254 to MS-DRGs 237 and
238 (Major Cardiovascular Procedures with MCC and without MCC,
respectively). The requestor stated that the assignment to MS-DRGs 252,
253, and 254 violates both of CMS' stated principles regarding
assigning new codes to MS-DRGs that reflect both clinical coherence and
similar consumption of resources.
From the standpoint of clinical coherence, the requestor noted
that, while procedures in MS-DRGs 252, 253, and 254 are vascular
procedures, the procedures do not involve the aorta. The requestor
further noted that AAA repairs, both open and endovascular, are
assigned to MS-DRGs 237 and 238. From the standpoint of similar
consumption of resources, the requestor included anticipated device
costs of $17,424 to $21,824 for a fenestrated endovascular procedure.
The requestor noted that these costs only represent the device and do
not include any additional resources required during the
hospitalization. The requestor believed that the device costs are more
similar to devices used in MS-DRGs 237 and 238.
CMS' practice is to assign new codes to MS-DRGs where similar
procedures are also located. In terms of clinical coherence, CMS
assigned the new code to the vascular procedure MS-DRGs (252, 253, and
254) where other noncoronary endovascular procedures for blood vessel
repair also are assigned. This decision was based on our practice to
group similar procedures together, in this case repairs to blood
vessels, especially for new codes when CMS has no data history.
With regard to resource consumption, we point out that procedure
code 39.78 was created for use effective with discharges on or after
October 1, 2011. Our review of data in the MedPAR file shows no
utilization of this code because it is too new. That is, we have no
claims data that would either prove or disprove the requestor's
supposition that procedure code 39.78 is not adequately paid under MS-
DRGs 252, 253, and 254. As discussed elsewhere in this preamble, the
MS-DRG system is not a device classification system. Therefore, because
there are very few companies currently marketing their fenestrated
graft devices, we are concerned that these companies are able to set
their own charges in the market.
In addition, the requestor opined that ``an argument could possibly
be made that the increased device costs and longer procedural times for
[procedure code] 39.78 suggest assignment into MS-DRG 237 alone would
be appropriate,'' although the requestor further stated that, without a
significant volume of actual claims data, it might be more reasonable
[for CMS] to take a conservative approach and assign these procedures
to either MS-DRG 237 or MS-DRG 238. We note that MS-DRGs 237 and 238
are paired MS-DRGs, with both MS-DRGs containing the same procedure
codes, but which have been subdivided based on the formula for the
presence or absence of comorbid or complicating conditions. It is not
an inherent part of the GROUPER logic to assign a code to only one DRG
in a set of paired or triplicate MS-DRGs.
Because there is no data history for procedure code 39.78 that
would justify a reassignment based on either clinical coherence or
resource consumption, in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR
27903 and 27904), we did not propose to make a change to the MS-DRG
assignment of procedure code 39.78 for FY 2013. We stated our belief
that procedure code 39.78 has been appropriately placed within the MS-
DRG structure. We also stated that we would continue to evaluate the
clinical coherence and resource consumption costs that impact this code
and the current MS-DRG assignment. We invited public comment on our
proposal.
Comment: Many commenters agreed or did not have any specific
objections regarding our proposal to not reassign procedure code 39.78
from MS-DRGs 252, 253, and 254 to MS-DRGs 237 and 238 for FY 2013 based
on the information we provided.
[[Page 53311]]
Response: We appreciate the commenters' support for our proposal
for FY 2013.
Comment: Numerous commenters representing various professional
organizations and device manufacturers disagreed with our proposal to
maintain the current MS-DRG structure for procedure code 39.78. The
commenters urged CMS to reevaluate the proposal and reassign procedure
code 39.78 to MS-DRGs 237 and 238 for FY 2013.
The commenters stated that the proposed MS-DRG assignment for
procedure code 39.78 is not clinically correct. Specifically, the
commenters stated that the association of a fenestrated graft procedure
to peripheral arterial endovascular interventions is not representative
of the complexities involved in performing the fenestrated graft
surgery, nor does it adequately depict a hospital's utilization of
resources. The commenters further noted that the implantation of
fenestrated grafts is more similar, from a clinical and resource
consumption perspective, to the other endovascular graft procedures
within MS-DRGs 237 and 238 than it is to the vascular procedures
assigned to MS-DRGs 252, 253, and 254.
One commenter provided detailed information outlining the specific
FDA-approved indications for both the standard and fenestrated
endovascular graft procedures for treatment of aneurysms to further
demonstrate how clinically similar the procedures actually are. Other
commenters clarified that fenestrated grafts require all the resources
of a standard endovascular graft procedure in addition to all the
resources required for placement of stents in the renal and visceral
arteries to maintain perfusion. Another commenter reported that the
devices required to perform a fenestrated graft procedure are ``(1)
more complicated, more numerous, and, in aggregate, significantly more
expensive than those required for the predecessor [standard]
procedures; and (2) the fenestrated/branch procedure itself is more
complex and time consuming, requiring significantly greater hospital
operating room time and resources.'' Therefore, according to the
commenters, the resources required to perform implantation of a
fenestrated graft are far more extensive in comparison to the resources
utilized to perform procedures assigned to MS-DRGs 252, 253, and 254.
Some commenters also believed that CMS may have misunderstood some
of the aspects of the fenestrated graft procedure. The commenters
indicated that if the standard endovascular graft procedure (for
example, procedure code 39.71 (Endovascular implantation of other graft
in abdominal aorta) is currently assigned to MS-DRGs 237-238 and the
fenestrated endovascular graft procedure requires greater utilization
of resources, logically procedure code 39.78 should be assigned to MS-
DRGs 237 and 238.
Other commenters reiterated the benefits of fenestrated graft
procedures to those patients who are not candidates for standard
endovascular grafts or open surgical repair. These commenters indicated
that the patients necessitating fenestrated grafts are a complex
patient population. Some commenters also stated that, despite the lack
of sufficient MedPAR claims data for procedure code 39.78, CMS should
consider the clinical similarities between fenestrated graft procedures
and the other procedures that currently group to MS-DRGs 237 and 238.
The commenters stated that, by reassigning procedure code 39.78 to
MS-DRGs 237 and 238, patients would no longer be restricted access to
this technology for treatment of juxtarenal/pararenal (next to or at
renal arteries) aneurysms and hospitals would be more appropriately
paid for the services they are providing.
Response: Although we did not propose to reassign procedure code
39.78 from MS-DRGs 252, 253, and 254 to MS-DRGs 237 and 238 for FY
2013, upon further review and consideration of the comments received,
we agree with the commenters that the fenestrated grafts are more
similar from a clinical and resource consumption perspective to the
other endovascular graft procedures within MS-DRGs 237 and 238.
Therefore, as final policy for FY 2013, we are reassigning
procedure code 39.78 from MS-DRG 252, 253, and 254 to MS-DRGs 237 and
238.
4. MDC 10 (Endocrine, Nutritional, and Metabolic Diseases and
Disorders): Disorders of Porphyrin Metabolism
We received a request for the creation of a new MS-DRG to better
identify cases where patients with disorders of porphyrin metabolism
exist, to recognize the resource requirements in caring for these
patients, to ensure appropriate payment for these cases, and to
preserve patient access to necessary treatments. Porphyria is defined
as a group of rare disorders (``porphyrias'') that interfere with the
production of hemoglobin that is needed for red blood cells. While some
of these disorders are genetic (inborn) and others can be acquired,
they all result in the abnormal accumulation of hemoglobin building
blocks, called porphyrins, which can be deposited in the tissues where
they particularly interfere with the functioning of the nervous system
and the skin.
Treatment for patients suffering from disorders of porphyrin
metabolism consists of an intravenous injection of Panhematin[supreg]
(hemin for injection). In 1984, this pharmaceutical agent became the
first approved drug for a rare disease to be designated under the
Orphan Drug Act. It is the only FDA-approved prescription treatment for
acute intermittent porphyria, being approved for manifestations
temporarily related to the menstrual cycle in susceptible women.
ICD-9-CM diagnosis code 277.1 (Disorders of porphyrin metabolism)
describes these cases, which are currently assigned to MS-DRG 642
(Inborn and Other Disorders of Metabolism). We analyzed data from the
FY 2011 MedPAR file for cases assigned to this MS-DRG. As shown in the
table below, we found a total of 1,447 cases in MS-DRG 642 with an
average length of stay of 4.63 days and average costs of $7,400. We
then analyzed the data for cases reporting diagnosis code 277.1 as the
principal diagnosis in this same MS-DRG. We found a total of 330 cases,
with an average length of stay of 6.12 days and average costs of
$11,476.
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 642--All cases........................................... 1,447 4.63 $7,400
MS-DRG 642- Cases with principal diagnosis code 277.1........... 330 6.12 11,476
----------------------------------------------------------------------------------------------------------------
While the average costs for the 330 cases reporting a principal
diagnosis code of 277.1 were higher than all cases in MS-DRG 642
($11,476 versus $7,400), the volume of affected cases is small,
representative of approximately
[[Page 53312]]
20 percent of all of the cases in MS-DRG 642. Under our existing policy
(76 FR 51487 and 51488), in deciding whether to make modifications to
the MS-DRGs, we consider whether the resource consumption and clinical
characteristics of the patients with a given set of conditions are
significantly different from the remaining patients in the MS-DRG. We
evaluate the utilization of resources related to patient care using
average costs and length of stay and rely on the judgment of our
medical advisors to decide whether patients are clinically distinct or
similar to other patients in the MS-DRG. In evaluating resource costs,
we consider both the absolute and percentage differences in average
costs between the cases we selected for review and the reminder 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 were extreme in terms of
costs or length of stay. Further, we consider the number of patients
who 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. Therefore, in the FY 2013 proposed rule, we determined that the
findings do not support the creation of a new MS-DRG.
We acknowledge the importance of ensuring that patients diagnosed
with a disorder of porphyrin metabolism have adequate access to care
and receive the necessary treatment. Despite the fact that our data
analysis did not demonstrate support for the creation of a new MS-DRG
at this time, we also explored an alternative option. In reviewing the
medical MS-DRGs in terms of resources and clinical coherence that are
also located within MDC 10, we found three MS-DRGs that we believe are
similar to MS-DRG 642. We analyzed data from the MedPAR file on cases
in MS-DRGs 643, 644, and 645 (Endocrine Disorders with MCC, with CC,
and without CC/MCC, respectively) to determine if the cases reporting a
principal diagnosis code of 277.1 would be more appropriately
reassigned from MS-DRG 642 to MS-DRGs 643, 644, and 645. Upon
examination of the data, we found that the average costs of these cases
were $10,835, $6,816, and $4,762, respectively, as shown in the table
below.
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 643--Cases with principal diagnosis code 277.1........... 6,562 7.11 $10,835
MS-DRG 644--Cases with principal diagnosis code 277.1........... 12,769 4.89 6,816
MS-DRG 645--Cases with principal diagnosis code 277.1........... 5,979 3.40 4,762
----------------------------------------------------------------------------------------------------------------
Based on these findings, if we were to reassign cases where
disorders of porphyrin metabolism (diagnosis code 277.1) were reported
as the principal diagnosis with a secondary diagnosis designated as a
CC (MS-DRG 644) or with a secondary diagnosis that was not a CC/MCC
(MS-DRG 645), Medicare would pay significantly less for these cases
than they are now paid under MS-DRG 642. Therefore, it would not be
appropriate to reassign cases reporting a principal diagnosis code of
277.1 from MS-DRG 642 to MS-DRGs 643, 644, and 645. In addition, our
clinical advisors did not support this reassignment. The MS-DRG
classification system on which the IPPS is based comprises a system of
averages. As such, it is understood that, in any particular MS-DRG, it
is not unusual for a small number of cases to demonstrate higher than
average costs, nor is it unusual for a small number of cases to
demonstrate lower than average costs. Upon review of the MedPAR data
and the alternative option discussed, our clinical advisors agree that
the current MS-DRG assignment for diagnoses of disorders of porphyrin
metabolism (diagnosis code 277.1) to MS-DRG 642 is most appropriate at
this time.
In the proposed rule, we acknowledged and recognized the severity
of symptoms that patients diagnosed with disorders of porphyrin
metabolism may experience. We also stated that we are sensitive to
concerns about access to care and treatment for these patients. We
further indicated that we would continue to monitor this issue and
determine how to better account for the variation in resource
utilization within the IPPS for these cases.
In summary, we did not propose to create a new MS-DRG or to
reassign cases reporting a principal diagnosis code of 277.1 to MS-DRGs
643, 644, and 645 for FY 2013. We invited public comment on our
proposal.
Comment: Several commenters agreed with our proposal to not create
a new MS-DRG or to reassign cases reporting a principal diagnosis code
of 277.1 from MS-DRG 642 to MS-DRGs 643, 644, and 645 for FY 2013.
Response: We appreciate the commenters' support for our proposal.
Comment: Two commenters, representing organizations dedicated to
the treatment, education, and study of patients diagnosed with
disorders of porphyrin metabolism, appreciated the attention that CMS
devoted to this issue. However, these commenters expressed concern that
CMS' proposal to not create a new MS-DRG for these cases would
negatively impact beneficiary access to necessary treatments. For
example, according to one of the commenters, certain facilities are
unable to provide the needed Panhematin[supreg] therapy as a result of
the costs incurred and the present MS-DRG assignment. The commenters
believed that for beneficiaries who experience an acute porphyric
attack, there are not any alternative therapies compared to the
effectiveness of Panhematin[supreg].
One of the commenters also submitted data from its own analysis
indicating that not only are the average costs of porphyria cases
greater than the average costs of all cases in MS-DRG 642, but also
that the average costs of porphyria cases are greater than the average
costs of other cases that contain the top 10 principal diagnoses (by
volume of discharges) assigned to MS-DRG 642. The commenter asserted
that, based on its analysis, as well as the analysis conducted and
presented by CMS in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR
27904 through 27905), porphyria cases undoubtedly satisfy the criteria
to create a new MS-DRG.
Additionally, the commenters opposed CMS' position regarding the
inadequate number of cases in which to establish a new MS-DRG for
porphyria cases. One of the commenters reported that, based on its own
analysis, the number of porphyria cases demonstrated a significant
subset of the total cases that grouped to MS-DRG 642. The other
commenter acknowledged that the number of porphyria cases is small;
however this commenter maintained that CMS may inadvertently be sending
the message that rare diseases affecting smaller populations are not as
significant as those diseases affecting larger populations by not
creating a new MS-DRG for porphyria cases. The commenters urged CMS to
reconsider
[[Page 53313]]
the proposal and create a new MS-DRG for cases with a principal
diagnosis of porphyria to ensure these beneficiaries have access to
treatment for this potentially life-threatening disease.
Response: We acknowledge the commenters' concerns. CMS is committed
to improving the lives and quality of care for Medicare beneficiaries.
We take this opportunity to note that it is not appropriate for
facilities to deny treatment to beneficiaries needing a specific type
of therapy or treatment that involves increased costs. The MS-DRG
system is a system of averages and it is expected that across the 571
diagnostic related groups that within certain groups, some cases may
demonstrate higher than average costs, while other cases may
demonstrate lower than average costs.
As discussed in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR
27904 through 27905), we recognize the average costs of the small
number of porphyria cases are greater than all the cases in MS-DRG 642.
While the commenter's analysis found that approximately 50 percent of
porphyria cases were more expensive than the average cost of the other
cases in this MS-DRG, it is not alarming and, in fact, is what we would
expect (as the remaining percent of cases are less expensive than the
average). The data provided by the commenter demonstrates that it is a
subset of the porphyria cases that has the significantly higher cost
exactly as it is a subset of the MS-DRG that has significantly higher
costs. An averaged payment system depends on aggregation of similar
cases with a range of costs, and these data are not unusual. In fact,
it is usually possible to define subsets with higher values and subsets
with lower values. We continue to follow our usual practice of
identifying sufficiently large sets of claims data with a resource/cost
similarity and clinical similarity and do not wish to abandon our use
of diagnostic related groups in favor of smaller ``single diagnosis
payments'' or even, as suggested by the commenter's data, subsets
within a single diagnosis.
We disagree with the commenter that our proposal to not create a
new MS-DRG for porphyria cases sends the message that rare diseases and
patient access to treatment are not a significant cause for concern to
the Agency in comparison to other well known and publicly recognized
conditions. Although it was not included as part of the commenter's
initial request for a new MS-DRG, we also explored an alternative
option to reassign cases with a principal diagnosis of porphyria as was
discussed in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27904
through 27905). Furthermore, we indicated our intent to continue to
monitor this issue.
As mentioned previously, we are sensitive to the commenters'
concerns and access to treatment for beneficiaries who have been
diagnosed with this condition. However, for the reasons summarized
above, we are finalizing our proposal for FY 2013 to not create a new
MS-DRG or to reassign cases with a principal diagnosis of porphyria
(code 277.1) from MS-DRG 642 to MS-DRGs 643, 644, and 645.
5. Medicare Code Editor (MCE) Changes
The Medicare Code Editor (MCE) is a software program that detects
and reports errors in the coding of Medicare claims data. Patient
diagnoses, procedure(s), and demographic information are entered into
the Medicare claims processing systems and are subjected to a series of
automated screens. The MCE screens are designed to identify cases that
require further review before classification into an MS-DRG.
a. MCE New Length of Stay Edit for Continuous Invasive Mechanical
Ventilation for 96 Consecutive Hours or More
In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27905 and 27906),
we proposed to make a change to the MCE edits which included the
creation of a new length of stay edit for continuous invasive
mechanical ventilation for 96 consecutive hours or more.
It was brought to our attention that a number of hospitals
reporting ICD-9-CM procedure code 96.72 (Continuous invasive mechanical
ventilation for 96 consecutive hours or more) may be inaccurately
reporting this code. As the title of the procedure code implies, a
patient must have received continuous mechanical ventilation for 96
hours or more in order for this code to be assigned. This equates to a
patient being hospitalized for at least a 4-day length of stay and
having received continuous invasive mechanical ventilation for a
minimum of 4 days. Therefore, a patient with a length of stay less than
4 days who received continuous invasive mechanical ventilation should
not have procedure code 96.72 reported on the claim.
The ICD-9-CM classification system contains three procedure codes
that identify and describe continuous invasive mechanical ventilation:
procedure code 96.70 (Continuous invasive mechanical ventilation of
unspecified duration); procedure code 96.71 (Continuous invasive
mechanical ventilation for less than 96 consecutive hours); and
procedure code 96.72 (Continuous invasive mechanical ventilation for 96
consecutive hours or more). To assist in the accurate assignment of
these codes, guidance in the form of a ``Note'' is provided within the
designated procedure section of ICD-9-CM. This ``Note'' describes the
calculation of the number of hours during a hospitalization in which a
patient receives continuous invasive mechanical ventilation. In
addition, coding advice pertaining to appropriate code assignment for
mechanical ventilation has been published in various editions of the
American Hospital Association's (AHA's) Coding Clinic for ICD-9-CM.
For the proposed rule, we analyzed the FY 2011 MedPAR data to
determine how many cases reported procedure code 96.72 with a length of
stay less than 4 days. Specifically, we reviewed cases reporting
procedure code 96.72 with a length of stay of 1 day, 2 days, or 3 days.
We found a total of 595 cases meeting those criteria. The data analysis
showed there were 89 cases reporting procedure code 96.72 with a length
of stay of 1 day and average costs of $5,948, 134 cases reporting
procedure code 96.72 with a length of stay of 2 days and average costs
of $7,776, and 372 cases reporting procedure code 96.72 with a length
of stay of 3 days and average costs of $11,613.
The data also demonstrated that the 595 cases found were
distributed across a wide range of MS-DRGs, with the top two (in terms
of volume) being MS-DRG 207 (Respiratory System Diagnosis with
Ventilator Support 96+ Hours) and MS-DRG 870 (Septicemia or Severe
Sepsis with Mechanical Ventilation 96+ hours). We note that the two MS-
DRGs with the highest volume of cases reporting procedure code 96.72
and having a length of stay less than 4 days are the two MS-DRGs that
specifically reference ``96+ hours'' in their titles. More importantly,
a large percentage of these cases reporting procedure code 96.72 in
error are being grouped to the incorrect MS-DRGs, resulting in
significant overpayments. For example, of the 89 cases reporting
procedure code 96.72 with a length of stay of 1 day, 31 cases were
grouped to MS-DRGs 207 and 870. Of the 134 cases reporting procedure
code 96.72 with a length of stay of 2 days, 54 cases were grouped to
MS-DRGs 207 and 870. Lastly, of the 372 cases reporting procedure code
96.72 with a length of stay of 3 days, 160 cases were grouped to MS-
DRGs 207 and 870. Therefore, the data show that a total of 245 cases
(41 percent)
[[Page 53314]]
were grouped to MS-DRGs 207 and 870 in error, resulting in
approximately $25,000 in increased payments for each case (or
approximately $6 million in increased payments for all 245 cases).
Based on the results of these figures for that portion of the total 595
cases found, there is an even larger dollar amount that is being
overpaid to hospitals. These overpayments justify corrective actions.
However, we also noted that the presumed amount of overpayments for
claims having a length of stay less than 4 days, as discussed above, is
merely an estimate based on the data analysis that has been conducted
at this time. We are aware that, for particular circumstances such as
those patients who may require observation services, it is possible to
have procedure code 96.72 reported on the claim with a length of stay
less than 4 days. Although unlikely, a patient might be briefly
ventilated in an extended outpatient stay following a toxic ingestion
with loss of protective reflexes or following outpatient procedures
with a prolonged effect of anesthesia. A subsequent conversion to an
inpatient stay would cause the costs to be attributable to the stay,
while the days themselves were not reported in the inpatient date span
on the claim. Similar effects could occur following an observation stay
for a patient on chronic home or skilled nursing facility ventilation.
It is for this reason that we proposed a new edit in which claims found
to have procedure code 96.72 with a length of stay less than 4 days
would be returned to the provider for validation and resubmission. We
indicated in the proposed rule that we would issue instructions in the
form of a Change Request (CR) prior to the implementation date. We
invited the public to comment on our proposal to create this edit,
effective for FY 2013.
Comment: Commenters urged CMS to reconsider the proposed new edit
for claims reporting procedure code 96.72 with a length of stay less
than 4 days that would result in these claims being returned to the
provider for validation and resubmission. Although several commenters
agreed with the concept of the edit, the commenters expressed concern
that the proposed process would be administratively burdensome to
hospitals that may be accurately reporting the code according to
established coding rules. For example, the commenters noted that coding
rules allow the counting of hours a patient is on mechanical
ventilation to begin from the time ventilation is initiated in the
emergency room department or upon admission. The commenters also stated
that for those instances where patients may require observation
services, as CMS noted in the proposed rule, it is possible that
procedure code 96.72 can be reported on a claim with a length of stay
less than 4 days. These commenters recommended that CMS work with the
Medicare administrative contractors (MACs) to develop a less burdensome
process for providers to implement this edit.
Response: We appreciate and acknowledge the commenters' concerns.
In developing systems requirements, we will continue to work with MACs.
Recent programming enhancements now allow the use of data fields that
were not previously available for claims processing. We believe that
these enhancements will eliminate the concern regarding additional
administrative burden to hospitals.
After consideration of the public comments received, for FY 2013,
we are finalizing our proposal to make a change to the MCE edits to
include the creation of a new length of stay edit for procedure code
96.72 when reported on a claim with a length of stay less than 4 days.
Detailed instructions will be issued in a future Change Request (CR)
prior to the implementation date.
b. Sleeve Gastrectomy Procedure for Morbid Obesity
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51539 through
51541), we discussed the issue of sleeve gastrectomy procedures for
morbid obesity under the section of the rule titled ``MDC 10
(Endocrine, Nutritional, and Metabolic Diseases and Disorders)'' as
well as under the section for ``Medicare Code Editor (MCE) Changes.''
We refer the reader to these sections for additional details and
background information.
Effective October 1, 2011, procedure code 43.82 (Laparoscopic
vertical (sleeve) gastrectomy) was created and designated as a
noncoverage procedure in the Medicare Code Editor. A Decision Memo
related to Bariatric Surgery for the Treatment of Morbid Obesity was
issued effective June 27, 2012, which describes a change in coverage to
Medicare beneficiaries for this procedure. Information related to this
decision memo can be located at the following CMS Web page: http://www.cms.gov/medicare-coverage-database/details/nca-decision-memo.aspx?NCAId=258&fromdb=true.
As this noncovered procedure edit for procedure code 43.82 is no
longer valid, we are removing it from the MCE for FY 2013. Instructions
in the form of a Change Request will be issued prior to October 1,
2012. In addition, updates to the Medicare National Coverage
Determinations Manual, Section 100.1, Nationally Noncovered Indications
for Bariatric Surgery for Treatment of Morbid Obesity, will be revised
to reflect this change in coverage.
6. Surgical Hierarchies
Some inpatient stays entail multiple surgical procedures, each one
of which, occurring by itself, could result in assignment of the case
to a different MS-DRG within the MDC to which the principal diagnosis
is assigned. Therefore, it is necessary to have a decision rule within
the GROUPER by which these cases are assigned to a single MS-DRG. The
surgical hierarchy, an ordering of surgical classes from most resource-
intensive to least resource-intensive, performs that function.
Application of this hierarchy ensures that cases involving multiple
surgical procedures are assigned to the MS-DRG associated with the most
resource-intensive surgical class.
Because the relative resource intensity of surgical classes can
shift as a function of MS-DRG reclassification and recalibrations, for
FY 2013, we reviewed the surgical hierarchy of each MDC, as we have for
previous reclassifications and recalibrations, to determine if the
ordering of classes coincides with the intensity of resource
utilization.
A surgical class can be composed of one or more MS-DRGs. For
example, in MDC 11, the surgical class ``kidney transplant'' consists
of a single MS-DRG (MS-DRG 652) and the class ``major bladder
procedures'' consists of three MS-DRGs (MS-DRGs 653, 654, and 655).
Consequently, in many cases, the surgical hierarchy has an impact on
more than one MS-DRG. The methodology for determining the most
resource-intensive surgical class involves weighting the average
resources for each MS-DRG by frequency to determine the weighted
average resources for each surgical class. For example, assume surgical
class A includes MS-DRGs 001 and 002 and surgical class B includes MS-
DRGs 003, 004, and 005. Assume also that the average costs of MS-DRG
001 are higher than that of MS-DRG 003, but the average costs of MS-
DRGs 004 and 005 are higher than the average costs of MS-DRG 002. To
determine whether surgical class A should be higher or lower than
surgical class B in the surgical hierarchy, we would weigh the average
costs of each MS-DRG in the class by frequency (that is, by the number
of cases in the MS-DRG) to determine average resource consumption for
the surgical class. The surgical classes would then be ordered from the
class with the highest average
[[Page 53315]]
resource utilization to that with the lowest, with the exception of
``other O.R. procedures'' as discussed below.
This methodology may occasionally result in assignment of a case
involving multiple procedures to the lower-weighted MS-DRG (in the
highest, most resource-intensive surgical class) of the available
alternatives. However, given that the logic underlying the surgical
hierarchy provides that the GROUPER search for the procedure in the
most resource-intensive surgical class, in cases involving multiple
procedures, this result is sometimes unavoidable.
We note that, notwithstanding the foregoing discussion, there are a
few instances when a surgical class with a lower average cost is
ordered above a surgical class with a higher average cost. For example,
the ``other O.R. procedures'' surgical class is uniformly ordered last
in the surgical hierarchy of each MDC in which it occurs, regardless of
the fact that the average costs for the MS-DRG or MS-DRGs in that
surgical class may be higher than those for other surgical classes in
the MDC. The ``other O.R. procedures'' class is a group of procedures
that are only infrequently related to the diagnoses in the MDC, but are
still occasionally performed on patients in the MDC with these
diagnoses. Therefore, assignment to these surgical classes should only
occur if no other surgical class more closely related to the diagnoses
in the MDC is appropriate.
A second example occurs when the difference between the average
costs for two surgical classes is very small. We have found that small
differences generally do not warrant reordering of the hierarchy
because, as a result of reassigning cases on the basis of the hierarchy
change, the average costs are likely to shift such that the higher-
ordered surgical class has lower average costs than the class ordered
below it.
In the FY 2013 IPPS/LTCH PPS proposed rule, we proposed limited
changes to the MS-DRG classifications for FY 2013, as discussed in
sections II.G.1. and 4. of this preamble. In our review of these
proposed changes, we did not identify any needed changes to the
surgical hierarchy. Therefore, in the proposed rule (77 FR 27906), we
did not propose any changes to the surgical hierarchy for Pre-MDCs and
MDCs for FY 2013.
Comment: Several commenters stated that our proposal to make no
changes to the surgical hierarchy seems reasonable, given the data and
information provided.
Response: Based on these public comments and our review of the
proposal to make no revisions to the surgical hierarchy using the March
2012 update of the FY 2011 MedPAR file and the revised GROUPER
software, we found that the proposal to make no revisions is still
supported by the data. Therefore, in this final rule, we are making no
changes to the surgical hierarchy for FY 2013.
7. Complications or Comorbidity (CC) Exclusions List
a. Background
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. We refer readers to section
II.D.2. and 3. of the preamble of the FY 2008 IPPS final rule with
comment period for a discussion of the refinement of CCs in relation to
the MS-DRGs we adopted for FY 2008 (72 FR 47121 through 47152).
b. CC Exclusions List for FY 2013
In the September 1, 1987 final notice (52 FR 33143) concerning
changes to the DRG classification system, we modified the GROUPER logic
so that certain diagnoses included on the standard list of CCs would
not be considered valid CCs in combination with a particular principal
diagnosis. We created the CC Exclusions List for the following reasons:
(1) To preclude coding of CCs for closely related conditions; (2) to
preclude duplicative or inconsistent coding from being treated as CCs;
and (3) to ensure that cases are appropriately classified between the
complicated and uncomplicated DRGs in a pair. As we indicated above, we
developed a list of diagnoses, using physician panels, to include those
diagnoses that, when present as a secondary condition, would be
considered a substantial complication or comorbidity. In previous
years, we have made changes to the list of CCs, either by adding new
CCs or deleting CCs already on the list.
In the May 19, 1987 proposed notice (52 FR 18877) and the September
1, 1987 final notice (52 FR 33154), we explained that the excluded
secondary diagnoses were established using the following five
principles:
Chronic and acute manifestations of the same condition
should not be considered CCs for one another.
Specific and nonspecific (that is, not otherwise specified
(NOS)) diagnosis codes for the same condition should not be considered
CCs for one another.
Codes for the same condition that cannot coexist, such as
partial/total, unilateral/bilateral, obstructed/unobstructed, and
benign/malignant, should not be considered CCs for one another.
Codes for the same condition in anatomically proximal
sites should not be considered CCs for one another.
Closely related conditions should not be considered CCs
for one another.
The creation of the CC Exclusions List was a major project
involving hundreds of codes. We have continued to review the remaining
CCs to identify additional exclusions and to remove diagnoses from the
master list that have been shown not to meet the definition of a
CC.\13\
---------------------------------------------------------------------------
\13\ See the FY 1989 final rule (53 FR 38485, September 30,
1988), for the revision made for the discharges occurring in FY
1989; the FY 1990 final rule (54 FR 36552, September 1, 1989), for
the FY 1990 revision; the FY 1991 final rule (55 FR 36126, September
4, 1990), for the FY 1991 revision; the FY 1992 final rule (56 FR
43209, August 30, 1991) for the FY 1992 revision; the FY 1993 final
rule (57 FR 39753, September 1, 1992), for the FY 1993 revision; the
FY 1994 final rule (58 FR 46278, September 1, 1993), for the FY 1994
revisions; the FY 1995 final rule (59 FR 45334, September 1, 1994),
for the FY 1995 revisions; the FY 1996 final rule (60 FR 45782,
September 1, 1995), for the FY 1996 revisions; the FY 1997 final
rule (61 FR 46171, August 30, 1996), for the FY 1997 revisions; the
FY 1998 final rule (62 FR 45966, August 29, 1997) for the FY 1998
revisions; the FY 1999 final rule (63 FR 40954, July 31, 1998), for
the FY 1999 revisions; the FY 2001 final rule (65 FR 47064, August
1, 2000), for the FY 2001 revisions; the FY 2002 final rule (66 FR
39851, August 1, 2001), for the FY 2002 revisions; the FY 2003 final
rule (67 FR 49998, August 1, 2002), for the FY 2003 revisions; the
FY 2004 final rule (68 FR 45364, August 1, 2003), for the FY 2004
revisions; the FY 2005 final rule (69 FR 49848, August 11, 2004),
for the FY 2005 revisions; the FY 2006 final rule (70 FR 47640,
August 12, 2005), for the FY 2006 revisions; the FY 2007 final rule
(71 FR 47870) for the FY 2007 revisions; the FY 2008 final rule (72
FR 47130) for the FY 2008 revisions, the FY 2009 final rule (73 FR
48510), the FY 2010 final rule (74 FR 43799); the FY 2011 final rule
(75 FR 50114); and the FY 2012 final rule (76 FR 51542). In the FY
2000 final rule (64 FR 41490, July 30, 1999, we did not modify the
CC Exclusions List because we did not make any changes to the ICD-9-
CM codes for FY 2000.
---------------------------------------------------------------------------
(1) No Revisions Based on Changes to the ICD-9-CM Diagnosis Codes for
FY 2013
For FY 2013, we did not propose to make any revisions to the CC
Exclusions List. There were no changes made to the ICD-9-CM coding
system, effective October 1, 2012, due to the partial code freeze. (We
refer readers to section
[[Page 53316]]
II.G.9. of the preamble of this final rule for a discussion of the ICD-
9-CM coding system.)
(2) Suggested Changes to the MS-DRG Severity Levels for Diagnosis Codes
for FY 2013
(A) Protein-Calorie Malnutrition
We received a request that we consider changing the severity levels
for the following protein-calorie malnutrition diagnosis codes:
263.0 (Malnutrition of moderate degree)
263.1 (Malnutrition of mild degree)
263.9 (Unspecified protein-calorie malnutrition)
It was suggested that we change the severity level for diagnosis
codes 263.0 and 263.1 from a non-CC to a CC, while changing the
severity level for diagnosis code 263.9 from a CC to a non-CC. We
received this comment during the comment period for the FY 2012 IPPS/
LTCH PPS proposed rule. We referred to this issue briefly in the FY
2012 IPPS/LTCH PPS final rule (76 FR 51557). We indicated that we
considered this comment outside of the scope of the proposed rule, as
we did not propose any severity level changes to these codes for FY
2012, and did not address it in the final rule. However, we addressed
this issue in the FY 2013 proposed rule (77 FR 27907 through 27908) and
are finalizing our policy in this final rule.
For the proposed rule, we analyzed the claims data in the FY 2011
MedPAR file for diagnosis codes 263.0, 263.1, and 263.9. We used the
same approach we used in initially creating the MS-DRGs and classifying
secondary diagnosis codes as non-CCs, CCs, or MCCs. A detailed
discussion of the process and criteria we used in this process is
described in the FY 2008 IPPS final rule with comment period (72 FR
47158 through 47161). We refer the readers to this discussion for
complete information on our approach to developing the non-CC, CC, and
MCC lists. Each diagnosis for which Medicare data were available was
evaluated to determine its impact on resource use and to determine the
most appropriate CC subclass (non-CC, CC, or MCC) assignment. In order
to make this determination, the average cost for each subset of cases
was compared to the expected cost for cases in that subset. The
following format was used to evaluate each diagnosis:
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Code Diagnosis Cnt1 C1 Cnt2 C2 Cnt3 C3
----------------------------------------------------------------------------------------------------------------
Count (Cnt) is the number of patients in each subset. C1, C2, and
C3 are a measure of the impact on resource use of patients in each of
the subsets. The C1, C2, and C3 values are a measure of the ratio of
average costs for patients with these conditions to the expected
average cost across all cases. The C1 value reflects a patient with no
other secondary diagnosis or with all other secondary diagnoses that
are non-CCs. The C2 value reflects a patient with at least one other
secondary diagnosis that is a CC but none that is an MCC. The C3 value
reflects a patient with at least one other secondary diagnosis that is
an MCC. A value close to 1.0 in the C1 field suggests that the
diagnosis code produces the same expected value as a non-CC. A value
close to 2.0 suggests the condition is more like a CC than a non-CC but
not as significant in resource usage as an MCC. A value close to 3.0
suggests the condition is expected to consume resources more similar to
an MCC than a CC or non-CC. For additional details on this analysis, we
refer readers to the FY 2008 IPPS final rule with comment period (72 FR
47158 through 47161).
The following chart shows the analysis for each of the protein-
calorie malnutrition diagnosis codes:
----------------------------------------------------------------------------------------------------------------
Diagnosis Cnt 1 Cnt 2 Cnt 3
Code description CC Level Cnt 1 Impact Cnt 2 Impact Cnt 3 Impact
----------------------------------------------------------------------------------------------------------------
263.0........... Malnutrition of Non-CC 6,040 2.14 21,383 2.61 21,635 3.20
moderate degree.
263.1........... Malnutrition of Non-CC 4,139 2.22 11,598 2.50 8,921 3.13
mild degree.
263.9........... Unspecified CC 2,737 2.16 165,825 2.54 178,044 3.34
protein-calorie
malnutrition.
----------------------------------------------------------------------------------------------------------------
We ran the following data as described in the FY 2008 IPPS final
rule with comment period (72 FR 47158 through 47161). The C1 value
reflects a patient with no other secondary diagnosis or with all other
secondary diagnoses that are non-CCs. The C2 value reflects a patient
with at least one other secondary diagnosis that is a CC but none that
is a MCC. The C3 value reflects a patient with at least one other
secondary diagnosis that is an MCC.
The chart above shows that the C1 findings ranged from a low of
2.14 to a high of 2.22. As stated earlier, a C1 value close to 2.0
suggests the condition is more like a CC than a non-CC but not as
significant in resource usage as an MCC. The C1 findings suggest that
these codes are more like a CC than a non-CC. The C2 findings ranged
from 2.50 to 2.61. A value close to 2.0 suggests the condition is more
like a CC than a non-CC but not as significant in resource usage as an
MCC. A value close to 3.0 suggests the condition is expected to consume
resources more similar to an MCC than a CC or non-CC. The C2 findings
of 2.50 for diagnosis code 263.1 and 2.54 for diagnosis code 263.9
suggest these codes are more similar to a CC than a non-CC, while the
finding of 2.61 for diagnosis code 263.0 is borderline more similar to
an MCC than a CC or non-CC when there is at least one other secondary
diagnosis code that is a CC but none that is an MCC.
CC conditions typically have a C1 value over 1.75, a C2 value under
2.5, and a C3 value under 3.2. MCC conditions typically have a C1 value
over 2.4, a C2 value over 2.8, and a C3 value over 3.3. We concluded
that diagnosis code 263.0 is more similar to a CC than an MCC.
Therefore, the C1 and C2 findings support changing diagnosis codes
263.0 and 263.1 from a non-CC to a CC and maintaining code 263.9 as a
CC. Our clinical advisors reviewed this issue and are in support of
these findings that these conditions are more appropriately classified
as CCs. Based on the data and clinical analysis, we proposed for FY
2013 to change diagnosis codes 263.0 and 263.1 from a non-CC to a CC.
We did not propose any change to the severity level for diagnosis code
263.9. We invited public comment on our proposals.
Comment: Several commenters supported our proposal to change the
severity level for codes 263.0 and 263.1
[[Page 53317]]
from a non-CC to a CC and to maintain the severity level of code 263.9
as a CC. Several commenters stated that the proposal seems reasonable,
given the data and information provided. Some commenters expressed
appreciation for CMS' recognition of the increased costs of care
associated with these conditions and support efforts to more accurately
reflect its impact.
Response: We appreciate the support of the commenters.
After consideration of the public comments we received, we are
finalizing our proposal to change diagnosis codes 263.0 and 263.1 from
a non-CC to a CC and to maintain the severity level of a CC for
diagnosis code 263.9 for FY 2013.
(B) Antineoplastic Chemotherapy Induced Anemia
We received a request from a commenter that the severity level for
diagnosis code 285.3 (Antineoplastic chemotherapy induced anemia) be
changed from a non-CC to a CC. We received this comment during the
comment period for the FY 2012 IPPS/LTCH PPS proposed rule. We referred
to this issue briefly in the FY 2012 IPPS/LTCH PPS final rule (76 FR
51557). In that rule, we indicated that we considered this comment
outside of the scope of the proposed rule because we did not propose
any severity level changes to diagnosis code 285.3 for FY 2012;
therefore, we did not address the issue in the final rule. However, we
addressed this issue in the FY 2013 proposed rule and are finalizing
our policy in this final rule. For the proposed rule, we examined
claims data in the FY 2011 MedPAR file for diagnosis code 285.3
according to the approach that we used in FY 2008 as described above.
The following table illustrates our findings:
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cnt 1 Cnt 2 Cnt 3
Code Diagnosis description CC Level Cnt 1 Impact Cnt 2 Impact Cnt 3 Impact
--------------------------------------------------------------------------------------------------------------------------------------------------------
285.3........................... Antineoplastic chemotherapy Non-CC 1,937 1.36 11,858 2.21 6,036 3.11
induced anemia.
--------------------------------------------------------------------------------------------------------------------------------------------------------
As discussed above, a value close to 1.0 in the C1 field suggests
that the diagnosis code produces the same expected value as a non-CC. A
value of close to 2.0 suggests the condition is more like a CC than a
non-CC but not as significant in resource usage as an MCC. The C1
finding for diagnosis code 285.3 of 1.36 supports the current severity
level of a non-CC. The C2 finding of 2.21 for diagnosis code 285.3
suggests that this code is more similar to a CC than a non-CC but not
as significant as an MCC when there is at least one other secondary
diagnosis code that is a CC. CC conditions typically have a C1 value
over 1.75, a C2 value under 2.5, and a C3 value under 3.2.
Therefore, the C1 and C2 findings do not support changing the
severity level for diagnosis code 285.3 to a CC. In addition, our
clinical advisors reviewed this issue and support the decision not to
change the severity level for diagnosis code 285.3 because the anemia
is inherent in the treatment of cancer and does not qualify as a CC. As
a result of our data analysis as well as the advice of our clinical
advisors, we did not propose any change to the severity level for
diagnosis code 285.3 for FY 2013. We invited public comment on our
proposal.
Comment: Several commenters stated that our proposal to maintain
the severity level of a non-CC for code 285.3 seems reasonable, given
the data and information provided.
Response: We appreciate the support of the commenters for our
proposal.
After consideration of the public comments we received, we are
finalizing our proposal to not change the severity level for diagnosis
code 285.3 for FY 2013.
(C) Cardiomyopathy and Congestive Heart Failure, Unspecified
We received a comment that recommended changes to the severity
levels for the cardiomyopathy and congestive heart failure, unspecified
codes. The commenter recommended that cardiomyopathy codes, which are
currently classified as CCs, be changed to non-CCs and diagnosis code
428.0 (Congestive heart failure, unspecified) be changed from a non-CC
to a CC. According to the commenter, these recommended changes would
better represent the resources utilized in caring for this population
and reduce the administrative burden in clarifying these diagnoses with
providers. We received this comment during the comment period for the
FY 2012 IPPS/LTCH PPS proposed rule. We referred to this issue briefly
in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51557). We indicated
that we considered this comment outside of the scope of the proposed
rule because we did not propose any severity level changes to these
codes for FY 2012; therefore, we did not address it in the final rule.
However, we addressed this issue in the FY 2013 proposed rule and are
finalizing our policy in this final rule.
The commenter did not provide a list of the cardiomyopathy codes.
We identified the following codes for analysis of the claims data in
the FY 2011 MedPAR file:
425.4 (Other primary cardiomyopathies)
425.5 (Alcoholic cardiomyopathy)
425.7 (Nutritional and metabolic cardiomyopathy)
425.8 (Cardiomyopathy in other diseases classified elsewhere)
425.9 (Secondary cardiomyopathy, unspecified)
428.0 (Congestive heart failure, unspecified)
We did not include diagnosis codes 425.11 (Hypertrophic obstructive
cardiomyopathy) and 425.18 (Other hypertrophic cardiomyopathy) for our
analysis because these two codes were created in FY 2012 and the data
are not yet available. We examined claims data according to the
approach that we used in FY 2008 as described above. The following
table illustrates our findings:
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cnt 1 Cnt 2 Cnt 3
Code Diagnosis description CC Level Cnt 1 Impact Cnt 2 Impact Cnt 3 Impact
--------------------------------------------------------------------------------------------------------------------------------------------------------
425.4...................................... Other primary cardiomyopathies CC 39,489 1.47 243,719 2.18 139,689 3.20
425.5...................................... Alcoholic cardiomyopathy...... CC 438 1.68 2,643 2.19 1,670 3.26
425.7...................................... Nutritional and metabolic CC 60 1.18 869 2.17 799 3.14
cardiomyopathy.
425.8...................................... Cardiomyopathy in other CC 940 1.19 5,967 2.15 5,171 3.14
diseases classified elsewhere.
[[Page 53318]]
425.9...................................... Secondary cardiomyopathy, CC 356 1.56 2,078 2.07 1.372 3.22
unspecified.
428.0...................................... Congestive heart failure, Non-CC 304,963 1.40 634,241 2.16 748,649 3.06
unspecified.
--------------------------------------------------------------------------------------------------------------------------------------------------------
The table above shows that the C1 findings for the cardiomyopathy
codes ranged from a low of 1.18 to a high of 1.68. A value close to 1.0
in the C1 field suggests that the diagnosis code produces the same
expected value as a non-CC. A value of close to 2.0 suggests the
condition is more like a CC than a non-CC but not as significant in
resource usage as an MCC. The C1 findings suggest that the majority of
these cardiomyopathy codes are more similar to a non-CC than a CC. The
C2 findings ranged from a low of 2.07 to a high of 2.19. These findings
suggest that these cardiomyopathy codes are more similar to a CC.
The C1 finding for diagnosis code 428.0 of 1.40 suggests that the
condition is more similar to a non-CC than a CC. The C2 finding for
diagnosis code 428.0 of 2.16 suggests that the secondary diagnosis is
more similar to a CC than a non-CC.
The data are mixed between the C1 and C2 findings for the
cardiomyopathy codes and do not consistently support a change in the
severity level. Our clinical advisors reviewed these issues and are not
in support of proposing any changes to the severity levels for these
codes. Our clinical advisors stated that the diagnosis of
cardiomyopathy (diagnosis codes 425.4 through 425.9) is generally
severe, with significant impact on the patient requiring additional
monitoring resources and cognitive effort, and is appropriately
classified as a CC.
The data are mixed between the C1 and C2 findings for the
congestive heart failure, unspecified, diagnosis code 428.0. Our
clinical advisors reviewed these issues and are not in support of
proposing any changes to the severity level of code 428.0. They
indicated that diagnosis code 428.0 is very nonspecific and does not
identify the severity of the heart failure, and concluded that the
current classification for code 428.0 as a non-CC is appropriate. As a
result of our data analysis and clinical advisors' review of these
issues, we did not propose any changes to the severity level for the
cardiomyopathy and congestive heart failure, unspecified codes for FY
2013. We invited public comment on our proposal.
Comment: Several commenters stated that our proposal to make no
changes to the severity level for cardiomyopathy and congestive heart
failure, unspecified codes seems reasonable, given the data and
information provided.
Response: We appreciate the support of the commenters for our
proposal.
After consideration of the public comments we received, we are
finalizing our proposal to maintain the current severity level for
cardiomyopathy and congestive heart failure, unspecified codes for FY
2013.
(D) Chronic Total Occlusion of Artery of the Extremities
We received a request to change the severity level designation for
diagnosis code 440.4 (Chronic total occlusion of artery of the
extremities) to a CC. Currently, the diagnosis code is classified as a
non-CC. Chronic total occlusion of artery of the extremities forms when
plaque accumulates in an artery over an extended period of time,
resulting in total cessation of blood flow. We analyzed claims data in
the FY 2011 MedPAR file for this diagnosis code according to the
approach that we used in FY 2008 as described above. The following
table illustrates our findings:
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cnt 1 Cnt 2 Cnt 3
Code Diagnosis description CC Level Cnt 1 Impact Cnt 2 Impact Cnt 3 Impact
--------------------------------------------------------------------------------------------------------------------------------------------------------
440.4................................... Chronic total occlusion of Non-CC 8,439 1.38 8,057 2.70 5,366 3.23
artery of the extremities.
--------------------------------------------------------------------------------------------------------------------------------------------------------
The C1 finding of 1.38 for diagnosis code 440.4 supports the
current designation of this diagnosis code as a non-CC. However, the C2
findings of 2.70 suggests that this code is similar to a CC or perhaps
an MCC, as this value is near to 3.0, which suggests that this
condition is similar to an MCC. However, we would expect a higher C1
value such as 2.4 for this condition to qualify as an MCC.
The C1 and C2 findings support changing diagnosis code 440.4 from a
non-CC to a CC. Our clinical advisors reviewed this issue and are in
support of changing the severity level because this condition behaves
as a CC. Therefore, in the FY 2013 IPPS/LTCH PPS proposed rule, we
proposed to change the severity level for diagnosis code 440.4 from a
non-CC to a CC for FY 2013. We invited public comment on our proposal.
Comment: Several commenters supported our proposed change to the
severity level from a non-CC to a CC for code 440.4. Several commenters
stated that the proposal seems reasonable, given the data and
information provided.
One commenter stated that crossing a stenotic occlusive lesion
typically requires manipulation of the guidewire with a single catheter
that remains in the vessel lumen. In contrast, crossing a chronic total
occlusion typically requires multiple wires and catheters whereby the
wire leaves the vessel lumen, dissects through the subintimal plane
around the occlusive lesion, and then must be manipulated back into the
true outflow lumen. According to the commenter, the additional time,
intensity of work, and resources necessary to perform an endovascular
revascularization of a chronic total occlusion justify the proposed
increase in severity level.
Response: We appreciate the support of the commenters for our
proposal.
After consideration of the public comments we received, we are
finalizing our proposal to change the severity level for diagnosis code
440.4 from a non-CC to a CC for FY 2013.
(E) Acute Kidney Failure With Other Specific Pathological Lesion in
Kidney
We received a request to consider changing the severity level for
diagnosis code 584.8 (Acute kidney failure with other specified
pathological lesion in kidney). This diagnosis code's severity level is
currently classified as an MCC. We examined claims data for this code
in the FY 2011 MedPAR file according to the approach described above.
The following table illustrates those findings.
[[Page 53319]]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Severity Cnt 1 Cnt 2 Cnt 3
Code Diagnosis description level Cnt 1 Impact Cnt 2 Impact Cnt 3 Impact
--------------------------------------------------------------------------------------------------------------------------------------------------------
584.8................................... Acute kidney failure with MCC 12 0.98 13 1.89 1,350 3.17
other specified
pathological lesion in
kidney.
--------------------------------------------------------------------------------------------------------------------------------------------------------
As discussed above, a C1 value close to 1.0 in the C1 field
suggests that the diagnosis code produces the same expected value as a
diagnosis code that has been classified as a non-CC. A value close to
2.0 in the C1 field suggests that the condition is more similar to a CC
severity level than a non-CC severity level, but not as significant in
resource usage as an MCC severity level. In this case, the C1 value
finding for diagnosis code 584.8 of 0.98 suggests that this diagnosis
code is more similar to a non-CC than an MCC. A C2 value close to 3.0
suggests that the condition is more similar to an MCC than a CC or a
non-CC. A C2 value close to 2.0 suggests that the condition is more
similar to a CC than a non-CC. The C2 value finding for diagnosis code
584.8 of 1.89 supports classifying the severity level of this diagnosis
code as a CC. Therefore, the C1 and C2 value findings support changing
the severity level of diagnosis code 584.8 from an MCC to a lower
severity level, that is, a CC. Our clinical advisors reviewed this
issue and stated that this condition behaves as a CC. Therefore, they
supported changing the severity level of this diagnosis code to a CC.
Based on the clinical analysis and consistent with supporting claims
data, we believe that the severity level of diagnosis code 584.8 should
be changed from an MCC to a CC. Therefore, in the FY 2013 IPPS/LTCH PPS
proposed rule, we proposed to change the severity level of diagnosis
code 584.8 from an MCC to a CC for FY 2013. We invited public comment
on our proposal.
Comment: Commenters stated CMS' proposed change to the severity
level of diagnosis code 584.8 from an MCC to a CC was reasonable, given
the data and information provided.
Response: We appreciate the support of the commenters for our
proposal.
Comment: One commenter opposed the proposal to change the severity
level of diagnosis code 584.8 from an MCC to a CC. The commenter stated
that this downgrade penalizes hospitals willing to take on sicker
patients because additional care is required to treat patients with
this condition. The commenter stated that this change would also hurt
hospitals whose clinical documentation staff, in conjunction with
providers, perform the additional work of identifying the underlying
cause of the kidney failure.
Response: Information from our claims data does not support the
commenter's statement that these are sicker patients who should be
classified at the MCC severity level. As discussed above, our claims
data suggests that code 584.8 is more appropriately classified as a CC.
The C1 finding of 0.98 suggests that this code is more like a non-CC
than an MCC. The C2 finding of 1.89 supports classifying this code as
either a non-CC or CC. Therefore, the C1 and C2 findings support
changing code 584.8 from an MCC to a lower severity level. Our clinical
advisors reviewed this issue and support changing the severity level of
this code to a CC. Our clinical analysis and consistent claims data
support changing code 584.8 from an MCC to CC.
We disagree with the commenter's statement that this severity level
change would hurt hospitals whose clinical documentation staff, in
conjunction with providers, perform the additional work of identifying
the underlying cause of the kidney failure. CMS supports improved
documentation practices by providers, which leads to better patient
care. Providers should consistently work on improved clinical
documentation for all patients, not just those who have a secondary
diagnosis on the MCC list. We do not agree that changing the severity
level of procedure code 584.8 hurts hospitals who attempt to improve
the clinical document in their medical records.
After consideration of the public comments we received, we are
finalizing our proposal to change the severity level of diagnosis code
584.8 from an MCC to a CC.
(F) Pressure Ulcer, Unstageable
We received a request to consider changing the severity level for
diagnosis code 707.25 (Pressure ulcer, unstageable) from its current
classification as a non-CC to an MCC. This issue was referred to as an
out-of-scope public comment in the FY 2012 IPPS/LTCH PPS final rule (76
FR 51557), but was not addressed in that rule.
For the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27910), we
analyzed claims data for diagnosis code 707.25 from the FY 2011 MedPAR
file according to the process and approach described above. The
following table illustrates our findings:
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cnt 1 Cnt 2 Cnt 3
Code Diagnosis description CC level Cnt 1 Impact Cnt 2 Impact Cnt 3 Impact
--------------------------------------------------------------------------------------------------------------------------------------------------------
707.25............................... Pressure ulcer, unstageable.. Non-CC 1,839 1.87 7,161 2.46 13,285 3.08
--------------------------------------------------------------------------------------------------------------------------------------------------------
As discussed above, a C1 value close to 2.0 suggests the condition
is more similar to a CC than a non-CC severity level but not as
significant in resource usage as an MCC. The C1 value finding of 1.87
for diagnosis code 707.25, which is near but not that close to a 2.0,
suggests that this code is more similar to a CC than an MCC. A C2 value
of close to 3.0 suggests the condition is more similar to an MCC than a
CC or non-CC. The C2 value finding for diagnosis code 707.25 is 2.46,
which is not close to 3.0 and, therefore, the data do not support
classifying this as an MCC. The C1 and C2 findings are more supportive
of a classification as a CC than an MCC. There is another problem with
this request to change diagnosis code 707.25 from a non-CC to an MCC.
Currently, only stages III and IV pressure ulcers are MCCs. This
unstageable code captures a pressure ulcer whose stage has not been
determined. It would be inappropriate to assume that a pressure ulcer
reported with diagnosis code 707.25 might be a stage III or IV pressure
ulcer. Our claims data C1 and C2 findings do not support the fact that
this code acts as an MCC. As mentioned earlier, the claims data are
more supportive of a classification as a CC than an MCC. We asked our
clinical advisors to review this issue. Our clinical advisors agree
that the data findings and their own clinical evaluation support not
changing the severity level of this diagnosis code to a CC or an MCC.
Our clinical advisors
[[Page 53320]]
recommend that unstageable pressure ulcers should continue to be
classified as a non-CC because the stage is not clearly designated as a
stage III or IV. Unstageable codes do not delineate what the stage of
the ulcer might be. As a result of our data analysis as well as the
advice of our clinical advisors, we believe that unstageable pressure
ulcers should continue to be classified as a non-CC. Therefore, we
proposed that diagnosis code 707.25 remain a non-CC for FY 2013.
We invited public comment on our proposal not to change the
severity level for diagnosis code 707.25 for FY 2013.
Comment: Several commenters supported our proposal not to change
the severity level for diagnosis code 707.25. The commenters stated the
proposal seems reasonable, given the data and information provided.
Response: We appreciate the support of the commenters.
Comment: One commenter questioned whether a ``not examined ulcer''
would be classified the same as unstageable. The commenter stated that
an ulcer should not be classified as unstageable simply because it was
not examined.
Response: If a pressure ulcer is documented in the medical record
and the stage is unspecified, code 707.20 (Pressure ulcer, unspecified
stage) would be assigned.
Comment: Some commenters did not support our proposal. The
commenters pointed out that the National Pressure Ulcer Advisory Panel
defines unstageable pressure ulcers as at least a stage III pressure
ulcer and suggested that the resource expenditures associated with
treating this condition would meet the definition of an MCC. Another
commenter recommended that the severity level for code 707.25 be
changed to a CC.
Response: Based on the data and our analysis presented above, we
concluded that diagnosis code 707.25 did not warrant a change to the
severity level. Our clinical advisors recommend that unstageable
pressure ulcers should continue to be classified as a non-CC because
the stage is not clearly designated as a stage III or IV. Without
knowing the stage of the ulcer, an assumption should not be made.
After consideration of the public comments we received, we are
finalizing our proposal to not change the severity level for code
707.25 for FY 2013.
For FY 2013, we proposed changes to Table 6G (Additions to the CC
Exclusion List). As we discussed earlier, we are finalizing our
proposed changes to the severity level for diagnosis codes 263.0,
263.1, and 440.4 from a non-CC to a CC. There are no proposed and
finalized changes to Table 6H (Deletions to the CC Exclusion List).
These tables, which contain codes that are effective for discharges
occurring on or after October 1, 2012, are not being published in the
Addendum to this final rule because of the length of the two tables.
Instead, we are making them available through the Internet on the CMS
Web site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-
Payment/AcuteInpatientPPS/index.html. Each of these principal diagnoses
for which there is a CC exclusion is shown in Tables 6G and 6H with an
asterisk, and the conditions that will not count as a CC are provided
in an indented column immediately following the affected principal
diagnosis.
A complete updated MCC, CC, and Non-CC Exclusions List is available
through the Internet on the CMS Web site at: http://www.cms.hhs.gov/
Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
Beginning with discharges on or after October 1, 2011, the indented
diagnoses were not recognized by the GROUPER as valid CCs for the
asterisked principal diagnosis.
To assist readers in identifying the changes to the MCC and CC
lists that occur as a result of our review of severity levels for
several ICD-9-CM diagnosis codes, we are providing the following
summaries of those MCC and CC changes for FY 2013. There are no new,
revised, or deleted diagnosis codes for FY 2013. Therefore, there are
no Tables 6A, 6C, and 6E published for FY 2013.
Summary of Additions to the MS-DRG MCC List--Table 6I.1
There are no additions to the MS-DRG MCC List.
Summary of Deletions From the MS-DRG MCC List--Table 6I.2
--------------------------------------------------------------------------------------------------------------------------------------------------------
Code Description
--------------------------------------------------------------------------------------------------------------------------------------------------------
584.8......................................... Acute kidney failure with other specified pathological lesion in kidney.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Summary of Additions to the MS-DRG CC List--Table 6J.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
Code Description
--------------------------------------------------------------------------------------------------------------------------------------------------------
263.0......................................... Malnutrition of moderate degree.
263.1......................................... Malnutrition of mild degree.
440.4......................................... Chronic total occlusion of artery of the extremities.
584.8......................................... Acute kidney failure with other specified pathological lesion in kidney.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Summary of Deletions From the MS-DRG CC List--Table 6J.2
There are no deletions from the MS-DRG CC list.
Alternatively, the complete documentation of the GROUPER logic,
including the current CC Exclusions List, is available from 3M/Health
Information Systems (HIS), which, under contract with CMS, is
responsible for updating and maintaining the GROUPER program. The
current MS-DRG Definitions Manual, Version 29.0, is available on a CD
for $225.00. Version 30.0 of this manual, which will include the final
FY 2013 MS-DRG changes, will be available on a CD for $225.00. These
manuals may be obtained by writing 3M/HIS at the following address: 100
Barnes Road, Wallingford, CT 06492; or by calling (203) 949-0303, or by
obtaining an order form at the Web site: http://www.3MHIS.com. Please
specify the revision or revisions requested.
8. Review of Procedure Codes in MS DRGs 981 Through 983; 984 Through
986; and 987 Through 989
Each year, we review cases assigned to former CMS DRG 468
(Extensive O.R. Procedure Unrelated to Principal Diagnosis), CMS DRG
476 (Prostatic O.R. Procedure Unrelated to Principal Diagnosis), and
CMS DRG 477 (Nonextensive O.R. Procedure Unrelated to Principal
Diagnosis) to determine whether it would be appropriate to
[[Page 53321]]
change the procedures assigned among these CMS DRGs. Under the MS-DRGs
that we adopted for FY 2008, CMS DRG 468 was split three ways and
became MS-DRGs 981, 982, and 983 (Extensive O.R. Procedure Unrelated to
Principal Diagnosis with MCC, with CC, and without CC/MCC,
respectively). CMS DRG 476 became MS-DRGs 984, 985, and 986 (Prostatic
O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and
without CC/MCC, respectively). CMS DRG 477 became MS-DRGs 987, 988, and
989 (Nonextensive O.R. Procedure Unrelated to Principal Diagnosis with
MCC, with CC, and without CC/MCC, respectively).
MS-DRGs 981 through 983, 984 through 986, and 987 through 989
(formerly CMS DRGs 468, 476, and 477, respectively) are reserved for
those cases in which none of the O.R. procedures performed are related
to the principal diagnosis. These MS-DRGs are intended to capture
atypical cases, that is, those cases not occurring with sufficient
frequency to represent a distinct, recognizable clinical group. MS-DRGs
984 through 986 (previously CMS DRG 476) are assigned to those
discharges in which one or more of the following prostatic procedures
are performed and are unrelated to the principal diagnosis:
60.0, Incision of prostate
60.12, Open biopsy of prostate
60.15, Biopsy of periprostatic tissue
60.18, Other diagnostic procedures on prostate and
periprostatic tissue
60.21, Transurethral prostatectomy
60.29, Other transurethral prostatectomy
60.61, Local excision of lesion of prostate
60.69, Prostatectomy, not elsewhere classified
60.81, Incision of periprostatic tissue
60.82, Excision of periprostatic tissue
60.93, Repair of prostate
60.94, Control of (postoperative) hemorrhage of prostate
60.95, Transurethral balloon dilation of the prostatic urethra
60.96, Transurethral destruction of prostate tissue by
microwave thermotherapy
60.97, Other transurethral destruction of prostate tissue by
other thermotherapy
60.99, Other operations on prostate
All remaining O.R. procedures are assigned to MS-DRGs 981 through
983 and 987 through 989, with MS-DRGs 987 through 989 assigned to those
discharges in which the only procedures performed are nonextensive
procedures that are unrelated to the principal diagnosis.\14\
---------------------------------------------------------------------------
\14\ The original list of the ICD-9-CM procedure codes for the
procedures we consider nonextensive procedures, if performed with an
unrelated principal diagnosis, was published in Table 6C in section
IV. of the Addendum to the FY 1989 final rule (53 FR 38591). As part
of the FY 1991 final rule (55 FR 36135), the FY 1992 final rule (56
FR 43212), the FY 1993 final rule (57 FR 23625), the FY 1994 final
rule (58 FR 46279), the FY 1995 final rule (59 FR 45336), the FY
1996 final rule (60 FR 45783), the FY 1997 final rule (61 FR 46173),
and the FY 1998 final rule (62 FR 45981), we moved several other
procedures from DRG 468 to DRG 477, and some procedures from DRG 477
to DRG 468. No procedures were moved in FY 1999, as noted in the
final rule (63 FR 40962); in FY 2000 (64 FR 41496); in FY 2001 (65
FR 47064); or in FY 2002 (66 FR 39852). In the FY 2003 final rule
(67 FR 49999) we did not move any procedures from DRG 477. However,
we did move procedure codes from DRG 468 and placed them in more
clinically coherent DRGs. In the FY 2004 final rule (68 FR 45365),
we moved several procedures from DRG 468 to DRGs 476 and 477 because
the procedures are nonextensive. In the FY 2005 final rule (69 FR
48950), we moved one procedure from DRG 468 to 477. In addition, we
added several existing procedures to DRGs 476 and 477. In the FY
2006 (70 FR 47317), we moved one procedure from DRG 468 and assigned
it to DRG 477. In FY 2007, we moved one procedure from DRG 468 and
assigned it to DRGs 479, 553, and 554. In FYs 2008, 2009, FY 2010,
FY 2011, and FY 2012, no procedures were moved, as noted in the FY
2008 final rule with comment period (72 FR 46241); the FY 2009 final
rule (73 FR 48513); the FY 2010 final rule (74 FR 43796); the FY
2011 final rule (75 FR 50122); and the FY 2012 final rule (76 FR
51549).
---------------------------------------------------------------------------
Our review of MedPAR claims data showed that there were no cases
that merited movement or should logically be assigned to any of the
other MDCs. Therefore, for FY 2013, we did not propose to change the
procedures assigned among these MS-DRGs.
We did not receive any public comments on our proposal. Therefore,
as we proposed, we are not making any changes to the procedures
assigned to MS-DRGs 981 through 983, MS-DRGs 984 through 986, and MS-
DRGs 987 through 989 for FY 2013.
a. Moving Procedure Codes From MS-DRGs 981 Through 983 or MS-DRGs 987
Through 989 into MDCs
We annually conduct a review of procedures producing assignment to
MS-DRGs 981 through 983 (Extensive O.R. procedure unrelated to
principal diagnosis with MCC, with CC, and without CC/MCC,
respectively) or MS-DRGs 987 through 989 (Nonextensive O.R. procedure
unrelated to principal diagnosis with MCC, with CC, and without CC/MCC,
respectively) on the basis of volume, by procedure, to see if it would
be appropriate to move procedure codes out of these MS-DRGs into one of
the surgical MS-DRGs for the MDC into which the principal diagnosis
falls. The data are arrayed in two ways for comparison purposes. We
look at a frequency count of each major operative procedure code. We
also compare procedures across MDCs by volume of procedure codes within
each MDC.
We identify those procedures occurring in conjunction with certain
principal diagnoses with sufficient frequency to justify adding them to
one of the surgical MS-DRGs for the MDC in which the diagnosis falls.
As noted above, there were no cases that merited movement or that
should logically be assigned to any of the other MDCs. Therefore, for
FY 2013, we did not propose to remove any procedures from MS-DRGs 981
through 983 or MS-DRGs 987 through 989 into one of the surgical MS-DRGs
for the MDC into which the principal diagnosis is assigned.
We did not receive any public comments on our proposal. Therefore,
as we proposed, we are not making any changes to the procedures
assigned to MS-DRGs 981 through 983 or MS-DRGs 987 through 989 for FY
2013.
b. Reassignment of Procedures Among MS-DRGs 981 Through 983, 984
Through 986, and 987 Through 989
We also annually review the list of ICD-9-CM procedures that, when
in combination with their principal diagnosis code, result in
assignment to MS-DRGs 981 through 983, 984 through 986 (Prostatic O.R.
procedure unrelated to principal diagnosis with MCC, with CC, or
without CC/MCC, respectively), and 987 through 989, to ascertain
whether any of those procedures should be reassigned from one of these
three MS-DRGs to another of the three MS-DRGs based on average costs
and the length of stay. We look at the data for trends such as shifts
in treatment practice or reporting practice that would make the
resulting MS-DRG assignment illogical. If we find these shifts, we
would propose to move cases to keep the MS-DRGs clinically similar or
to provide payment for the cases in a similar manner. Generally, we
move only those procedures for which we have an adequate number of
discharges to analyze the data.
There were no cases representing shifts in treatment practice or
reporting practice that would make the resulting MS-DRG assignment
illogical, or that merited movement so that cases should logically be
assigned to any of the other MDCs. Therefore, for FY 2013, we did not
propose to move any procedure codes among these MS-DRGs.
We did not receive any public comments on our proposal. Therefore,
as we proposed, we are not moving any procedures assigned to MS-DRGs
981 through 983, MS-DRGs 984 through 986, and MS-DRGs 987 through 989
for FY 2013.
[[Page 53322]]
c. Adding Diagnosis or Procedure Codes to MDCs
Based on the review of cases in the MDCs as described above in
sections II.G.1. through 4. of this preamble, we did not propose to add
any diagnosis or procedure codes to MDCs for FY 2013. We did not
receive any public comments on our proposal. Therefore, as we proposed,
we are not adding any diagnosis or procedure codes to MDCs for FY 2013.
9. Changes to the ICD-9-CM Coding System, Including Discussion of the
Replacement of the ICD-9-CM Coding System With the ICD-10-CM and ICD-
10-PCS Systems in FY 2014
a. ICD-9-CM Coding System
The ICD-9-CM is a coding system currently used for the reporting of
diagnoses and procedures performed on a patient. In September 1985, the
ICD-9-CM Coordination and Maintenance Committee was formed. This is a
Federal interdepartmental committee, co-chaired by the National Center
for Health Statistics (NCHS), the Centers for Disease Control and
Prevention, and CMS, charged with maintaining and updating the ICD-9-CM
system. The Committee is jointly responsible for approving coding
changes, and developing errata, addenda, and other modifications to the
ICD-9-CM to reflect newly developed procedures and technologies and
newly identified diseases. The Committee is also responsible for
promoting the use of Federal and non-Federal educational programs and
other communication techniques with a view toward standardizing coding
applications and upgrading the quality of the classification system.
The Official Version of the ICD-9-CM contains the list of valid
diagnosis and procedure codes. (The Official Version of the ICD-9-CM is
available from the Government Printing Office on CD-ROM for $29.00 by
calling (202) 512-1800.) Complete information on ordering the CD-ROM is
also available at: http://www.cms.hhs.gov/ICD9ProviderDiagnosticCodes/05CDROM.asp#TopOfPage. The Official Version of the ICD-9-CM is no
longer available in printed manual form from the Federal Government; it
is only available on CD-ROM. Users who need a paper version are
referred to one of the many products available from publishing houses.
The NCHS has lead responsibility for the ICD-9-CM diagnosis codes
included in the Tabular List and Alphabetic Index for Diseases, while
CMS has lead responsibility for the ICD-9-CM procedure codes included
in the Tabular List and Alphabetic Index for Procedures.
The Committee encourages participation in the above process by
health-related organizations. In this regard, the Committee holds
public meetings for discussion of educational issues and proposed
coding changes. These meetings provide an opportunity for
representatives of recognized organizations in the coding field, such
as the American Health Information Management Association (AHIMA), the
American Hospital Association (AHA), and various physician specialty
groups, as well as individual physicians, health information management
professionals, and other members of the public, to contribute ideas on
coding matters. After considering the opinions expressed at the public
meetings and in writing, the Committee formulates recommendations,
which then must be approved by the agencies.
The Committee presented proposals for coding changes for
implementation in FY 2013 at a public meeting held on September 14,
2011 and finalized the coding changes after consideration of comments
received at the meetings and in writing by November 18, 2011.
The Committee held its 2012 meeting on March 5, 2012. New codes for
which there was consensus of public support and for which complete
tabular and indexing changes were made by May 2012 are included in the
October 1, 2012 update to ICD-9-CM. Code revisions that were discussed
at the March 5, 2012 Committee meeting but that could not be finalized
in time to include them in the tables listed in section VI. of the
Addendum to the proposed rule are included in Table 6B which is listed
in section VI. of the Addendum to this final rule and available via the
Internet on the CMS Web site, and are marked with an asterisk (*).
In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27912), we stated
that, for FY 2013, there were no changes to the ICD-9-CM coding system
due to the partial code freeze or for new technology. However, at the
March 5, 2012 meeting there was a request for a code for a new
technology. As discussed below, only codes for new technologies or new
diagnoses are being considered during the partial code freeze. After
discussions at the meeting and public comment received after the
meeting, it was decided that there will be one new procedure code
effective October 1, 2012: new code 00.95 (Injection or infusion of
glucarpidase).
Therefore, there are no new, revised, or deleted diagnosis codes
and no revised or deleted procedure codes that are usually announced in
Tables 6A (New Diagnosis Codes), 6C (Invalid Diagnosis Codes), 6D
(Invalid Procedure Codes), 6E (Revised Diagnosis Code Titles), and 6F
(Revised Procedure Codes). The new procedure code is listed in Table 6B
(New Procedure Codes) for this final rule, which is available via the
Internet on the CMS Web site.
Copies of the minutes of the procedure codes discussions at the
Committee's September 14, 2011 meeting and March 5, 2012 meeting can be
obtained from the CMS Web site at: http://cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html?redirect=/icd9ProviderDiagnosticCodes/03_meetings.asp. The minutes of the
diagnosis codes discussions at the September 14, 2011 meeting and March
5, 2012 meeting are found at: http://www.cdc.gov/nchs/icd.htm. These
Web sites also provide detailed information about the Committee,
including information on requesting a new code, attending a Committee
meeting, and timeline requirements and meeting dates.
We encourage commenters to address suggestions on coding issues
involving diagnosis codes to: Donna Pickett, Co-Chairperson, ICD-9-CM
Coordination and Maintenance Committee, NCHS, Room 2402, 3311 Toledo
Road, Hyattsville, MD 20782. Comments may be sent by Email to:
[email protected].
Questions and comments concerning the procedure codes should be
addressed to: Patricia E. Brooks, Co-Chairperson, ICD-9-CM Coordination
and Maintenance Committee, CMS, Center for Medicare Management,
Hospital and Ambulatory Policy Group, Division of Acute Care, C4-08-06,
7500 Security Boulevard, Baltimore, MD 21244-1850. Comments may be sent
by Email to: [email protected].
In the September 7, 2001 final rule implementing the IPPS new
technology add-on payments (66 FR 46906), we indicated we would attempt
to include proposals for procedure codes that would describe new
technology discussed and approved at the Spring meeting as part of the
code revisions effective the following October.
Section 503(a) of Public Law 108-173 included a requirement for
updating ICD-9-CM codes twice a year instead of a single update on
October 1 of each year. This requirement was included as part of the
amendments to the Act relating to recognition of new technology under
the IPPS. Section 503(a) amended section 1886(d)(5)(K) of the Act by
adding a clause (vii) which states that the ``Secretary shall provide
[[Page 53323]]
for the addition of new diagnosis and procedure codes on April 1 of
each year, but the addition of such codes shall not require the
Secretary to adjust the payment (or diagnosis-related group
classification) * * * until the fiscal year that begins after such
date.'' This requirement improves the recognition of new technologies
under the IPPS system by providing information on these new
technologies at an earlier date. Data will be available 6 months
earlier than would be possible with updates occurring only once a year
on October 1.
While section 1886(d)(5)(K)(vii) of the Act states that the
addition of new diagnosis and procedure codes on April 1 of each year
shall not require the Secretary to adjust the payment, or DRG
classification, under section 1886(d) of the Act until the fiscal year
that begins after such date, we have to update the DRG software and
other systems in order to recognize and accept the new codes. We also
publicize the code changes and the need for a mid-year systems update
by providers to identify the new codes. Hospitals also have to obtain
the new code books and encoder updates, and make other system changes
in order to identify and report the new codes.
The ICD-9-CM Coordination and Maintenance Committee holds its
meetings in the spring and fall in order to update the codes and the
applicable payment and reporting systems by October 1 of each year.
Items are placed on the agenda for the ICD-9-CM Coordination and
Maintenance Committee meeting if the request is received at least 2
months prior to the meeting. This requirement allows time for staff to
review and research the coding issues and prepare material for
discussion at the meeting. It also allows time for the topic to be
publicized in meeting announcements in the Federal Register as well as
on the CMS Web site. The public decides whether or not to attend the
meeting based on the topics listed on the agenda. Final decisions on
code title revisions are currently made by March 1 so that these titles
can be included in the IPPS proposed rule. A complete addendum
describing details of all changes to ICD-9-CM, both tabular and index,
is published on the CMS and NCHS Web sites in May of each year.
Publishers of coding books and software use this information to modify
their products that are used by health care providers. This 5-month
time period has proved to be necessary for hospitals and other
providers to update their systems.
A discussion of this timeline and the need for changes are included
in the December 4-5, 2005 ICD-9-CM Coordination and Maintenance
Committee minutes. The public agreed that there was a need to hold the
fall meetings earlier, in September or October, in order to meet the
new implementation dates. The public provided comment that additional
time would be needed to update hospital systems and obtain new code
books and coding software. There was considerable concern expressed
about the impact this new April update would have on providers.
In the FY 2005 IPPS final rule, we implemented section
1886(d)(5)(K)(vii) of the Act, as added by section 503(a) of Public Law
108-173, by developing a mechanism for approving, in time for the April
update, diagnosis and procedure code revisions needed to describe new
technologies and medical services for purposes of the new technology
add-on payment process. We also established the following process for
making these determinations. Topics considered during the Fall ICD-9-CM
Coordination and Maintenance Committee meeting are considered for an
April 1 update if a strong and convincing case is made by the requester
at the Committee's public meeting. The request must identify the reason
why a new code is needed in April for purposes of the new technology
process. The participants at the meeting and those reviewing the
Committee meeting summary report are provided the opportunity to
comment on this expedited request. All other topics are considered for
the October 1 update. Participants at the Committee meeting are
encouraged to comment on all such requests. There were no requests
approved for an expedited April 1, 2012 implementation of an ICD-9-CM
code at the September 14, 2011 Committee meeting. Therefore, there were
no new ICD-9-CM codes implemented on April 1, 2012.
Current addendum and code title information is published on the CMS
Web site at: http://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html?redirect=/icd9ProviderDiagnosticCodes/01overview.asp#TopofPage. Information on
ICD-9-CM diagnosis codes, along with the Official ICD-9-CM Coding
Guidelines, can be found on the Web site at: http://www.cdc.gov/nchs/icd9.htm. Information on new, revised, and deleted ICD-9-CM codes is
also provided to the AHA for publication in the Coding Clinic for ICD-
9-CM. AHA also distributes information to publishers and software
vendors.
CMS also sends copies of all ICD-9-CM coding changes to its
Medicare contractors for use in updating their systems and providing
education to providers.
These same means of disseminating information on new, revised, and
deleted ICD-9-CM codes will be used to notify providers, publishers,
software vendors, contractors, and others of any changes to the ICD-9-
CM codes that are implemented in April. The code titles are adopted as
part of the ICD-9-CM Coordination and Maintenance Committee process.
Thus, although we publish the code titles in the IPPS proposed and
final rules, they are not subject to comment in the proposed or final
rules. We will continue to publish the October code updates in this
manner within the IPPS proposed and final rules. For codes that are
implemented in April, we will assign the new procedure code to the same
MS-DRG in which its predecessor code was assigned so there will be no
MS-DRG impact as far as MS-DRG assignment. Any midyear coding updates
will be available through the Web sites indicated above and through the
Coding Clinic for ICD-9-CM. Publishers and software vendors currently
obtain code changes through these sources in order to update their code
books and software systems. We will strive to have the April 1 updates
available through these Web sites 5 months prior to implementation
(that is, early November of the previous year), as is the case for the
October 1 updates.
b. Code Freeze
The International Classification of Diseases, 10th Revision (ICD-
10) coding system applicable to hospital inpatient services is to be
implemented on October 1, 2013, as described in the Health Insurance
Portability and Accountability Act of 1996 (HIPAA) Administrative
Simplification: Modifications to Medical Data Code Set Standards to
Adopt ICD-10-CM and ICD-10-PCS final rule (74 FR 3328 through 3362,
January 16, 2009). However, the Secretary of Health and Human Services
issued a proposed rule that would delay, from October 1, 2013, to
October 1, 2014, the compliance date for the International
Classification of Diseases, 10th Edition diagnosis and procedure codes
(ICD-10). The proposed rule, CMS-0040-P, went on display at the Office
of the Federal Register on April 9, 2012, and was published in the
Federal Register on April 17, 2012 (77 FR 22950) and is available for
viewing at: http://www.gpo.gov/fdsys/browse/collection.action?collectionCode=FR.
[[Page 53324]]
The ICD-10 coding system includes the International Classification
of Diseases, 10th Revision, Clinical Modification (ICD-10-CM) for
diagnosis coding and the International Classification of Diseases, 10th
Revision, Procedure Coding System (ICD-10-PCS) for inpatient hospital
procedure coding, as well as the Official ICD-10-CM and ICM-10-PCS
Guidelines for Coding and Reporting. In the January 16, 2009 ICD-10-CM
and ICD-10-PCS final rule (74 FR 3328 through 3362), there was a
discussion of the need for a partial or total freeze in the annual
updates to both ICD-9-CM and ICD-10-CM and ICD-10-PCS codes. The public
comment addressed in that final rule stated that the annual code set
updates should cease l year prior to the implementation of ICD-10. The
commenters stated that this freeze of code updates would allow for
instructional and/or coding software programs to be designed and
purchased early, without concern that an upgrade would take place
immediately before the compliance date, necessitating additional
updates and purchases.
HHS responded to comments in the ICD-10 final rule that the ICD-9-
CM Coordination and Maintenance Committee has jurisdiction over any
action impacting the ICD-9-CM and ICD-10 code sets. Therefore, HHS
indicated that the issue of consideration of a moratorium on updates to
the ICD-9-CM, ICD-10-CM, and ICD-10-PCS code sets in anticipation of
the adoption of ICD-10-CM and ICD-10-PCS would be addressed through the
Committee at a future public meeting.
The code freeze was discussed at multiple meetings of the ICD-9-CM
Coordination and Maintenance Committee and public comment was actively
solicited. The Committee evaluated all comments from participants
attending the Committee meetings as well as written comments that were
received. There was an announcement at the September 15-16, 2010 and
September 14, 2011 ICD-9-CM Coordination and Maintenance Committee
meetings that a partial freeze of both ICD-9-CM and ICD-10 codes will
be implemented as follows:
The last regular annual update to both ICD-9-CM and ICD-10
code sets was made on October 1, 2011.
On October 1, 2012, there will be only limited code
updates to both ICD-9-CM and ICD-10 code sets to capture new technology
and new diseases.
On October 1, 2013, there were to be only limited code
updates to ICD-10 code sets to capture new technology and diagnoses as
required by section 503(a) of Public Law 108-173. There were to be no
updates to ICD-9-CM on October 1, 2013, as the system would no longer
be a HIPAA standard and, therefore, no longer be used for reporting.
With the proposed ICD-10 implementation delay, there will be only
limited code updates to both ICD-9-CM and ICD-10 to capture new
technology and new diagnoses on October 1, 2013.
On October 1, 2014, regular updates to ICD-10 were to
begin. As stated earlier, HHS has issued a proposed rule that would
delay the compliance date of ICD-10 from October 1, 2013, to October 1,
2014. If this delay is implemented as proposed, there would be only
limited ICD-10 code updates for new technologies and new diseases on
October 1, 2014. There would be no updates to ICD-9-CM on October 1,
2014, as the system would no longer be a HIPAA standard and, therefore,
no longer be used for reporting. Full ICD-10 updates would begin on
October 1, 2015, one year after the implementation of ICD-10.
The ICD-9-CM Coordination and Maintenance Committee announced that
it would continue to meet twice a year during the freeze. At these
meetings, the public will be encouraged to comment on whether or not
requests for new diagnosis and procedure codes should be created based
on the need to capture new technology and new diseases. Any code
requests that do not meet the criteria will be evaluated for
implementation within ICD-10 on or after October 1, 2014, once the
partial freeze is ended.
Complete information on the partial code freeze and discussions of
the issues at the Committee meetings can be found on the ICD-9-CM
Coordination and Maintenance Committee Web site at: http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html?redirect=/
icd9ProviderDiagnosticCodes/03.asp#TopOfPage. A summary of the
September 14, 2011 Committee meeting, along with both written and audio
transcripts of this meeting, are posted on the ``Download'' section of
this Web page.
Comment: Several commenters expressed concern about the delay in
the implementation of ICD-10. Some commenters supported a delay, while
others opposed any delay.
Response: Proposals on ICD-10 implementation are being addressed
through a separate rulemaking as we have indicated above. These
comments will be addressed as part of that separate rulemaking.
c. Processing of 25 Diagnosis Codes and 25 Procedure Codes on Hospital
Inpatient Claims
CMS is currently processing all 25 diagnosis codes and 25 procedure
codes submitted on electronic hospital inpatient claims. Prior to
January 1, 2011, hospitals could submit up to 25 diagnoses and 25
procedures; however, CMS' system limitations allowed for the processing
of only the first 9 diagnosis codes and 6 procedure codes. We discussed
this change in processing claims in the FY 2011 IPPS/LTCH PPS final
rule (75 FR 50127), in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR
25843), in a correction notice issued in the Federal Register on June
14, 2011 (76 FR 24633), and in the FY 2012 IPPS/LTCH PPS final rule (76
FR 51553). As discussed in these prior rules, CMS undertook an
expansion of our internal system capability so that we are able to
process up to 25 diagnoses and 25 procedures on hospital inpatient
claims as part of the HIPAA ASC X12 Technical Reports Type 3, Version
005010 (Version 5010) standards system update. We recognize the value
of the additional information provided by this coded data for multiple
uses such as for payment, quality measures, outcome analysis, and other
important uses. We will continue to process up to 25 diagnosis codes
and 25 procedure codes when received on the 5010 format.
d. ICD-10 MS-DRGs
In response to the FY 2011 IPPS/LTCH PPS proposed rule, we received
comments on the creation of the ICD-10 version of the MS-DRGs, which
will be implemented at the same time as ICD-10 (75 FR 50127 and 50128).
As we stated earlier, the Secretary of Health and Human Services has
issued a proposed rule that would delay the compliance date of ICD-10
from October 1, 2013 to October 1, 2014. While we did not propose an
ICD-10 version of the MS-DRGs in the FY 2011 IPPS/LTCH PPS proposed
rule, we noted that we have been actively involved in converting our
current MS-DRGs from ICD-9-CM codes to ICD-10 codes and sharing this
information through the ICD-9-CM Coordination and Maintenance
Committee. We undertook this early conversion project to assist other
payers and providers in understanding how to go about their own
conversion projects. We posted ICD-10 MS-DRGs based on Version 26.0 (FY
2009) of the MS-DRGs. We also posted a paper that describes how CMS
went about completing this project and suggestions for others to
follow. All of this information can be found on the
[[Page 53325]]
CMS Web site at: http://www.cms.gov/ICD10/17_ICD10_MS_DRG_Conversion_Project.asp. We have continued to keep the public updated
on our maintenance efforts for ICD-10-CM and ICD-10-PCS coding systems
as well as the General Equivalence Mappings that assist in conversion
through the ICD-9-CM Coordination and Maintenance Committee.
Information on these committee meetings can be found at: http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html.
During FY 2011, we developed and posted Version 28.0 of the ICD-10
MS-DRGs based on the FY 2011 MS-DRGs (Version 28.0) that we finalized
in the FY 2011 IPPS/LTCH PPS final rule on the CMS Web site. This ICD-
10 MS-DRGs Version 28.0 also included the CC Exclusion List and the
ICD-10 version of the hospital-acquired conditions (HACs), which was
not posted with Version 26.0. We also discussed this update at the
September 15-16, 2010 and the March 9-10, 2011 meetings of the ICD-9-CM
Coordination and Maintenance Committee. The minutes of these two
meetings are posted on the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html.
We reviewed comments on the ICD-10 MS-DRGs Version 28.0 and made
updates as a result of these comments. We called the updated version
the ICD-10 MS-DRGs Version 28 R1. We posted a Definitions Manual of
ICD-10 MS-DRGs Version 28 R1 on our ICD-10 MS-DRG Conversion Project
Web site at: http://www.cms.gov/ICD10/17_ICD10_MS_DRG_Conversion_Project.asp. To make the review of Version 28 R1 updates easier for the
public, we also made available pilot software on a CD ROM that could be
ordered through the National Technical Information Service (NTIS). A
link to the NTIS ordering page was provided on the CMS ICD-10 MS-DRG
Web page. We stated that we believed that, by providing the ICD-10 MS-
DRG Version 28 R1 Pilot Software (distributed on CD ROM), the public
would be able to more easily review and provide feedback on updates to
the ICD-10 MS-DRGs. We discussed the updated ICD-10 MS-DRGs Version 28
R1 at the September 14, 2011 ICD-9-CM Coordination and Maintenance
Committee meeting. We encouraged the public to continue to review and
provide comments on the ICD-10 MS-DRGs so that CMS could continue to
update the system.
In FY 2012, we prepared the ICD-10 MS-DRGs Version 29.0, based on
the FY 2012 MS-DRGs (Version 29.0) that we finalized in the FY 2012
IPPS/LTCH PPS final rule. We posted a Definitions Manual of ICD-10 MS-
DRGs Version 29.0 on our ICD-10 MS-DRGs Web site. We also prepared a
document that describes changes made from Version 28.0 to Version 29.0
to facilitate a review. The ICD-10 MS-DRGs Version 29.0 was discussed
at the ICD-9-CM Coordination and Maintenance Committee meeting on March
5, 2012. Information was provided on the types of updates made. Once
again the public was encouraged to review and comment on the most
recent update to the ICD-10 MS-DRGs.
We provided information on a study conducted on the impact on
converting MS-DRGs to ICD-10. Information on this study is summarized
in a paper entitled ``Impact of the Transition to ICD-10 on Medicare
Inpatient Hospital Payments.'' This paper is posted on the CMS ICD-10
MS-DRG conversion Web site at: http://www.cms.gov/ICD10/17_ICD10_MS_DRG_Conversion_Project.asp. The paper describes CMS' approach to the
conversion of the MS-DRGs from ICD-9-CM codes to ICD-10 codes. The
study was undertaken using the ICD-9-CM MS-DRGs Version 27.0 (FY 2010)
and converted to the ICD-10 MS-DRGs Version 27.0. The study estimated
the impact on aggregate payment to hospitals and the distribution of
payments across hospitals. The paper was distributed and discussed at
the September 15, 2010 ICD-9-CM Coordination and Maintenance Committee.
The impact of the conversion from ICD-9-CM to ICD-10 on Medicare MS-DRG
hospital payments was estimated using 2009 Medicare data. The study
found a hospital payment increase of 0.05 percent using the ICD-10 MS-
DRGs Version 27.0. For detailed information on this study, we refer
readers to the complete report which is posted on the CMS Web site at:
http://www.cms.gov/ICD10/17_ICD10_MS_DRG_Conversion_Project.asp.
CMS provided an overview of this hospital payment impact study at
the March 5, 2012 ICD-9-CM Coordination and Maintenance Committee
meeting. This presentation followed presentations on the creation of
ICD-10 MS-DRGs Version 29.0. A summary report of this meeting can be
found on the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html. At this March 2012 meeting, CMS
announced that it would produce an update on this impact study based on
an updated version of the ICD-10 MS-DRGs. This update will provide
additional information to the public as CMS is evaluating refinements
made to the ICD-10 MS-DRGs based on public comments.
We will continue to work with the public to explain how we are
approaching the conversion of MS-DRGs to ICD-10 and will post drafts of
updates as they are developed for public review. The final version of
the ICD-10 MS-DRGs will be implemented at the same time as ICD-10 and
will be subject to notice and comment rulemaking. In the meantime, we
will provide extensive and detailed information on this activity
through the ICD-9-CM Coordination and Maintenance Committee.
10. Public Comments on Issues Not Addressed in the Proposed Rule
We received a number of public comments regarding MS-DRG issues
that were outside of the scope of the proposals included in the FY 2013
IPPS/LTCH PPS proposed rule. We have summarized these public comments
below. However, because these public comments were outside of the scope
of the proposed rule, we are not addressing them in this final rule. As
stated in section II.G. of this preamble, we encourage individuals with
comments about MS-DRG classifications to submit these comments no later
than December of each year so they can be considered for possible
inclusion in the annual proposed rule and, if included, may be
subjected to public review and comment. We will consider these comments
for possible proposals in future rulemaking as part of our annual
review process.
Some commenters requested that CMS create a new MS-DRG for total
ankle replacement procedures. One commenter requested that CMS
eliminate the severity levels for heart and liver transplants and
implement one MS-DRG for heart transplants and one MS-DRG for liver
transplants.
One commenter requested that CMS conduct an analysis of diagnosis
code V45.88 (Status post administration of tPA (rt-PA) in a different
facility within the last 24 hours prior to admission to current
facility) to determine whether new data warrant any change in the MS-
DRG structure for these cases.
One commenter recommended that bronchial valve procedures reported
with ICD-9-CM procedure codes 33.71 (Endoscopic insertion or
replacement of bronchial valve(s), single lobe) and 33.73 (Endoscopic
insertion or replacement of bronchial valve(s), multiple lobes), that
are assigned to medical MS-DRGs 190 and 192 (Chronic Obstructive
Pulmonary Disease with MCC, with CC, or without MCC/CC, respectively)
be assigned instead to
[[Page 53326]]
surgical MS-DRGs 163 and 165 (Major Chest Procedures with MCC, with CC,
or without MCC/CC, respectively).
H. Recalibration of MS-DRG Weights
1. Data Sources for Developing the Weights
In developing the FY 2013 system of weights, we used two data
sources: claims data and cost report data. As in previous years, the
claims data source is the MedPAR file. This file is based on fully
coded diagnostic and procedure data for all Medicare inpatient hospital
bills. The FY 2011 MedPAR data used in this final rule include
discharges occurring on October 1, 2010, through September 30, 2011,
based on bills received by CMS through March 31, 2012, from all
hospitals subject to the IPPS and short-term, acute care hospitals in
Maryland (which are under a waiver from the IPPS under section
1814(b)(3) of the Act). The FY 2011 MedPAR file used in calculating the
relative weights includes data for approximately 10,804,695 Medicare
discharges from IPPS providers. Discharges for Medicare beneficiaries
enrolled in a Medicare Advantage managed care plan are excluded from
this analysis. These discharges are excluded when the MedPAR ``GHO
Paid'' indicator field on the claim record is equal to ``1'' or when
the MedPAR DRG payment field, which represents the total payment for
the claim, is equal to the MedPAR ``Indirect Medical Education (IME)''
payment field, indicating that the claim was an ``IME only'' claim
submitted by a teaching hospital on behalf of a beneficiary enrolled in
a Medicare Advantage managed care plan. In addition, the March 31, 2012
update of the FY 2011 MedPAR file complies with version 5010 of the X12
HIPAA Transaction and Code Set Standards, and includes a variable
called ``claim type.'' Claim type ``60'' indicates that the claim was
an inpatient claim paid as fee-for-service. Claim types ``61,'' ``62,''
``63,'' and ``64'' relate to encounter claims, Medicare Advantage IME
claims, and HMO no-pay claims. Therefore, the calculation of the
relative weights for FY 2013 also excludes claims with claim type
values not equal to ``60.'' The data exclude CAHs, including hospitals
that subsequently became CAHs after the period from which the data were
taken. The second data source used in the cost-based relative weighting
methodology is the Medicare cost report data files from the HCRIS.
Normally, we use the HCRIS dataset that is 3 years prior to the IPPS
fiscal year (that is, for the calculation of the FY 2013 MS-DRG
relative weights, we use data from the FY 2010 HCRIS, which are data
from cost reports that began on or after October 1, 2009 and before
October 1, 2010). However, during the development of this final rule,
as was the case with the proposed rule, we have found that those cost
reports in the FY 2010 HCRIS dataset with fiscal year begin dates that
are on or after May 1, 2010, and before October 1, 2010, are not
accessible. This is because cost reports with fiscal year begin dates
of May 1, 2010, through September 30, 2010, were filed on the new cost
report Form 2552-10, and cost reports filed on Form 2552-10 are not
currently accessible in the HCRIS. However, because data from cost
reports filed on Form 2552-10 are not currently available, to ensure
that the FY 2013 MS-DRG relative weights are calculated with a dataset
that is as comprehensive and accurate as possible, as we proposed, we
are calculating the final FY 2013 MS-DRG relative weights with data
from FY 2010 cost reports for providers with fiscal year begin dates of
on or after October 1, 2009 and before May 1, 2010, and backfilling
with data from FY 2009 cost reports for those providers that have
fiscal year begin dates on or after May 1, 2010 through September 30,
2010. We used cost report data from the March 31, 2012 update of the
HCRIS for FY 2009 and FY 2010 in calculating the FY 2013 cost-based
relative weights.
2. Methodology for Calculation of the Relative Weights
The methodology we used to calculate the FY 2013 MS-DRG cost-based
relative weights based on claims data in the FY 2011 MedPAR file and
data from the FY 2009 and FY 2010 Medicare cost reports is as follows:
To the extent possible, all the claims were regrouped
using the proposed FY 2013 MS-DRG classifications discussed in sections
II.B. and G. of the preamble of this final rule.
The transplant cases that were used to establish the
relative weights for heart and heart-lung, liver and/or intestinal, and
lung transplants (MS-DRGs 001, 002, 005, 006, and 007, respectively)
were limited to those Medicare-approved transplant centers that have
cases in the FY 2010 MedPAR file. (Medicare coverage for heart, heart-
lung, liver and/or intestinal, and lung transplants is limited to those
facilities that have received approval from CMS as transplant centers.)
Organ acquisition costs for kidney, heart, heart-lung,
liver, lung, pancreas, and intestinal (or multivisceral organs)
transplants continue to be paid on a reasonable cost basis. Because
these acquisition costs are paid separately from the prospective
payment rate, it is necessary to subtract the acquisition charges from
the total charges on each transplant bill that showed acquisition
charges before computing the average cost for each MS-DRG and before
eliminating statistical outliers.
Claims with total charges or total lengths of stay less
than or equal to zero were deleted. Claims that had an amount in the
total charge field that differed by more than $10.00 from the sum of
the routine day charges, intensive care charges, pharmacy charges,
special equipment charges, therapy services charges, operating room
charges, cardiology charges, laboratory charges, radiology charges,
other service charges, labor and delivery charges, inhalation therapy
charges, emergency room charges, blood charges, and anesthesia charges
were also deleted.
At least 96.2 percent of the providers in the MedPAR file
had charges for 10 of the 15 cost centers. Claims for providers that
did not have charges greater than zero for at least 10 of the 15 cost
centers were deleted.
Statistical outliers were eliminated by removing all cases
that were beyond 3.0 standard deviations from the geometric mean of the
log distribution of both the total charges per case and the total
charges per day for each MS-DRG.
Effective October 1, 2008, because hospital inpatient
claims include a POA indicator field for each diagnosis present on the
claim, only for purposes of relative weight-setting, the POA indicator
field was reset to ``Y'' for ``Yes'' for all claims that otherwise have
an ``N'' (No) or a ``U'' (documentation insufficient to determine if
the condition was present at the time of inpatient admission) in the
POA field.
Under current payment policy, the presence of specific HAC codes,
as indicated by the POA field values, can generate a lower payment for
the claim. Specifically, if the particular condition is present on
admission (that is, a ``Y'' indicator is associated with the diagnosis
on the claim), it is not a HAC, and the hospital is paid for the higher
severity (and, therefore, the higher weighted MS-DRG). If the
particular condition is not present on admission (that is, an ``N''
indicator is associated with the diagnosis on the claim) and there are
no other complicating conditions, the DRG GROUPER assigns the claim to
a lower severity (and, therefore, the lower weighted MS-DRG) as a
penalty for allowing a Medicare inpatient to contract a HAC. While the
POA reporting meets policy goals of
[[Page 53327]]
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. Thus, if the higher charges of these HAC claims are
grouped into lower severity MS-DRGs prior to the relative weight-
setting process, the relative weights of these particular MS-DRGs would
become artificially inflated, potentially skewing the relative weights.
In addition, we want to protect the integrity of the budget neutrality
process by ensuring that, in estimating payments, no increase to the
standardized amount occurs as a result of lower overall payments in a
previous year that stem from using weights and case-mix that are based
on lower severity MS-DRG assignments. If this would occur, the
anticipated cost savings from the HAC policy would be lost.
To avoid these problems, we reset the POA indicator field to ``Y''
only for relative weight-setting purposes for all claims that otherwise
have an ``N'' or a ``U'' in the POA field. This resetting ``forced''
the more costly HAC claims into the higher severity MS-DRGs as
appropriate, and the relative weights calculated for each MS-DRG more
closely reflect the true costs of those cases.
Once the MedPAR data were trimmed and the statistical outliers were
removed, the charges for each of the 15 cost groups for each claim were
standardized to remove the effects of differences in area wage levels,
IME and DSH payments, and for hospitals in Alaska and Hawaii, the
applicable cost-of-living adjustment. Because hospital charges include
charges for both operating and capital costs, we standardized total
charges to remove the effects of differences in geographic adjustment
factors, cost-of-living adjustments, and DSH payments under the capital
IPPS as well. Charges were then summed by MS-DRG for each of the 15
cost groups so that each MS-DRG had 15 standardized charge totals.
These charges were then adjusted to cost by applying the national
average CCRs developed from the FY 2009 and FY 2010 cost report data.
The 15 cost centers that we used in the relative weight calculation
are shown in the following table. The table shows the lines on the cost
report and the corresponding revenue codes that we used to create the
15 national cost center CCRs.
BILLING CODE 4120-01-P
[[Page 53328]]
[GRAPHIC] [TIFF OMITTED] TR31AU12.001
[[Page 53329]]
[GRAPHIC] [TIFF OMITTED] TR31AU12.002
[[Page 53330]]
[GRAPHIC] [TIFF OMITTED] TR31AU12.003
[[Page 53331]]
[GRAPHIC] [TIFF OMITTED] TR31AU12.004
[[Page 53332]]
[GRAPHIC] [TIFF OMITTED] TR31AU12.005
[[Page 53333]]
[GRAPHIC] [TIFF OMITTED] TR31AU12.006
[[Page 53334]]
[GRAPHIC] [TIFF OMITTED] TR31AU12.007
[[Page 53335]]
[GRAPHIC] [TIFF OMITTED] TR31AU12.008
[[Page 53336]]
[GRAPHIC] [TIFF OMITTED] TR31AU12.009
[[Page 53337]]
[GRAPHIC] [TIFF OMITTED] TR31AU12.010
[[Page 53338]]
[GRAPHIC] [TIFF OMITTED] TR31AU12.011
[[Page 53339]]
[GRAPHIC] [TIFF OMITTED] TR31AU12.012
BILLING CODE 4120-01-C
[[Page 53340]]
3. Development of National Average CCRs
We developed the national average CCRs as follows:
Using the FY 2009 and FY 2010 cost report data, we removed CAHs,
Indian Health Service hospitals, all-inclusive rate hospitals, and cost
reports that represented time periods of less than 1 year (365 days).
We included hospitals located in Maryland because we include their
charges in our claims database. We then created CCRs for each provider
for each cost center (see prior table for line items used in the
calculations) and removed any CCRs that were greater than 10 or less
than 0.01. We normalized the departmental CCRs by dividing the CCR for
each department by the total CCR for the hospital for the purpose of
trimming the data. We then took the logs of the normalized cost center
CCRs and removed any cost center CCRs where the log of the cost center
CCR was greater or less than the mean log plus/minus 3 times the
standard deviation for the log of that cost center CCR. Once the cost
report data were trimmed, we calculated a Medicare-specific CCR. The
Medicare-specific CCR was determined by taking the Medicare charges for
each line item from Worksheet D-4 and deriving the Medicare-specific
costs by applying the hospital-specific departmental CCRs to the
Medicare-specific charges for each line item from Worksheet D-4. Once
each hospital's Medicare-specific costs were established, we summed the
total Medicare-specific costs and divided by the sum of the total
Medicare-specific charges to produce national average, charge-weighted
CCRs.
After we multiplied the total charges for each MS-DRG in each of
the 15 cost centers by the corresponding national average CCR, we
summed the 15 ``costs'' across each MS-DRG to produce a total
standardized cost for the MS-DRG. The average standardized cost for
each MS-DRG was then computed as the total standardized cost for the
MS-DRG divided by the transfer-adjusted case count for the MS-DRG. The
average cost for each MS-DRG was then divided by the national average
standardized cost per case to determine the relative weight.
The FY 2013 cost-based relative weights were then normalized by an
adjustment factor of 1.5916044904 so that the average case weight after
recalibration was equal to the average case weight before
recalibration. The normalization adjustment is intended to ensure that
recalibration by itself neither increases nor decreases total payments
under the IPPS, as required by section 1886(d)(4)(C)(iii) of the Act.
The 15 national average CCRs for FY 2013 are as follows:
------------------------------------------------------------------------
Group CCR
------------------------------------------------------------------------
Routine Days............................................ 0.514
Intensive Days.......................................... 0.442
Drugs................................................... 0.199
Supplies & Equipment.................................... 0.335
Therapy Services........................................ 0.370
Laboratory.............................................. 0.143
Operating Room.......................................... 0.238
Cardiology.............................................. 0.145
Radiology............................................... 0.136
Emergency Room.......................................... 0.226
Blood and Blood Products................................ 0.389
Other Services.......................................... 0.397
Labor & Delivery........................................ 0.450
Inhalation Therapy...................................... 0.189
Anesthesia.............................................. 0.109
------------------------------------------------------------------------
Since FY 2009, the relative weights have been based on 100 percent
cost weights based on our MS-DRG grouping system.
When we recalibrated the DRG weights for previous years, we set a
threshold of 10 cases as the minimum number of cases required to
compute a reasonable weight. In the FY 2013 IPPS/LTCH PPS proposed rule
(77 FR 27930), we proposed to use that same case threshold in
recalibrating the MS-DRG weights for FY 2013. Using data from the FY
2011 MedPAR file, there were 8 MS-DRGs that contain fewer than 10
cases. Under the MS-DRGs, we have fewer low-volume DRGs than under the
CMS DRGs because we no longer have separate DRGs for patients aged 0 to
17 years. With the exception of newborns, we previously separated some
DRGs based on whether the patient was age 0 to 17 years or age 17 years
and older. Other than the age split, cases grouping to these DRGs are
identical. The DRGs for patients aged 0 to 17 years generally have very
low volumes because children are typically ineligible for Medicare. In
the past, we have found that the low volume of cases for the pediatric
DRGs could lead to significant year-to-year instability in their
relative weights. Although we have always encouraged non-Medicare
payers to develop weights applicable to their own patient populations,
we have received frequent complaints from providers about the use of
the Medicare relative weights in the pediatric population. We believe
that eliminating this age split in the MS-DRGs will provide more stable
payment for pediatric cases by determining their payment using adult
cases that are much higher in total volume. Newborns are unique and
require separate MS-DRGs that are not mirrored in the adult population.
Therefore, it remains necessary to retain separate MS-DRGs for
newborns. All of the low-volume MS-DRGs listed below are for newborns.
In FY 2013, because we do not have sufficient MedPAR data to set
accurate and stable cost weights for these low-volume MS-DRGs, we
proposed to compute weights for the low-volume MS-DRGs by adjusting
their FY 2012 weights by the percentage change in the average weight of
the cases in other MS-DRGs. The crosswalk table is shown below:
------------------------------------------------------------------------
Low[dash]Volume MS-DRG MS-DRG Title Crosswalk to MS-DRG
------------------------------------------------------------------------
768........................... Vaginal Delivery FY 2012 FR weight
with O.R. (adjusted by percent
Procedure Except change in average
Sterilization weight of the cases
and/or D&C. in other MS-DRGs).
789........................... Neonates, Died or FY 2012 FR weight
Transferred to (adjusted by percent
Another Acute change in average
Care Facility. weight of the cases
in other MS-DRGs).
790........................... Extreme FY 2012 FR weight
Immaturity or (adjusted by percent
Respiratory change in average
Distress weight of the cases
Syndrome, in other MS-DRGs).
Neonate.
791........................... Prematurity with FY 2012 FR weight
Major Problems. (adjusted by percent
change in average
weight of the cases
in other MS-DRGs).
792........................... Prematurity FY 2012 FR weight
without Major (adjusted by percent
Problems. change in average
weight of the cases
in other MS-DRGs).
793........................... Full-Term Neonate FY 2012 FR weight
with Major (adjusted by percent
Problems. change in average
weight of the cases
in other MS-DRGs).
794........................... Neonate with FY 2012 FR weight
Other (adjusted by percent
Significant change in average
Problems. weight of the cases
in other MS-DRGs).
795........................... Normal Newborn... FY 2012 FR weight
(adjusted by percent
change in average
weight of the cases
in other MS-DRGs).
------------------------------------------------------------------------
[[Page 53341]]
We did not receive any public comments on this section. In this
final rule, we are adopting the national average CCRs as proposed
without modification, with the MS-DRG weights recalibrated based on
these CCRs.
4. Bundled Payments for Care Improvement (BPCI) Initiative
a. Background
Section 3021 of the Affordable Care Act, codified at section 1115A
of the Act, authorizes CMS to test innovative payment and service
delivery models with the goal of reducing Medicare program expenditures
while preserving or enhancing the quality of care furnished to
individuals. Because initiatives established under this authority could
result in IPPS hospitals receiving a payment different than what they
otherwise would receive under the IPPS, we believe it is important to
identify how these initiatives are addressed in the context of MS-DRG
recalibration and ratesetting, budget neutrality, and the impact
analysis in the Addendum of this final rule, as we did in the proposed
rule.
Under the Bundled Payments for Care Improvement (BPCI) initiative,
CMS would link payments for multiple services that patients receive
during an episode of care. CMS is working in partnership with providers
to develop and test models of bundling payments through the BPCI
initiative. On August 23, 2011, CMS invited providers to apply to help
develop and test four different models of bundling payments. For
additional information, we refer readers to the CMS Web site at: http://www.innovations.cms.gov/initiatives/Bundled-Payments/index.html. We
are providing below a brief overview of payments under each model.
However, the BPCI initiative Request for Application and related
information on the CMS Web site at http://www.innovations.cms.gov/initiatives/Bundled-Payments/index.html/ provide more details of this
initiative.
As described below and also in the Addendum to the proposed rule
and this final rule, we generally proposed to include, and for this
final rule are including, data from hospitals participating in the BPCI
initiative and to treat these hospitals without regard to their
participation in the BPCI initiative for the purposes of IPPS
ratesetting.
We did not receive any public comments about our proposals.
Therefore, as discussed in greater detail below, we are finalizing the
treatment of hospitals participating in the BPCI initiative as
proposed. For hospitals participating in Models 1, 2, and 4, we are
finalizing treating these hospitals the same as prior fiscal years for
purposes of the FY 2013 (and subsequent years) IPPS payment modeling
and ratesetting process without regard to a hospital's participation
within these bundled payment models (that is, as if they are not
participating in those models under the BPCI initiative).
Model 1
In Model 1, the episode of care is defined as the inpatient
hospital services for the acute care hospital stay only. Applicants for
this model were asked to propose discount percentages for various
periods of the 3-year program, which would be applied to the IPPS
operating MS-DRG payment for each participating hospital's MS-DRGs over
the lifetime of the initiative. That is, for hospitals participating in
Model 1, Medicare would continue to pay participating acute care
hospitals under the IPPS. However, these payments to participating
acute care hospitals would be at a reduced payment amount that reflects
the applicable discount percentage for cases in all MS-DRGs for the
specific period of the program. We note that an adjustment would be
made such that payments for IME, DSH, and outliers would be calculated
based on the nondiscounted MS-DRG operating IPPS payment amount and
then paid, if applicable, in addition to the discounted MS-DRG
operating IPPS payment. The minimum discount percentage that awardees
are expected to offer would be phased in over time, with the discount
percentage updated as frequently as every 6 months.
Model 2
In Model 2, the episode of care is defined as the inpatient acute
care hospital stay for specific clinical conditions and a specified
period of time following discharge (with a minimum episode length of at
least 30 days following hospital discharge). The payment bundle for
Model 2 would encompass all Medicare Part A payments for designated MS-
DRGs, Part B professional services paid under the Medicare Physician
Fee Schedule (MPFS) during the hospital stay, and related professional
services furnished after discharge during the episode, ``related
readmissions'' (as defined under the BPCI initiative), care by a
postacute care provider such as an HHA, IRF, SNF, LTCH, and other
related services furnished during the episode (that is, all Medicare
Part A and Part B with the exception of hospice care). Applicants,
which may be a Medicare supplier or provider, groups of such entities,
or other organizations that bring together providers and suppliers to
test the model, were asked to propose specific MS-DRG(s) for the
clinical condition(s) to be tested in Model 2. Furthermore, the
applicants were asked to propose the target price on an MS-DRG basis
for the episode that includes a single rate of discount off of the
expected Medicare payment (including hospital, postacute care, Medicare
Part B professional services, and other services, as applicable) for
all Model 2 beneficiaries discharged from the inpatient hospital stay
with the specified MS-DRG(s). We note that, when proposing the target
price, applicants were instructed to include IPPS outlier payments in
their calculation; however, IPPS IME and DSH payments should be
excluded from the target price. In Model 2, payments would be made at
the usual fee-for-service payment rates to the participating providers
through the regular claims processing system, after which the aggregate
Medicare payment for the episode would be reconciled against the target
price. If aggregate Medicare expenditures are less than the target
price, the awardee would be paid the difference as a reconciliation
payment. Conversely, if aggregate Medicare expenditures exceed the
target price, CMS would recoup that amount from the awardee.
Model 3
In Model 3, the episode of care begins at initiation of postacute
services at one of four postacute care providers (HHAs, IRFs, SNFs, and
LTCHs) within 30 days after discharge from any acute care hospital for
specific clinical conditions. As with the other three models,
applicants may be one or more Medicare providers or supplier or other
organization(s) bringing those entities together to test the model.
Applicants were asked to propose an episode length that would extend to
at least 30 days following initiation of care at an HHA, IRF, SNF, or
LTCH. The payment bundle for Model 3 would encompass care by a
postacute care provider, and other related services furnished during
the episode, including Medicare Part B professional services paid under
the MPFS, and inpatient hospital readmissions (as defined under the
BPCI initiative). In contrast to Model 2, the payment bundle for Model
3 does not include services provided in the initial acute care hospital
stay. We note that, while the episode is initiated at one of the four
postacute care providers rather than at an acute care hospital,
applicants were asked to specify the clinical condition(s) to be tested
in Model 3 by proposing relevant MS-
[[Page 53342]]
DRG(s). Therefore, applicable to all Model 3 beneficiaries discharged
from any inpatient acute care hospital stay with the specified MS-
DRG(s), applicants were to propose a target price on an MS-DRG basis
for the episode that includes a single rate of discount off of the
expected Medicare payment, which includes care by a postacute care
provider, related Medicare Part B professional services paid under the
MPFS, inpatient hospital readmissions, and other related services
furnished during the episode. In Model 3, payments would be made at the
usual fee-for-service payment rates to the participating providers
through the regular claims processing process, after which the
aggregate Medicare payment for the episode would be reconciled against
the target price. Like Model 2, if aggregate Medicare expenditures are
less than the target price, the awardee would be paid the difference as
a reconciliation payment. Conversely, if aggregate Medicare
expenditures exceed the target price, CMS would recoup that amount from
the awardee. We note that Model 3 does address payment for related
hospital readmissions.
Model 4
In Model 4, the episode of care is defined as the acute care
hospital stay and includes all ``related readmissions'' (as defined
under the BPCI initiative). The payment bundle for Model 4 would
encompass Medicare inpatient hospital services, Medicare Part B
professional services paid under the MPFS furnished during the initial
hospitalization, as well as hospital services and Medicare Part B
professional services during any related readmissions. Applicants were
asked to propose specific MS-DRG(s) for the clinical condition(s) to be
tested in Model 4. Applicants for this model were asked to propose a
target price for the episode that includes a single rate of discount
off of expected Medicare payment (including both Medicare Part A
hospital services and Part B professional services) for all
beneficiaries discharged from the inpatient hospital stay with the
specified MS-DRG(s).
In contrast to Models 2 and 3, where usual Medicare fee-for-service
payments are made to all providers and reconciliation of Medicare
spending against the target price for the episode is conducted
retrospectively, under Model 4, hospitals would receive a prospectively
established bundled payment for specified MS-DRGs. This payment would
include both the MS-DRG payment for the hospital and a fixed payment
amount for the Medicare Part B professional services anticipated to be
furnished during the episode. That is, separate payment for providers'
professional services furnished during the inpatient hospital stay
would not be made. Participating Model 4 hospitals receiving payment
would take responsibility for distributing payment to providers that
would otherwise be paid separately. We note that IPPS IME and DSH
payments to Model 4 hospitals would be calculated based on the
nondiscounted base MS-DRG operating IPPS payment that would have been
made in the absence of the model. Other applicable payment adjustors
would also be calculated based on the base MS-DRG operating IPPS
payment amount that would otherwise have applied to the case, as
opposed to the prospectively established amount paid through this
initiative, which would be higher as it includes payment for Part B
services as well as the base MS-DRG payment. Under Model 4, no separate
IPPS outlier payments would be made.
b. Treatment of Data From Hospitals Participating in the BPCI
Initiative
As discussed above, acute care hospitals had the opportunity to
apply and participate in the BPCI payment models described above. As we
discussed in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27932), for
Model 1 and Model 2, participating acute care hospitals would continue
to receive an IPPS payment under section 1886(d) of the Act (subject to
a predetermined discount for hospitals participating in Model 1). For
Model 2, participating hospitals may also receive a reconciliation
payment under the BPCI initiative (based on their predetermined target
price). Under Model 3, services provided in the initial acute care
hospital stay are not included; however, the model does address payment
for possible hospital readmissions. Under Model 1, hospitals
participate for all MS-DRGs, while, under Model 2, hospitals
participate for only pre-selected MS-DRGs. We believe it is appropriate
to include all applicable data from these subsection(d) hospitals in
our IPPS payment modeling and ratesetting calculations because these
hospitals are still receiving IPPS payments under section 1886(d) of
the Act (in addition to, with respect to Model 2 hospitals, any
reconciliation payment the hospital may receive under the BPCI
initiative). Moreover, even if these hospitals were not receiving IPPS
payments under section 1886(d) of the Act (and were participating in
Models 1 and 2), the Secretary has the authority to make appropriate
adjustments for payment amounts under section 1886(d)(5)(I)(i) of the
Act to include all applicable data from these subsection(d) hospitals
in our IPPS ratesetting calculations. We believe it is appropriate to
use the Secretary's authority under section 1886(d)(5)(I)(i) of the Act
to include all IPPS, short-term, acute care hospitals within the IPPS
ratesetting calculations because excluding these hospitals would
diminish the number of providers used to determine the IPPS rates,
which could cause fluctuations in the IPPS rates and could produce
instability to the IPPS rates. Therefore, because we believe it is
appropriate to include all claims from hospitals participating within
Models 1 and 2 within the IPPS ratesetting calculations, using the
Secretary's authority under section 1886(d)(5)(I)(i) of the Act, in the
FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27932), we proposed to
include all applicable data from ``subsection (d)'' hospitals
participating in Models 1 and 2 under the BPCI initiative in our IPPS
payment modeling and ratesetting calculations (which includes
recalibration of the MS-DRG weights, ratesetting, calculation of the
budget neutrality factors, and the impact analysis). In essence, we
proposed to continue to treat these hospitals the same as prior fiscal
years for purposes of the FY 2013 (and subsequent years) IPPS payment
modeling and ratesetting process without regard to a hospital's
participation within these two bundled payment models (that is, we
would treat these hospitals as if they are not participating in Model 1
or Model 2 under the BPCI initiative). We did not receive any public
comments on our proposal. Therefore, we are finalizing treating these
hospitals the same as prior fiscal years for purposes of the FY 2013
(and subsequent years) IPPS payment modeling and ratesetting process
without regard to a hospital's participation within these two bundled
payment models (that is, we would treat these hospitals as if they are
not participating in Model 1 or Model 2 under the BPCI initiative), as
we proposed.
In contrast to BPCI Models 1 and 2 (wherein participating IPPS
hospitals would receive an IPPS payment under section 1886(d) of the
Act, and, in the case of Model 2, may also receive a reconciliation
payment under the BPCI initiative), IPPS hospitals participating in
Model 4 would receive a predetermined bundled payment for Medicare Part
A and Part B services for a pre-specified MS-DRG ``episode'' (and any
``related readmissions'' as defined under the BPCI initiative). These
bundled payments are for certain pre-
[[Page 53343]]
specified MS-DRG(s) episodes (not all cases) and would be made in
accordance with the terms of the model, as authorized by section 1115A
of the Act (these IPPS hospitals would also receive ``regular'' IPPS
payments under section 1886(d) of the Act for those MS-DRGs not
included in the bundling model). Similar to Models 1 and 2, we believe
it is appropriate to keep all applicable data from these ``subsection
(d)'' hospitals in our IPPS payment modeling and ratesetting
calculations because the majority of Medicare payments these hospitals
would receive would be IPPS payments under section 1886(d) of the Act
(that is, payments for cases in MS-DRGs that are not included in the
bundled payment model). Moreover, although these hospitals are not
receiving payments under 1886(d) of the Act for the cases included in
the prospective bundled payment under Model 4, the Secretary has the
authority to make appropriate adjustments for payment amounts at
section 1886(d)(5)(I)(i) of the Act to include all applicable data from
these subsection (d) hospitals in our IPPS ratesetting calculations. We
believe it is appropriate to use the Secretary's authority under
section 1886(d)(5)(I)(i) of the Act to include all IPPS, short-term,
acute care hospitals and their claims within the IPPS ratesetting
calculations because excluding these hospitals would diminish the
number of providers used to determine the IPPS rates, which could cause
fluctuations in the IPPS rates and could produce instability to the
IPPS rates. Therefore, because we believe it is appropriate to include
all claims from hospitals participating within Models 1 and 2 within
the IPPS ratesetting calculations and use the Secretary's authority
under section 1886(d)(5)(I)(i) of the Act to include those hospitals
and claims, we also believe it is appropriate to include all applicable
data from subsection (d) hospitals participating in Model 4 in our IPPS
payment modeling and ratesetting calculations (which includes
recalibration of the MS-DRG weights, ratesetting, calculation of the
budget neutrality factors, and the impact analysis) and proposed to do
so in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27932 through
27933). In essence, we proposed to continue to treat these hospitals
the same as prior fiscal years for purposes of the FY 2013 (and
subsequent years) IPPS payment modeling and ratesetting process without
regard to a hospital's participation within this bundled payment model
(that is, we would treat these hospitals as if they are not
participating in Model 4 under the BPCI initiative). We did not receive
any public comments on our proposal. Therefore, we are finalizing
treating these hospitals the same as prior fiscal years for purposes of
the FY 2013 (and subsequent years) IPPS payment modeling and
ratesetting process without regard to a hospital's participation within
these two bundled payment models (that is, we would treat these
hospitals as if they are not participating in Model 4 under the BPCI
initiative), as we proposed.
We note that Model 3 only addresses payments for related
readmissions and postacute care services (rather than IPPS payments).
Therefore, we believed it was not necessary to propose to address the
treatment of any data for participating hospitals in Model 3. We
continue to believe it is not necessary to address the treatment of any
data for participating hospitals in Model 3. We did not receive any
public comments on our decision not to propose to address the treatment
of any data for participating hospitals in Model 3.
Because we did not receive any public comments, we are finalizing
the treatment of hospitals participating in the BPCI initiative as
proposed. For hospitals participating in Models 1, 2, and 4, we are
finalizing treating these hospitals the same as prior fiscal years for
purposes of the FY 2013 (and subsequent years) IPPS payment modeling
and ratesetting process without regard to a hospital's participation
within these bundled payment models (that is, as if they are not
participating in those models under the BPCI initiative).
I. Add-On Payments for New Services and Technologies
1. Background
Sections 1886(d)(5)(K) and (L) of the Act establish a process of
identifying and ensuring adequate payment for new medical services and
technologies (sometimes collectively referred to in this section as
``new technologies'') under the IPPS. Section 1886(d)(5)(K)(vi) of the
Act specifies that a medical service or technology will be considered
new if it meets criteria established by the Secretary after notice and
opportunity for public comment. Section 1886(d)(5)(K)(ii)(I) of the Act
specifies that a new medical service or technology may be considered
for new technology add-on payment if, ``based on the estimated costs
incurred with respect to discharges involving such service or
technology, the DRG prospective payment rate otherwise applicable to
such discharges under this subsection is inadequate.'' We note that
beginning with discharges occurring in FY 2008, CMS transitioned from
CMS-DRGs to MS-DRGs.
The regulations at 42 CFR 412.87 implement these provisions and
specify three criteria for a new medical service or technology to
receive the additional payment: (1) The medical service or technology
must be new; (2) the medical service or technology must be costly such
that the DRG rate otherwise applicable to discharges involving the
medical service or technology is determined to be inadequate; and (3)
the service or technology must demonstrate a substantial clinical
improvement over existing services or technologies. The regulations at
42 CFR 412.88 also implement these provisions and describe the
additional payment for the new medical service or technology. Below, we
highlight some of the major statutory and regulatory provisions
relevant to the new technology add-on payment criteria, as well as
other information. For a complete discussion on the new technology add-
on payment criteria, we refer readers to the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51572 through 51574).
Under the first criterion, as reflected in 42 CFR 412.87(b)(2), a
specific medical service or technology will be considered ``new'' for
purposes of new medical service or technology add-on payments until
such time as Medicare data are available to fully reflect the cost of
the technology in the MS-DRG weights through recalibration. We note
that we do not consider a service or technology to be new if it is
substantially similar to one or more existing technologies. That is,
even if a technology receives a new FDA approval, it may not
necessarily be considered ``new'' for purposes of new technology add-on
payments if it is ``substantially similar'' to a technology that was
approved by FDA and has been on the market for more than 2 to 3 years.
In the FY 2006 IPPS final rule (70 FR 47351) and FY 2010 IPPS/RY 2010
LTCH PPS final rule (74 FR 43813 and 43814), we explained our policy
regarding substantial similarity in detail.
Under the second criterion, Sec. 412.87(b)(3) further provides
that, to be eligible for the add-on payment for new medical services or
technologies, the MS-DRG prospective payment rate otherwise applicable
to the discharge involving the new medical services or technologies
must be assessed for adequacy. Under the cost criterion, to assess the
adequacy of payment for a new technology paid under the applicable MS-
DRG prospective
[[Page 53344]]
payment rate, we evaluate whether the charges for cases involving the
new technology exceed certain threshold amounts. Table 10 that was
released with the FY 2012 IPPS/LTCH PPS final rule contains the final
thresholds that we used to evaluate applications for new technology
add-on payments for FY 2013 in this final rule. We refer readers to the
Web site http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FR2012/list.asp#TopOfPage for a complete viewing of
Table 10 from the FY 2012 IPPS/LTCH PPS final rule.
In the September 7, 2001 final rule that established the new
technology add-on payment regulations (66 FR 46917), we discussed the
issue of whether the Health Insurance Portability and Accountability
Act (HIPAA) Privacy Rule at 45 CFR Parts 160 and 164 applies to claims
information that providers submit with applications for new technology
add-on payments. We refer readers to the FY 2012 IPPS/LTCH PPS final
rule (76 FR 51573) for complete information on this issue.
Under the third criterion, Sec. 412.87(b)(1) of our existing
regulations provides that a new technology is an appropriate candidate
for an additional payment when it represents ``an advance that
substantially improves, relative to technologies previously available,
the diagnosis or treatment of Medicare beneficiaries.'' For example, a
new technology represents a substantial clinical improvement when it
reduces mortality, decreases the number of hospitalizations or
physician visits, or reduces recovery time compared to the technologies
previously available. We refer readers to the September 7, 2001 final
rule for a complete discussion of this criterion (66 FR 46902).
The new medical service or technology add-on payment policy under
the IPPS provides additional payments for cases with relatively high
costs involving eligible new medical services or technologies while
preserving some of the incentives inherent under an average-based
prospective payment system. The payment mechanism is based on the cost
to hospitals for the new medical service or technology. Under Sec.
412.88, if the costs of the discharge (determined by applying cost-to-
charge ratios (CCRs) as described in Sec. 412.84(h)) exceed the full
DRG payment (including payments for IME and DSH, but excluding outlier
payments), Medicare will make an add-on payment equal to the lesser of:
(1) 50 percent of the estimated costs of the new technology (if the
estimated costs for the case including the new technology exceed
Medicare's payment); or (2) 50 percent of the difference between the
full DRG payment and the hospital's estimated cost for the case. Unless
the discharge qualifies for an outlier payment, the additional Medicare
payment for new medical services and technologies is limited to the
full MS-DRG payment plus 50 percent of the estimated costs of the new
technology.
Section 503(d)(2) of Public Law 108-173 provides that there shall
be no reduction or adjustment in aggregate payments under the IPPS due
to add-on payments for new medical services and technologies.
Therefore, in accordance with section 503(d)(2) of Public Law 108-173,
add-on payments for new medical services or technologies for FY 2005
and later years have not been subjected to budget neutrality.
In the FY 2009 IPPS final rule (73 FR 48561 through 48563), we
modified our regulations at Sec. 412.87 to codify our longstanding
practice of how CMS evaluates the eligibility criteria for new medical
service or technology add-on payment applications. That is, we first
determine whether a medical service or technology meets the newness
criterion, and only if so, do we then make a determination as to
whether the technology meets the cost threshold and represents a
substantial clinical improvement over existing medical services or
technologies. We also amended Sec. 412.87(c) to specify that all
applicants for new technology add-on payments must have FDA approval or
clearance for their new medical service or technology by July 1 of each
year prior to the beginning of the fiscal year that the application is
being considered.
The Council on Technology and Innovation (CTI) at CMS oversees the
agency's cross-cutting priority on coordinating coverage, coding and
payment processes for Medicare with respect to new technologies and
procedures, including new drug therapies, as well as promoting the
exchange of information on new technologies between CMS and other
entities. The CTI, composed of senior CMS staff and clinicians, was
established under section 942(a) of Public Law 108-173. The Council is
co-chaired by the Director of the Center of Clinical Standards and
Quality (CCSQ) and the Director of the Center for Medicare (CM), who is
also designated as the CTI's Executive Coordinator.
The specific processes for coverage, coding, and payment are
implemented by CM, CCSQ, and the local claims-payment contractors (in
the case of local coverage and payment decisions). The CTI supplements,
rather than replaces, these processes by working to assure that all of
these activities reflect the agency-wide priority to promote high-
quality, innovative care. At the same time, the CTI also works to
streamline, accelerate, and improve coordination of these processes to
ensure that they remain up to date as new issues arise. To achieve its
goals, the CTI works to streamline and create a more transparent coding
and payment process, improve the quality of medical decisions, and
speed patient access to effective new treatments. It is also dedicated
to supporting better decisions by patients and doctors in using
Medicare-covered services through the promotion of better evidence
development, which is critical for improving the quality of care for
Medicare beneficiaries.
To improve the understanding of CMS' processes for coverage,
coding, and payment and how to access them, the CTI has developed an
``Innovator's Guide'' to these processes. The intent is to consolidate
this information, much of which is already available in a variety of
CMS documents and in various places on the CMS Web site, in a user-
friendly format. This guide was published in August 2008 and is
available on the CMS Web site at: http://www.cms.gov/CouncilonTechInnov/Downloads/InnovatorsGuide5_10_10.pdf.
As we indicated in the FY 2009 IPPS final rule (73 FR 48554), we
invite any potential applicants, such as product developers or
manufacturers of new medical technologies, to contact the agency early
in the process of product development if they have questions or
concerns about the evidence that would be needed later in the
development process for the agency's coverage and/or payment decisions
for Medicare.
The CTI aims to provide useful information on its activities and
initiatives to stakeholders, including Medicare beneficiaries,
advocates, medical product manufacturers, providers, and health policy
experts. Stakeholders with further questions about Medicare's coverage,
coding, and payment processes, or who want further guidance about how
they can navigate these processes, can contact the CTI at
[email protected].
We note that applicants for add-on payments for new medical
services or technologies for FY 2014 must submit a formal request,
including a full description of the clinical applications of the
medical service or technology and the results of any clinical
evaluations demonstrating that the new medical service or technology
represents a substantial clinical improvement, along
[[Page 53345]]
with a significant sample of data to demonstrate that the medical
service or technology meets the high-cost threshold. Complete
application information, along with final deadlines for submitting a
full application, will be posted as it becomes available on the CMS Web
site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/newtech.html. To allow interested parties to identify
the new medical services or technologies under review before the
publication of the proposed rule for FY 2014, the Web site also will
post the tracking forms completed by each applicant.
2. Public Input Before Publication of a Notice of Proposed Rulemaking
on Add-On Payments
Section 1886(d)(5)(K)(viii) of the Act, as amended by section
503(b)(2) of Public Law 108-173, provides for a mechanism for public
input before publication of a notice of proposed rulemaking regarding
whether a medical service or technology represents a substantial
clinical improvement or advancement. The process for evaluating new
medical service and 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 2013 prior
to publication of the FY 2013 IPPS/LTCH PPS proposed rule, we published
a notice in the Federal Register on November 18, 2011 (76 FR 71571
through 71572), and held a town hall meeting at the CMS Headquarters
Office in Baltimore, MD, on February 14, 2012. In the announcement
notice for the meeting, we stated that the opinions and alternatives
provided during the meeting would assist us in our evaluations of
applications by allowing public discussion of the substantial clinical
improvement criterion for each of the FY 2013 new medical service and
technology add-on payment applications before the publication of the FY
2013 proposed rule.
Approximately 70 individuals registered to attend the town hall
meeting in person, while additional individuals listened over an open
telephone line. Four of the five FY 2013 applicants presented
information on its technology, including a discussion of data
reflecting the substantial clinical improvement aspect of the
technology. We considered each applicant's presentation made at the
town hall meeting, as well as written comments submitted on the
applications that were received by the due date of March 6, 2012, in
our evaluation of the new technology add-on payment applications for FY
2013 in the proposed rule.
In response to the published notice and the new technology town
hall meeting, commenters submitted and presented public comments that
were unrelated to the substantial clinical improvement criterion in
regard to the new technology applications for FY 2013. We also received
public comments on the proposed rule relating to topics such as
marginal cost factors for new technology add-on payments, and the use
of external data in determining the cost threshold and mapping new
technologies to the appropriate MS-DRG. Because we did not request
public comments nor propose to make any changes to any of the issues
above, we are not summarizing these public comments nor responding to
them in this final rule.
3. FY 2013 Status of Technology Approved for FY 2012 Add-On Payments:
Auto Laser Interstitial Thermal Therapy (AutoLITT\TM\) System
Monteris Medical submitted an application for new technology add-on
payments for FY 2011 for the AutoLITT\TM\. AutoLITT\TM\ is a minimally
invasive, MRI-guided laser tipped catheter designed to destroy
malignant brain tumors with interstitial thermal energy causing
immediate coagulation and necrosis of diseased tissue. The technology
can be identified by ICD-9-CM procedure codes 17.61 (Laser interstitial
thermal therapy [LITT] of lesion or tissue of brain under guidance),
and 17.62 (Laser interstitial thermal therapy [LITT] of lesion or
tissue of head and neck under guidance), which became effective on
October 1, 2009.
The AutoLITT\TM\ received a 510K FDA clearance in May 2009. The
AutoLITT\TM\ is indicated for use to necrotize or coagulate soft tissue
through interstitial irradiation or thermal therapy in medicine and
surgery in the discipline of neurosurgery with 1064 nm lasers. The
AutoLITT\TM\ may be used in patients with glioblastoma multiforme brain
tumors. The applicant stated in its application and through
supplemental information that, due to required updates, the technology
was actually introduced to the market in December 2009. The applicant
explained that it was necessary to reduce the thermal damage lines from
three to one and complete International Electrotechnical Commission/
Underwriter Laboratory testing, which led to the introduction of the
technology to the market in December 2009, although the technology was
approved by FDA in May 2009. The applicant also stated through
supplementary information to its application that the first sale of the
product took place on March 19, 2010. However, because the product was
already available for use in December 2009, it appears that the newness
date would begin in December 2009. In the FY 2011 IPPS/LTCH PPS
proposed rule, we welcomed public comments on this issue.
After evaluation of the newness, costs, and substantial clinical
improvement criteria for new technology payments for the AutoLITT\TM\
and consideration of the public comments we received in response to the
FY 2011 IPPS/RY 2011 LTCH PPS proposed rule, including the additional
analysis of clinical data and supporting information submitted by the
applicant, we approved the AutoLITT\TM\ for new technology add-on
payments for FY 2011. Consistent with the applicant's clinical trial,
the add-on payment is intended only for use of the device in cases of
glioblastoma multiforme. Therefore, we limited the new technology add-
on payment to cases involving the AutoLITT\TM\ in MS-DRGs 025
(Craniotomy and Endovascular Intracranial Procedures with MCC), 026
(Craniotomy and Endovascular Intracranial Procedures with CC), and 027
(Craniotomy and Endovascular Intracranial Procedures without CC or
MCC). Cases involving the AutoLITT\TM\ that are eligible for the new
technology add-on payment are identified by assignment to MS-DRGs 025,
026, and 027 with a procedure code
[[Page 53346]]
of 17.61 (Laser interstitial thermotherapy of lesion or tissue of brain
under guidance) in combination with a principal diagnosis code that
begins with a prefix of 191 (Malignant neoplasm of brain). We note that
using the procedure and diagnosis codes above and restricting the add-
on payment to cases that map to MS-DRGs 025, 026, and 027 is consistent
with information provided by the applicant, which demonstrated that
cases of the AutoLITT\TM\ would only map to MS-DRGs 025, 026, and 027.
Procedure code 17.62 (Laser interstitial thermotherapy of lesion or
tissue of head and neck under guidance) does not map to MS-DRGs 025,
026, or 027 under the GROUPER software and, therefore, is ineligible
for new technology add-on payment.
The average cost of the AutoLITT\TM\ is reported as $10,600 per
case. Under Sec. 412.88(a)(2) of the regulations, new technology add-
on payments are limited to the lesser of 50 percent of the average cost
of the device or 50 percent of the costs in excess of the MS-DRG
payment for the case. As a result, the maximum add-on payment for a
case involving the AutoLITT\TM\ is $5,300.
The new technology add-on payment regulations provide that ``a
medical service or technology may be considered new within 2 or 3 years
after the point at which data begin to become available reflecting the
ICD-9-CM code assigned to the new service or technology'' (42 CFR
412.87(b)(2)). Our practice has been to begin and end new technology
add-on payments on the basis of a fiscal year, and we have generally
followed a guideline that uses a 6-month window before and after the
start of the fiscal year to determine whether to extend the new
technology add-on payment for an additional fiscal year. In general, we
extend add-on payments for an additional year only if the 3-year
anniversary date of the product's entry on the market occurs in the
latter half of the fiscal year (70 FR 47362). In the proposed rule,
with regard to the newness criterion for the AutoLITT\TM\, we stated
that we consider the beginning of the newness period for the device to
commence from the market release date of December 2009. Therefore, for
FY 2013, as of December 2012, the AutoLITT\TM\ will have been on the
market for 3 years, and would therefore no longer be considered ``new''
as of December 2012 nor be considered eligible for new technology add-
on payments in FY 2013. However, we received information from the
applicant that the market release date of the AutoLITT\TM\ occurred
after April 2010 (which occurs in the latter half of the fiscal year)
and, therefore, it appears that the AutoLITT\TM\ would still be
considered ``new'' for FY 2013 and would still be eligible for new
technology add-on payments in FY 2013. We note that we received this
information in close proximity to the publication of the proposed rule
and anticipated receiving further information on the delayed market
release date from the applicant and welcomed public comment as well.
Comment: The applicant submitted a public comment to demonstrate
that the AutoLITT\TM\ was first available on May 11, 2010, which would
make the AutoLITT\TM\ eligible for new technology add-on payments in FY
2013 (because the 3-year anniversary date of AutoLITT\TM\ would take
place in the latter half of the fiscal year). The manufacturer
explained that some of the sterile disposable products were not
released from quarantine until May 11, 2010, which prevented the
AutoLITT\TM\ from being used prior to May 11, 2010. Therefore, the
manufacturer asserted that the first time the AutoLITT\TM\ was
available on the market was May 11, 2010.
Response: We appreciate the manufacturer providing this information
and we agree that the AutoLITT\TM\ is considered new as of May 11,
2010, instead of December 2009. As stated above, 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 on the market occurs in
the latter half of the fiscal year (70 FR 47362). Because the 3-year
anniversary date of the AutoLITT\TM\ entry on the market occurs in the
latter half of the fiscal year, we still consider the AutoLITT\TM\ to
be new for FY 2013. Therefore, we are continuing to make new technology
add-on payments for the AutoLITT\TM\ in FY 2013. We discuss the coding
and payment policies for the AutoLITT\TM\ earlier in this section.
Comment: Several public commenters recommended extending new
technology add-on payments for the AutoLITT\TM\ in FY 2013.
Response: As stated above, we still consider the AutoLITT\TM\ to be
new for FY 2013, and will continue to make new technology add-on
payments for the AutoLITT\TM\ in FY 2013.
4. FY 2013 Applications for New Technology Add-On Payments
We received six applications for new technology add-on payments for
FY 2013. However, two applicants withdrew their applications prior to
the publication of the proposed rule.
a. Glucarpidase (Trade Brand Voraxaze[supreg])
BTG International, Inc. (BTG) submitted an application for new
technology add-on payments for Glucarpidase (trade brand
Voraxaze[supreg]) for FY 2013. In the proposed rule, we summarized this
application, and stated that Glucarpidase is used in the treatment of
patients who have been diagnosed with toxic methotrexate (MTX)
concentrations as a result of renal impairment. The administration of
Glucarpidase causes a rapid and sustained reduction of toxic MTX
concentrations.
Methotrexate (MTX) is a widely used anticancer agent. The
administration of high-dose methotrexate (HDMTX) is an important
component of the treatment provided to patients who have been diagnosed
with various types of cancer. According to the applicant, HDMTX, in
particular, is specifically used in the treatment of patients who have
been diagnosed with osteosarcoma, acute lymphoblastic leukemia, non-
Hodgkin's lymphoma, or primary CNS lymphoma. The applicant further
stated that the administration of HDMTX can cause renal dysfunction.
Renal dysfunction impairs the elimination of MTX, which in turn causes
the levels of MTX to rise to the point of life-threatening toxicity.
The applicant maintains that there are not any currently FDA-
approved pharmaceutical treatment options available to rapidly decrease
MTX levels in patients who have been diagnosed with toxic MTX
concentrations as a result of renal impairment. The applicant asserts
that extracorporeal treatment options that are routinely employed to
rapidly treat this condition, such as hemodialysis, hemodiafiltration,
high-flux hemodialysis, charcoal hemoperfusion or hemofiltration,
peritoneal dialysis, exchange transfusion, or plasma exchange, are
invasive, may add excess morbidity to the treatment regimen, and have
proven to have limited effects.\15\ High flux hemodialysis is the most
effective method of extracorporeal MTX removal, but this method
requires 5 to 6 days of daily treatment (4 to 6 hours per session).\16\
The risks associated with repeated hemodialysis procedures such as
anemia, infection, and increased mortality, especially in neutropenic
or thrombocytopenic patients, are significant and cause rebounds in MTX
levels. The applicant maintains that other treatment options, such as
the
[[Page 53347]]
administration of leucovorin, hydration, and urinary alkalinization,
also are commonly used to reduce harmful levels of MTX. However, these
treatment options do not reduce toxic MTX concentrations in all patient
populations.\17\
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\15\ Widemann et al., [Cancer, 2004, and Vilay et al.,],
Pharmacotherapy, Vol. 30, January, 2010).
\16\ Wall et al., American Journal of Kidney Diseases, Vol. 28,
No. 6, 1996.
\17\ Pinedo et al, Cancer Research, 36, 4418-4424 December,
1976.
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Voraxaze[supreg] was approved by the FDA on January 17, 2012.
Beginning in 1993, certain patients could obtain expanded access for
treatment use to Voraxaze[supreg] as an investigational drug. Since
2007, the applicant has been authorized to recover the costs of making
Voraxaze[supreg] available through its expanded access program. We
describe expanded access for treatment use of investigational drugs and
authorization to recover certain costs of investigational drugs in more
detail below. Voraxaze[supreg] was available on the market in the
United States as a commercial product to the larger population as of
April 30, 2012.
With regard to newness, in the proposed rule we expressed concern
that Voraxaze[supreg] may no longer be considered ``new.''
Specifically, section 1886(d)(5)(K)(ii)(II) of the Act requires that we
provide for the collection of cost data for a new medical service or
technology for a period of at least 2 years and no more than 3 years
``beginning on the date on which an inpatient hospital code is issued
with respect to the service or technology''. In addition, the
regulations at Sec. 412.87(b)(2) state that ``A medical service or
technology may be considered new within 2 or 3 years after the point at
which data begin to become available reflecting the ICD-9-CM code
assigned to the new service or technology (depending on when a new code
is assigned and data on the new service or technology become available
for DRG recalibration). After CMS has recalibrated the DRGs, based on
available data, to reflect the costs of an otherwise new medical
service or technology, the medical service or technology will no longer
be considered `new' under the criterion of this section.'' As we have
indicated in the past, we generally believe that the newness period
begins on the date that FDA approval is granted. The FDA approval date
is typically the date when new technologies are available on the market
and as a result begin to be reflected within the MS-DRGs cost data.
As noted above, Voraxaze[supreg] was approved by the FDA in January
2012. However, starting in 1993, certain patients were able to obtain
access to Voraxaze[supreg] as an investigational drug through an
expanded access program, and the applicant has been authorized to
recover certain costs of making Voraxaze[supreg] available through its
expanded access program since 2007. We discuss below in more detail
whether the cost of Voraxaze[supreg] is already reflected within the
MS-DRG relative weights.
To determine the date of newness for Voraxaze[supreg], as we stated
in the proposed rule, we believe it is appropriate to compare
investigational drugs provided under the expanded access program to
devices eligible for the Humanitarian Use Device (HUD) Program because
these programs contain similarities for the purpose of evaluating the
newness criterion.
In prior final rules, we have evaluated and approved technologies
with a Humanitarian Device Exemption (HDE) approval. In the FY 2010
IPPS/LTCH PPS final rule, we approved new technology add-on payments
for the Spiration[supreg] IBV[supreg], which received a HDE approval
from the FDA on October 24, 2008, and had its first Institutional
Review Board (IRB) approval on March 12, 2009 (74 FR 43754, 43819).
Therefore, technologies with an HDE approval may be eligible for new
technology add-on payments. In other words, we have concluded that HDE
approval constitutes an FDA approval in the context of the newness
criterion and would begin the newness period, subject to market
availability.
There are separate processes and standards for providing expanded
access to investigational drugs for treatment use and for the HUD
Program. The term ``expanded access'' refers to the use of
investigational drugs, or approved drugs where availability is limited
by a risk evaluation or mitigation strategy, when the primary purpose
is to diagnose, monitor, or treat a patient's disease or condition.
When the requirements in (FDA's regulations at) 21 CFR Part 312,
Subpart I are met, a patient or group of patients with a serious or
immediately life-threatening disease or condition, and no comparable or
satisfactory alternative therapy, may obtain expanded access to an
investigational drug. When patients obtain expanded access to an
unapproved investigational drug, the safety and effectiveness of the
drug have not been fully established, and the drug does not have formal
FDA approval under a New Drug Application (NDA) or Biologics Licensing
Application (BLA) for commercial marketing. Manufacturers may continue
conducting clinical trials in parallel to the expanded access program
in order to pursue formal market approval from the FDA under an NDA or
BLA for commercial marketing. The FDA's Office of Orphan Products
Development administers the Humanitarian Use Device (HUD) Program. A
HUD is a device that is intended to benefit patients by treating or
diagnosing a disease or condition that affects fewer than 4,000
individuals in the United States per year. To obtain approval for a
HUD, a HDE application is submitted to FDA. A HDE application is
similar in both form and content to a Premarket Approval (PMA)
application, but is exempt from the effectiveness requirements of a
PMA. A HDE application must, however, contain sufficient information
for FDA to determine that the device does not pose an unreasonable or
significant risk of illness or injury, and that the probable benefit to
health outweighs the risk of injury or illness from its use, taking
into account the probable risks and benefits of currently available
devices or alternative forms of treatment. An approved HDE authorizes
marketing of the HUD, however, an HDE approval requires that the device
only be used in facilities that have established a local IRB to
supervise clinical testing of devices, and that an IRB approve the use
of the device to treat or diagnose the specific disease. Although HUDs
can be marketed, they are subject to a general prohibition on profit;
that is, they may not, except in narrow circumstances, be sold for an
amount that exceeds the cost of research and development, fabrication
and distribution.
Expanded access to investigational drugs and the HUD Program have
similarities and differences that are relevant to the newness criterion
as we stated in the proposed rule. Both have limits on who is eligible
to receive a drug or use a device. In addition, to satisfy the
requirements for expanded access in FDA's regulations, and for a HDE to
meet the standard for approval, a sponsor is not required to
demonstrate effectiveness of the product at the same level as for
approval of a PMA, NDA, or BLA. Expanded access to investigational
drugs and the HUD Program differ in many ways, including that the HUD
Program is for devices, and the expanded access programs provide access
to drugs. In addition, under the HUD Program, the device is granted FDA
approval for limited use. However, while FDA authorizes expanded access
to an investigational drug, FDA does not approve the investigational
drug when it authorizes expanded access.
This second difference is key to our interpretation of our policy
to recognize a HDE approval as an FDA approval. We believe that the
availability of a drug through the expanded access program
[[Page 53348]]
would not constitute FDA approval in the context of the newness
criterion because unapproved, investigational drugs made available to
certain patients through the expanded access program do not receive FDA
approval prior to enrollment in the program and cannot be marketed. In
other words, we believe that for the purposes of evaluating whether a
new technology meets the newness criterion, it may be appropriate not
to consider the date when Voraxaze[supreg] became available to certain
patients through the applicant's expanded access program as the date of
market availability.
We note that cost recovery for investigational drugs is of concern
with regard to the newness criterion. Although a sponsor (for example,
a drug manufacturer) may not commercially distribute an investigational
drug, in certain circumstances, a sponsor of a clinical trial or an
expanded access program may receive authorization from FDA to charge
for certain costs associated with making an investigational drug
available. The applicant has been authorized to recover certain costs
by making Voraxaze[supreg] available since 2007. As we stated earlier,
once CMS has recalibrated the DRGs based on available data to reflect
the costs of an otherwise new technology, that technology will no
longer be considered ``new''' for the purposes of the new technology
add-on payments. It is possible that a hospital may have submitted a
claim to Medicare for the cost of Voraxaze[supreg] provided through the
applicant's expanded access program. Therefore, it is also possible
that the costs associated with this technology may already be reflected
in some limited fashion in the data used to determine the MS-DRG
relative weights. While these are possibilities, we have not in the
past been confronted with a situation where an applicant has indicated
that hospitals have sought cost recovery for their technology when the
technology was available through the expanded access program. We also
have not been confronted with a situation where an applicant has
indicated that cost recovery was sought for technologies (that were not
available via an expanded access program) during clinical trials. We
note that our data do not distinguish charges for drugs by FDA approval
status, and, therefore, we do not exclude from the relative weight
calculation costs (as derived from charges) associated with
investigational drugs if they are included by hospitals on a claim.
Therefore, cost data for non-FDA approved technologies (that is, still
involved in clinical trials) may be present in the relative weights on
a very limited basis prior to FDA approval, regardless of whether a
technology received new technology add-on payments.
We invited public comment regarding the issue of whether a drug is
considered ``new'' for the purposes of new technology add-on payments
starting with its availability in the expanded access program, and how
that may differ from devices being considered ``new'' starting from the
date the device received FDA approval under a HDE (subject to market
availability or availability to Medicare beneficiaries) and
specifically requested comment on these considerations in the context
of Voraxaze[supreg]. We also invited public comment on whether the
costs of Voraxaze[supreg], or more generally, any unapproved
investigational drug for which cost recovery is authorized are already
included in data used to determine relative weights, and how that
influences the start of a newness period, if at all. In addition, we
invited public comment regarding the market availability of
Voraxaze[supreg] between its FDA approval date of January 17, 2012, and
the market availability date according to the applicant of April 2012
and the reasons for the delay in availability.
Comment: Several public commenters responded with opinions
regarding whether Voraxaze[supreg] should be considered new for the
purposes of new technology add-on payments. One commenter stated that
Voraxaze[supreg] was available on a ``very limited basis'' since 1993,
and recommended that it be considered ``new'' for the purpose of new
technology add-on payments. The commenter also stated that because the
manufacturer was only covering its costs under the expanded access
program, existing charge data do not adequately reflect the ``true
price'' of the technology. The commenter further noted that the
frequency with which the technology is used is low, and that the
associated relative weights are ``likely artificially low.''
The applicant submitted information through the submittal of a
public comment documenting that Voraxaze[supreg] was approved by the
FDA in January 2012 and that marketing of Voraxaze did not begin until
April 2012. The applicant added that the FDA's Office of Prescription
Drug Promotion (OPDP) considers a product new from the point of initial
marketing and promotion, stating that, ``OPDP generally considers that
`new' is an accurate description of the marketing phase for six months
from the time a product is initially marketed and this should be
distinguished from the time a product is cleared by FDA for
marketing.'' The applicant concluded that the FDA recognizes a time
delay between approval and commercial availability as standard in the
pharmaceutical industry.
In addition, the applicant provided supplemental information that
demonstrated that Voraxaze was not available on the market until April
30, 2012. This documentation included specific information regarding
training, manufacturing/packaging and trade/distribution activities
that needed to take place prior to April 30, 2012. Once these
activities were completed, the applicant stated that it discontinued
the treatment of IND/cost recovery program for Voraxaze[supreg] on
April 29, 2012, and that market availability of Voraxaze[supreg] began
on April 30, 2012.
The applicant also noted that one of the reasons it did not
initiate commercialization activities prior to the FDA approval date of
January 30, 2012 was because the company was awaiting final FDA
labeling approval (that is, prescribing information) for
Voraxaze[supreg], which was delivered to BTG on the day of approval,
which was January 17, 2012. The applicant believed it would not have
been prudent for BTG to initiate commercialization activities before
receiving the final labeling approval because it would have required
expensive and time-consuming rework.
One commenter stated that Voraxaze[supreg] meets the newness
criteria. The commenter explained that the FDA approval date is
reasonable to use for determination of newness. The commenter stated
that prior to FDA approval, Voraxaze[supreg] was only available through
a laborious expanded access process that many oncology centers did not
have in place. Thus, it was truly only available at many centers for
the first time as of April 30, 2012.
Another commenter stated that it believed that Voraxaze[supreg]
does not meet the newness criterion but did not provide additional
information.
Response: Generally, our policy is to begin the newness period on
the date of FDA approval/clearance or, if later, the date of market
availability for the technology. Availability under the expanded access
program neither represents the date of FDA approval (in this case,
January 2012) nor the date of market availability (April 30, 2012).
Therefore, we consider Voraxaze[supreg] to be ``new'' as of April 30,
2012, its date of market availability.
We note, as discussed in section II.G.7. of the preamble to this
final rule, we are creating a new ICD-9-CM procedure code 00.95
(Injection or
[[Page 53349]]
infusion of glucarpidase) to identify this new technology. This new
code is effective October 1, 2012.
With respect to the cost criterion, as we described in the proposed
rule, the applicant researched the 2009 Standard Analytic Inpatient
File (SAF) for cases with a principal or secondary diagnosis of
osteosarcoma (ICD-9-CM code series 170.xx), acute lymphoblastic
leukemia (ICD-9-CM code series 204.0x), non-Hodgkin's lymphoma (ICD-9-
CM code series 200.xx and 202.xx), or primary CNS lymphoma (ICD-9-CM
code series 200.5x) with a corresponding ICD-9-CM procedure code for
chemotherapy (99.25) that may be eligible for Voraxaze[supreg], based
on the product's approved indications. The applicant's search yielded
potentially eligible cases within 249 MS-DRGs, of which 56 MS-DRGs
captured 12 or more cases.
Using this universe of cases (249 MS-DRGs), the applicant added the
additional costs of Voraxaze[supreg] to the case-weighted average
standardized charge per case. Although the applicant submitted data
related to the estimated cost of Voraxaze[supreg], the applicant noted
that the cost of the technology was proprietary information. According
to the applicant, it did not convert the costs to charges for this
analysis because of the technology's high cost. The applicant maintains
that an average adult receiving treatment for one of the diagnoses
above would require a minimum of four vials of Voraxaze[supreg].
The applicant used the following multiple analysis of different
subsets of MS-DRGs to compare the average case-weighted standardized
charge per case to the average case-weighted threshold to determine
that Voraxaze[supreg] met the cost criteria:
The applicant found 12,324 eligible cases within 249 MS-
DRGs, and determined a case-weighted average standardized charge per
case of $87,582 (which includes the cost of Voraxaze[supreg]) and a
case-weighted threshold of $39,216. The applicant maintains that
Voraxaze[supreg] meets the cost criterion because the case-weighted
average standardized charge per case exceeds the case-weighted
threshold.
The applicant excluded those MS-DRGs that had fewer than
11 cases, which resulted in 12,134 eligible cases within 56 MS-DRGs.
The applicant determined a case-weighted average standardized charge
per case of $84,039 (which includes the cost of Voraxaze[supreg]) and a
case-weighted threshold of $37,195. The applicant maintains that
Voraxaze[supreg] meets the cost criterion because the case-weighted
average standardized charge per case exceeds the case-weighted
threshold.
The applicant analyzed the 20 MS-DRGs that contained the
highest number of cases and, based on the 11,534 cases they stated they
found, determined a case-weighted average standardized charge per case
of $80,400 (which includes the cost of Voraxaze[supreg]) and a case-
weighted threshold of $34,990. The applicant maintains that
Voraxaze[supreg] meets the cost criterion because the case-weighted
average standardized charge per case exceeds the case-weighted
threshold.
We invited public comment on whether or not Voraxaze[supreg] meets
the cost criterion. Specifically, we welcomed public comment on the
methodologies used in the applicant's analysis, including (1) the
methods used to identify the eligible cases used in the cost analysis
of this technology, especially if there are cases that should be
excluded from the analysis because of clinical reasons, and if there
are other ways to identify cases for which this technology may be
appropriate, and (2) the appropriateness of not converting the costs to
charges for the purposes of this analysis and what would be an accurate
and appropriate CCR for this technology.
Comment: The applicant submitted a public comment stating that it
believed that Voraxaze[supreg] meets the cost criterion because the
commercial costs of Voraxaze[supreg] are not reflected in the MS-DRG
relative weights. The applicant added that Voraxaze[supreg] was
available via expanded access since 2007 and hospitals were not allowed
to submit for reimbursement of Voraxaze[supreg] because it was an
investigational drug. Even if hospitals attempted to submit for
reimbursement, the applicant noted that the Voraxaze[supreg] cost
recovery price is substantially lower than its commercial price of
$22,500 (effective April 30, 2012) and any existing data prior to April
30, 2012 used to determine MS-DRG relative weights would not capture
such a price difference and would largely underestimate the cost of
Voraxaze[supreg]. Other commenters stated that Voraxaze[supreg] clearly
meets the cost criterion. The commenters explained that they believed
the situations where Voraxaze[supreg] is indicated for use were rare,
and in those situations they believed that the cost of care for the
affected patient rises substantially.
Response: We appreciate the commenters' input. We agree that
Voraxaze[supreg] meets the cost criterion.
With regard to substantial clinical improvement, the applicant
maintains that Voraxaze[supreg] is a clinical improvement compared to
current treatment options because it is less time intensive, allows
certain patient populations to avoid risks associated with current
treatment options, and has characteristics that allows it to reduce MTX
concentrations more effectively. As noted above, the applicant
maintains that current treatment options for renal impairment as a
result of toxic MTX concentrations are limited to extracorporeal
methods that are time-intensive and could subject patients in certain
populations to harm from the associated risks. The applicant states
that the administration of Voraxaze[supreg] to patients who have been
diagnosed with HDMTX-induced renal dysfunction metabolizes circulating
MTX to the inactive metabolite DAMPA. The applicant asserts that this
characteristic action of the technology represents a substantial
clinical improvement over current treatment options available to
patients who have toxic MTX concentrations in a more effective, and
rapid way, and provides protection to eligible patient populations
against potential harm associated with current treatment options.
In addition, the applicant provided the results from a study of 23
patients diagnosed with MTX-induced renal dysfunction treated with
Voraxaze[supreg]. During this study, the applicant reported that the
administration of Voraxaze[supreg] lowered toxic MTX concentrations in
patients within 15 minutes after the administration by more than 98
percent. Because the administration of Voraxaze[supreg] could
metabolize both leucovorin and its active metabolite, 5-mTHF, these
patients were also administered Leucovorin, a drug used to enhance the
treatment for patients with high levels of MTX. The applicant noted
that the combination of Voraxaze[supreg] and Leucovorin rescue was well
tolerated by the 23 patients studied, and MTX-related toxicities were
reduced from severe to mild to moderate. The range of age of these 23
patients was 19 to 94 years old with 18 of the 23 patients being 50
years or older.\18\ The applicant asserted that the types of health
conditions treated with HDMTX, such as acute lymphoblastic leukemia,
osteosarcoma, central nervous system (CNS) lymphoma, and leptomeningeal
cancer, tend to occur within the Medicare population and cites research
that states ``HD-MTX-induced renal failure with persistence of toxic
blood MTX levels is a rare but life threatening complication that
occurs more frequently in adults, particularly those with advanced age
and CNS
[[Page 53350]]
lymphoma.'' \19\ When these malignancies arise which require treatment
with HDMTX, HDMTX-induced renal failure with persistent toxic MTX
levels is a complication that occurs more frequently in adults. The
applicant asserted that the administration of Voraxaze[supreg] has been
shown to be well-tolerated by older adult patients, while achieving
similar reduction rates in younger patient populations who have been
diagnosed with toxic MTX concentrations and treated with
Voraxaze[supreg].\20\ The applicant also provided additional published
peer-reviewed articles\21,22,23,24,25,26\ relevant to their application
to support their assertion that they meet the substantial clinical
improvement criteria.
---------------------------------------------------------------------------
\18\ Green and Chamberlan, Cancer Chemotherapy and Pharmacology
Volume 63, November 4, 2009.
\19\ Schwartz, Borner et al., The Oncologist, December 2007.
\20\ Schwartz, Borner et al,. The Oncologist, December 2007.
\21\ Levy CC, Goldman P. The enzymatic hydrolysis of
methotrexate and folic acid. J Biol Chem. 1967; 242:2993-2998.
\22\ Minton NP, Atkinson T, Sherwood RF. Molecular cloning of
the Pseudomonas carboxypeptidase G2 gene and its expression in
Escherichia coli and Pseudomonas putida. J Bacteriol. 1983; 156:
1222-1227\.\
\23\ Widemann BC, Balis FM, Kim A, et al. Glucarpidase,
leucovorin and thymidine for high-dose methotrexate induced renal
dysfunction. Clinical and pharmacologic factors affecting outcome. J
Clin Oncology 2010; 28:1-8.
\24\ Patterson DM, Lee SM. Glucarpidase following high-dose
methotrexate: update on development. Expert Opin Biol Ther.
2010;10(1):105-111.
\25\ Phillips M, Smith W, Balan G, et al. Pharmacokinetics of
glucarpidase in subjects with normal and impaired renal function. J
Clin Pharmacol 2008; 48:279-284.
\26\ Bleyer WA. Methotrexate: clinical pharmacology, current
status and therapeutic guidelines. Cancer Treat Rev. 1977;4:87-101.
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We invited public comment on whether or not Voraxaze[supreg] meets
the criterion of representing a substantial clinical improvement for
Medicare beneficiaries.
Comment: The applicant submitted public comments that stated,
``Voraxaze[supreg] meets the substantial clinical benefit criterion
because the FDA accepted, reviewed, and approved the biologic licenses
application (BLA) for Voraxaze[supreg] on an accelerated timeline. The
FDA initiates an expedited review when a high unmet need exists and
when an applicant has a product that may qualify as a substantial
clinical improvement.''
Several other public comments also stated that Voraxaze[supreg]
meets the substantial clinical improvement criteria. One of the
commenters, a pediatric oncologist, asserted that prior to
Glucarpidase, there were no reliably effective interventions for
patients suffering from high dose MTX induced renal dysfunction, a life
threatening medical emergency. The commenter further noted that
numerous interventions historically employed were generally invasive
(that is, charcoal hemoperfusion), had variable but limited impact, and
were not readily available at most treatment centers. The commenter
concluded that Glucarpidase is a highly effective pharmacologic rescue
that can be readily delivered to patients at high risk of or
experiencing a life threatening complication of cancer therapy, that
there is no other comparable pharmacologic intervention available, and
that Glucarpidase is superior to less reliable, invasive measures.
Another commenter stated that when Voraxaze[supreg] is used in a timely
fashion, it can improve severe MTX-induced toxicity, prevent the need
for dialysis and other invasive procedures, and can be lifesaving. The
commenter believed that Voraxaze[supreg] is a unique medication, which
can treat a rare and life-threatening complication of methotrexate
therapy which has no alternative mediation. The commenter believed that
alternative supportive care to Voraxaze[supreg], including
hospitalization and dialysis, is exceptionally expensive.
Another commenter who also supported new technology add-on payments
for the Voraxaze[supreg] believed that Voraxaze[supreg] is a drug that
can provide life-saving reversal of toxic levels of methotrexate. The
commenter further stated that patients with toxic levels of
methotrexate are hospitalized and receive the drug during an inpatient
admission. However, due to its high cost, the commenter explained that
many hospitals are reluctant to stock Voraxaze[supreg] in the pharmacy
or use it at all due to the lack of reimbursement available when used
as an inpatient medication. The commenter continued by stating that the
alternative is to provide Leucovorin rescue and vigorous hydration,
which often is effective and significantly cheaper. However, the
commenter noted that this approach results in prolonged hospital stays,
which have their own costs (to the system at large) and expose the
patient to potential iatrogenic complications. If a new technology add-
on payment is available, the commenter believed that Voraxaze[supreg]
would become the standard of care for methotrexate toxicity and enable
a more rapid discharge of the patient from the inpatient setting.
Another commenter stated that it believed ``certain new biologic agents
that prevent toxicity but have high drug acquisition costs are
underused because of financial disincentives,'' and cited this
technology as an example. The commenter noted that this technology
``can reduce the need for dialysis, reduce morbidity and decrease the
length of hospital stay,'' and cited this background as an oncologist
for support.
Response: After reviewing the totality of the evidence and the
public comments we received, we agree that Voraxaze[supreg] represents
a substantial clinical improvement for Medicare beneficiaries. It
appears that Voraxaze[supreg] is less time intensive and allows select
patient populations to avoid risks associated with current treatment
options. Also, Voraxaze[supreg] is able to treat patients who have
toxic MTX concentrations in a more effective and rapid way than
existing treatment options in certain situations, and provides
protection to eligible patient populations against potential harm
associated with current treatment options. Specifically, the applicant
provided the results from a study of 23 patients diagnosed with MTX-
induced renal dysfunction treated with Voraxaze[supreg]. Based on the
clinical trial data, the administration of Voraxaze[supreg] lowered
toxic MTX concentrations in patients within 15 minutes after the
administration by more than 98 percent. Therefore, we believe that
Voraxaze[supreg] represents a substantial clinical improvement for
Medicare beneficiaries. However, we remain interested in seeing
clinical endpoints that show that reduction in methotrexate levels
leads to improved renal function.
Voraxaze[supreg] has met all three criteria for new technology add-
on payments and is eligible for new technology add-on payments in FY
2013. Cases of Voraxaze[supreg] will be identified with ICD-9-CM
procedure code 00.95 (Injection or infusion of glucarpidase). The cost
of Voraxaze[supreg] is $22,500 per vial. The applicant stated that an
average of four vials is used per Medicare beneficiary. Therefore, the
average cost per case for Voraxaze[supreg] is $90,000 ($22,500 x 4).
Under Sec. 412.88(a)(2), new technology add-on payments are limited to
the lesser of 50 percent of the average cost of the technology or 50
percent of the costs in excess of the MS-DRG payment for the case. As a
result, the maximum new technology add-on payment for Voraxaze[supreg]
is $45,000 per case.
b. DIFICIDTM (Fidaxomicin) Tablets
Optimer Pharmaceuticals, Inc. submitted an application for new
technology add-on payments for FY 2013 for the use of
DIFICIDTM (Fidaxomicin) tablets. In the proposed rule, we
summarized this application and stated that the applicant asserts that
Fidaxomicin is a major clinical advancement in the options available to
[[Page 53351]]
treat Clostridium difficile-associated diarrhea (CDAD).
Clostridium difficile (C. Diff.) is a bacterium that can cause
infection with symptoms that range from diarrhea to life-threatening
inflammation of the colon, and is also commonly referred to as CDAD.
The symptoms associated with CDAD can be treated by stopping
administration of an antibiotic because often antibiotics can alter the
native intestinal microflora and thus trigger CDAD. For mild cases of
CDAD, this step may be sufficient to relieve the associated symptoms.
However, many patients who have been diagnosed with more severe cases
of CDAD require further treatment. Further treatment options include
prescribing antibiotics such as Metronidazole or Vancomycin,
prescribing probiotics administered in conjunction with antibiotics,
and performing surgery using a fecal transplant to restore healthy
intestinal bacteria by placing donor stool in the colon. According to
the applicant, about one-fourth of the patients diagnosed with CDAD
experience a recurrence of these associated symptoms.
As indicated on the labeling submitted to the FDA, the applicant
noted that Fidaxomicin is taken twice a day as a daily dosage (200 mg
tablet twice daily = 400 mg per day) as an oral antibiotic. The
applicant asserts that Fidaxomicin provides potent bactericidal
activity against C. Diff., and moderate bactericidal activity against
certain other gram-positive organisms, such as enterococcus and
staphylococcus. Unlike other antibiotics used to treat CDAD, the
applicant noted that the effects of Fidaxomicin preserve bacteroides
organisms in the fecal flora. These are markers of normal anaerobic
microflora. The applicant asserts that this helps prevent pathogen
introduction or persistence, which potentially inhibits the re-
emergence of C. Diff., and reduces the likelihood of overgrowths as a
result of vancomycin-resistant Enterococcus (VRE). Because of this
narrow spectrum of activity, the applicant asserts that Fidaxomicin
does not alter this native intestinal microflora.\27\
---------------------------------------------------------------------------
\27\ Koo, Garey et al. Future novel therapeutic agents for
Clostridium difficile infection. Expert Opin Investig Drugs.,
2010;19(7):825-836.
Tannock, Munro et al., A new macrocyclic antibiotic,
fidaxomicin (OPT-80), causes less alteration to the bowel microbiota
of Clostridium difficile-infected patients than does vancomycin.
Microbiology. 2010 Nov;156(Pt 11):3354-9.
---------------------------------------------------------------------------
With regard to the newness criterion, Fidaxomicin was approved by
the FDA on May 27, 2011, for the treatment of CDAD in adult patients,
18 years of age and older. Fidaxomicin was commercially available on
the market within 7 weeks after the FDA's approval was granted.
Currently, there are not any ICD-9-CM diagnosis or procedure codes that
exist to uniquely identify the use of Fidaxomicin, or any oral drug, as
a procedure. Optimer submitted a request to the ICD-9-CM Coordination
and Maintenance Committee for a new ICD-9-CM procedure code, which was
discussed at the committee's meeting on March 5, 2012. For further
information regarding the code proposal, we refer readers to the CMS
Web site at: http://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials.html.
In the proposed rule, we stated that we believe that under our
current new technology add-on payment policy, eligibility for
consideration for new technology add-on payments is limited to new
technologies associated with procedures described by ICD-9-CM codes. In
the FY 2002 IPPS final rule, we established the framework for our
current policy (66 FR 46907 through 46915). The discussion of
technologies in that rule focuses on those technologies identifiable by
ICD-9-CM codes. We also discuss in response to comments the feasibility
and appropriateness of HCPCS codes and V-codes. Similar to ICD-9-CM
codes, HCPCS codes are also a procedure-based system and identify
procedures. We noted in that rule that V-codes would not be appropriate
to use for identification of new technology because they are not a
substitute for procedure coding. Volume 3 of ICD-9-CM contains codes
that describe inpatient procedures (65 FR 50325). In other words, we
have not considered drugs that are only taken orally to be eligible for
consideration for new technology add-on payments, because there is no
procedure associated with these drugs and, therefore, no ICD-9-CM
code(s).
As we stated in the proposed rule, this interpretation is also
consistent with other Medicare payment policies. For example, when
drugs taken orally are given as part of an outpatient encounter, they
would likely be considered self-administered drugs under the Hospital
Outpatient Prospective Payment System (OPPS). If a Medicare beneficiary
who has outpatient status were to be provided a self-administered drug
by a hospital or wholly-owned or wholly-operated entity of that
hospital and that beneficiary were subsequently admitted to that
hospital for a related reason within three days, the hospital may not
include these self-administered drugs on the inpatient bill (under the
3-day payment window policy), because self-administered drugs are not
covered under the OPPS. However, they would be required to include
nondiagnostic services related to admission and all other diagnostic
services on the inpatient bill (under the 3-day payment window).
We invited public comment on our interpretation of our policy
regarding drugs that are only self-administered for consideration for
new technology add-on payments. Further, we invited public comment on
whether or not Fidaxomicin meets the newness criterion.
Comment: A number of public commenters, including the applicant,
stated that the technology meets the newness criterion. Specifically,
commenters discussed: (1) The ICD-9-CM coding for this technology, (2)
the statutory authority for the policy in relation to the coding of
oral therapies, (3) CMS' current policy and practices regarding coding,
(4) CMS' practices with regard to establishing new codes to implement
payment policies, (5) the use of V-codes in the ICD-9-CM system for
oral drugs, and (6) the non-ICD-9-CM options for coding this technology
for the new technology add-on payments. We summarize each issue, in
turn, in the following comments and responses below.
Response: We appreciate the commenters' supporting rationale for
how this technology meets the newness criterion under the new
technology add-on payment policy. We respond to each of the six points,
in turn, below. We note that, as a result of our analysis of the public
comments we received, in our responses below, we, in this final rule,
revised our policy to allow the use of National Drug Codes (NDCs) to
identify oral medications that have no inpatient procedure for the
purposes of new technology add-on payments. This change will be
effective for payments for discharges occurring on or after October 1,
2012. We note that this does not preclude CMS from using additional
ICD-9-CM procedure or diagnosis codes to identify cases for this new
technology in conjunction with NDCs. In particular, for this
technology, we established a methodology to identify cases for new
technology add-on payments by using the NDC for the drug (52015-0080-
01) and ICD-9-CM diagnosis code 008.45, Intestinal infection due to
Clostridium difficile. Furthermore, we establish that the beginning of
the newness period for this technology is its FDA approval date of May
27, 2011.
Comment: The applicant submitted a public comment asserting that it
believed that an ICD-9-CM procedure
[[Page 53352]]
code would be the ``best option'' and noted that this should be limited
to the ``sole purpose of tracking use of the product'' for new
technology add-on payments. The applicant indicated that it did not
believe this created a precedent for inpatient procedure coding.
Response: With regard to use of an ICD-9-CM procedure code for this
technology, subsequent to and as recommended by CMS at the March 12,
2012 ICD-9-CM Coordination and Maintenance (C&M) Committee meeting, no
new ICD-9-CM procedure code for the administration of this technology
was created. Public comments received during and subsequent to the
public meetings opposed the establishment and addition of codes for
self-administered drugs. The commenters stated that this type of
service has never been included in ICD-9-CM procedure codes. Other
commenters believed that such an addition to the ICD-9-CM system would
be setting a major new precedent. Hospitals currently code and report
procedures and more invasive services such as surgeries, infusion of
drugs, and specialized procedures such as cardiac catheterizations.
Hospitals do not code nor report self-administered drugs. While we
appreciate the commenters' belief that a new ICD-9-CM procedure code
should be created and that this code could be limited to new
technological procedures and would thus not create a precedent for
inpatient procedure codes, we disagree for the reasons stated above and
described in more detail below. While the ICD-9-CM procedure coding
system has been used to create codes for categories of service not
previously coded for the purpose of new technology add-on payments,
these new codes have been limited to inpatient procedures associated
with their respective technologies. The commenters cited, as an
example, the creation of procedure code 00.11, Infusion of drotrecogin
alfa (activated) [Xigris], as an example of where CMS has ``created
unique new ICD-9-CM codes in categories of service that did not
previously exist.'' We note that infusions of drugs have been part of
the ICD-9-CM inpatient procedure coding system since it was created in
1979. Infusion of drugs requires specialized health care personnel to
administer the infusion procedure. Patients taking self-administered
drugs do not require the use of hospital or health care personnel to
perform a procedure. Since the inception of the ICD-9-CM coding system,
drugs given to a patient through use of an infusion have been
considered procedures described by ICD-9-CM codes. The identification
of a patient taking a self-administered drug has never been described
by ICD-9-CM codes because it was not deemed to be a hospital procedure.
This technology is an orally administered drug and, as noted by the
applicant in its public comment, ``must be administered orally to
effectively treat CDAD''. Orally-administered drugs require no
inpatient procedure to administer. Therefore, we believe it would be
inappropriate to establish an ICD-9-CM procedure code for their
administration, even for the purpose of new technology add-on payments.
Comment: One commenter asserted that the statutory authority exists
for new technology add-on payments for oral therapies with no inpatient
procedure (that is, infusion). The commenter reiterated our statement
in the proposed rule that, ``we believe that under our current new
technology add-on payment policy, eligibility * * * is limited to new
technologies associated with procedure codes described by ICD-9-CM
codes'' (77 FR 27939). Similarly, another commenter stated that, ``CMS
asked whether DIFICID\TM\ could qualify under the statute and
regulations for new technology because it is an oral therapy.'' Both
commenters stated that the proposed rule ``does not assert that there
is any corresponding statutory or regulatory bar to granting a [new
technology add-on payment] to an oral therapy, and indeed there is
none.'' Another commenter stated that, while self-administered drugs
are not covered by Part B, they are covered by Part A. Another
commenter stated that, ``the fact that DIFICID\TM\ must be administered
orally to effectively treat [clostridium dificile associated disease]
should not preclude it from being considered under the [new technology
add-on] policy.'' Commenters pointed out that the statute ``require[s]
that the agency `shall' establish a mechanism to recognize costs of new
medical services or technologies * * * which `shall' provide for
additional payment when such services are used.'' Another commenter
further stated that it believed that ``the Congressional intent was
explicit'' and stated that the statute ``allow[s] `any code such as
ICD-9-CM and its subsequent revision' (emphasis added [in the public
comment]).'' Another commenter stated that, ``the FY2002 [final rule on
the new technology add-on payment] exemplifies CMS' authority and
flexibility to use codes broadly for [the new technology add-on
payment], if needed.'' Another commenter recognized that the statute
explicitly points out the use of ICD-9-CM codes, but reminded the
agency that they believed that ``the regulation permits administrative
flexibility.'' Additionally, the commenter described the application
form, and noted that, ``this policy document includes 5 specific
questions not necessarily reflected directly in statute or
regulation.'' Of the five items pointed out by the commenter, four
refer to FDA approval, and one to ICD-9-CM procedure coding.
Response: With regard to the question of whether or not statutory
authority exists to allow new technology add-on payments for oral
medications without inpatient procedures (that is, infusion), we note
that, as the commenters pointed out, in the proposed rule, we did not
assert that such statutory authority did not exist. We believe that
under our current new technology add-on payment policy, eligibility for
new technology add-on payments is limited to new technologies
associated with procedure codes described by ICD-9-CM codes (77 FR
27939). We believe that the statute could be interpreted in a manner
that does not preclude new technology add-on payments for oral
medications that have no inpatient procedure (that is, infusion)
insofar as such an oral medication meets the other aspects of the
newness criterion in addition to meeting the cost and substantial
clinical improvement criteria. We interpret our current policy as
limiting new technology add-on payments to technologies associated with
inpatient procedures, as described in the FY 2002 final rule on CMS'
new technology add-on payment policy (66 FR 46915). We note that this
technology is the first application we have received for a technology
that is an oral medication where no inpatient procedure is associated.
In light of public comments we received, we are revising our policy to
allow for the use of an alternative code set to identify oral
medications where no inpatient procedure is associated for the purposes
of new technology add-on payments. We are establishing the use of NDCs
as the alternative code set for this purpose and describe our rationale
for this particular code set in response to comments below. This change
will be effective for payments for discharges occurring on or after
October 1, 2012. We note that this does not preclude CMS from using
additional ICD-9-CM procedure or diagnosis codes to identify cases for
this new technology in conjunction with this alternative code set. We
also agree with the comment that these oral medications for which no
inpatient procedure is
[[Page 53353]]
associated may be considered self-administered drugs under Part B and
are not payable under the outpatient prospective payment system (OPPS).
We remind hospitals that, although hospitals are required to bundle
related therapeutic services within the 3 days prior to and on the day
of inpatient admission on the inpatient claim, hospitals may not
include services that are not payable under the OPPS within the 3 days
prior to and on the day of inpatient admission as part of the inpatient
claim (42 CFR 412.2(c)(5)).
Comment: Commenters reviewed our current policy and practice with
regard to identification of new technologies for new technology add-on
payments. They reiterated statements from the FY 2002 final rule on
CMS' new technology add-on payment policy, while one commenter pointed
out that, ``CMS considered several coding options to track new
procedures and technologies * * * and discussed use of ICD-9-CM V-
codes, HCPCS Level II codes, and G codes to classify new
technologies.'' Another commenter stated that CMS has in the past
created ICD-9-CM codes for new technology add-on payments, and cited as
an example the creation of procedure code 00.11, Infusion of
drotrecogin alfa (activated) [Xigris], as an example of where CMS has
``created unique new ICD-9 codes in categories of service that did not
previously exist.''
Response: With regard to our current policy and practice on the use
of code sets to identify new technologies for new technology add-on
payments, we appreciate the commenters' input. As we stated in response
to other public comments, we interpret our current policy as limiting
new technology add-on payments to technologies associated with
inpatient procedures, as described in the FY 2002 final rule on the new
technology add-on payment policy. We note that this technology is the
first application we have received for a technology that is an oral
medication with no inpatient procedure. Also, as we stated in response
to other comments, we point out that the example the commenters cite,
procedure code 00.11, Infusion of drotrecogin alfa (activated)
[Xigris], is for an infusion and that infusion can be an inpatient
procedure.
Comment: Commenters reviewed our practice with regard to
establishing new codes to implement Medicare policies. Specifically,
they mentioned the creation of a claim modifier to reflect the use of
surgical devices that CMS created to ``implement claims processing of a
new policy'' and also the creation of policy claim codes MX (wrong
surgery on patient), MY (wrong surgery on body part), and MZ (surgery
on wrong patient) to identify claims to implement a national coverage
decision regarding certain never events. They asserted that CMS is able
to establish new codes to implement policies.
Response: With regard to the examples of CMS' practices of
establishing new codes to implement Medicare policies, we appreciate
the commenters' responses. We agree that from time to time CMS will
implement, as needed, new codes and processes to implement Medicare
policies, including payment and coverage policies. The examples
provided by the commenters do not specifically address the new
technology add-on payment policy, instead, they address other Medicare
payment policies and national coverage decisions.
Comment: One commenter pointed out that V-codes currently exist for
oral drugs. Specifically, the commenter cited code V58.66 for long term
(current) use of aspirin and code V58.68 for long-term (current) use of
bisphosphonates. The commenter also pointed out that three codes in
subcategory V07.5 for the use of agents affecting estrogen receptors
and estrogen levels have inclusion notes for multiple medications, some
of which are oral.
Response: With regard to the existence of V-codes for oral drugs,
we agree with the commenters that V-codes exist that capture the long
term use of certain drugs, including those that may be orally
administered. V-codes are used to capture additional information about
factors influencing health status and contact with health services. The
codes for long-term (current) drug use were created to assist in
following patients who use certain drugs over a long period of time.
The codes do not necessarily indicate that a patient received the
specific drug during the current health care encounter. The patient may
be taking the drug based on a prescription received during a prior
health care encounter and did not receive it during the current
encounter.
However, we have not adopted the use of V-codes for use in the new
technology add-on payment policy. Currently, the new technology add-on
payment policy is based on the use of ICD-9-CM procedure codes, which
indicate that a procedure or service is provided during the hospital
stay. The long-term (current) drug use V-codes described do not provide
this information. As indicated earlier, the V-codes indicate the
patient has been on certain drugs on a long-term basis, and do not
necessarily indicate that the patient received the drug during the
current health care encounter. We continue to believe that V-codes are
not appropriate for new technology add-on payments because we do not
believe the nature of these codes appropriately identifies new
technologies; they indicate that some circumstance or problem is
present which influences the person's health status, but is not in
itself a current illness or injury. Common V-codes are status codes,
history codes, aftercare codes, and follow-up codes. In addition, V-
codes do not identify items related to current resource use for an
inpatient stay. For the most part, V-codes do not impact the DRG, and
they are not taken into consideration when forming DRG assignment and,
thus, are not used in setting relative weights for the IPPS. However,
we note that we continue to explore the usefulness of these and other
alternatives, such as those available in ICD-10, for coding and
identifying technologies for the purposes of new technology add-on
payments.
Comment: One commenter described non-ICD-9-CM alternatives for
coding this technology for the purposes of the new technology add-on
payment policy. One option described by the commenter was the use of a
value code and condition code to identify this technology. The
commenter pointed out that a value code, value code 77, currently
exists to identify when a new technology add-on payment is being
claimed. The commenter noted that value codes are used with condition
codes, and suggested that an option could be for CMS to submit a
request to the National Uniform Billing Committee (NUBC) for a ``unique
Condition Code to describe DIFICIDTM administration.'' A
second option described by the commenters was to use a national drug
code (NDC) on the claim to identify the technology for the purposes of
new technology add-on payments. The commenter described two ways to
implement such an option, one where the NDC would be used in isolation
(as product information in Box 80 of the UB-04 claims form) and one
where it would be used in combination with ICD-9 diagnosis code 008.45,
Intestinal infection due to Clostridium difficile (where the NDC would
be reported on the UB-04 in Box 43 and the diagnosis code reported on
the UB-04 in Box 65). The commenter pointed out that using the NDC in
isolation may require hospitals to ``make changes to their billing
systems'' and that using the NDC in combination with a diagnosis code
may require hospitals to ``make substantial reprogramming to their
systems.'' Because of the possibility that hospitals may need to make
changes,
[[Page 53354]]
the commenter stated that they believed that other options would be
preferable and that an ICD-9-CM code is the ``best option.''
Response: With regard to the non-ICD-9-CM options for identifying
this technology and new technologies for new technology add-on
payments, we appreciate the commenters' suggestions. The commenters
first discussed a value code or condition code option for identifying
new technologies. We agree that currently value code 77 is used to
identify claims for new technology add-on payments. Commenters
suggested that CMS could request a condition code from the NUBC to be
used in conjunction with this value code to identify this new
technology. While we appreciate the commenters' suggestion, we believe
that this unnecessarily subjects eligibility for new technology add-on
payments to a non-CMS claims identifier field. Furthermore, we note
that even on an expedited basis, it is not likely that the NUBC process
would necessarily result in the timely creation of a condition code to
identify this technology. Therefore, we disagree with the commenters
that this is a feasible option for coding and identifying technologies
for the purposes of new technology add-on payments. Commenters then
discussed two ways to use the NDC to identify this technology. We agree
that NDCs can be used to identify drugs and that, in the instance where
no inpatient procedures are associated with a drug, the NDC could be
used to identify an oral drug for new technology add-on payments. While
commenters stated that they believed this may require hospitals to
change their ``billing practices'' or ``make substantial reprogramming
to their systems,'' we believe that these changes, insofar as they
might be needed, would not represent a large burden for hospitals. We
note that currently the NDC code is used on outpatient claims for the
ESRD-PPS to identify oral equivalent ESRD drugs. We further note that
the hospital would be required to report the NDC code for the purposes
of new technology add-on payments so that it could receive a new
technology add-on payment which, by definition, is an increase relative
to the payment they would have received in the absence of such an add-
on payment. Specifically, the commenter discussed using the NDC in Box
43 in conjunction with the diagnosis code 008.45 (Intestinal infection
due to Clostridium difficile) or using the NDC as product information
in Box 80. We agree with the applicant and the other commenters that it
is important to identify cases for new technology add-on payments using
the diagnosis code 008.45. Because the NDC can specifically identify
this technology, and other technologies that are oral drugs where no
inpatient procedure is associated, we believe it can be used to
identify these technologies for purposes of new technology add-on
payments. We continue to believe our current policy to recognize new
technologies associated with inpatient procedures through ICD-9-CM
coding is appropriate and, in response to public comments we received,
are expanding our policy prospectively for discharges occurring on or
after October 1, 2012, to recognize oral medications where no inpatient
procedure can be associated through the coding of NDCs. In the case of
this application, we agree with the commenter that the NDC code of
52015-0080-01 can be used in conjunction with diagnosis code 008.45 to
identify the use of this technology, and establish that the use of both
codes will identify this technology for the purposes of new technology
add-on payments. We discuss our broader policy change to allow NDCs as
an alternative code set to identify oral drugs where no inpatient
procedure is associated in response to other comments.
With regard to the cost criterion, Optimer researched the FY 2010
MedPAR file for cases that would be eligible for treatment with
Fidaxomicin to determine if it would qualify for the cost criterion for
new technology add-on payments. Based on its analysis, the applicant
identified cases in which a patient had been diagnosed with CDAD by
searching the MedPAR file for claims that included ICD-9-CM diagnosis
code 008.45 (Intestinal infection due to Clostridium difficile) as a
principal diagnosis or secondary diagnosis. Optimer provided three
examples of how the results of the analyses of different MS-DRGs
demonstrate that it meets the cost criterion.
Under the first analysis, the applicant researched the FY 2010
MedPAR file for cases that included ICD-9-CM diagnosis code 008.45 as a
principal or secondary diagnosis across all MS-DRGs. The applicant
found 162,310 cases within 536 MS-DRGs, and determined a case-weighted
average standardized charge per case (excluding charges for the cost of
Fidaxomicin) of $50,136. Using a factor of 6.5 percent to inflate the
charges to 2012 rates based on the Medical Consumer Price Index (CPI),
the applicant determined a case weighted standardized charge per case
that equals $53,394. The applicant then added the charges related to
the technology to the inflated charges. Finally, the applicant
determined a final case-weighted average standardized charge per case
of $58,994, which exceeds the case-weighted threshold of $43,673.
Because the final case-weighted average standardized charge per case
for the applicable MS-DRGs exceeds the case-weighted threshold amount
in this first analysis, the applicant maintains that Fidaxomicin meets
the cost criterion for new technology add-on payments.
Under the second analysis, the applicant researched the FY 2010
MedPAR file for cases that included ICD-9-CM diagnosis code 008.45 only
as a principal diagnosis, which mapped to MS-DRGs 371 (Major
Gastrointestinal Disorders and Peritoneal Infections with MCC), 372
(Major Gastrointestinal Disorders and Peritoneal Infections with CC),
and 373 (Major Gastrointestinal Disorders and Peritoneal Infections
without CC/MCC). The applicant found 55,410 cases, and determined a
case-weighted average standardized charge per case (excluding charges
for the cost of Fidaxomicin) of $28,007. Using a factor of 6.5 percent
to inflate the charges to 2012 rates based on the Medical CPI, the
applicant determined a case-weighted standardized charge per case that
equals $29,828. The applicant then added the charges related to the
drug to the inflated charges. The applicant then determined a final
case-weighted average standardized charge per case of $35,428, which
exceeds the case-weighted threshold of $34,730. Because the final case-
weighted average standardized charge per case for the applicable MS-
DRGs exceeds the case-weighted threshold amount in this second
analysis, the applicant maintains that Fidaxomicin meets the cost
criterion for new technology add-on payments.
Under the third analysis, the applicant again researched the FY
2010 MedPAR file for cases that included ICD-9-CM diagnosis code 008.45
as a principal or secondary diagnosis across all MS-DRGs. The applicant
then narrowed the results of the analysis to include only the top 37
MS-DRGs (in volume of cases), which accounted for 75 percent of all
cases. The applicant's methodology resulted in 121,748 cases, and the
applicant determined a case-weighted average standardized charge per
case (excluding charges for the cost of Fidaxomicin) of $45,523. Using
a factor of 6.5 percent to inflate the charges to 2012 rates based on
the Medical CPI, the applicant determined a case-weighted standardized
charge per case that equals $48,482. The applicant then added the
charges related to the drug to the inflated charges. The applicant then
determined a final case-
[[Page 53355]]
weighted average standardized charge per case of $54,082, which exceeds
the case-weighted threshold of $42,452. Because the final case-weighted
average standardized charge per case for the applicable MS-DRGs exceeds
the case-weighted threshold amount in this third analysis, the
applicant maintains that Fidaxomicin meets the cost criterion for new
technology add-on payments.
In the three analyses discussed above, the applicant submitted data
related to the estimated cost and charge of the drug (using a charge
markup). However, the applicant has not released the cost of the
technology, asserting that it is proprietary information. The applicant
converted the cost of the technology to a charge using a charge markup
(a factor of 6.5 percent based on the Medical CPI) that represented a
10-day dosage.
In the proposed rule, we expressed concern that these analyses do
not take into account situations in which patients would be prescribed
Fidaxomicin later in the duration of their inpatient stay, and may
finish the course of Fidaxomicin sometime after being discharged from
the hospital. In addition, as discussed above, if Fidaxomicin is
prescribed and self-administered during the 3-day period prior to
admission to an IPPS hospital for a related encounter, we do not
believe that this service is payable under the OPPS, and we do not
believe that charges associated with it can be included on the
inpatient claim submitted to Medicare because of the 3-day payment
window policy. Therefore, in the proposed rule, we noted that it may
not be appropriate to include in the applicant's calculations the full
charges related to Fidaxomicin and the corresponding proprietary
charges for the 10-day dose. In addition, in the proposed rule, we
stated that we believed that it is necessary for the applicant to
adjust its estimates to remove from the MedPAR file's claims for the
charges that describe other types of treatment options such as
Vancomycin, since use of these treatments would preclude use of
Fidaxomicin. Furthermore, to identify the cases that may be eligible
for the technology's use, the applicant researched and analyzed claims
that included ICD-9-CM diagnosis code 008.45 as the principal diagnosis
or as the principal or secondary diagnosis. We are concerned that this
baseline for eligible cases may not represent the appropriate universe
of cases, such as if all MS-DRGs were considered or if a subset of MS-
DRGs were considered.
We invited public comment on whether or not Fidaxomicin meets the
cost criterion. In addition, we invited public comment on the
methodologies used by the applicant in its analyses, in particular the
assumptions made about the dosage in developing the cost analysis. We
were also interested in comments about the applicant's selection of
claims with an ICD-9-CM diagnosis code 008.45 as the principal
diagnosis or secondary diagnosis, and whether those cases accurately
represented the Medicare population that may benefit from the
technology's use.
Comment: The applicant submitted public comments responding to our
concerns from the proposed rule. Our first concern was that these
analyses did not take into account situations in which patients would
be prescribed Fidaxomicin later in the duration of their inpatient stay
and may finish the course of Fidaxomicin sometime after being
discharged from the hospital. The applicant responded by providing a
sample of claims of patients that received DIFICID \TM\ during their
inpatient stay to determine the amount of days that DIFICID \TM\ is
used within the inpatient setting. The applicant collected 116
inpatient stays across 26 unique MS-DRGs for patients who received
DIFICID \TM\ during their stay of which, 71 of the claims were Medicare
fee-for-services (FFS) cases which mapped to 22 unique MS-DRGs.
Regarding these data (from all 116 cases) the applicant noted the
following: the average length of stay for all DIFICID \TM\
(Fidaxomicin) cases is 13.9 days; on average, patients started DIFICID
\TM\ (Fidaxomicin) on day 6.7 of their stay; and on average, patients
received DIFICID \TM\ for 6.2 days of their stay. Using the subset of
71 Medicare claims also demonstrated that patients received DIFICID
\TM\ on average of 6.2 days of their stay.
Using the 116 cases from the sample, the applicant computed a case-
weighted average standardized charge per case of $92,684, which exceeds
the case-weighted threshold of $45,388. The applicant also conducted a
similar analysis using the Medicare subset of 71 Medicare cases. The
applicant computed a case-weighted average standardized charge per case
of $100,146, which exceeds the case-weighted threshold of $44,980.
Because the case-weighted average standardized charge per case for both
scenarios exceeds the case-weighted threshold amount (in both
scenarios), the applicant maintains that Fidaxomicin meets the cost
criterion for new technology add-on payments.
Our second concern was with regard to the 3-day payment window. If
Fidaxomicin is prescribed and self-administered during the 3-day period
prior to admission to an IPPS hospital for a related encounter, as we
noted in the proposed rule, we do not believe that this service is
payable under the OPPS, and we do not believe that charges associated
with it can be included on the inpatient claim submitted to Medicare
because of the 3-day payment window policy. Therefore, it may not be
appropriate to include in the applicant's calculations the full charges
related to Fidaxomicin and the corresponding proprietary charges for
the 10-day dose. The applicant noted that all cases from the sample
data show that treatment was initiated well after admission to the
inpatient setting. Even for those patients who presented at admission
with a clostridium difficile infection (CDI) diagnosis, DIFICID \TM\
(Fidaxomicin) began an average of 4.6 days after the patient was
admitted. The applicant believed that these data address CMS' concern
over the potential for outpatient administration of DIFICID \TM\
(Fidaxomicin) prior to inpatient admission. The applicant asserted that
to date, utilization patterns of DIFICID \TM\ (Fidaxomicin) show that
the drug is used primarily in the inpatient setting and that outpatient
use prior to admission is very limited.
Our third concern was that the applicant's analyses may not
represent the appropriate universe of cases, such as if all MS-DRGs
were considered or if a subset of MS-DRGs were considered. The
applicant reiterated that it submitted three different types of MedPAR
analysis, one of which captured all cases where C. Difficile infection
(CDI) occurred. The applicant added that the first MedPAR analysis
contained no restrictions on its search for cases of CDI and as such
should represent the complete universe of patients who may be eligible
for DIFICID \TM\. The applicant further stated that its data sample of
116 inpatient claims contains the actual MS-DRGs and standardized
charges of patients who received DIFICID \TM\ which meets the cost
criteria.
The applicant noted that the sample data (of 116 claims) does not
represent the full universe of eligible DIFICID \TM\ (Fidaxomicin)
patients for the following reasons: First, because DIFICID \TM\ was
new, the applicant asserted that hospitals may not have been aware of
the full benefit of the drug. Second, the applicant asserted that
hospitals may have believed they were not adequately compensated for
the cost of DIFICID \TM\ within the existing MS-DRG payment and,
therefore, may not have considered DIFICID \TM\ for treatment except in
cases where the patient's costs were
[[Page 53356]]
significantly higher than average and additional outlier payments were
anticipated. The applicant concluded that it believed that its original
analysis of the FY 2010 MedPAR data with all patients diagnosed with
CDI during their inpatient stay represents the full universe of
potential DIFICID \TM\ cases, and is the most appropriate case scenario
for purposes of calculating DIFICID \TM\'s (Fidaxomicin's)
qualifications for the new technology add-on payment cost criterion.
We were also concerned that it is necessary for the applicant to
adjust its estimates to remove from the MedPAR file's claims the
charges that describe other types of treatment options such as
Vancomycin because use of these treatments would preclude use of
Fidaxomicin. The applicant replied in its comment that it performed a
cost criterion estimate with DIFICID \TM\ removed from the inflation-
adjusted weighted average standardized charge. The applicant explored
additional data analyses to separate Vancomycin charges from the total
MedPAR charges. However, the applicant asserted that no approach was
viable due to (1) Lack of distinct coding to identify inpatient cases
in which Vancomycin was administered, (2) lack of data on Vancomycin
dosing per case, and (3) lack of data on the appropriate hospital mark-
up applied to Vancomycin costs. Therefore, the applicant stated that it
believed, in the absence of data to estimate Vancomycin charges
included in the MedPAR CDI cases, one methodology to approximate this
was by, removing the inflated adjusted charges for DIFICID \TM\ from
the case-weighted average standardized charge per case of the first
scenario. The applicant also noted that, although it determined an
average use of DIFICID \TM\ for 6.2 days within the inpatient setting
based on the sample of 116 claims, it recommended that CMS consider 6.5
days of inpatient administration of DIFICID \TM\. The applicant
justified this increase based on its belief that hospitals and
physicians will use it more. In particular, the applicant believed that
the increased adoption of DIFICID \TM\ would lead to earlier
prescription of DIFICID \TM\ by physicians for primary CDAD treatment
in the inpatient setting as opposed to a secondary treatment. Using
this methodology (of removing inflated adjusted charges for DIFICID
\TM\ and assuming utilization of DIFICID \TM\ for 6.5 days within the
inpatient setting), the applicant revised its calculation for the first
analysis (which included all cases of C. Diff) and determined a case-
weighted average standardized charge per case of $55,214, which exceeds
the case-weighted threshold of $43,673. Because the case-weighted
average standardized charge per case exceeds the case-weighted
threshold amount, the applicant maintains that Fidaxomicin meets the
cost criterion for new technology add-on payments.
Response: We appreciate the applicant's response to our concerns
and believe that the sample of claims the applicant submitted
substantiates the average use of DIFICID \TM\ within the inpatient
setting. We agree with the applicant that the appropriate universe of
cases is the first MedPAR analysis which contained no restrictions on
its search for cases of CDI and as such should represent the complete
universe of patients who may be eligible for DIFICID \TM\. However, at
this time we believe it is appropriate to use an estimate of 6.2 days
of inpatient administration of DIFICID \TM\ from the sample of claims
rather than the 6.5 days that the applicant recommended. The estimate
of 6.2 days is based on actual data while the extra 0.3 days (for a
total of 6.5 days) is based on projected assumptions by the applicant.
Therefore, we are revising the applicant's analysis described above of
the first MedPAR analysis by substituting 6.2 days instead of 6.5 days
for the administration of DIFICID \TM\ within the inpatient setting. We
also appreciate the applicant's discussion of the difficulties
associated in the removing of charges associated with Vancomycin, which
represents one potential treatment option this technology could
replace. We do not disagree with the applicant's suggestion to remove
inflated adjusted charges for DIFICID \TM\ as an alternative. Using
this methodology (of removing inflated adjusted charges for DIFICID
\TM\ and assuming utilization of DIFICID \TM\ for 6.2 days within the
inpatient setting), we determined a case weighted average standardized
charge per case of $55,130, which still exceeds the case-weighted
threshold of $43,673. Because the case-weighted average standardized
charge per case exceeds the case-weighted threshold amount, we believe
the applicant has met the cost criterion.
With regard to the substantial clinical improvement criterion, in
the proposed rule, we stated that the applicant maintained that
Fidaxomicin represents a substantial clinical improvement to the
treatment options currently available. According to the applicant,
Fidaxomicin represents the first major clinical advancement in the
treatment options available to address CDAD in more than 25 years, and
it is one of only two agents indicated by the FDA to treat this
condition. The applicant noted that reports from its clinical trials
show that a higher proportion of patients achieve positive clinical
response to treatment with Fidaxomicin as opposed to treatment with
Vancomycin. The applicant reported that these patients did not
experience recurrences of associated symptoms for at least 25 days
after the end of treatment. The applicant asserted that Fidaxomicin has
longer acting antimicrobial activity and inhibits spore formation in C.
difficile in vitro. The applicant stated that C. difficile cells
produce spores when exposed to air; therefore, transmission of
infection occurs even when the cells themselves are killed.
The applicant reported on two randomized, double-blinded
trials.28 29 A non-inferiority design was utilized to
demonstrate the efficacy of administering Fidaxomicin (200 mg twice
daily for 10 days) compared to administering Vancomycin (125 mg four
times daily for 10 days) to adult patients diagnosed with CDAD. The
demographic profile and baseline CDAD characteristics of the subjects
enrolled in both trials were similar. These patients had a median age
of 64 years, were mainly white (90 percent), female (58 percent), and
inpatients (63 percent).
---------------------------------------------------------------------------
\28\ Pivotal trial 101.1.C.003: Thomas J. Louie, M.D., Mark A.
Miller, M.D., Kathleen M. Mullane, D.O., Karl Weiss, M.D., Arnold
Lentnek, M.D., Yoav Golan, M.D., Sherwood Gorbach, M.D., Pamela
Sears, Ph.D., and Youe-Kong Shue, Ph.D. for the OPT-80-003 Clinical
Study Group. Fidaxomicin versus Vancomycin for Clostridium difficile
Infection. N Engl J Med 2011; 364:422-431February 3, 2011. Attached
reference: 12--LouieNEJM2011.pdf
\29\ Crook D, Weiss K, Comely O, Miller M, Esposito R, Gorbach
8. Randomized Clinical Trial (RCT) in Clostridium difficile
Infection (CDI) Confirms Equivalent Cure Rate and Lower Recurrence
Rate of Fidaxomicin (FDX) versus Vancomycin (VCN). 20th European
Congress of Clinical Microbiology and Infectious Diseases; April 10-
13, 2010; Vienna, Austria.
---------------------------------------------------------------------------
The applicant reported that the primary efficacy endpoint (for both
trials) was the clinical response rate at the end of therapy, based
upon improvement in diarrhea or other symptoms such that, in the
investigator's judgment, further CDAD treatment was not needed. An
additional efficacy endpoint was a sustained clinical response 25 days
after the end of treatment. Sustained response was only evaluated for
patients who were clinical successes at the end of treatment. Sustained
response was defined as clinical response at the end of treatment, and
survival without proven or suspected reoccurrence of a diagnosis of
CDAD beyond 25 days after
[[Page 53357]]
the end of treatment. The results for clinical response at the end of
treatment in both trials, which the applicant submitted in the table
below, indicate that the effects of administering Fidaxomicin is
noninferior to the effects of administering Vancomycin based on the 95
percent confidence interval (CI) lower limit being greater than the
non-inferiority margin of -10 percent.
The applicant stated that the results for sustained clinical
response at the end of the follow-up period, also shown in the table
below, indicate that the effects of administering Fidaxomicin is
superior to the effects of administering Vancomycin on this endpoint.
Because clinical success at the end of treatment and mortality rates
were similar across treatment arms (approximately 6 percent in each
group), the applicant determined that the differences in sustained
clinical response were due to lower rates of proven or suspected
reoccurrence of diagnoses of CDAD in patients during the follow-up
period. In addition, the applicant asserts that the effects of
administering Fidaxomicin has minimal impact on normal gut flora due to
its limited specificity, and could be associated with a lower risk of
acquisition of VRE if used as a treatment option instead of
administering Vancomycin.
Clinical Response Rates at End-of-Therapy and Sustained Response at 25 days Post-Therapy
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Clinical response at end of treatment Sustained response at follow-up
----------------------------------------------------------------------------------------------------------------------------------------------------------------
FIDAXOMICIN % (N) Vancomycin % (N) Difference (95% CI) FIDAXOMICIN % (N) Vancomycin % (N) Difference (95% CI)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Trial 1........................ 88% (N=289) 86% (N=307) 2.6% (-2.9%, 8.0%) 70% (N=289) 57% (N=307) 12.7% (4.4%, 20.9%)
Trial 2........................ 88% (N=253) 87% (N=256) 1.0% (-4.8%, 6.8%) 72% (N=253) 57% (N=256) 14.6% (5.8%, 23.3%)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Based on the analysis described above, the applicant asserts
Fidaxomicin meets the substantial clinical improvement criterion as a
treatment option with the potential to decrease hospitalizations and
physician office visits, as well as to improve the quality of life for
patients who have been diagnosed with CDAD.
We expressed concern in the proposed rule that this technology may
not offer a substantial clinical improvement compared to other
effective treatment alternatives already available in the treatment of
patients who have been diagnosed with CDAD. In addition, although the
applicant maintains that there is no evidence of significant clinical
resistance developing with the use of this drug, in the proposed rule,
we expressed concern about the long-term possibility that patients may
develop resistance to this drug since the applicant provided no data to
substantiate its claim. We invited public comment on whether or not
Fidaxomicin meets the substantial clinical improvement criterion based
on the analysis and results presented by the applicant.
Comment: Regarding our concern that the technology may not offer a
substantial clinical improvement, the applicant noted that ``DIFICID
\TM\ is the only agent proven to provide a superior sustained clinical
response versus Vancomycin--meaning a higher proportion of patients
achieve clinical response and remain free of potentially devastating
recurrences through 25 days after the end of treatment * * *
Recurrences are a unique challenge in the management of CDAD in large
part due to the ability of C. difficile to form spores.'' The applicant
also noted that its technology prevents sporulation while other
existing medications do not. In addition, the applicant discussed oral
administration as being ``advantageous in treating CDAD''.
Regarding our concern about the long-term possibility that patients
may develop resistance to this drug, the applicant responded with
several pieces of information. First, the applicant cited advice from
``antimicrobial stewardship programs, such as those recommended by the
CDC `Get Smart' program (http://www.cdc.gov/getsmart/) and SHEA/IDSA
policy (http://www.idsociety.org/StewardshipPolicy/),'' which the
applicant noted, ``advise utilizing the most narrow spectrum agent to
treat an infection to help decrease the likelihood of resistant
development.'' The applicant believed Fidaxomicin ``uniquely fits in
this profile as, unlike broad spectrum antibacterial drugs, it is
targeted specifically against C. difficile with minimal impact on other
bacteria, including the normal flora found in the gastrointestinal
tract.'' Second, the applicant further stated that, ``The potential for
resistance to antibacterial agents increases when bacteria are exposed
to suboptimal drug concentrations at the site of infection. However,
DIFICID \TM\ has minimal absorption from the intestines and fecal
concentrations that are >1000 times that required to kill C.
difficile.'' Third, the applicant also noted that, ``In laboratory
testing, DIFICID \TM\ exhibited no crossresistance with other classes
of antibacterial drugs.'' and ``The low potential for patients to
develop resistance to DIFICID \TM\ was also demonstrated in two pivotal
phase 3 clinical trials.'' Fourth, the applicant noted that,
``resistance to treating agents is not an issue with this disease, as
it has not been reported with the other two commonly used agents,
Metronidazole and Vancomycin.'' Further, the applicant stated that,
``Despite Metronidazole and Vancomycin being utilized to treat C.
difficile infection (CDI) and C. difficile-associated diarrhea (CDAD)
for over 25 years, resistance has not been reported for either agent.''
Fifth, the applicant refers to the SHEA/IDSA guidelines noting that
these ``specifically state that considering the high fecal
concentrations achieved with oral Vancomycin, emergence of resistance
is likely not a concern.'' The applicant then concluded that,
``Fidaxomicin is similar in this regard given its extremely high fecal
concentrations.'' and that, ``This indicates that the potential for
resistance is extremely low when treating CDAD.''
Response: We appreciate the applicant's response to our concerns
from the proposed rule. We considered this information in our decision
below on whether DIFICIDTM meets the substantial clinical
improvement criterion.
Comment: Several public commenters stated that Fidaxomicin meets
the substantial clinical improvement criterion. One commenter noted,
``In the past year, DIFICIDTM clinically has been invaluable
in treating some of these more difficult cases. The drug has been well
tolerated, and we have seen fewer patients with recurrence after
therapy with DIFICIDTM * * * DIFICIDTM is
revolutionary because it offers a significant advancement that we have
not seen in previous CDI therapies: targeted therapy and reduced
[[Page 53358]]
recurrences.'' Another commenter expressed support for the literature,
research, and data pertaining to the use of DIFICIDTM on its
patients with C. difficile infections. The commenter added that it has
had the opportunity to use DIFICIDTM on a few occasions thus
far and has had very good outcomes, especially regarding the rapid
improvement in symptoms.
Response: We appreciate the commenters' input. After reviewing the
totality of the evidence and the public comments we received, we agree
with the commenters that DIFICIDTM (Fidaxomicin) represents
a substantial clinical improvement over existing technologies. We
believe that DIFICIDTM represents a treatment option with
the potential to decrease hospitalizations and physician office visits,
and reduce the recurrence of CDAD, as well as to improve the quality of
life for patients who have been diagnosed with CDAD.
Therefore, DIFICIDTM (Fidaxomicin) has met all three
criteria for the new technology add-on payment policy and is eligible
for new technology add-on payments in FY 2013. Cases of
DIFICIDTM (Fidaxomicin) will be identified with ICD-9-CM
diagnosis code 008.45 in combination with NDC code 52015-0080-01.
Providers must code the NDC on the 837i Health Care Claim Institutional
form (in combination with ICD-9-CM diagnosis code 008.45) in order to
receive the new technology add-on payment. Further guidance will be
issued after this final rule with how to code the NDC code on the 837i
form. According to the applicant, the cost of DIFICIDTM
(Fidaxomicin) is $2,800 for a 10-day dosage. The average cost per day
for DIFICIDTM is $280 ($2,800/10). As discussed above, cases
of DIFICIDTM (Fidaxomicin) within the inpatient setting
typically incur an average dosage of 6.2 days, which results in an
average cost per case for DIFICIDTM of $1,736 ($280 x 6.2).
We note, as stated above in our discussion of the cost criteria, we are
not using an average dosage of 6.5 days for DIFICIDTM
because we prefer to rely on statistical data from the sample of 116
claims that received DIFICIDTM rather than information based
on multiple assumptions. However, the applicant is welcome to submit
additional data for FY 2014 that demonstrate changes to the average
dosage of 6.2 days (within the inpatient setting). Under Sec.
412.88(a)(2), new technology add-on payments are limited to the lesser
of 50 percent of the average cost of the technology or 50 percent of
the costs in excess of the MS-DRG payment for the case. As a result,
the maximum new technology add-on payment for FY 2013 for
DIFICIDTM (Fidaxomicin) is $868.
c. Zilver[supreg] PTX[supreg] Drug Eluting Stent
Cook[supreg] Medical submitted an application for new technology
add-on payments for the Zilver[supreg] PTX[supreg] Drug Eluting Stent
(Zilver[supreg] PTX[supreg]) for FY 2013. In the proposed rule, we
summarized this application. The Zilver[supreg] PTX[supreg] is intended
for use in the treatment of peripheral artery disease (PAD) of the
above-the-knee femoropopliteal arteries (superficial femoral arteries).
According to the applicant, the stent is percutaneously inserted into
the artery(s), usually by accessing the common femoral artery in the
groin. The applicant states that an introducer catheter is inserted
over the wire guide and into the target vessel where the lesion will
first be treated with an angioplasty balloon to prepare the vessel for
stenting. The applicant indicates that the stent is self-expanding,
made of nitinol (nickel titanium), and is coated with the drug
Paclitaxel. Paclitaxel is a drug approved for use as an anticancer
agent and for use with coronary stents to reduce the risk of
renarrowing of the coronary arteries after stenting procedures.
The applicant maintains that there are currently no FDA approved
drug-eluting stents used for superficial femoral arteries. At the time
of the proposed rule, the applicant expected to receive FDA approval
for the stent in the second quarter of 2012. However, at the time of
this final rule, the technology has still not received FDA approval.
The technology is currently described by ICD-9-CM procedure code 00.60
(Insertion of drug-eluting stent(s) of the superficial femoral artery).
We invited public comment regarding how the Zilver[supreg] PTX[supreg]
meets the newness criterion.
Comment: The applicant stated that it received a letter from the
FDA indicating that the FDA's Center for Devices and Radiological
Health considers the device to be ``approvable.'' The applicant added
that it expects formal FDA approval before September 2012. With FDA
approval imminent and expected before the implementation date of
October 1, 2012, the applicant requested that the ``approvable'' letter
from the FDA's Center for Devices and Radiological Health be allowed to
serve as a proxy for FDA approval.
Response: In accordance with Sec. 412.87(c) of the regulations, we
require that all applicants for new technology add-on payments must
have FDA approval or clearance for their new medical service or
technology by July 1 of each year prior to the beginning of the fiscal
year that the application is being considered. Because the
Zilver[supreg] PTX[supreg] is not approved by the FDA as of such date,
we cannot consider this application for new technology add-on payments
for FY 2013. Therefore, the Zilver[supreg] PTX[supreg] does not meet
the newness criteria.
With regard to the cost criterion, the applicant believes that
cases of superficial femoral arteries typically map to MS-DRGs 252
(Other Vascular Procedures with MCC), 253 (Other Vascular Procedures
with CC), and 254 (Other Vascular Procedures without CC/MCC). The
applicant searched the FY 2009 MedPAR file for cases with a procedure
code of 39.90 (Insertion of non-drug-eluting peripheral vessel stents)
in combination with a diagnosis code of 440.20 (Atherosclerosis of the
extremities, unspecified), 440.21 (Atherosclerosis of the extremities,
with intermittent claudication), 440.22 (Atherosclerosis of the
extremities with rest pain), 440.23 (Atherosclerosis of the extremities
with ulceration), and 440.24 (Atherosclerosis of the extremities with
gangrene). The applicant found 7,144 cases (or 24.4 percent of all
cases) in MS-DRG 252; 9,146 cases (or 31.2 percent of all cases) in MS-
DRG 253; and 13,012 cases (or 44.4 percent of all cases) in MS-DRG 254.
The average charge per case was $78,765 for MS-DRG 252, $63,758 for MS-
DRG 253, and $47,586 for MS-DRG 254, equating to a case-weighted
average charge per case of $60,236.
The case-weighted average charge per case above does not include
charges related to the Zilver[supreg] PTX[supreg]; therefore, it is
first necessary to remove the amount of charges related to the nondrug-
eluting peripheral vessel stents and replace them with charges related
to the Zilver[supreg] PTX[supreg]. The applicant used two methodologies
to remove the charges of the nondrug-eluting peripheral vessel stents
and replace them with charges related to the Zilver[supreg]
PTX[supreg]. Although the applicant submitted data related to the
estimated cost of the nondrug-eluting peripheral vessel stents and the
Zilver[supreg] PTX[supreg], the applicant noted that the cost of these
devices was proprietary information.
Under the first methodology, the applicant determined the amount of
stents per case based on the following ICD-9-CM codes on each claim:
00.45 (Insertion of one vascular stent), 00.46 (Insertion of two
vascular stents), 00.47 (Insertion of three vascular stents) and 00.48
(Insertion of four or more vascular stents). If a claim had a code of
00.48, the applicant assumed a maximum of four stents per case. The
applicant multiplied the amount of stents used
[[Page 53359]]
per case by the average market price for nondrug-eluting peripheral
vessel stents and then converted the cost of the stents used per case
to a charge by dividing the results by the national average CCR of
0.329 for supplies and equipment (76 FR 51571). The applicant removed
the appropriate amount of charges per case and then standardized the
charges per case. Because the applicant used FY 2009 MedPAR data, it
was necessary to inflate the charges from FY 2009 to FY 2012. Using
data from the U.S. Department of Labor Bureau of Labor Statistics
Consumer Price Index, the applicant inflated the average standardized
charge per case with an inflation factor of 6 percent. To determine the
amount of Zilver[supreg] PTX[supreg] stents per case, instead of using
the amount of stents used per case based on the ICD-9-CM codes above,
the applicant used an average of 1.9 stents per case based on the
Zilver[supreg] PTX[supreg] Global Registry Clinical Study.\30\ The
applicant believed that it is appropriate to use data from the clinical
study (to determine the average amount of stents used per case) rather
than the actual data from the claims because the length of a nondrug-
eluting peripheral vessel stent typically ranges from 80 mm to 120 mm,
while the length of the Zilver[supreg] PTX[supreg] is 80 mm (which
could cause a variance in the actual amount of stents used per case
when using the Zilver[supreg] PTX[supreg]). Similar to above, the
applicant multiplied the average of 1.9 stents used per case by the
future market price for the Zilver[supreg] PTX[supreg] and then
converted the cost of the stents used per claim to a charge by dividing
the results by the national average CCR of 0.329 for supplies and
equipment. The applicant then added the amount of charges related to
the Zilver[supreg] PTX[supreg] to the inflated average standardized
charge per case and determined a final case-weighted average
standardized charge per case of $60,014. Using the FY 2013 Table 10
thresholds, the case-weighted threshold for MS-DRGs 252, 253, and 254
was $52,293 (all calculations above were performed using unrounded
numbers). Because the case-weighted average standardized charge per
case for the applicable MS-DRGs exceed the case-weighted threshold
amount, the applicant maintains that the Zilver[supreg] PTX[supreg]
meets the cost criterion.
---------------------------------------------------------------------------
\30\ Dake, M.D., Ansel, G.M., Jaff, M.R., Ohki, T., Saxon, R.R.,
Smouse, H.B., Zeller, T., Roubin, G.S., Burket, M.W., Khatib, Y.,
Snyder, S.A., Ragheb, A.O., White, J.K., Machan, L.S.(2011),
Paclitaxel-eluting stents show superiority to balloon angioplasty
and bare metal stents in femoropopliteal disease: twelve-month
zilver PTX randomized study results. Circulation Cardiovascular
Interventions, published online September 27, 2011, 495-504.
---------------------------------------------------------------------------
The second methodology was similar to the first methodology
described above, but the applicant used hospital-specific CCRs from the
FY 2009 IPPS impact file to convert the cost of the nondrug-eluting
peripheral vessel stents and the cost of the Zilver[supreg] PTX[supreg]
to charges. In summary, the applicant determined the amount of nondrug-
eluting peripheral vessel stents used per case based on the ICD-9-CM
codes on each claim (as discussed above). The applicant multiplied the
amount of stents used per case by the average market price for nondrug-
eluting peripheral vessel stents and then converted the cost of the
stents used per case to a charge by dividing by the hospital-specific
CCR (from the FY 2009 IPPS impact file). The applicant removed the
appropriate amount of charges per case and then standardized the
charges per case. Similar to the step described above, because the
applicant used FY 2009 MedPAR data, it was necessary to inflate the
charges from FY 2009 to FY 2012. Using data from the Bureau of Labor
Statistics Consumer Price Index, the applicant inflated the average
standardized charge per case with an inflation factor of 6 percent. To
determine the amount of Zilver[supreg] PTX[supreg] stents per case,
instead of using the amount of stents used per case based on the ICD-9-
CM codes above, the applicant used an average of 1.9 stents per case
based on the Zilver[supreg] PTX[supreg] Global Registry Clinical Study
(because of the reason stated in the first methodology). The applicant
then multiplied the average of 1.9 stents used per case by the future
market price for the Zilver[supreg] PTX[supreg] and then converted the
cost of the stents used per claim to a charge by dividing the results
by the hospital-specific CCR (from the FY 2009 IPPS impact file). The
applicant then added the amount of charges related to the
Zilver[supreg] PTX[supreg] to the inflated average standardized charge
per case and determined a final case-weighted average standardized
charge per case of $60,339. Using the FY 2013 Table 10 thresholds, the
case-weighted threshold for MS-DRGs 252, 253, and 254 was $52,293 (all
calculations above were performed using unrounded numbers). Because the
case-weighted average standardized charge per case for the applicable
MS-DRGs exceed the case-weighted threshold amount, the applicant
maintains that the Zilver[supreg] PTX[supreg] would meet the cost
criterion.
We invited public comment on whether or not the Zilver[supreg]
PTX[supreg] meets the cost criterion. Additionally, we invited public
comment on the methodologies used by the applicant in its analysis,
including its assumptions regarding the types of cases in which this
technology could potentially be used, the number of stents required for
each case, and the CCRs used in the cost calculation.
Comment: We received several public comments regarding whether the
Zilver[supreg] PTX[supreg] meets the cost criterion.
Response: Because the Zilver[supreg] PTX[supreg] has not yet
received FDA approval, and therefore, does not meet the newness
criterion, as discussed above, it is not eligible for the IPPS new
technology add-on payments for FY 2013. Therefore, we are not
summarizing the details of these comments nor responding to them in
this final rule.
In an effort to demonstrate that the technology meets the
substantial clinical improvement criterion, the applicant shared
several findings from the clinical trial data. The applicant stated
that current treatment options for patients who have been diagnosed
with PAD includes angioplasty, bare metal stenting, bypass graft and
endarterectomy. The applicant asserts that the Zilver[supreg]
PTX[supreg] meets the substantial clinical improvement because it
decreases the recurrence of symptoms arising from restenotic SFA
lesions, the rate of subsequent diagnostic or therapeutic interventions
required to address restenotic lesions, and the number of future
hospitalizations.
The applicant cited a 480-patient, multicenter, multinational
randomized controlled trial that compared the Zilver[supreg]
PTX[supreg] to balloon angioplasty; an additional component of the
study allowed a direct comparison of the Zilver[supreg] PTX[supreg] to
a bare (uncoated) metal Zilver[supreg] stent. The primary safety
endpoint of the randomized controlled study was ``Event-Free Survival''
(EFS), defined as ``freedom from the major adverse events of death,
target lesion revascularization, target limb ischemia requiring
surgical intervention or surgical repair of the target vessel, and
freedom of worsening systems as described by the Rutherford
classification by 2 classes or to class 5 or 6.'' The primary
effectiveness endpoint was primary patency (defined as a less than 50
percent re-narrowing).
The applicant noted that the Zilver[supreg] PTX[supreg] had an EFS
of 90.4 percent compared to balloon angioplasty, which had an EFS of
83.9 percent, demonstrating that the Zilver[supreg] PTX[supreg] is as
safe or safer than balloon angioplasty. In addition, the applicant
noted that the Zilver[supreg] PTX[supreg] demonstrated a 50-percent
reduction in restenosis rates compared to angioplasty and a 20-
[[Page 53360]]
percent reduction compared to bare metal stents. The 12-month patency
rate for the Zilver[supreg] PTX[supreg] was 83.1 percent, which
compared favorably to the balloon angioplasty patency rate of 32.8
percent. In the provisional stenting arm of the study, which allowed a
direct comparison of the Zilver[supreg] PTX[supreg] and a bare metal
stent, the Zilver[supreg] PTX[supreg] primary patency exceeded the bare
metal stent patency by nearly 20 percent (89.9 percent versus 73.0
percent \1\). The applicant stated that these differences are
significant, as they result in a substantial clinical improvement
compared to angioplasty and bare metal stenting, with patients being
spared a recurrence of their leg pain and the need to be admitted to
the hospital for repeat procedures on these treated lesions.
The applicant also cited a prospective, multicenter, multinational,
787-patient single arm study on the Zilver[supreg] PTX[supreg] that
demonstrated similar safety and effectiveness results consistent with
those from the pivotal randomized controlled study above. The applicant
cited an EFS for the Zilver[supreg] PTX[supreg] of 89.0 percent and an
86.2 percent primary patency rate. The applicant stated that these
results confirm the safety and effectiveness of the Zilver[supreg]
PTX[supreg], and compare favorably to current results for angioplasty
and bare metal stenting. The applicant added that these results also
demonstrate a 67 to 81 percent relative reduction in Target Lesion
Revascularization (the need to retreat an already treated lesion that
has restenosed, resulting in a recurrence of symptoms) rates compared
to recently published results of contemporary bare metal stents.\31\
---------------------------------------------------------------------------
\31\ Dake, M. D., Scheinert, D., Tepe, G., Tessarek, J.,
Fanelli, F., Bosiers, M., et al. (2011). Nitinol stents with
polymer-free paclitaxel coating for lesions in the superficial
femoral and popliteal arteries above the knee: Twelve-month safety
and effectiveness results from the zilver PTX single-arm clinical
study. Journal of Endovascular Therapy, 18(5), 613-623.
---------------------------------------------------------------------------
We invited public comment regarding whether the Zilver[supreg]
PTX[supreg] meets the substantial clinical improvement criterion.
Comment: Several commenters commented on whether the Zilver[supreg]
PTX[supreg] meets the substantial clinical improvement criterion.
Response: Because the Zilver[supreg] PTX[supreg] has not yet
received FDA approval, and therefore, does not meet the newness
criterion, as discussed above, it is not eligible for IPPS new
technology add-on payments for FY 2013. Therefore, we are not
summarizing the details of these public comments or responding to them
in this final rule d. Zenith[supreg] Fenestrated Abdominal Aortic
Aneurysm (AAA) Endovascular Graft.
Cook[supreg] Medical submitted an application for new technology
add-on payments for the Zenith[supreg] Fenestrated Abdominal Aortic
Aneurysm (AAA) Endovascular Graft (Zenith[supreg] F. Graft) for FY
2013. In the proposed rule, we summarized this application. The
applicant stated that the current treatment for patients who have had
an AAA is an endovascular graft. The applicant explained that the
Zenith[supreg] F. Graft is an implantable device designed to treat
patients who have an AAA and who are anatomically unsuitable for
treatment with currently approved AAA endovascular grafts because of
the length of the infrarenal aortic neck. The applicant noted that,
currently, an AAA is treated through an open surgical repair or medical
management for those patients not eligible for currently approved AAA
endovascular grafts.
The applicant stated that the Zenith[supreg] F. Graft is custom-
made for each patient. It is a modular system consisting of three
components: a two-part main body graft and one iliac leg. The two-part
main body of the graft consists of a proximal tubular graft and a
distal bifurcated graft body. The proximal body graft contains
precisely located holes (fenestrations) and/or cut-outs from the
proximal margin (scallops) of the polyester graft material along with a
bare proximal stent with barbs to provide fixation. The iliac leg
component, which couples with the main bifurcated body, completes the
basic fenestrated endograft.
With respect to newness, the applicant stated that FDA approval for
the use of the Zenith[supreg] F. Graft was granted on April 4, 2012.
The technology is described by ICD-9-CM procedure code 39.78
(Endovascular implantation of branching or fenestrated graft(s) in
aorta), which became effective October 1, 2011. While procedure code
39.78 maps to MS-DRGs 252, 253, and 254 (Other Vascular Procedures with
MCC, with CC, and without MCC/CC, respectively), the applicant believes
that MS-DRGs 237 and 238 (Major Cardiovascular Procedures with MCC and
without MCC, respectively) would be a more appropriate assignment for
procedure code 39.78. We note that in section III.G.3.b. of this
preamble, we discuss our final policy which reassigns procedure code
39.78 from MS-DRG 252, 253, and 254 to MS-DRGs 237 and 238. We invited
public comment regarding whether the Zenith[supreg] F. Graft meets the
newness criterion for new technology add-on payment.
We did not receive any public comments regarding whether the
Zenith[supreg] F. Graft meets the newness criterion. However, because
the Zenith[supreg] F. Graft was approved by the FDA on April 4, 2012,
we believe the Zenith[supreg] F. Graft meets the newness criterion as
of that date.
With regard to the cost criterion, the applicant used clinical
trial data and three separate analyses of FY 2010 MedPAR data to
demonstrate that the Zenith[supreg] F. Graft meets the cost criteria.
We note that in the proposed rule the applicant believed that it met
the cost criteria since it demonstrated that the case weighted average
charge per case exceeded the threshold for MS-DRGs 252-254 since at
that time procedure code 39.78 was assigned to MS-DRG 252-254. However,
as mentioned above, in this final rule we have reassigned procedure
code 39.78 from MS-DRG 252-254 to MS-DRGs 237-238. Therefore, for this
final rule, in order for the applicant to meet the cost criteria, it
must demonstrate that the case weighted average standardized charge per
case exceeds the thresholds for MS-DRGs 237-238.
The applicant submitted clinical trial data \32\ which was based on
173 claims (all Medicare patients except one patient). The applicant
found that, of the 173 cases, 35 cases (or 20.2 percent of all cases)
mapped to MS-DRG 252, 86 cases (or 49.7 percent of all cases) mapped to
MS-DRG 253, and 52 cases (or 30.1 percent of all cases) mapped to MS-
DRG 254, equating to a case-weighted average charge per case of
$87,733.
---------------------------------------------------------------------------
\32\ Evaluation of the Safety and Effectiveness of the Zenith(R)
Fenestrated AAA Endovascular Graft, Zenith Fenestrated AAA
Endovascular Graft Pivotal Study, Clinicaltrials.gov: identifier
NCT00875563 and a Physician Sponsored IDE.
---------------------------------------------------------------------------
The applicant noted that the investigational devices (the bare
metal renal stents that are used in the procedure and the
Zenith[supreg] F. Graft) were sold to the trial sites at reduced
prices. Therefore, the average charge per case cited above contains
reduced charges for the investigational devices rather than commercial
charges. As a result, the applicant believes it is necessary to remove
the reduced charges for the investigational devices and replace them
with commercial charges, in order to determine the cost of the
investigational devices for each of the three analyses. Although the
applicant submitted data related to the estimated cost of the
investigational devices, the applicant noted that the cost of these
devices was proprietary information.
To remove the reduced charges for the investigational devices, the
applicant searched the clinical trial claims data
[[Page 53361]]
and removed those charges with a revenue code of 0624 (investigational
device exempt). Because the claims data for the clinical trial ranged
from 2002 to 2010, it was necessary to inflate the charges. Using data
from the U.S. Department of Labor Bureau of Labor Statistics (BLS)
Consumer Price Index, the applicant applied an inflation factor to the
claim charges ranging from 3 percent to 27 percent, depending on the
year of the claim. After inflating the charges, the applicant then
added the commercial charges of the investigational devices to the
inflated charge per case. To determine the amount of commercial charges
related to the investigational devices, the applicant divided the cost
of the investigational devices by the hospital-specific CCR from the FY
2012 IPPS Final Rule Impact File. After adding the charges of the
investigational devices to the inflated charges, the applicant then
standardized the charges on each claim. As a result, the applicant
determined a final case-weighted average standardized charge per case
of $122,821. In the proposed rule, the applicant used the FY 2013 Table
10 thresholds for MS-DRGs 252, 253, and 254 and determined a case-
weighted threshold of $53,869 (all calculations above were performed
using unrounded numbers). Because the final case-weighted average
standardized charge per case for MS-DRGs 252, 253, and 254 exceeds the
case-weighted threshold amount, the applicant maintained that the
Zenith[supreg] F. Graft met the cost criterion for new technology add-
on payments. As noted above, for this final rule the applicant must
demonstrate that it meets the cost criteria for MS-DRGs 237 and 238.
The thresholds for MS-DRGs 237 and 238 are $101,728 and $69,591,
respectively. If the applicant compared the final case-weighted average
standardized charge per case of $122,821 (under MS-DRGs 252, 253, and
254) to the highest threshold for MS-DRGs 237 and 238 ($101,728), it
would still exceed the threshold in excess of $20,000. Therefore, under
this analysis the applicant would meet the cost criterion since the
final case-weighted average standardized charge per case would exceed
the threshold under MS-DRGs 237 and 238.
We note that, in addition to the analysis above, the applicant
conducted a similar cost analysis using drug eluting renal stents
instead of bare metal renal stents. The applicant noted that the price
of drug eluting renal stents exceeds the price of bare metal renal
stents by approximately $2,200 per stent. Therefore, the applicant
asserted that if the price of drug eluting renal stents is more
expensive than bare metal renal stents and the Zenith[supreg] F. Graft
meets the cost criteria with bare metal renal stents, the
Zenith[supreg] F. Graft also meets the cost criteria when the applicant
uses drug eluting renal stents in its analysis.
As mentioned above, the applicant conducted three separate analyses
using FY 2010 MedPAR data to identify cases eligible for the
Zenith[supreg] F. Graft to demonstrate that it meets the cost
criterion. Because procedure code 39.78 was effective October 1, 2011,
the applicant noted that it was unable to conduct a MedPAR data
analysis with claims that contained a procedure code of 39.78.
Therefore, in order to identify cases eligible for the Zenith[supreg]
F. Graft prior to October 1, 2011, the applicant searched the MedPAR
file for the following three scenarios. The first analysis searched the
FY 2010 MedPAR file for cases with procedure code 39.71 (Endovascular
implantation of graft in abdominal aorta) in combination with a
diagnosis code of 441.4 (Abdominal aneurysm without mention of
rupture). Procedure code 39.71 maps to MS-DRGs 237 and 238. The
applicant found 1,679 cases (or 9.1 percent of all cases) in MS-DRG 237
and 16,793 cases (or 90.9 percent of all cases) in MS-DRG 238. The
average charge per case was $122,252 for MS-DRG 237 and $76,883 for MS-
DRG 238, equating to a case-weighted average charge per case of
$81,006.
The applicant noted that these MedPAR claims data included charges
for the existing stent graft but did not include charges for the
Zenith[supreg] F. Graft. Therefore, the applicant stated that it was
first necessary to remove the amount of charges related to the existing
stent graft and replace them with charges for the Zenith[supreg] F.
Graft. Although the applicant submitted data related to the estimated
cost of the existing stent graft and the Zenith[supreg] F. Graft, the
applicant noted that the cost of these devices was proprietary
information.
To determine the amount of charges for the existing stent graft,
the applicant divided the costs for the existing stent graft by the
national average CCR of 0.329 for supplies and equipment (76 FR 51571).
The applicant removed the appropriate amount of charges per case from
the average charge per case. Because the applicant used FY 2010 MedPAR
data, it was necessary to inflate the charges from FY 2010 to FY 2012.
Using data from the BLS' Consumer Price Index, the applicant inflated
the case-weighted average standardized charge per case with an
inflation factor of 4 percent. The applicant then determined the amount
of charges for the Zenith[supreg] F. Graft by dividing the costs of the
Zenith[supreg] F. Graft by the national average CCR of 0.329 for
supplies. The applicant then added the amount of charges related to the
Zenith[supreg] F. Graft to the inflated charges and then standardized
the charges. The applicant determined a final case-weighted average
standardized charge per case of $80,509. Using the FY 2013 Table 10
thresholds, the case-weighted threshold for MS-DRGs 237 and 238 was
$72,512 (all calculations above were performed using unrounded
numbers). Because the final case-weighted average standardized charge
per case for the applicable MS-DRGs exceeds the case-weighted threshold
amount under this first analysis, the applicant maintains that the
Zenith[supreg] F. Graft meets the cost criterion for new technology
add-on payment.
For its second analysis, the applicant searched the FY 2010 MedPAR
file for cases with procedure code 38.44 (Resection of vessel with
replacement, aorta) in combination with a diagnosis code of 441.4.
Similar to the first analysis, the applicant conducted this analysis
using MS-DRGs 237 and 238 because procedure code 38.44 maps to MS-DRGs
237 and 238. The applicant found 1,310 cases (or 37.9 percent of all
cases) in MS-DRG 237 and 2,145 cases (or 62.1 percent of all cases) in
MS-DRG 238. The average charge per case was $110,708 for MS-DRG 237 and
$64,095 for MS-DRG 238, equating to a case-weighted average charge per
case of $81,769.
The next steps of the applicant's second analysis were similar to
the steps in the first analysis. The applicant noted that the MedPAR
claims data included charges for the vascular graft for open procedures
but did not include charges for the Zenith[supreg] F. Graft. Therefore,
the applicant indicated that it was first necessary to remove the
amount of charges related to the vascular graft for open procedures and
replace them with charges for the Zenith[supreg] F. Graft. Although the
applicant submitted data related to the estimated cost of the vascular
graft for open procedures and the Zenith[supreg] F. Graft, the
applicant noted that the cost of these devices was proprietary
information.
To determine the amount of charges for the vascular graft for open
procedures, the applicant divided the costs for the vascular graft for
open procedures by the national average CCR of 0.329 for supplies and
equipment (76 FR 51571). The applicant removed the appropriate amount
of charges per case
[[Page 53362]]
from the average charge per case. Similar to the first analysis, the
applicant inflated the case-weighted average charge per case with an
inflation factor of 4 percent (based on data from the BLS' Consumer
Price Index). The applicant then determined the amount of charges for
the Zenith[supreg] F. Graft by dividing the costs of the Zenith[supreg]
F. Graft by the national average CCR of 0.329 for supplies. The
applicant then added the amount of charges related to the
Zenith[supreg] F. Graft to the inflated charges and then standardized
the charges. The applicant determined a final case-weighted average
standardized charge per case of $118,774. Using the FY 2013 Table 10
thresholds, the case-weighted threshold for MS-DRGs 237 and 238 was
$81,776 (all calculations above were performed using unrounded
numbers). Because the final case-weighted average standardized charge
per case for the applicable MS-DRGs exceeds the case-weighted threshold
amount in this second analysis, the applicant maintains that the
Zenith[supreg] F. Graft meets the cost criterion for new technology
add-on payments. In the proposed rule, we noted that while the
applicant removed charges for the vascular graft for open procedures,
we were concerned that the applicant did not remove charges for other
services such as extra operating room time and other possible charges
that would be incurred during an open procedure but would possibly not
be incurred during cases when the Zenith[supreg] F. Graft is implanted.
Comment: In response to our concerns, the applicant took the
following steps to demonstrate that the Zenith[supreg] F. Graft meets
the cost criterion under the second analysis. The applicant first
determined the average hospital length of stay (LOS), ICU time and OR
time for open AAA repairs versus fenestrated AAA repairs. The applicant
researched several peer reviewed studies that contain data for OR time,
LOS and ICU time for open procedures. Based on these studies, the
applicant calculated a weighted average for each of these measures. The
weighted average was a LOS of 9.53 days, 4.07 ICU days, and 261 minutes
of OR time.
The applicant used clinical trial data to determine the average OR
time, LOS, and ICU time for AAA fenestrated procedures. Based on Cook's
clinical trial data,\33\ the applicant determined an average LOS of 3.5
days and ICU time of 0.5 days for AAA fenestrated procedures. To
determine the amount of OR minutes, the applicant used literature from
eight studies including the Cook clinical trial data and determined a
weighted average of 235 OR minutes. The applicant noted that the
reported hospital LOS and ICU length of stay for fenestrated procedures
from outside the United States is significantly longer than those
experienced in the study in the United States. Because the applicant
believed that the standard of care related to length of hospital stay
and ICU stay from European experience are dissimilar to practices
within the United States, it only used data from the Cook clinical
trial rather than other clinical trial data (which included data from
Europe) to determine the average for ICU days and LOS.
---------------------------------------------------------------------------
\33\ Unpublished results, Evaluation of the Safety and
Effectiveness of the Zenith(R) Fenestrated AAA Endovascular Graft,
Zenith Fenestrated AAA Endovascular Graft Pivotal Study,
Clinicaltrials.gov identifier NCT00875563.
---------------------------------------------------------------------------
The applicant then calculated the percentage savings or rate of
savings for the OR time, LOS and ICU time with the following formula:
(open procedure minutes or days--fenestrated minutes or days)/open
procedure minutes or days. This resulted in savings of 9.96 percent for
OR minutes, 87.71 percent for ICU days, and 63.27 percent for LOS days.
The applicant then applied the savings at a claim level by applying the
rate of savings to the service charge categories from the MedPAR data
(rate of savings * open device service charge category). Savings of
9.96 percent for OR time was applied to Service Category 12 (which
contains OR charges for revenue centers 36X, 71X and 72X), savings of
87.71 percent for ICU days was applied to Accommodation Charge Category
4 (which includes total ICU charges), and savings of 63.27 percent for
LOS was applied to Accommodation Charge Category 1 (which includes
standard room charges). To determine the case-weighted average
standardized charge per case, the applicant deducted the reduced
charges (savings) from the case-weighted average charge per case
($81,769), which resulted in a revised case-weighted average charge per
case of $66,206. The applicant then inflated the revised case-weighted
average charge per case by 4 percent (based on data from the BLS'
Consumer Price Index), which resulted in an inflated case weighted
average charge per case of $68,854. Next, the applicant determined the
amount of charges for the Zenith[supreg] F. Graft by dividing the costs
of the Zenith[supreg] F. Graft by the national average CCR of 0.329 for
supplies. The applicant then added the amount of charges related to the
Zenith[supreg] F. Graft to the inflated charges and then standardized
the charges. The applicant determined a final case-weighted average
standardized charge per case of $106,731. Using the FY 2013 Table 10
thresholds, the case-weighted threshold for MS-DRGs 237 and 238 was
$81,776 (all calculations above were performed using unrounded
numbers). Because the final case-weighted average standardized charge
per case for the applicable MS-DRGs exceeds the case-weighted threshold
amount in this revised second analysis, the applicant maintains that
the Zenith[supreg]F. Graft Meets the Cost Criterion for New Technology
Add-On Payments.
Response: We appreciate the applicant's response and submittal of
this supplemental analysis, which addresses our concerns from the
proposed rule.
The third analysis was a combination of the first and second
analyses discussed above. The applicant searched the FY 2010 MedPAR
file for cases with a procedure code of 38.44 or 39.71 in combination
with a diagnosis code of 441.4. Similar to the first and second
analyses, the applicant conducted this analysis using MS-DRGs 237 and
238 because both procedure codes map to MS-DRGs 237 and 238. The
applicant found 2,981 cases (or 13.6 percent of all cases) in MS-DRG
237 and 18,928 cases (or 86.4 percent of all cases) in MS-DRG 238. The
applicant removed those cases that had both procedure codes 38.44 and
39.71 on the claim. The average charge per case was $116,826 for MS-DRG
237 and $75,298 for MS-DRG 238, equating to a case-weighted average
charge per case of $80,948.
The applicant noted that the MedPAR claims data included charges
for the existing stent graft or vascular graft for open procedures but
did not include charges for the Zenith[supreg] F. Graft. Therefore, the
applicant stated that it was first necessary to remove the amount of
charges related to the existing stent graft or vascular graft for open
procedures and replace them with charges for the Zenith[supreg] F.
Graft. Similar to the first and second analyses, to determine the
amount of charges for the existing stent graft or vascular graft for
open procedures, the applicant divided the costs for these devices by
the national average CCR of 0.329 for supplies and equipment (76 FR
51571). The applicant removed the appropriate amount of charges per
case from the average charge per case. The applicant inflated the case-
weighted average standardized charge per case with an inflation factor
of 4 percent (based on data from the BLS' Consumer Price Index). The
applicant then determined the amount of charges for the Zenith[supreg]
F.
[[Page 53363]]
Graft by dividing the costs of the Zenith[supreg] F. Graft by the
national average CCR of 0.329 for supplies. The applicant then added
the amount of charges related to the Zenith[supreg] F. Graft to the
inflated charges and then standardized the charges. As a result, the
applicant determined a final case-weighted average standardized charge
per case of $86,081. Using the FY 2013 Table 10 thresholds, the case-
weighted threshold for MS-DRGs 237 and 238 was $73,964 (all
calculations above were performed using unrounded numbers). Because the
final case-weighted average standardized charge per case for the
applicable MS-DRGs exceeds the case-weighted threshold amount, the
applicant maintains that the Zenith[supreg] F. Graft meets the cost
criterion for new technology add-on payment.
In the proposed rule, similar to our concerns with the second
analysis, we were concerned that for this third analysis the applicant
did not remove charges for other services such as extra operating room
time and other possible charges that would be incurred during an open
procedure, but would possibly not be incurred during cases when the
Zenith[supreg] F. Graft is implanted.
Comment: The applicant applied the same analysis above and deducted
the reduced charges (savings) for OR time, LOS, and ICU days from the
case-weighted average charge per case ($80,948), which resulted in a
revised case-weighted average charge per case of $39,756. The applicant
then inflated the revised case-weighted average charge per case by 4
percent (based on data from the BLS' Consumer Price Index), which
resulted in an inflated case-weighted average charge per case of
$41,346. The applicant then determined the amount of charges for the
Zenith[supreg] F. Graft by dividing the costs of the Zenith[supreg] F.
Graft by the national average CCR of 0.329 for supplies. The applicant
then added the amount of charges related to the Zenith[supreg] F. Graft
to the inflated charges and then standardized the charges. The
applicant determined a final case-weighted average standardized charge
per case of $82,497. Using the FY 2013 Table 10 thresholds, the case-
weighted threshold for MS-DRGs 237 and 238 was $73,964 (all
calculations above were performed using unrounded numbers). Because the
final case-weighted average standardized charge per case for the
applicable MS-DRGs exceeds the case-weighted threshold amount in this
revised second analysis, the applicant maintains that the
Zenith[supreg] F. Graft meets the cost criterion for new technology
add-on payments.
Response: We thank the commenter for submitting this supplemental
analysis which addresses our concerns from the proposed rule.
We appreciate the multiple analyses of the FY 2010 MedPAR data
provided by the applicant and as stated above we believe the commenter
has addressed our concerns from the proposed rule. Therefore, we
believe that the Zenith[supreg] F. Graft meets the cost criterion for
new technology add-on payments.
The applicant maintains that the technology also meets the
substantial clinical improvement criterion. The applicant first
explained that current treatment for those patients who are not
eligible for standard endovascular AAA devices is an open repair. The
applicant referenced data from a published series \34\ that
demonstrated an open repair can lead to a high risk of morbidity and
increased mortality. The applicant added that an open procedure
requires suprarenal aortic cross-clamping.\35\ The applicant also noted
that there is a high risk of blood loss during an open procedure and
the de-branching of vessels increases the level of surgical risk. The
applicant further noted that 30 to 40 percent of patients who have an
infrarenal AAA cannot be treated with current commercial devices
because of anatomical reasons (for example, insufficient neck length to
achieve graft adequate seal).\36\ The applicant added that use of
standard endografts in patients with neck lengths less than 10 mm can
result in a fourfold increase in an endoleak.\37\
---------------------------------------------------------------------------
\34\ Wilderman, M. et al. Fenestrated Grafts or Debranching
Procedures for Complex Abdominal Aortic Aneurysms. Perspectives in
Vascular Surgery and Endovascular Therapy, March 2009; 21(1): 13-18.
\35\ Jongkind V, Yeung K, et al. Juxtarenal aortic aneurysm
repair. Journal of Vascular Surgery 2010 Sept; 29(3) 760-767.
\36\ Wilderman, M. et al. Fenestrated Grafts or Debranching
Procedures for Complex Abdominal Aortic Aneurysms. Perspectives in
Vascular Surgery and Endovascular Therapy, March 2009; 21(1): 13-18.
\37\ Amiot, S., et al., Fenestrated endovascular grafting: the
French multicentre experience. Eur J Vasc Endovasc Surg, 2010.
39(5): p. 537-44.
---------------------------------------------------------------------------
The applicant also stated that the intended use of the
Zenith[supreg] F. Graft differs from standard AAA endovascular grafts
in that the fenestrated device provides physicians the ability to treat
patients who have infrarenal aortic neck lengths as short as 4 mm,
where standard endovascular AAA devices require an infrarenal aortic
neck length of at least 10 to 15 mm. Therefore, the applicant believes
that the Zenith[supreg] F. Graft offers an additional AAA repair option
to those patients who have limited surgical treatment options (for
example, if short infrarenal neck lengths make the patients at too high
a risk to be candidates for open surgical repair).
The applicant also stated, for patients who have AAAs and short
infrarenal neck lengths, the Zenith[supreg] F. Graft offers a less
invasive treatment option than open surgical repair. The applicant
referred to several sources of literature to support the following
endpoints for fenestrated endovascular aortic repair (EVAR) versus open
repair of the juxtarenal AAA relative to open repair of the juxtarenal
AAA: reduced peri-operative mortality (2.4 percent (range: 0 to 5.7
percent)) 38,39,40,41,42,43,44,45,46 reported for
fenestrated EVAR repairs versus 2.9 percent (range 0 to 7.4 percent)
47,48 reported for open repair of juxtarenal AAA); reduced
morbidity by reducing renal failure requiring permanent dialysis (1.9
percent (pooled average) for fenestrated EVAR repairs versus 3.4
percent reported for open repair of juxtarenal AAA); shorter hospital
stay and less operative blood loss to open repair. The applicant
maintains that fenestrated EVAR repair results in an average length of
stay of 3.5 days, compared to 14.2 days for open repair of juxtarenal
AAA, and blood loss
[[Page 53364]]
of 537 ml, compared to 2586 ml for open repair of juxtarenal AAA.
---------------------------------------------------------------------------
\38\ Nordon, I.M., et al., Modern treatment of juxtarenal
abdominal aortic aneurysms with fenestrated endografting and open
repair--a systematic review. Eur J Vasc Endovasc Surg, 2009. 38(1):
p. 35-41.
\39\ Verhoeven, E.L., et al., Fenestrated stent grafting for
short-necked and juxtarenal abdominal aortic aneurysm: an 8-year
single-centre experience. Eur J Vasc Endovasc Surg, 2010. 39(5): p.
529-36.
\40\ Chisci E, Kristmundsson T, de Donato G, et al. The AAA with
a challenging neck: outcome of open versus endovascular repair with
standard and fenestrated stent-grafts. J Endovasc Ther 2009;16:137-
146.
\41\ Amiot, S., et al., Fenestrated endovascular grafting: the
French multicentre experience. Eur J Vasc Endovasc Surg, 2010.
39(5): p. 537-44.
\42\ Kristmundsson T, Sonesson B, Malina M, et al. Fenestrated
endovascular repair for juxtarenal aortic pathology. J Vasc Surg
2009;49:568-574.
\43\ Beck AW, Bos WT, Vourliotakis G, et al. Fenestrated and
branched endograft repair of juxtarenal aneurysms after previous
open aortic reconstruction. J Vasc Surg 2009;49:1387-1394.
\44\ Tambyraja, A.L., et al., Fenestrated aortic endografts for
juxtarenal aortic aneurysm: medium term outcomes. Eur J Vasc
Endovasc Surg, 2011. 42(1): p. 54-8.
\45\ Unpublished results, Evaluation of the Safety and
Effectiveness of the Zenith(R) Fenestrated AAA Endovascular Graft,
Zenith Fenestrated AAA Endovascular Graft Pivotal Study,
Clinicaltrials.gov identifier NCT00875563.
\46\ Unpublished results, British Society of Endovascular
Therapy-sponsored GlobalStar Collaborative Study.
\47\ Jongkind V, Yeung K, et al. Juxtarenal aortic aneurysm
repair. J. Vasc. Surg. 2010 Sept; 29(3) 760-767.
\48\ Landry G, Lau I, Liem T, Mitchell E, Moneta G.. Open
abdominal aortic aneurysm repair in the endovascular era: effect of
clamp site on outcomes. Arch. Surg., 144 (9) Sep. 2009, 811-6.
---------------------------------------------------------------------------
In the proposed rule, we noted that the information provided by the
applicant to evaluate substantial clinical improvement compares this
technology to open surgical repair. We expressed concern that the
applicant did not present publicly available information comparing the
technology to medical management, which the applicant mentions as
another method for treating patients anatomically unsuited for
currently approved AAA endovascular grafts. In these comparisons, we
were also concerned that information regarding the longevity of the
Zenith[supreg] F. Graft as well as long-term complications and
secondary interventions or reinterventions has not been presented. In
terms of the data presented by the applicant, we were concerned that
these clinical study data were nonrandomized, did not differentiate
between patients by infrarenal neck length and/or suitability for other
endovascular grafts, and were of noninferiority. We invited public
comment on whether or not the Zenith[supreg] F. Graft meets the
substantial clinical improvement criterion.
Comment: The applicant responded to our concerns from the proposed
rule by submitting a public comment with supplemental information. With
respect to the concern that the applicant did not compare the
technology to medical management which the applicant listed as a
treatment option (in addition to an open procedure), the applicant
cited the FDA indications of the device and noted that while the
application referred to medical management it was not intended to
suggest that medical management was a reasonable alternative treatment
option for AAAs at heightened risk of rupture. Therefore, the applicant
assumed that medical management had already been maximized in the
patients' treatment regimen and that some type of surgical intervention
was necessary to treat the aneurysm and prevent rupture. Additionally,
the applicant further explained that in its application, prior to the
Zenith[supreg] F. Graft, surgery was considered the most appropriate
option for patients who have a suitably large aneurysm. However,
certain patient factors may prevent surgical intervention including
anatomical limitations that prevent the use of current endovascular
stents or the patient's attendant comorbidities may alter the risk/
benefit equation so that surgery is not a viable option. As a result,
the applicant stated that medical management represented the default
treatment and at risk of aneurysm rupture but is still considered
inferior to a definitive surgical intervention. The applicant concluded
that it is for these patients that the Zenith[supreg] F. Graft was
developed.
The applicant also cited clinical data that demonstrated little
improvement has been achieved in the survival rates of patients who do
not undergo a surgical intervention for their aneurysm (because the
aneurysm may rupture) in contrast to the published series on
fenestrated repair, which has indicated low 30-day mortality rates.
Therefore, the applicant believed that surgical intervention with the
Zenith[supreg] F. Graft is considered a suitable treatment for a
patient population (where a surgical intervention was not an option
prior to the Zenith[supreg] F. Graft) when considering the potential
risk and benefit of the procedure.
The applicant also responded to the concern that there is a lack of
data on long term complications and secondary interventions or re-
interventions. The commenter noted that Mastracci et al presented at
the 2012 Society of Vascular Surgery annual meeting on the durability
of branched and fenestrated endografts reported that 650 patients
underwent endovascular aortic repair with branched or fenestrated
devices at the Cleveland Clinic. Approximately one-third of these
patients underwent a fenestrated AAA repair; the balance were branched
thoracoabdominal and thoracic aortic aneurysm repairs. Through 9 years
of follow-up (with a mean of 3 years), secondary procedures were
performed for 0.6 percent of celiac, 4 percent of SMA, 6 percent of
right renal, and 5 percent of left renal arteries. The average time to
reintervention was 237 days and the 30 days, 1 year and 5 year freedom
from any intervention was 98 percent, 94 percent, and 84 percent,
respectively. Death resulted from branch stent complications in only
two patients (related to SMA thrombosis). Mastracci et al concluded
that branches, following branched or fenestrated aortic repair, appear
to be durable, and are rarely the cause of patient death; the absence
of long-term data on the branch patency in open repair precludes
comparison, yet the lower morbidity and mortality risk coupled with
longer-term durability data will further alter the balance of repair
options. The applicant noted that this conclusion is consistent with
the applicant's conclusion.
Finally, in response to the concern that the studies conducted were
non randomized, did not differentiate between patients by infrarenal
neck length and/or suitability for other endovascular grafts and were
of non inferiority, the commenter responded that a randomized test was
not conducted because it was anticipated that the clinical trial
conducted for FDA registration would primarily enroll high risk
patients in whom open surgical repair would present an unacceptably
high risk of operative mortality. The applicant stated that this
precluded a randomized study design. With regard to the concern about
not considering other endovascular graft options, the applicant
explained that the shortest FDA-approved neck length indication of an
available standard AAA graft is >10 mm (IFU--Medtronic Endurant
Endovascular Graft). The Zenith[supreg] F. Graft is designed to treat
neck lengths of >=4 mm, and there is no other endovascular graft
available in the USA indicated to treat such short neck lengths. The
applicant also clarified that the study of non-inferiority was for the
IDE clinical study performed for FDA approval. One of the study's goals
was to show non-inferiority in 6-month treatment success, comparing
matched patients treated with a standard Zenith AAA Endovascular Graft
(used to treat AAAs anatomically suited for treatment) with patients
treated with a standard endovascular device. The purpose was to
demonstrate that the Zenith[supreg] F. Graft could offer a treatment
option to patients with a juxtarenal AAA that was not worse than the
well-established treatment success experienced with a standard AAA
endovascular graft when used to treat patients anatomically suited for
a standard device (not when using a standard AAA graft to treat a
short-necked, juxtarenal aneurysm). The applicant concluded that for
this device, this intended patient population, and this comparator a
non-inferiority design is a valid study design demonstrating non-
inferiority to the high standard of success experienced in standard AAA
endovascular repair and provides compelling evidence of Zenith[supreg]
F. Graft's effectiveness.
Response: We appreciate the applicant's response in regard to our
concerns presented in the proposed rule. We agree that the
Zenith[supreg] F. Graft represents a substantial clinical improvement
over existing technologies because it offers a treatment option to a
patient population that would otherwise require an open procedure or a
treatment option to those patients who are ineligible for an open
procedure. The Zenith[supreg] F. Graft offers a less invasive treatment
option compared to an open procedure which results in reduced
mortality, reduced morbidity, shorter hospital stays and less operative
blood loss.
Comment: Other commenters were concerned that the Zenith[supreg] F.
Graft may
[[Page 53365]]
not meet the substantial clinical criterion because of the concerns
expressed by CMS in the proposed rule.
Response: As discussed above, the applicant has responded to our
concerns and we agree that the Zenith[supreg] F. Graft meets the
substantial clinical improvement criterion.
Based on the discussion above, the Zenith[supreg] F. Graft meets
all of the new technology add-on payment policy criteria. Therefore, we
are approving the Zenith[supreg] F. Graft for new technology add-on
payments in FY 2013. Cases involving the Zenith[supreg] F. Graft that
are eligible for new technology add-on payments will be identified by
ICD-9-CM procedure code 39.78. In the application, the applicant
provided a breakdown of the costs of the Zenith[supreg] F. Graft. The
total cost of the Zenith[supreg] F. Graft utilizing bare metal (renal)
alignment stents was $17,264. Of the $17,264 in costs for the
Zenith[supreg] F. Graft, $921 are for components that are used in a
standard Zenith AAA Endovascular Graft procedure. Because the costs for
these components are already reflected within the MS-DRGs (and are no
longer ``new''), we do not believe it is appropriate to include these
costs in our determination of the maximum cost to determine the add-on
payment for the Zenith[supreg] F. Graft. Therefore, the total maximum
cost for the Zenith[supreg] F. Graft is $16,343 ($17,264 - $921). Under
Sec. 412.88(a)(2), new technology add-on payments are limited to the
lesser of 50 percent of the average cost of the device or 50 percent of
the costs in excess of the MS-DRG payment for the case. As a result,
the maximum add-on payment for a case involving the Zenith[supreg] F.
Graft is $8,171.50.
III. Changes to the Hospital Wage Index for Acute Care Hospitals
A. Background
Section 1886(d)(3)(E) of the Act requires that, as part of the
methodology for determining prospective payments to hospitals, the
Secretary must adjust the standardized amounts ``for area differences
in hospital wage levels by a factor (established by the Secretary)
reflecting the relative hospital wage level in the geographic area of
the hospital compared to the national average hospital wage level.'' In
accordance with the broad discretion conferred under the Act, we
currently define hospital labor market areas based on the delineations
of statistical areas established by the Office of Management and Budget
(OMB). A discussion of the FY 2013 hospital wage index based on the
statistical areas, including OMB's revised definitions of Metropolitan
Areas, appears under section III.B. of this preamble.
Beginning October 1, 1993, section 1886(d)(3)(E) of the Act
requires that we update the wage index annually. Furthermore, this
section of the Act provides that the Secretary base the update on a
survey of wages and wage-related costs of short-term, acute care
hospitals. The survey must exclude the wages and wage-related costs
incurred in furnishing skilled nursing services. This provision also
requires us to make any updates or adjustments to the wage index in a
manner that ensures that aggregate payments to hospitals are not
affected by the change in the wage index. The adjustment for FY 2013 is
discussed in section II.B. of the Addendum to this final rule.
As discussed below in section III.H. of this preamble, we also take
into account the geographic reclassification of hospitals in accordance
with sections 1886(d)(8)(B) and 1886(d)(10) of the Act when calculating
IPPS payment amounts. Under section 1886(d)(8)(D) of the Act, the
Secretary is required to adjust the standardized amounts so as to
ensure that aggregate payments under the IPPS after implementation of
the provisions of sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the
Act are equal to the aggregate prospective payments that would have
been made absent these provisions. The budget neutrality adjustment for
FY 2013 is discussed in section II.A.4.b. of the Addendum to this final
rule.
Section 1886(d)(3)(E) of the Act also provides for the collection
of data every 3 years on the occupational mix of employees for short-
term, acute care hospitals participating in the Medicare program, in
order to construct an occupational mix adjustment to the wage index. A
discussion of the occupational mix adjustment that we are applying
beginning October 1, 2012 (the FY 2013 wage index) appears under
section III.F. of this preamble.
In response to concerns frequently expressed by providers and other
relevant parties that the current wage index system does not
effectively reflect the true variation in labor costs for a large
cross-section of hospitals, two studies were undertaken by the
Department. First, section 3137(b) of the Affordable Care Act required
the Secretary to submit to Congress a report that includes a plan to
comprehensively reform the Medicare wage index applied under section
1886(d) of the Act. In developing the plan, the Secretary was directed
to take into consideration the goals for reforming the wage index that
were set forth by the Medicare Payment Advisory Commission (MedPAC) in
its June 2007 report entitled ``Report to Congress: Promoting Greater
Efficiency in Medicare'' and to ``consult with relevant affected
parties.'' Second, the Secretary commissioned the Institute of Medicine
(IOM) to ``evaluate hospital and physician geographic payment
adjustments, the validity of the adjustment factors, measures and
methodologies used in those factors, and sources of data used in those
factors.'' Reports on both of these studies recently have been
released. We refer readers to section IX.B. of this preamble for
summaries of the studies, their findings, and recommendations on
reforming the wage index system.
B. Core-Based Statistical Areas for the Hospital Wage Index
The wage index is calculated and assigned to hospitals on the basis
of the labor market area in which the hospital is located. In
accordance with the broad discretion under section 1886(d)(3)(E) of the
Act, beginning with FY 2005, we define hospital labor market areas
based on the Core-Based Statistical Areas (CBSAs) established by OMB
and announced in December 2003 (69 FR 49027). For a discussion of OMB's
delineations of CBSAs and our implementation of the CBSA definitions,
we refer readers to the preamble of the FY 2005 IPPS final rule (69 FR
49026 through 49032). We also discussed in the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51582) that, in 2013, OMB plans to announce new area
delineations based on new standards adopted in 2010 (75 FR 37246) and
the 2010 Census of Population and Housing data. For the FY 2013 wage
index, to be effective October 1, 2012 and before the availability of
OMB's new area delineations, we proposed to use the same labor market
areas that we used for the FY 2012 wage index (76 FR 51581).
We did not receive any public comments on the use of labor market
areas for the FY 2013 wage index. Therefore, we are finalizing, for FY
2013, the use of the same labor market areas that we used for the FY
2012 wage index.
C. Worksheet S-3 Wage Data for the FY 2013 Proposed Wage Index
The FY 2013 wage index values are based on the data collected from
the Medicare cost reports submitted by hospitals for cost reporting
periods beginning in FY 2009 (the FY 2012 wage indices were based on
data from cost reporting periods beginning during FY 2008).
[[Page 53366]]
1. Included Categories of Costs
The FY 2013 wage index includes the following categories of data
associated with costs paid under the IPPS (as well as outpatient
costs):
Salaries and hours from short-term, acute care hospitals
(including paid lunch hours and hours associated with military leave
and jury duty)
Home office costs and hours
Certain contract labor costs and hours (which includes
direct patient care, certain top management, pharmacy, laboratory, and
nonteaching physician Part A services, and certain contract indirect
patient care services (as discussed in the FY 2008 final rule with
comment period (72 FR 47315))
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 2012, the wage
index for FY 2013 also excludes the direct and overhead salaries and
hours for services not subject to IPPS payment, such as SNF services,
home health services, costs related to GME (teaching physicians and
residents) and certified registered nurse anesthetists (CRNAs), and
other subprovider components that are not paid under the IPPS. The FY
2013 wage index also excludes the salaries, hours, and wage-related
costs of hospital-based rural health clinics (RHCs), and Federally
qualified health centers (FQHCs) because Medicare pays for these costs
outside of the IPPS (68 FR 45395). In addition, salaries, hours, and
wage-related costs of CAHs are excluded from the wage index, for the
reasons explained in the FY 2004 IPPS final rule (68 FR 45397).
3. Use of Wage Index Data by Providers Other Than Acute Care Hospitals
Under the IPPS
Data collected for the IPPS wage index are also currently used to
calculate wage indices applicable to other providers, such as SNFs,
home health agencies (HHAs), and hospices. In addition, they are used
for prospective payments to IRFs, IPFs, and LTCHs, and for hospital
outpatient services. We note that, in the IPPS rules, we do not address
comments pertaining to the wage indices for non-IPPS providers, other
than for LTCHs. Such comments should be made in response to separate
proposed rules for those providers.
D. Verification of Worksheet S-3 Wage Data
The wage data for the FY 2013 wage index were obtained from
Worksheet S-3, Parts II and III of the Medicare cost report for cost
reporting periods beginning on or after October 1, 2008, and before
October 1, 2009. For wage index purposes, we refer to cost reports
during this period as the ``FY 2009 cost report,'' the ``FY 2009 wage
data,'' or the ``FY 2009 data.'' Instructions for completing Worksheet
S-3, Parts II and III are in the Provider Reimbursement Manual (PRM),
Part II, Sections 3605.2 and 3605.3. The data file used to construct
the wage index includes FY 2009 data submitted to us as of June 27,
2012. As in past years, we performed an extensive review of the wage
data, mostly through the use of edits designed to identify aberrant
data.
We asked our fiscal intermediaries/MACs to revise or verify data
elements that result in specific edit failures. For the FY 2013
proposed wage index, we identified and excluded 32 providers with data
that were too aberrant to include in the proposed wage index, although
we stated that if data elements for some of these providers are
corrected, we intended to include some of these providers in the FY
2013 final wage index. We have received corrected data for 8 providers,
and therefore, we are including the data for these 8 providers in the
FY 2013 final wage index. However, we also have determined that the
data for 14 additional providers are too aberrant to include in the FY
2013 final wage index. Thus, in total we are excluding the data of 38
providers from the FY 2013 final wage index.
In constructing the FY 2013 proposed wage index, we included the
wage data for facilities that were IPPS hospitals in FY 2009, inclusive
of those facilities that have since terminated their participation in
the program as hospitals, as long as those data did not fail any of our
edits for reasonableness. We believe that including the wage data for
these hospitals is, in general, appropriate to reflect the economic
conditions in the various labor market areas during the relevant past
period and to ensure that the current wage index represents the labor
market area's current wages as compared to the national average of
wages. However, we excluded the wage data for CAHs as discussed in the
FY 2004 IPPS final rule (68 FR 45397). For the proposed rule, we
removed 7 hospitals that converted to CAH status between February 15,
2011, the cut-off date for CAH exclusion from the FY 2012 wage index,
and February 14, 2012, the cut-off date for CAH exclusion from the FY
2013 wage index. However, after the issuance of the proposed rule, we
have learned that one provider which we believed was a CAH actually is
an IPPS hospital with valid wage data for FY 2013. Therefore, we have
added that provider's wage data for purposes of the FY 2013 final wage
index. Accordingly, for this final rule, we removed the data of only 6
(not 7) hospitals that have converted to CAH status between February
15, 2011 and February 14, 2012. After removing hospitals with aberrant
data and hospitals that converted to CAH status, the FY 2013 final wage
index is calculated based on 3,447 hospitals.
For the FY 2013 final wage index, we allotted the wages and hours
data for a multicampus hospital among the different labor market areas
where its campuses are located in the same manner we allotted such
hospitals' data in the FY 2012 wage index (76 FR 51591). Table 2
containing the FY 2013 wage index associated with this final rule
(available on the CMS Web site) includes separate wage data for the
campuses of four multicampus hospitals.
E. Method for Computing the FY 2013 Unadjusted Wage Index
The method used to compute the FY 2013 wage index without an
occupational mix adjustment follows the same methodology that we used
to compute the FY 2012 final wage index without an occupational mix
adjustment (76 FR 51591 through 51593).
As discussed in that 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, 2008, through April 15, 2010, for private industry
hospital workers from the BLS' Compensation and Working Conditions. We
have consistently used the ECI as the data source for our wages and
salaries and other price proxies in the IPPS market basket, and as we
proposed, we are not making any changes to the usage for FY 2013. The
factors used to adjust the hospital's data were based on the midpoint
of the cost reporting period, as indicated below.
[[Page 53367]]
Midpoint of Cost Reporting Period
------------------------------------------------------------------------
Adjustment
After Before factor
------------------------------------------------------------------------
10/14/2008.................................... 11/15/2008 1.03003
11/14/2008.................................... 12/15/2008 1.02786
12/14/2008.................................... 01/15/2009 1.02582
01/14/2009.................................... 02/15/2009 1.02386
02/14/2009.................................... 03/15/2009 1.02199
03/14/2009.................................... 04/15/2009 1.02014
04/14/2009.................................... 05/15/2009 1.01826
05/14/2009.................................... 06/15/2009 1.01635
06/14/2009.................................... 07/15/2009 1.01446
07/14/2009.................................... 08/15/2009 1.01263
08/14/2009.................................... 09/15/2009 1.01086
09/14/2009.................................... 10/15/2009 1.00910
10/14/2009.................................... 11/15/2009 1.00728
11/14/2009.................................... 12/15/2009 1.00539
12/14/2009.................................... 01/15/2010 1.00352
01/14/2010.................................... 02/15/2010 1.00172
02/14/2010.................................... 03/15/2010 1.00000
03/14/2010.................................... 04/15/2010 0.99830
------------------------------------------------------------------------
For example, the midpoint of a cost reporting period beginning
January 1, 2009, and ending December 31, 2009, is June 30, 2009. An
adjustment factor of 1.01446 would be applied to the wages of a
hospital with such a cost reporting period.
Using the data as described above and in the FY 2012 IPPS/LTCH PPS
final rule, the FY 2013 national average hourly wage (unadjusted for
occupational mix) is $37.4855. The Puerto Rico overall average hourly
wage (unadjusted for occupational mix) is $15.8643.
F. Occupational Mix Adjustment to the FY 2013 Wage Index
As stated earlier, section 1886(d)(3)(E) of the Act provides for
the collection of data every 3 years on the occupational mix of
employees for each short-term, acute care hospital participating in the
Medicare program, in order to construct an occupational mix adjustment
to the wage index, for application beginning October 1, 2004 (the FY
2005 wage index). The purpose of the occupational mix adjustment is to
control for the effect of hospitals' employment choices on the wage
index. For example, hospitals may choose to employ different
combinations of registered nurses, licensed practical nurses, nursing
aides, and medical assistants for the purpose of providing nursing care
to their patients. The varying labor costs associated with these
choices reflect hospital management decisions rather than geographic
differences in the costs of labor.
1. Development of Data for the FY 2013 Occupational Mix Adjustment
Based on the 2010 Occupational Mix Survey
As provided for under section 1886(d)(3)(E) of the Act, we collect
data every 3 years on the occupational mix of employees for each short-
term, acute care hospital participating in the Medicare program.
As discussed in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51582
through 51586), the FY 2013 wage index is based on data collected on
the new 2010 Medicare Wage Index Occupational Mix Survey (Form CMS-
10079 (2010)). The survey is available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html?redirect=/AcuteInpatientPPS/WIFN/list.asp
and through the fiscal intermediaries/MACs. Hospitals were required to
submit their completed 2010 surveys to their fiscal intermediaries/MACs
by July 1, 2011. The preliminary, unaudited 2010 survey data will be
released in early October 2012, along with the FY 2010 Worksheet S-3
wage data, for the FY 2014 wage index review and correction process.
2. Calculation of the Occupational Mix Adjustment for FY 2013
For FY 2013, we calculated the occupational mix adjustment factor
using the same methodology that we used for the FY 2012 wage index (76
FR 51582 through 51586). As a result of applying this methodology, the
FY 2013 occupational mix adjusted national average hourly wage is
$37.4608. The FY 2013 occupational mix adjusted Puerto Rico-specific
average hourly wage is $15.9019.
Because the occupational mix adjustment is required by statute, all
hospitals that are subject to payments under the IPPS, or any hospital
that would be subject to the IPPS if not granted a waiver, must
complete the occupational mix survey, unless the hospital has no
associated cost report wage data that are included in the FY 2013 wage
index. For the FY 2010 survey, the response rate was 91.7 percent. In
the FY 2013 wage index established in this final rule, we applied proxy
data for noncompliant hospitals, new hospitals, or hospitals that
submitted erroneous or aberrant data in the same manner that we applied
proxy data for such hospitals in the FY 2012 wage index occupational
mix adjustment (76 FR 51586).
In the FY 2011 IPPS/LTCH PPS proposed rule and final rule (75 FR
23943 and 75 FR 50167, respectively), we stated that, in order to gain
a better understanding of why some hospitals are not submitting the
occupational mix data, we will require hospitals that do not submit
occupational mix data to provide an explanation for not complying. This
requirement was effective beginning with the new 2010 occupational mix
survey. We instructed fiscal intermediaries/MACs to begin gathering
this information as part of the FY 2013 wage index desk review process.
We will review these data for future analysis and consideration of
potential penalties for noncompliant hospitals.
G. Analysis and Implementation of the Occupational Mix Adjustment and
the FY 2013 Occupational Mix Adjusted Wage Index
1. Analysis of the Occupational Mix Adjustment and the Occupational Mix
Adjusted Wage Index
As discussed in section III.F. of this preamble, for FY 2013, we
apply the occupational mix adjustment to 100 percent of the FY 2013
wage index. We calculated the final occupational mix adjustment using
data from the 2010 occupational mix survey data, using the methodology
described in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51582 through
51586).
Using the occupational mix survey data and applying the
occupational mix adjustment to 100 percent of the FY 2013 wage index
results in a national average hourly wage of $37.4608 and a Puerto-Rico
specific average hourly wage of $15.9019. After excluding data of
hospitals that either submitted aberrant data that failed critical
edits, or that do not have FY 2009 Worksheet S-3, Parts II and III,
cost report data for use in calculating the FY 2013 wage index, we
calculated the FY 2013 wage index using the occupational mix survey
data from 3,192 hospitals. Using the Worksheet S-3, Parts II and III,
cost report data of 3,447 hospitals and occupational mix survey data
from 3,192 hospitals represents a 92.6 percent survey response rate.
The FY 2013 national average hourly wages for each occupational mix
nursing subcategory as calculated in Step 2 of the occupational mix
calculation are as follows:
------------------------------------------------------------------------
Average hourly
Occupational mix nursing subcategory wage
------------------------------------------------------------------------
National RN............................................ 37.435806262
National LPN and Surgical Technician................... 21.779745192
National Nurse Aide, Orderly, and Attendant............ 15.334363984
National Medical Assistant............................. 17.232523608
[[Page 53368]]
National Nurse Category................................ 31.852574284
------------------------------------------------------------------------
The national average hourly wage for the entire nurse category as
computed in Step 5 of the occupational mix calculation is
$31.852574284. Hospitals with a nurse category average hourly wage (as
calculated in Step 4) of greater than the national nurse category
average hourly wage receive an occupational mix adjustment factor (as
calculated in Step 6) of less than 1.0. Hospitals with a nurse category
average hourly wage (as calculated in Step 4) of less than the national
nurse category average hourly wage receive an occupational mix
adjustment factor (as calculated in Step 6) of greater than 1.0.
Based on the 2010 occupational mix survey data, we determined (in
Step 7 of the occupational mix calculation) that the national
percentage of hospital employees in the nurse category is 43.47
percent, and the national percentage of hospital employees in the all
other occupations category is 56.53 percent. At the CBSA level, the
percentage of hospital employees in the nurse category ranged from a
low of 21.9 percent in one CBSA, to a high of 62.0 percent in another
CBSA.
We also compared the FY 2013 wage data adjusted for occupational
mix from the 2010 survey to the FY 2013 wage data adjusted for
occupational mix from the 2007-2008 survey. This analysis illustrates
the effect on area wage indices of using the 2010 survey data compared
to the 2007-2008 survey data; that is, it shows whether hospitals' wage
indices are increasing or decreasing under the current survey data as
compared to the prior survey data. Our analysis shows that the FY 2013
wage index values for 189 (48.3 percent) urban areas and 14 (29.2
percent) rural areas will increase. Fifty three (13.6 percent) urban
areas will increase by 1 percent or more, and no urban areas will
increase by 5 percent or more. Three (6.3 percent) rural areas will
increase by 1 percent or more, and no rural areas will increase by 5
percent or more. However, the wage index values for 199 (50.9 percent)
urban areas and 34 (70.8 percent) rural areas will decrease using the
2010 data. Sixty-three (16.1 percent) urban areas will decrease by 1
percent or more, and no urban areas will decrease by 5 percent or more.
Three (6.3 percent) rural areas will decrease by 1 percent or more, and
no rural areas will decrease by 5 percent or more. The largest positive
impacts using the 2010 data compared to the 2007-2008 data are 4.34
percent for an urban area and 3.20 percent for a rural area. The
largest negative impacts are 4.91 percent for an urban area and 2.26
percent for a rural area. Three urban areas and no rural areas will be
unaffected. These results indicate that the wage indices of more CBSAs
overall (53.1 percent) will be decreasing due to application of the
2010 occupational mix survey data as compared to the 2007-2008 survey
data to the wage index. Further, a larger percentage of urban areas
(48.3 percent) will benefit from the 2010 occupational mix survey as
compared to the 2007-2008 survey than will rural areas (29.2 percent).
We compared the FY 2013 occupational mix adjusted wage indices for
each CBSA to the unadjusted wage indices for each CBSA. As a result of
applying the occupational mix adjustment to the wage data, the wage
index values for 206 (52.7 percent) urban areas and 34 (70.8 percent)
rural areas will increase. One hundred fifteen (29.4 percent) urban
areas will increase by 1 percent or more, and 3 (0.77 percent) urban
areas will increase by 5 percent or more. Fourteen (29.2 percent) rural
areas will increase by 1 percent or more, and no rural areas will
increase by 5 percent or more. However, the wage index values for 185
(47.3 percent) urban areas and 14 (29.2 percent) rural areas will
decrease. Eighty-one (20.7 percent) urban areas will decrease by 1
percent or more, and one urban area will decrease by 5 percent or more
(0.26 percent). Seven (14.6 percent) rural areas will decrease by 1
percent or more, and no rural areas will decrease by 5 percent or more.
The largest positive impacts are 6.68 percent for an urban area and
2.62 percent for a rural area. The largest negative impacts are 5.26
percent for an urban area and 3.14 percent for a rural area. No urban
or rural areas are unaffected. These results indicate that a larger
percentage of rural areas (70.8 percent) will benefit from the
occupational mix adjustment than do urban areas (52.7 percent). While
these results are more positive overall for rural areas than under the
previous occupational mix adjustment that used survey data from 2007-
2008, almost one-third (29.2 percent) of rural CBSAs will still
experience a decrease in their wage indices as a result of the
occupational mix adjustment.
2. Application of the Rural, Imputed, and Frontier Floors
a. Rural Floor
Section 4410 of Public Law 105-33 provides that, for discharges on
or after October 1, 1997, the area wage index applicable to any
hospital that is located in an urban area of a State may not be less
than the area wage index applicable to hospitals located in rural areas
in that State. This provision is referred to as the ``rural floor.''
Section 3141 of Public Law 111-148 also requires that a national budget
neutrality adjustment be applied in implementing the rural floor. In
the FY 2013 proposed wage index, we estimated that 393 hospitals would
receive an increase in their FY 2013 proposed wage index due to the
application of the rural floor. In the FY 2013 final wage index
associated with this final rule and available on the CMS Web site, 454
hospitals are receiving an increase in their FY 2013 wage index due to
the application of the rural floor.
Comment: We did not make any proposals in the FY 2013 proposed rule
pertaining to the rural floor. However, several commenters opposed the
application of the national budget neutrality adjustment for the rural
floor. The commenters noted our discussion of the impacts of the policy
in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 28170 through 28172)
and, in particular, the table in the Addendum at 77 FR 28171 shows
Massachusetts would receive significant extra IPPS payments alone for
FY 2013, due, in part, to this policy. The commenters opined that the
national rural floor budget neutrality policy ``unfairly skews Medicare
payments, reducing payments to thousands of hospitals across the nation
while benefitting a few dozen hospitals in one State.'' The commenters
requested that CMS reassess the national rural floor budget neutrality
provision and recommended that CMS reverse the provision.
Response: As discussed above, the national rural floor budget
neutrality adjustment for the IPPS is required by section 3141 of
Public Law 111-148.
b. Imputed Floor and Alternative, Temporary Methodology for Computing
the Imputed Floor
In the FY 2005 IPPS final rule (69 FR 49109), we adopted the
``imputed floor'' policy as a temporary 3-year regulatory measure to
address concerns from hospitals in all-urban States that have argued
that they are disadvantaged by the absence of rural hospitals to set a
wage index floor for those States. Since its initial implementation, we
have extended the imputed floor policy three times, the last of which
was adopted in the FY 2012 IPPS/LTCH PPS final rule and is set to
expire on September 30, 2013 (we refer readers to the discussion in the
FY 2012 IPPS/LTCH PPS final rule (76 FR 51593)). There are currently
two all-urban States, New Jersey and Rhode Island, that have a range of
wage
[[Page 53369]]
indices assigned to hospitals in the State, including through
reclassification or redesignation (we refer readers to discussions of
geographic reclassifications and redesignations in section III.H. of
this preamble). However, as we explain below, the current method for
computing the imputed floor benefits only New Jersey, and not Rhode
Island.
The current methodology for computing the imputed floor is
specified in our regulations at 42 CFR 412.64(h)(4). In computing the
imputed floor for an all-urban State, we calculate the ratio of the
lowest-to-highest CBSA wage index for each all-urban State (that is,
New Jersey and Rhode Island) as well as the average of the ratios of
lowest-to-highest CBSA wage indices of those all-urban States. We
compare the State's own ratio to the average ratio for all-urban States
and whichever is higher is multiplied by the highest CBSA wage index
value in the State--the product of which establishes the imputed floor
for the State. Rhode Island has only one CBSA (Providence-New Bedford-
Fall River, RI-MA); therefore, Rhode Island's own ratio equals 1.0, and
its imputed floor is equal to its original CBSA wage index value.
Conversely, New Jersey has 10 CBSAs. Because the average ratio of New
Jersey and Rhode Island is higher than New Jersey's own ratio, the
current methodology provides a benefit for New Jersey, but not for
Rhode Island.
In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27950), for the
FY 2013 wage index, the final year of the extension of the imputed
floor policy under Sec. 412.64(h)(4), we proposed an alternative,
temporary methodology for computing the imputed floor wage index to
address the concern that the current imputed floor methodology
guarantees a benefit for one all-urban State with multiple wage indices
but cannot benefit the other. We proposed that this proposed
alternative methodology for calculating the imputed floor would be
established using data from the application of the rural floor policy
for FY 2013. We proposed that we would first determine the average
percentage difference between the post-reclassified, pre-floor area
wage index and the post-reclassified, rural floor wage index (without
rural floor budget neutrality applied) for all CBSAs receiving the
rural floor. (Table 4D associated with the proposed rule and available
on the CMS Web site included the CBSAs receiving a State's rural floor
wage index.) The lowest post-reclassified wage index assigned to a
hospital in an all-urban State having a range of such values would then
be increased by this factor, the result of which would establish the
State's alternative imputed floor. We proposed to amend Sec.
412.64(h)(4) to add new paragraphs (v)(A) and (B) to incorporate this
proposed alternative methodology, and to make conforming references.
In addition, for the FY 2013 wage index, we did not propose any
changes to the current imputed floor methodology at Sec. 412.64(h)(4)
and, therefore, no changes to the New Jersey imputed floor computation
for FY 2013. Instead, for FY 2013, we proposed a second, alternative
methodology that would be used in cases where an all-urban State has a
range of wage indices assigned to its hospitals, but the State cannot
benefit from the methodology in existing Sec. 412.64(h)(4). We stated
that we intended to further evaluate the need, applicability, and
methodology for the imputed floor before the September 30, 2013
expiration of the imputed floor policy and address these issues in the
FY 2014 proposed rule.
Comment: A few commenters addressed our proposal for an
alternative, temporary methodology for calculating the imputed floor.
Some of the commenters supported the proposal. One commenter also urged
CMS to adopt the alternative methodology for 3 consecutive fiscal years
rather than the proposed 1-year period. Another commenter, a State
hospital association, urged CMS to make the imputed floor a permanent
policy in the FY 2013 final rule. Two State hospital associations
opposed the proposal. One association agreed with the rationale that
CMS had previously provided in the FY 2012 IPPS/LTCH PPS proposed rule
(76 FR 25878 through 25879) for not proposing to extend the imputed
floor policy. The association urged CMS to allow the imputed floor
policy to expire and not to finalize the proposed alternative
methodology that would allow additional hospitals to benefit from the
imputed floor. Another association suggested that CMS should provide
additional information and consider the effects on all States, not just
the benefits that may apply to one or two specific States.
Additionally, the national hospital association stated that it would be
premature for it to comment on the proposal at this time due to its
ongoing analysis of wage index reform.
Response: As discussed above and in the FY 2013 IPPS/LTCH PPS
proposed rule, we proposed the alternative methodology for only the one
remaining year of the imputed floor policy, which expires on September
30, 2013. We made no proposal for extending the general imputed floor
policy beyond FY 2013; therefore, we do not agree with the suggestion
to adopt a final policy that would extend the alternative, temporary
policy for 3 years, beyond FY 2013. As proposed, we are adopting as
final for the FY 2013 wage index the alternative, temporary methodology
for computing the imputed floor wage index, as well as the proposal to
amend Sec. 412.64(h)(4) to add new paragraphs (v)(A) and (B) to
incorporate the alternative methodology. In addition, as we stated
above, we plan to further evaluate the need, applicability, and
methodology for the imputed floor policy and will address these issues
in the FY 2014 proposed rule.
The wage index and impact tables associated with this FY 2013 final
rule that are available on the CMS Web site include the application of
the imputed floor policy at Sec. 412.64(h)(4) and a national budget
neutrality adjustment for the imputed floor. There are 29 providers in
New Jersey that will receive an increase in their FY 2013 wage index
due to the imputed floor policy. The wage index and impact tables for
this final rule also reflect the application of the second alternative
methodology for computing the imputed floor, which will benefit four
hospitals in Rhode Island.
c. Frontier Floor
Section 10324 of Public Law 111-148 requires that hospitals in
frontier States cannot be assigned a wage index of less than 1.0000 (we
refer readers to a discussion of the implementation of this provision
in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50160). Four States in
the FY 2013 wage index are receiving the frontier State wage index:
Montana, North Dakota, South Dakota, and Wyoming; 45 providers in these
States are receiving the frontier floor value of 1.0000 in the FY 2013
wage index associated with this final rule. Although Nevada is also, by
definition, a frontier State and was assigned a frontier floor value of
1.0000 for FY 2012, its FY 2013 rural floor value of 1.0256 is greater
than the frontier floor value (that is, 1.0000) and, therefore, is the
State's minimum wage index for FY 2013.
We did not receive any public comments on the frontier floor
policy.
The areas affected by the rural, imputed, and frontier floor
policies for the FY 2013 wage index are identified in Table 4D
associated with this final rule and available on the CMS Web site.
3. FY 2013 Wage Index Tables
The wage index values for FY 2013 (except those for hospitals
receiving wage index adjustments under section 1886(d)(13) of the Act),
included in
[[Page 53370]]
Tables 4A, 4B, 4C, and 4F, available on the CMS Web site, include the
occupational mix adjustment, geographic reclassification or
redesignation as discussed in section III.H. of this preamble, and the
application of the rural, imputed, and frontier State floors as
discussed in section III.G.2. of this preamble.
Tables 3A and 3B, available on the CMS Web site, list the 3-year
average hourly wage for each labor market area before the redesignation
or reclassification of hospitals based on FYs 2007, 2008, and 2009 cost
reporting periods. Table 3A lists these data for urban areas, and Table
3B lists these data for rural areas. In addition, Table 2, which is
available on the CMS Web site, includes the adjusted average hourly
wage for each hospital from the FY 2007 and FY 2008 cost reporting
periods, as well as the FY 2009 period used to calculate the FY 2013
wage index. The 3-year averages are calculated by dividing the sum of
the dollars (adjusted to a common reporting period using the method
described previously) across all 3 years, by the sum of the hours. If a
hospital is missing data for any of the previous years, its average
hourly wage for the 3-year period is calculated based on the data
available during that period. The average hourly wages in Tables 2, 3A,
and 3B, which are available on the CMS Web site, include the
occupational mix adjustment. The wage index values in Tables 4A, 4B,
4C, and 4D also include the national rural and imputed floor budget
neutrality adjustment. The wage index values in Table 2 also include
the out-migration adjustment for eligible hospitals.
H. Revisions to the Wage Index Based on Hospital Redesignations and
Reclassifications
1. General Policies and Effects of Reclassification and Redesignation
Under section 1886(d)(10) of the Act, the MGCRB considers
applications by hospitals for geographic reclassification for purposes
of payment under the IPPS. Hospitals must apply to the MGCRB to
reclassify 13 months prior to the start of the fiscal year for which
reclassification is sought (generally by September 1). Generally,
hospitals must be proximate to the labor market area to which they are
seeking reclassification and must demonstrate characteristics similar
to hospitals located in that area. The MGCRB issues its decisions by
the end of February for reclassifications that become effective for the
following fiscal year (beginning October 1). The regulations applicable
to reclassifications by the MGCRB are located in 42 CFR 412.230 through
412.280. (We refer readers to a discussion of the proximity
requirements in the FY 2002 IPPS final rule (66 FR 39874 and 39875).)
The general policies for reclassifications and redesignations that we
proposed, and are adopting, for FY 2013, and the policies for the
effects of hospitals' reclassifications and redesignations on the wage
index, are the same as those discussed in the FY 2012 IPPS/LTCH PPS
final rule for the FY 2012 final wage index (76 FR 51595 and 51596).
Also, in the FY 2012 IPPS/LTCH PPS final rule, we discussed the effects
on the wage index of urban hospitals reclassifying to rural areas under
42 CFR 412.103. Hospitals that are geographically located in States
without any rural areas are ineligible to apply for rural
reclassification pursuant to 42 CFR 412.103.
2. FY 2013 MGCRB Reclassifications
a. FY 2013 Reclassification Requirements and Approvals
Under section 1886(d)(10) of the Act, the MGCRB considers
applications by hospitals for geographic reclassification for purposes
of payment under the IPPS. The specific procedures and rules that apply
to the geographic reclassification process are outlined in regulations
under 42 CFR 412.230 through 412.280.
At the time this final rule was constructed, the MGCRB had
completed its review of FY 2013 reclassification requests. Based on
such reviews, there were 193 hospitals approved for wage index
reclassifications by the MGCRB for FY 2013. Because MGCRB wage index
reclassifications are effective for 3 years, for FY 2013, hospitals
reclassified during FY 2011 or FY 2012 are eligible to continue to be
reclassified to a particular labor market area based on such prior
reclassifications. There were 265 hospitals approved for wage index
reclassifications in FY 2011, and 205 hospitals approved for wage index
reclassifications in FY 2012. Of all the hospitals approved for
reclassification for FY 2011, FY 2012, and FY 2013, based upon the
review at the time of this final rule, 663 hospitals are in a
reclassification status for FY 2013.
Under 42 CFR 412.273, hospitals that have been reclassified by the
MGCRB are permitted to withdraw their applications within 45 days of
the publication of a proposed rule. For information about withdrawing,
terminating, or canceling a previous withdrawal or termination of a 3-
year reclassification for wage index purposes, we refer readers to 42
CFR 412.273, as well as the FY 2002 IPPS final rule (66 FR 39887) and
the FY 2003 IPPS final rule (67 FR 50065). Additional discussion on
withdrawals and terminations, and clarifications regarding reinstating
reclassifications and ``fallback'' reclassifications, were included in
the FY 2008 IPPS final rule (72 FR 47333).
Changes to the wage index that result from withdrawals of requests
for reclassification, terminations, wage index corrections, appeals,
and the Administrator's review process for FY 2013 are incorporated
into the wage index values published in this FY 2013 IPPS/LTCH PPS
final rule. These changes affect not only the wage index value for
specific geographic areas, but also the wage index value redesignated/
reclassified hospitals receive; that is, whether they receive the wage
index that includes the data for both the hospitals already in the area
and the redesignated/reclassified hospitals. Further, the wage index
value for the area from which the hospitals are redesignated/
reclassified may be affected.
b. Applications for Reclassifications for FY 2014
Applications for FY 2014 reclassifications are due to the MGCRB by
September 4, 2012 (the first working day of September 2012). We note
that this is also the deadline for canceling a previous wage index
reclassification withdrawal or termination under 42 CFR 412.273(d).
Applications and other information about MGCRB reclassifications may be
obtained, beginning in mid-July 2012, via the Internet on the CMS Web
site at: http://www.cms.gov/Regulations-and-Guidance/Review-Boards/MGCRB/index.html?redirect=/MGCRB/02_instructions_and_applications.asp, or by calling the MGCRB at (410) 786-1174. The
mailing address of the MGCRB is: 2520 Lord Baltimore Drive, Suite L,
Baltimore, MD 21244-2670.
3. Redesignations of Hospitals under Section 1886(d)(8)(B) of the Act
Section 1886(d)(8)(B) of the Act requires us to treat a hospital
located in a rural county adjacent to one or more urban areas as being
located in the MSA if certain criteria are met. Effective beginning FY
2005, we use OMB's 2000 CBSA standards and the Census 2000 data to
identify counties in which hospitals qualify under section
1886(d)(8)(B) of the Act to receive the wage index of the urban area.
Hospitals located in these counties have been known as ``Lugar''
hospitals and the counties themselves are often referred to
[[Page 53371]]
as ``Lugar'' counties. The FY 2013 chart with the listing of the rural
counties containing the hospitals designated as urban under section
1886(d)(8)(B) of the Act is available via the Internet on the CMS Web
site.
4. Reclassifications Under Section 1886(d)(8)(B) of the Act
As in the past, hospitals redesignated under section 1886(d)(8)(B)
of the Act are also eligible to be reclassified to a different area by
the MGCRB. Affected hospitals were permitted to compare the
reclassified wage index for the labor market area in Table 4C
associated with the proposed rule (which was available on the CMS Web
site) into which they would be reclassified by the MGCRB to the wage
index for the area to which they are redesignated under section
1886(d)(8)(B) of the Act. Hospitals could have withdrawn from an MGCRB
reclassification within 45 days of the publication of the FY 2013
proposed rule. (We refer readers to the FY 2012 IPPS/LTCH PPS final
rule (76 FR 51598 through 51599) for the procedural rules and
requirements for a hospital that is redesignated under section
1886(d)(8)(B) of the Act and seeking reclassification under the MGCRB,
as well as our policy of measuring the urban area, exclusive of the
Lugar County, for purposes of meeting proximity requirements.) We treat
New England deemed counties in a manner consistent with how we treat
Lugar counties. (We refer readers to FY 2008 IPPS final rule with
comment period (72 FR 47337) for a discussion of this policy.)
5. Reclassifications Under Section 508 of Pub. L. 108-173
Section 508 of Public Law 108-173 allowed certain qualifying
hospitals to receive wage index reclassifications and assignments that
they otherwise would not have been eligible to receive under the law.
Although section 508 originally was scheduled to expire after a 3-year
period, Congress extended the provision several times, as well as
certain special exceptions that would have otherwise expired. For a
discussion of the original section 508 provision and its various
extensions, we refer readers to the FY 2012 notice, CMS-1442-N, which
went on public display at the Office of the Federal Register on April
19, 2012, and was published in the Federal Register on April 20, 2012
(77 FR 23722). The most recent extension of the provision was included
in section 302 of the Temporary Payroll Tax Cut Continuation Act of
2011 (Pub. L. 112-78), as amended by section 3001 of the Middle Class
Tax Relief and Job Creation Act of 2012 (Pub. L. 112-96), which
extended certain section 508 reclassifications and special exception
wage indices for a 6-month period during FY 2012, from October 1, 2011
through March 31, 2012. Section 508 reclassifications and certain
special exceptions have not been extended for FY 2013. Therefore, the
FY 2013 wage index associated with this final rule does not reflect any
section 508 reclassifications or special exception wage indices.
6. Waiving Lugar Redesignation for the Out-Migration Adjustment
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51599 through
51600), we adopted the policy that, beginning with FY 2012, an eligible
hospital that waives its Lugar status in order to receive the out-
migration adjustment has effectively waived its deemed urban status
and, thus, is rural for all purposes under the IPPS, including being
considered rural for the DSH payment adjustment, effective for the
fiscal year in which the hospital receives the out-migration
adjustment. (We refer readers to a discussion of DSH payment adjustment
under section IV.G. of this preamble.)
In addition, we adopted a minor procedural change that would allow
a Lugar hospital that qualifies for and accepts the out-migration
adjustment (through written notification to CMS within the requisite
number of days from the publication of the proposed rule \49\) to
automatically waive its urban status for the 3-year period for which
its out-migration adjustment is effective. That is, such a Lugar
hospital would no longer be required during the second and third years
of eligibility for the out-migration adjustment to advise us annually
that it prefers to continue being treated as rural and receive the
adjustment. Thus, under the procedural change, a Lugar hospital that
requests to waive its urban status in order to receive the rural wage
index in addition to the out-migration adjustment would be deemed to
have accepted the out-migration adjustment and agrees to be treated as
rural for the duration of its 3-year eligibility period, unless, prior
to its second or third year of eligibility, the hospital explicitly
notifies CMS in writing, within the required period (generally 45 days
from the publication of the proposed rule), that it instead elects to
return to its deemed urban status and no longer wishes to accept the
out-migration adjustment.
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\49\ Hospitals generally have 45 days from publication of the
proposed rule to request an out-migration adjustment in lieu of the
section 1886(d)(8) deemed urban status.
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We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR
51599 through 51600) for a detailed discussion of the policy and
process for waiving Lugar status for the out-migration adjustment.
7. Cancellation of Acquired Rural Status Due to MDH Expiration
As we discussed in the FY 2011 IPPS/LTCH PPS final rule (75 FR
50286 and 50287) and in the FY 2012 IPPS/LTCH PPS final rule (76 FR
51683 through 51684), section 3124 of the Affordable Care Act extended
the MDH program from the end of FY 2011 (for discharges occurring
before October 1, 2011) to the end of FY 2012 (for discharges occurring
before October 1, 2012). Accordingly, beginning with FY 2013, there
will no longer be an MDH designation, and those hospitals that were
formerly MDHs will be paid based solely on the Federal rate.
Comment: Several commenters requested CMS to permit hospitals to
revisit any geographic reclassification decisions that would impact
their ability to qualify for MDH status in the event that the Congress
extends the MDH program. In particular, in anticipation of the
September 30, 2012 expiration of the MDH program, the commenters stated
that some urban hospitals that became rural under section 1886(d)(8)(E)
of the Act in order to qualify for MDH status had canceled their rural
status so that they could instead receive their urban area wage index
or reclassify for a higher wage index under section 1886(d)(10) of the
Act for FY 2013. The commenters further stated that if the MDH program
is extended, such hospital would no longer be qualified for MDH status
because the hospital is no longer a rural provider.
Response: Although we understand the commenters' concerns, we
believe it would be imprudent for CMS in this FY 2013 final rule to
revise existing Medicare regulations and procedural rules around
actions that the Congress may take in the future. If legislation is
passed to continue the MDH program, CMS will develop policies and
procedures to implement the specific provisions of such legislation.
I. FY 2013 Wage Index Adjustment Based on Commuting Patterns of
Hospital Employees
In accordance with the broad discretion granted to the Secretary
under section 1886(d)(13) of the Act, as added by section 505 of Public
Law 108-173, beginning with FY 2005, we established a process to make
adjustments to the hospital wage index
[[Page 53372]]
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. The FY 2013
out-migration adjustment is based on the same policies, procedures, and
computation that were used for the FY 2012 out-migration adjustment (we
refer readers to a full discussion of the adjustment, including rules
on deeming hospitals reclassified under section 1886(d)(8) or section
1886(d)(10) to have waived the out-migration adjustment, in the FY 2012
IPPS/LTCH PPS final rule (76 FR 51601 through 51602)). Table 4J,
available via the Internet on the CMS Web site, lists the out-migration
adjustments for the FY 2013 wage index.
We did not receive any public comments on our proposals for the
out-migration adjustment for FY 2013.
J. Process for Requests for Wage Index Data Corrections
The preliminary, unaudited Worksheet S-3 wage data and occupational
mix survey data files for the proposed FY 2013 wage index were made
available on October 4, 2011, through the Internet on the CMS Web site
at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html?redirect=/AcuteInpatientPPS/WIFN/list.asp.
In the interest of meeting the data needs of the public, beginning
with the proposed FY 2009 wage index, we post an additional public use
file on our Web site that reflects the actual data that are used in
computing the proposed wage index. The release of this new file does
not alter the current wage index process or schedule. We notify the
hospital community of the availability of these data as we do with the
current public use wage data files through our Hospital Open Door
forum. We encourage hospitals to sign up for automatic notifications of
information about hospital issues and the scheduling of the Hospital
Open Door forums at the CMS Web site at: http://www.cms.gov/Outreach-and-Education/Outreach/OpenDoorForums/index.html.
In a memorandum dated September 29, 2011, we instructed all fiscal
intermediaries/MACs to inform the IPPS hospitals they service of the
availability of the wage index data files and the process and timeframe
for requesting revisions (including the specific deadlines listed
below). We also instructed the fiscal intermediaries/MACs to advise
hospitals that these data were also made available directly through
their representative hospital organizations.
If a hospital wished to request a change to its data as shown in
the October 4, 2011 wage and occupational mix data files, the hospital
was to submit corrections along with complete, detailed supporting
documentation to its fiscal intermediary/MAC by December 5, 2011.
Hospitals were notified of this deadline and of all other deadlines and
requirements, including the requirement to review and verify their data
as posted on the preliminary wage index data files on the Internet,
through the September 29, 2011 memorandum referenced above.
In the September 29, 2011 memorandum, we also specified that a
hospital requesting revisions to its occupational mix survey data was
to copy its record(s) from the CY 2010 occupational mix preliminary
files posted to the CMS Web site in October, highlight the revised
cells on its spreadsheet, and submit its spreadsheet(s) and complete
documentation to its fiscal intermediary/MAC no later than December 5,
2011.
The fiscal intermediaries/MACs notified the hospitals by mid-
February 2012 of any changes to the wage index data as a result of the
desk reviews and the resolution of the hospitals' early-December
revision requests. The fiscal intermediaries/MACs also submitted the
revised data to CMS by mid-February 2012. CMS published the proposed
wage index public use files that included hospitals' revised wage index
data on February 21, 2012. Hospitals had until March 5, 2012, to submit
requests to the fiscal intermediaries/MACs for reconsideration of
adjustments made by the fiscal intermediaries/MACs as a result of the
desk review, and to correct errors due to CMS' or the fiscal
intermediary's (or, if applicable, the MAC's) mishandling of the wage
index data. Hospitals also were required to submit sufficient
documentation to support their requests.
After reviewing requested changes submitted by hospitals, fiscal
intermediaries/MACs were required to transmit any additional revisions
resulting from the hospitals' reconsideration requests by April 11,
2012. The deadline for a hospital to request CMS intervention in cases
where the hospital disagreed with the fiscal intermediary's (or, if
applicable, the MAC's) policy interpretations was April 18, 2012.
Hospitals were given the opportunity to examine Table 2, which was
listed in section VI. of the Addendum to the proposed rule and
available on the CMS Web site at: http://www.cms.gov. Table 2 contained
each hospital's adjusted average hourly wage used to construct the wage
index values for the past 3 years, including the FY 2009 data used to
construct the proposed FY 2013 wage index. We noted that the hospital
average hourly wages shown in Table 2 only reflected changes made to a
hospital's data that were transmitted to CMS by March 2, 2012.
We released the final wage index data public use files in early May
2012 on the Internet at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html?redirect=/
AcuteInpatientPPS/WIFN/list.asp. The May 2012 public use files were
made available solely for the limited purpose of identifying any
potential errors made by CMS or the fiscal intermediary/MAC in the
entry of the final wage index data that resulted from the correction
process described above (revisions submitted to CMS by the fiscal
intermediaries/MACs by April 11, 2012). If, after reviewing the May
2012 final public use files, a hospital believed that its wage or
occupational mix data were incorrect due to a fiscal intermediary/MAC
or CMS error in the entry or tabulation of the final data, the hospital
had to send a letter to both its fiscal intermediary/MAC and CMS that
outlined why the hospital believed an error existed and provided all
supporting information, including relevant dates (for example, when it
first became aware of the error). CMS and the fiscal intermediaries
(or, if applicable, the MACs) had to receive these requests no later
than June 4, 2012.
Each request also had to be sent to the fiscal intermediary/MAC.
The fiscal intermediary/MAC reviewed requests upon receipt and
contacted CMS immediately to discuss any findings.
After the release of the May 2012 wage index data files, changes to
the wage and occupational mix data were only made in those very limited
situations involving an error by the fiscal intermediary/MAC or CMS
that the hospital could not have known about before its review of the
final wage index data files. Specifically, neither the fiscal
intermediary/MAC nor CMS approved the following types of requests:
Requests for wage index data corrections that were
submitted too late to be included in the data transmitted to
[[Page 53373]]
CMS by fiscal intermediaries or the MACs on or before April 11, 2012.
Requests for correction of errors that were not, but could
have been, identified during the hospital's review of the February 21,
2012 wage index public use files.
Requests to revisit factual determinations or policy
interpretations made by the fiscal intermediary or the MAC or CMS
during the wage index data correction process.
Verified corrections to the wage index data received timely by CMS
and the fiscal intermediaries or the MACs (that is, by June 4, 2012)
were incorporated into the final wage index in this FY 2013 IPPS/LTCH
PPS final rule, which will be effective October 1, 2012.
We created the processes described above to resolve all substantive
wage index data correction disputes before we finalize the wage and
occupational mix data for the FY 2013 payment rates. Accordingly,
hospitals that did not meet the procedural deadlines set forth above
will not be afforded a later opportunity to submit wage index data
corrections or to dispute the fiscal intermediary's (or, if applicable,
the MAC's) decision with respect to requested changes. Specifically,
our policy is that hospitals that do not meet the procedural deadlines
set forth above will not be permitted to challenge later, before the
Provider Reimbursement Review Board, the failure of CMS to make a
requested data revision. (See W. A. Foote Memorial Hospital v. Shalala,
No. 99-CV-75202-DT (E.D. Mich. 2001) and Palisades General Hospital v.
Thompson, No. 99-1230 (D.D.C. 2003).) We refer readers also to the FY
2000 IPPS final rule (64 FR 41513) for a discussion of the parameters
for appeals to the PRRB for wage index data corrections.
Again, we believe the wage index data correction process described
above provides hospitals with sufficient opportunity to bring errors in
their wage and occupational mix data to the fiscal intermediary's (or,
if applicable, the MAC's) attention. Moreover, because hospitals have
access to the final wage index data by early May 2012, they have the
opportunity to detect any data entry or tabulation errors made by the
fiscal intermediary or the MAC or CMS before the development and
publication of the final FY 2013 wage index by August 2012, and the
implementation of the FY 2013 wage index on October 1, 2012. If
hospitals availed themselves of the opportunities afforded to provide
and make corrections to the wage and occupational mix data, the wage
index implemented on October 1 should be accurate. Nevertheless, in the
event that errors are identified by hospitals and brought to our
attention after June 4, 2012, we retain the right to make midyear
changes to the wage index under very limited circumstances.
Specifically, in accordance with 42 CFR 412.64(k)(1) of our
existing regulations, we make midyear corrections to the wage index for
an area only if a hospital can show that: (1) the fiscal intermediary
or the MAC or CMS made an error in tabulating its data; and (2) the
requesting hospital could not have known about the error or did not
have an opportunity to correct the error, before the beginning of the
fiscal year. For purposes of this provision, ``before the beginning of
the fiscal year'' means by the June 4 deadline for making corrections
to the wage data for the following fiscal year's wage index. This
provision is not available to a hospital seeking to revise another
hospital's data that may be affecting the requesting hospital's wage
index for the labor market area. As indicated earlier, because CMS
makes the wage index data available to hospitals on the CMS Web site
prior to publishing both the proposed and final IPPS rules, and the
fiscal intermediaries or the 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), we revised 42 CFR
412.64(k)(2) to specify that, effective on October 1, 2005, that is,
beginning with the FY 2006 wage index, a change to the wage index can
be made retroactive to the beginning of the Federal fiscal year only
when: (1) The fiscal intermediary (or, if applicable, the MAC) or CMS
made an error in tabulating data used for the wage index calculation;
(2) the hospital knew about the error and requested that the fiscal
intermediary (or, if applicable, the MAC) and CMS correct the error
using the established process and within the established schedule for
requesting corrections to the wage index data, before the beginning of
the fiscal year for the applicable IPPS update (that is, by the June 4,
2012 deadline for the FY 2013 wage index); and (3) CMS agreed that the
fiscal intermediary (or, if applicable, the MAC) or CMS made an error
in tabulating the hospital's wage index data and the wage index should
be corrected.
In those circumstances where a hospital requested a correction to
its wage index data before CMS calculated the final wage index (that
is, by the June 4, 2012 deadline), and CMS acknowledges that the error
in the hospital's wage index data was caused by CMS' or the fiscal
intermediary's (or, if applicable, the MAC's) mishandling of the data,
we believe that the hospital should not be penalized by our delay in
publishing or implementing the correction. As with our current policy,
we indicated that the provision is not available to a hospital seeking
to revise another hospital's data. In addition, the provision cannot be
used to correct prior years' wage index data; and it can only be used
for the current Federal fiscal year. In 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 judicial decision reverses a CMS denial of a
hospital's wage index data revision request.
K. Labor-Related Share for the FY 2013 Wage Index
Section 1886(d)(3)(E) of the Act directs the Secretary to adjust
the proportion of the national prospective payment system base payment
rates that are attributable to wages and wage-related costs by a factor
that reflects the relative differences in labor costs among geographic
areas. It also directs the Secretary to estimate from time to time the
proportion of hospital costs that are labor-related: ``The Secretary
shall adjust the proportion (as estimated by the Secretary from time to
time) of hospitals' costs which are attributable to wages and wage-
related costs of the DRG prospective payment rates * * *.'' We refer to
the portion of hospital costs attributable to wages and wage-related
costs as the labor-related share. The labor-related share of the
prospective payment rate is adjusted by an index of relative labor
costs, which is referred to as the wage index.
Section 403 of Public Law 108-173 amended section 1886(d)(3)(E) of
the Act to provide that the Secretary must employ 62 percent as the
labor-related share unless this ``would result in lower payments to a
hospital than would otherwise be made.'' However, this provision of
Public Law 108-173 did
[[Page 53374]]
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 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43850
through 43856), we rebased and revised the hospital market basket for
operating costs. We established a FY 2006-based IPPS hospital market
basket to replace the FY 2002-based IPPS hospital market basket,
effective October 1, 2009. In that final rule, we presented our
analysis and conclusions regarding the frequency and methodology for
updating the labor-related share for FY 2010. We also recalculated a
labor-related share of 68.8 percent, using the FY 2006-based IPPS
market basket, for discharges occurring on or after October 1, 2009. In
addition, we implemented this revised and rebased labor-related share
in a budget neutral manner, but 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 1.0 being paid using a labor-related share lower than the
labor-related share of hospitals with a wage index greater than 1.0.
The labor-related share is used to determine the proportion of the
national IPPS base payment rate to which the area wage index is
applied. In this FY 2013 final rule, as we proposed, we are not making
any further changes to the national average proportion of operating
costs that are attributable to wages and salaries, fringe benefits,
contract labor, the labor-related portion of professional fees,
administrative and business support services, and all other labor-
related services (previously referred to in the FY 2002-based IPPS
market basket as labor-intensive).
We did not receive any public comments on the application of the
labor-related share to the wage index for FY 2013. Therefore, for FY
2013, we are continuing to use a labor-related share of 68.8 percent
for discharges occurring on or after October 1, 2012. Tables 1A and 1B,
which are published in section VI. of the Addendum to this final rule
and available via the Internet, reflect this labor-related share. We
note that section 403 of Public Law 108-173 amended sections
1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act to provide that the
Secretary must employ 62 percent as the labor-related share unless this
employment ``would result in lower payments to a hospital than would
otherwise be made.'' Therefore, for all IPPS hospitals whose wage
indices are less than 1.0000, we are applying the wage index to a
labor-related share of 62 percent of the national standardized amount.
For all IPPS hospitals whose wage indices are greater than 1.0000, we
are applying the wage index to a labor-related share of 68.8 percent of
the national standardized amount.
For Puerto Rico hospitals, the national labor-related share is 62
percent because the national wage index for all Puerto Rico hospitals
is less than 1.0. As we proposed in the FY 2013 proposed rule, we are
continuing to use a labor-related share for the Puerto Rico-specific
standardized amounts of 62.1 percent for discharges occurring on or
after October 1, 2012. This Puerto Rico labor-related share of 62.1
percent was also adopted in the FY 2010 IPPS/LTCH PPS final rule (74 FR
43857) at the time the FY 2006-based hospital market basket was
established, effective October 1, 2009. Consistent with our methodology
for determining the national labor-related share, we added the Puerto
Rico-specific relative weights for wages and salaries, fringe benefits,
contract labor, the labor-related portion of professional fees,
administrative and business support services, and all other labor-
related services (previously referred to in the FY 2002-based IPPS
market basket as labor-intensive) to determine the labor-related share.
Puerto Rico hospitals are paid based on 75 percent of the national
standardized amounts and 25 percent of the Puerto Rico-specific
standardized amounts. The labor-related share of a hospital's Puerto
Rico-specific rate will be either the Puerto Rico-specific labor-
related share of 62.1 percent or 62 percent, depending on which results
in higher payments to the hospital. If the hospital has a Puerto Rico-
specific wage index of greater than 1.0, we will set the hospital's
rates using a labor-related share of 62.1 percent for the 25 percent
portion of the hospital's payment determined by the Puerto Rico
standardized amounts because this amount will result in higher
payments. Conversely, a hospital with a Puerto Rico-specific wage index
of less than 1.0 will be paid using the Puerto Rico-specific labor-
related share of 62 percent of the Puerto Rico-specific rates because
the lower labor-related share will result in higher payments. The
Puerto Rico labor-related share of 62.1 percent for FY 2013 is
reflected in Table 1C, which is published in section VI. of the
Addendum to this final rule and available via the Internet.
IV. Other Decisions and Changes to the IPPS for Operating Costs and
Graduate Medical Education (GME) Costs
A. Hospital Readmissions Reduction Program
1. Statutory Basis for the Hospital Readmissions Reduction Program
Section 3025 of the Affordable Care Act, as amended by section
10309 of the Affordable Care Act, added a new subsection (q) to section
1886 of the Act. Section 1886(q) of the Act establishes the ``Hospital
Readmissions Reduction Program,'' effective for discharges from an
``applicable hospital'' beginning on or after October 1, 2012, under
which payments to those applicable hospitals may be reduced to account
for certain excess readmissions.
Section 1886(q)(1) of the Act sets forth the methodology by which
payments to ``applicable hospitals'' will be adjusted to account for
excess readmissions. Pursuant to section 1886(q)(1) of the Act,
payments for discharges from an ``applicable hospital'' will be an
amount equal to the product of the ``base operating DRG payment
amount'' and the adjustment factor for the hospital for the fiscal
year. That is, ``base operating DRG payments'' are reduced by an
adjustment factor that accounts for excess readmissions. Section
1886(q)(2) of the Act defines the base operating DRG payment amount as
``the payment amount that would otherwise be made under subsection (d)
(determined without regard to subsection (o) [the Hospital VBP
Program]) for a discharge if this subsection did not apply; reduced by
* * * any portion of such payment amount that is attributable to
payments under paragraphs (5)(A), (5)(B), (5)(F), and (12) of
subsection (d).'' Paragraphs (5)(A), (5)(B), (5)(F), and (12) of
subsection (d) refer to outlier payments, IME payments, DSH payments,
and payments for low-volume hospitals, respectively.
Furthermore, section 1886(q)(2)(B) of the Act specifies special
rules for defining ``the payment amount that would otherwise be made
under subsection (d)'' for certain hospitals. Specifically, section
1886(q)(2)(B) of the Act states that ``[i]n the case of a Medicare-
dependent, small rural hospital (with respect to discharges occurring
during fiscal years 2012 and 2013) or a sole community hospital * * *
the payment amount that would otherwise be made under subsection (d)
shall be determined without regard to subparagraphs (I) and (L) of
subsection (b)(3) and subparagraphs (D) and (G) of subsection (d)(5).''
We are finalizing policies to implement the statutory
[[Page 53375]]
provisions related to the definition of ``base operating DRG payment
amount'' in this FY 2013 IPPS/LTCH PPS final rule.
Section 1886(q)(3)(A) of the Act defines the ``adjustment factor''
for an applicable hospital for a fiscal year as equal to the greater of
``(i) the ratio described in subparagraph (B) for the hospital for the
applicable period (as defined in paragraph (5)(D)) for such fiscal
year; or (ii) the floor adjustment factor specified in subparagraph
(C).'' Section 1886(q)(3)(B) of the Act, in turn, describes the ratio
used to calculate the adjustment factor. It states that the ratio is
``equal to 1 minus the ratio of--(i) the aggregate payments for excess
readmissions * * *; and (ii) the aggregate payments for all discharges
* * *.'' Section 1886(q)(3)(C) of the Act describes the floor
adjustment factor, which is set at 0.99 for FY 2013, 0.98 for FY 2014,
and 0.97 for FY 2015 and subsequent fiscal years.
Section 1886(q)(4) of the Act sets forth the definitions of
``aggregate payments for excess readmissions'' and ``aggregate payments
for all discharges'' for an applicable hospital for the applicable
period. The term ``aggregate payments for excess readmissions'' is
defined in section 1886(q)(4)(A) of the Act as ``the sum, for
applicable conditions * * * of the product, for each applicable
condition, of (i) the base operating DRG payment amount for such
hospital for such applicable period for such condition; (ii) the number
of admissions for such condition for such hospital for such applicable
period; and (iii) the ``Excess Readmission Ratio * * * for such
hospital for such applicable period minus 1.'' The ``excess readmission
ratio'' is a hospital-specific ratio based on each applicable
condition. Specifically, section 1886(q)(4)(C) of the Act defines the
excess readmission ratio as the ratio of ``risk-adjusted readmissions
based on actual readmissions'' for an applicable hospital for each
applicable condition, to the ``risk-adjusted expected readmissions''
for the applicable hospital for the applicable condition.
Section 1886(q)(5) of the Act provides definitions of ``applicable
condition,'' ``expansion of applicable conditions,'' ``applicable
hospital,'' ``applicable period,'' and ``readmission.'' The term
``applicable condition,'' this is addressed in detail in section
IV.C.3.a. of the FY 2012 IPPS/LTCH PPS final rule (76 FR 51665 through
51666), is defined as a ``condition or procedure selected by the
Secretary among conditions and procedures for which: (i) readmissions *
* * represent conditions or procedures that are high volume or high
expenditures * * * and (ii) measures of such readmissions * * * have
been endorsed by the entity with a contract under section 1890(a) * * *
and such endorsed measures have exclusions for readmissions that are
unrelated to the prior discharge (such as a planned readmission or
transfer to another applicable hospital).'' Section 1886(q)(5)(B) of
the Act also requires the Secretary, beginning in FY 2015, ``to the
extent practicable, [to] expand the applicable conditions beyond the 3
conditions for which measures have been endorsed * * * to the
additional 4 conditions that have been identified by the Medicare
Payment Advisory Commission in its report to Congress in June 2007 and
to other conditions and procedures as determined appropriate by the
Secretary.''
Section 1886(q)(5)(C) of the Act defines ``applicable hospital,''
that is, a hospital subject to the Hospital Readmissions Reduction
Program, as a ``subsection (d) hospital or a hospital that is paid
under section 1814(b)(3) [of the Act], as the case may be.'' The term
``applicable period,'' as defined under section 1886(q)(5)(D) of the
Act, ``means, with respect to a fiscal year, such period as the
Secretary shall specify.'' As explained in the FY 2012 IPPS/LTCH PPS
final rule, the ``applicable period'' is the period from which data are
collected in order to calculate various ratios and adjustments under
the Hospital Readmissions Reduction Program.
Section 1886(q)(6) of the Act sets forth the public reporting
requirements for hospital-specific readmission rates. Section
1886(q)(7) of the Act limits administrative and judicial review of
certain determinations made pursuant to section 1886(q) of the Act.
Finally, section 1886(q)(8) of the Act requires the Secretary to
collect data on readmission rates for all hospital inpatients for
``specified hospitals'' in order to calculate the hospital-specific
readmission rates for all hospital inpatients and to publicly report
these readmission rates.
2. Overview
As we stated in the FY 2012 IPPS/LTCH PPS final rule, we intend to
implement the requirements of the Hospital Readmissions Reduction
Program in the FY 2012, FY 2013, and future IPPS/LTCH PPS rulemaking
cycles.
As explained above, the payment adjustment factor set forth in
section 1886(q) of the Act does not apply to discharges until FY 2013.
Therefore, we elected to implement the Hospital Readmissions Reduction
Program over a 2-year period, beginning in FY 2012. In the FY 2012
IPPS/LTCH PPS final rule, we addressed the issues of the selection of
readmission measures and the calculation of the excess readmission
ratio, which will be used, in part, to calculate the readmission
adjustment factor. Specifically, in the FY 2012 IPPS/LTCH PPS final
rule (76 FR 51660 through 51676), we addressed portions of section
1886(q) of the Act related to the following provisions:
Selection of applicable conditions;
Definition of ``readmission;''
Measures for the applicable conditions chosen for
readmission;
Methodology for calculating the excess readmission ratio;
and
Definition of ``applicable period.''
With respect to the topics of ``measures for readmission'' for the
applicable conditions, and ``methodology for calculating the excess
readmission ratio,'' we specifically addressed the following:
Index hospitalizations;
Risk adjustment;
Risk standardized readmission rate;
Data sources; and
Exclusion of certain readmissions.
We are providing below a summary of the provisions of section
1886(q) of the Act that were finalized in the FY 2012 IPPS/LTCH PPS
final rule.
Applicable conditions: In the FY 2012 IPPS/LTCH PPS final rule (76
FR 51665 through 51666), we finalized the applicable conditions for the
FY 2013 Hospital Readmissions Reduction Program as heart failure (HF),
acute myocardial infarction (AMI), and pneumonia (PN). Section
1886(q)(5)(A) of the Act requires that the ``applicable conditions'' be
conditions or procedures for which readmissions are ``high volume or
high expenditure'' and that ``measures of such readmissions'' have been
endorsed by the entity with a contract under section 1890(a) of the Act
(currently National Quality Forum (NQF)) and such endorsed measures
have exclusions for readmissions that are unrelated to the prior
discharge. In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27956), we
proposed to codify this definition of ``applicable conditions'' in the
regulations we proposed at 42 CFR 412.152.
Comment: One commenter stated that the Hospital Readmissions
Reduction Program measures were not reviewed by the Measure Application
Partnership (MAP) in 2011. The commenter urged CMS to coordinate MAP
review of the Hospital Readmissions Reduction Program and related
measures.
Response: We thank the commenter for the suggestion. The three
measures
[[Page 53376]]
to be used in the Hospital Readmissions Reduction Program were
finalized in the FY 2012 IPPS/LTCH Final Rule posted at the Office of
the Federal Register on August 1, 2011, which pre-dated the requirement
and establishment of the pre-rulemaking process as described under
section 3014(b) of the Affordable Care Act, which amended section 1890A
of the Act. This provision of the Affordable Care Act requires the
Secretary to submit measures to a multi-stakeholder group, currently
the Measure Application Partnership (MAP) for pre-rulemaking review.
CMS established this pre-rulemaking process in December 2011. Because
the statutory language at section 1886(q)(1) of the Act, as amended by
section 3025 of the Affordable Care Act, refers to FY 2013 ``and
subsequent Fiscal Years'' but authorizes expansion of the conditions
(and hence measures) to be used in the program beginning with FY 2015,
we believe the statute implies that the measures adopted for use in FY
2013 would also be used in FY 2014. In the future, if we consider
proposing any new measures for future expansion of the Hospital
Readmissions Reduction Program beyond these three measures, which we
have the authority to do beginning with in FY 2015, we plan to submit
them to the MAP for pre-rulemaking review.
Comment: Several commenters expressed concerns that the Hospital
Readmissions Reduction Program may induce unintended consequences of
overcrowding hospital emergency departments, as hospitals may believe
they are compelled to avoid readmitting patients.
Response: We recognize that performance-based payment penalty or
incentive programs may have the potential for unintended consequences.
We are committed to monitoring the measures and assessing unintended
consequences over time, such as the inappropriate shifting of care,
increased patient morbidity and mortality, and other negative
unintended consequences for patients.
After consideration of the public comments we received, we are
finalizing our proposal to codify the definition of ``applicable
condition'' at 42 CFR 412.152 without modification.
In the FY 2012 IPPS/LTCH PPS final rule, we discussed how each of
the finalized ``applicable conditions'' for FY 2013 meets these
statutory requirements. We noted that section 1886(q)(5)(B) of the Act
allows for the Secretary to expand the conditions for the Hospital
Readmissions Reduction Program starting in FY 2015.
Comment: Several commenters addressed the expansion of conditions
to be included in the program. Some commenters urged that CMS not
include the hospital-wide readmission measure, currently proposed for
the Hospital IQR program, in future HRRP program expansion. Commenters
believed it would result in double counting of AMI, HF, and PN
patients, and that condition-specific measures were more actionable and
understandable for hospitals subject to this provision. Other
commenters encouraged CMS to include the following conditions in future
program expansions: Atrial fibrillation (as one of other vascular
conditions); chronic obstructive pulmonary disease; coronary artery
bypass grafting; and percutaneous transluminal angioplasty. One
commenter suggested that CMS delay the expansion of the program until
such time as hospitals gain familiarity with the first three conditions
used in the program.
Response: We thank the commenters for these suggestions and will
take them into consideration when we address the expansion of the
applicable conditions in future rulemaking.
Readmission: In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51666),
we finalized a definition of ``readmission'' as occurring when a
patient is discharged from an applicable hospital and then admitted to
the same or another acute care hospital, that is, another applicable
hospital, within a specified time period (30 days) from the date of
discharge from the initial index hospitalization. In the FY 2013 IPPS/
LTCH PPS proposed rule (77 FR 27956), we proposed to codify this
definition of ``readmission'' under the regulations we proposed at 42
CFR 412.152. As we also discussed in the FY 2012 IPPS/LTCH PPS final
rule, only one readmission during the 30 days following the discharge
from the initial hospitalization will count as a readmission for
purposes of calculating the ratios set forth in section 1886(q)(3) of
the Act. For any given patient, none of the subsequent readmissions he
or she experiences within 30 days after discharge would be counted as a
new ``index'' admission (that is, an admission evaluated for a
subsequent readmission).
Comment: Several commenters did not believe that the readmissions
measures adequately measures quality. Commenters noted that it is
difficult to determine which readmissions are preventable, and
questioned whether reducing readmissions is a desirable outcome because
increased mortality could lead to decreased readmission rates. One
commenter cited research that higher readmission rates occur in
communities with more physicians and hospital beds and in areas with
high poverty and large minority or older populations to demonstrate
that it is unclear whether readmissions always reflect poor quality.
Response: We believe that risk-standardized readmission rates
provide an important quality indicator to hospitals, CMS, patients,
policymakers, and insurers. Readmission of patients who were recently
discharged after hospitalization with AMI, HF, or pneumonia represents
an important, expensive, and often avoidable adverse outcome. The risk
of readmission can be avoided by improving the quality and type of care
provided to these patients. There is ample evidence \50,51,52\ that
hospitals can reduce their readmission rates through such efforts as
ensuring patients are clinically ready at discharge, reducing risk of
infection, reconciling medications, improving communication with
community providers participating in transitions of care, educating
patients adequately upon discharge, and assuring patients understand
follow-up care upon discharge. These interventions are aligned with
efforts to improve mortality and are not at odds with the goal of
survival. Moreover, the results of public reporting of the measures
indicate that hospitals can do well on both mortality and readmission
rates.
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\50\ Jack BW, Chetty VK, Anthony D et al. A reengineered
hospital discharge program to decrease rehospitalization: a
randomized trial. Ann Intern Med. Feb 3, 2009;150(3):178-187.
\51\ Coleman EA, Perry C, Chalmers S, Min SJ. The care
transitions intervention: results of a randomized controlled trial.
Arch Intern Med. Sep 25 2006;166(17):1822-1828.
\52\ Hernandez AF, Greiner MA, Fonarow GC, et al. Relationship
between early physician follow-up and 30-day readmission among
Medicare beneficiaries hospitalized for heart failure. JAMA, May 5
2010:303(17):1716-1722.
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Comment: One commenter recommended a 7-day to 15-day readmission
timeframe instead of 30 days, stating that a 30-day measure may be
appropriate for assessing a community's ability to work together to
provide the best care and services for patients, but may attribute more
responsibility to the hospital than might otherwise be warranted.
Response: In the FY 2012 IPPS/LTCH PPS final rule, we finalized 30
days as the time period specified from the date of discharge for the
purpose of defining readmission for the Hospital Readmissions Reduction
Program. The 30-day time period meets the requirement set forth in
section 1886(q)(5)(E) of the Act that the time period specified by the
Secretary for
[[Page 53377]]
defining a readmission be consistent with the time period specified for
the endorsed measures. Furthermore, the timeframe of 30 days is a
clinically meaningful period for hospitals to collaborate with their
communities in an effort to reduce readmissions.
Comment: One commenter expressed specific concerns that the list of
planned readmissions in the AMI measure does not account for all
planned readmissions. Specifically, the commenter recommended the
inclusion of AMI codes with ``0'' in the fifth digit, indicating
``episode of care unspecified.'' The commenter noted that if the
episode of care is unspecified, it could be outside the 30-day
readmission timeframe. The commenter added that under the ICD-9-CM
guidelines, the ICD-9-CM codes 410.XX for AMI are used for ``acute''
condition for up to 8 weeks duration.
Response: We thank the commenter for the suggestion. However, the
AMI ICD-9-CM codes described by the commenter are used to identify
index hospitalizations, not readmissions. The measures only identify
the index admissions based on the use of the principal discharge
diagnosis, which should represent the reason the patient was admitted
to the hospital. Therefore, despite the use of the word
``unspecified,'' in most cases the AMI will have been the primary
reason for admission and appropriately included as an index case.
Comment: One commenter stated the 30-day timeframe may be
appropriate for assessing a community's ability to collaborate and
provide the best care and services for discharged patients, but 30 days
is too long a timeframe to fairly assess the attribution of the
hospital's direct care of a patient.
Response: The 30-day time period that we finalized in the FY 2012
IPPS/LTCH PPS final rule (76 FR 51666) meets the requirement set forth
in section 1886(q)(5)(E) of the Act that the time period specified by
the Secretary for defining a readmission be consistent with the time
period specified for the endorsed measures. We disagree with the
commenter that a much shorter timeframe is fairer, and believe that the
timeframe of 30 days is a clinically meaningful period for hospitals to
collaborate with their communities in an effort to reduce readmissions.
This approach would ensure patients are clinically ready at discharge,
reducing risk of infection, reconciling medications, improving
communication with community providers participating in transitions of
care, educating patients adequately upon discharge, and assuring
patients understand follow-up care upon discharge.
Comment: One commenter requested clarification whether transfers
from short-term acute care hospitals to LTCHs are excluded from the
definition of readmissions.
Response: As defined in section 1886(q)(5)(E) of the Act, and
finalized in the FY 2012 IPPS/LTCH PPS final rule, only readmissions to
a subsection (d) hospital or a hospital that is paid under section
1814(b)(3) [of the Act] will be counted as readmissions. Readmissions
to LTCHs will not be counted as readmissions.
After consideration of the public comments we received, we are
finalizing our proposal to codify the definition of ``readmission'' at
42 CFR 412.152 without modification.
Measures for applicable conditions: As finalized in the FY 2012
IPPS/LTCH PPS final rule (76 FR 51666 and 51667), we will use three
NQF-endorsed, hospital risk-standardized readmission measures for FY
2013, which are currently in the Hospital IQR Program: Acute Myocardial
Infarction 30-day Risk Standardized Readmission Measure (NQF
0505); Heart Failure 30-day Risk Standardized Readmission
Measure (NQF 0330); and Pneumonia 30-day Risk Standardized
Readmission Measure (NQF 0506). The measures, as endorsed by
the NQF, include the 30-day time window, risk-adjustment methodology,
and exclusions for certain readmissions.
As finalized in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51673),
we will use the risk-standardized readmission ratio of the NQF-endorsed
readmission measures as the excess readmission ratio. The ratio is a
measure of relative performance. If a hospital performs better than an
average hospital that admitted similar patients (that is, patients with
the same risk factors for readmission such as age and comorbidities),
the ratio will be less than 1.0. If a hospital performs worse than
average, the ratio will be greater than 1.0.
Measure methodology: In the FY 2012 IPPS/LTCH PPS final rule (76 FR
51668 through 51669), we finalized the methodology of the measures and
are summarizing it briefly below.
Index hospitalizations included in the measure calculation: We
finalized the definition of ``index hospitalization'' consistent with
the NQF-endorsed definition. The measures define an index
hospitalization as a hospitalization evaluated in the measure for a
possible readmission within 30 days after discharge (that is, a
hospitalization included in the measure calculation). The measures
exclude as index hospitalizations patients who died during the first
admission, patients who have not spent at least 30 days post-discharge
enrolled in Medicare fee-for-service (FFS), patients who are discharged
against medical advice, and patients who are under the age of 65.
Comment: Several commenters suggested exclusions from the index
hospitalizations included in the measures, which included exclusions
for patients under ``extreme circumstances'' such as transplants, end-
stage renal disease, burn, trauma, psychosis and substance abuse.
Response: We appreciate the concern expressed by the commenters
that patients of these ``extreme circumstances'' clinically could be
sicker and more likely to be readmitted. The measures address clinical
differences in hospitals' case-mix through risk adjustment rather than
through excluding patients from the measure as suggested by the
commenter. The goal in developing outcomes measures is to create a
clinically cohesive cohort that includes as many patients as possible
admitted with the given condition. Greatly expanding our list of
exclusions would result in a measure that was less useful and
meaningful, because it would reflect the care of fewer patients. In
addition, we believe that by excluding patients with significant
comorbidities, the measure would not assess of the quality of care for
those patients. To fairly profile hospitals' performance, it is
critical to place hospitals on a level playing field and account for
their differences in the patients that present for care. This is
accomplished through adequate risk-adjustment for patients' clinical
presentation rather than exclusion of patients.
Risk adjustment: The three measures, as endorsed by the NQF and
finalized in the FY 2012 IPPS/LTCH PPS final rule, adjust for key
factors that are clinically relevant and have strong relationships with
the outcome (for example, patient demographic factors, patient
coexisting medical conditions, and indicators of patient frailty).
Under the current NQF-endorsed methodology, these covariates are
obtained from Medicare claims extending 12 months prior to, and
including, the index admission. This risk-adjustment approach adjusts
for differences in the clinical status of the patient at the time of
the index admission as well as for demographic variables. A complete
list of the variables used for risk adjustment and the clinical and
statistical process for selecting the variables for each NQF-endorsed
measure, as proposed, is
[[Page 53378]]
available at the Web site: http://qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1219069855841.
Comment: Several commenters suggested that the readmission measures
include adjustments for socioeconomic status and other factors that are
either outside the hospitals' immediate control or that may adversely
affect certain types of hospitals more than others. Suggestions for
variables to include in either the patient level or the hospital-level
model included: patient race, ethnicity, language, income, lifestyle,
health literacy, dual-eligible status (that is, eligibility for both
Medicare and Medicaid), insurance status, functional status, cognitive
impairment, post-discharge care support structure, and access to
primary care. Two commenters suggested stratification of the hospital
calculations by the percentage of dual-eligible patients. Other
commenters suggested accounting for societal factors such as housing
stability, food scarcity, and chronic unemployment.
Response: We have continued to consider and evaluate stakeholder
concerns regarding the influence of patient socioeconomic status on
readmission rates. In our analyses (http://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/HospitalChartBook2011.pdf), we consistently find that
hospitals that care for large proportions of patients of low
socioeconomic status are capable of performing well on readmission
measures. Many safety-net providers and teaching hospitals do as well
or better on the measures than hospitals without substantial numbers of
patients of low socioeconomic status. The measures include rigorous
risk-adjustment for differences in patient illness, and this likely
incorporates some of the patient differences due to socioeconomic
status (to the extent that patients of low socioeconomic status present
to the hospital with greater level of disease). The risk adjustment for
clinical factors likely captures much of the variation due to
socioeconomic status, thus leading to more modest impact of
socioeconomic status on hospital readmissions than stakeholders expect.
We note that the goal of risk adjustment is to account for factors that
are inherent to the patient at the time of admission, such as severity
of disease, so as to put hospitals on a level playing field. The
measures should not be risk-adjusted to account for differences in
practice patterns that lead to lower or higher risk for patients to be
readmitted. The measures aim to reveal differences related to the
patterns of care. Furthermore, the statutory language in section
1886(q)(5)(A)(ii)(I) of the Act requires that the measures included in
the Hospital Readmissions Reduction Program be consistent with measures
that are NQF-endorsed. A change in the risk-adjustment methodology of
the measures as they are currently endorsed by the NQF would take time
and necessitate additional rulemaking to adopt such measures. The
measures also do not adjust for socioeconomic status because the
association between socioeconomic status and health outcomes can be
due, in part, to differences in the quality of health care received by
groups of patients with varying socioeconomic status. The measures do
not adjust for socioeconomic status, or other patient factors such as
race, both because we do not want to hold hospitals to different
standards for the outcomes of their patients of low socioeconomic
status (which would definitely occur if calculations were stratified by
percent dual-eligible patients as suggested by two of the commenters),
and because our analyses demonstrate that patient socioeconomic status
does not determine hospital performance on the readmission measures.
Finally, we do not want to mask potential disparities or minimize
incentives to improve the outcomes of disadvantaged populations. This
approach is also consistent with the guidance from the NQF, which
states that risk models should not obscure disparities by adjusting for
factors associated with inequality in case (such as race or
socioeconomic status) as well as with the methodology finalized in the
FY 2012 IPPS/LTCH PPS final rule (76 FR 51660 through 51676). However,
we are committed to tracking this issue and will continue to evaluate
disparities in care and the impact of the Hospital Readmissions
Reduction Program on providers of vulnerable populations, including
teaching and safety-net hospitals.
Comment: Two commenters supported CMS' decisions not to risk-adjust
for socioeconomic status and urged CMS to resist making any changes to
the Hospital Readmissions Reduction Program based on socioeconomic
status, because the same care protocols that work with a different
population may also work with patients of lower socioeconomic
circumstances. One commenter appreciated the justification for the
continued exclusion of patient-level socioeconomic status covariates--
that doing so would impose different performance expectations based on
the income distribution of patients and would also result in
overfitting the risk adjustment models, in that it would result in an
overly complex and possibly multicollinear model that yields inaccurate
predictions.
Response: We thank the commenters for their support of our approach
to risk-adjustment.
Comment: One commenter believed that the risk adjustment variables
used to calculate readmission rates are not transparent to hospitals
and urged CMS to ensure they are publicly and easily accessible.
Response: The risk adjustment variables that will be used to
calculate readmission rates can be found in the readmission measure
methodology reports found on the Web site at: http://qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1219069855841. Some of the patient risk factors are grouped using the CMS
Condition Categories (CC) classification. A crosswalk of CCs to ICD-9-
CM codes is available at: http://qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1219069856694.
Comment: One commenter stated that the comorbidities included in
the risk-adjustment variables may not all be consistently coded at the
present time.
Response: We have validated the 30-day readmission measures with
models that use medical record-abstracted data for risk adjustment.
This validation supported the use of the administrative claims data on
comorbidities and demonstrated that the estimates of hospitals' risk-
standardized readmission rates (RSRRs) based on administrative data are
very similar to the rates estimated by models based on medical record
data. This high level of agreement in the results based on the two
different approaches supports the use of the administrative claims-
based models for public reporting. Our approach to gathering risk
factors for patients also mitigates the potential limitations of claims
data. Because not every diagnosis is coded at every visit, we use
inpatient, outpatient, and physician claims data for the 12 months
prior to admission, and secondary diagnosis codes during the index
admission, for risk adjustment.
Data sources: The finalized measures use Medicare inpatient claims
data for Medicare FFS patients 65 years and older to identify index
hospitalizations and readmissions. For risk adjustment, the measures
use Part A and Part B claims for the 12 months prior to the index
hospitalization as well as index hospitalization claims.
[[Page 53379]]
Exclusion of certain readmissions: The NQF-endorsed measures of
readmissions finalized in the FY 2012 IPPS/LTCH PPS final rule include
exclusions of readmissions consistent with the statutory requirement
that all measures exclude certain readmissions that are unrelated to
the prior discharge, such as transfers to other acute care facilities
and planned readmissions.
Comment: Some commenters urged CMS to identify and exclude planned
readmissions for the AMI, HF, and PN readmission measures. The
commenters stated that failure to do so may encourage providers to
delay necessary follow-up procedures. Two commenters urged CMS to
explore common reasons for planned readmissions, bring them to the NQF
for review for continued endorsement for the AMI, HF, and PN measures,
and use these planned readmissions for the measures in subsequent
rulemaking. A few commenters recommended that CMS also consider
implementing codes that hospitals can use to designate when a
readmission is planned so that these cases can be excluded from the
readmission measure, and recommended using the NUBC Committee's
proposed discharge status codes to identify planned readmissions.
Response: Our contractor engaged multiple clinical experts to
develop a list of planned readmissions which was made part of a
hospital-wide readmission measure that recently obtained NQF
endorsement. During the development of this hospital-wide readmission
measure, there was a 2-week informal public comment period in order to
receive feedback on the measure and its planned readmission algorithm.
The list of planned readmissions also underwent a 2-week informal
public comment period when the hospital-wide readmission measure was
evaluated at the NQF.
We maintain the measures annually and submit the updates to NQF for
review. In response to stakeholder input, we intend to update the
condition-specific measures to permit more planned readmissions for the
condition-specific measures, which would not be counted as
readmissions. Any NQF-approved changes to the measures will then be
proposed for the Hospital Readmissions Reduction Program through future
rulemaking. We are aware of the NUBC's intention to propose discharge
status code on claims to identify planned readmissions. We would
analyze its reliability, validity, and usability for identifying
planned readmissions prior to considering the adoption of such a code
for use in the readmission measures in the future.
Comment: Some commenters suggested that CMS exclude readmissions
that occur for reasons such as transplants and device implantation,
trauma, psychoses, substance use, end-stage renal disease, maternity
and neonatal readmissions, rehabilitation, sepsis, natural disease or
treatment progression, acute decompensated heart failure, the result of
nonhospital community factors, and disaster relief.
Response: We thank the commenters for these suggestions. Many of
these suggestions are among the planned readmission updates we intend
to submit for the AMI, HF and PN measures as part of annual maintenance
review by NQF. We perform measure maintenance reviews which include
consideration of public comments, exploration and identification of any
other exclusions for the measures; in this case, other types of
readmissions, that would be excluded from the measures as planned
readmissions would be considered during the maintenance review. If we
determine certain readmissions should be excluded from the measures, we
will revise the measures, present them to NQF for endorsement, and
update the Hospital Readmissions Reduction Program in future
rulemaking.
Comment: Several commenters urged CMS to differentiate between
related and unrelated readmissions. One suggestion to define ``related
readmissions'' as any readmission for which the patient's primary
diagnosis falls within the same MS-DRG or as the diagnosis for the
initial admission, or to use the AHRQ CCs as a way to group diagnoses
and procedure codes into clinically meaningful groups.
Response: We do not seek to differentiate between related and
unrelated readmissions, or to identify preventable readmissions or
``necessary'' readmissions for several reasons. First, from the patient
perspective, an unplanned readmission for any reason is likely to be an
undesirable outcome of care after an acute hospitalization. Second,
readmissions not directly related to the index condition may still be a
result of the care received during the index hospitalization. For
example, a patient hospitalized for heart failure who develops a
hospital-acquired infection may ultimately be readmitted for sepsis. It
would be inappropriate to treat this readmission as unrelated to the
care the patient received during the index hospitalization.
Furthermore, the range of potentially avoidable readmissions also
includes those not directly related to the initial hospitalization,
such as those resulting from poor communication at discharge or
inadequate follow-up. As such, creating a comprehensive list of
potential complications related to the index hospitalization would be
arbitrary, incomplete, and, ultimately, impossible to implement. The
measures are not meant to suggest that the appropriate readmission rate
is zero, but rather to identify hospitals that have a higher rate of
readmissions than would be expected given their case mix.
Minimum number of discharges for applicable conditions: Section
1886(q)(4)(C)(ii) of the Act allows the Secretary discretion to
determine the minimum number of discharges for the applicable
condition. We finalized a policy in the FY 2012 IPPS/LTCH PPS final
rule that the minimum number of discharges for applicable conditions is
25 for each condition for the FY 2013 Hospital Readmissions Reduction
Program.
Comment: Several commenters urged CMS to raise the minimum case
threshold to qualify for the Hospital Readmissions Reduction Program to
improve the reliability of the measures.
Response: We determined the 25-case threshold for public reporting
based on a reliability statistic that is calculated from the
intercluster correlation, a parameter of the model. We are maintaining
the minimum 25-case threshold that we adopted through rulemaking last
year.
Applicable period: Under section 1886(q)(5)(D) of the Act, the
Secretary has the authority to specify the applicable period with
respect to a fiscal year. In the FY 2012 IPPS/LTCH PPS final rule, we
finalized our policy to use 3 years of claims data to calculate the
proposed readmission measures. Specifically, we finalized the policy to
use claims data from July 1, 2008, to June 30, 2011, to calculate the
excess readmission ratios and to calculate the FY 2013 Hospital
Readmissions Reduction Program payment adjustment. As we discussed in
section IV.A.3.d. of the preamble of the FY 2013 IPPS/LTCH PPS proposed
rule (77 FR 27957), the excess readmission ratios used to model our
proposed methodology to calculate the Hospital Readmissions Reduction
Program payment adjustment were based on the 3-year time period of July
1, 2007 to June 30, 2010. However, we indicated that, for the final
rule, we intended to use excess readmission ratios based on the
applicable period of July 1, 2008 to June 30, 2011, as finalized in the
FY 2012 IPPS/LTCH PPS final rule. In the FY 2013 IPPS/LTCH PPS proposed
rule, we proposed to codify the definition of ``applicable period'' at
42 CFR 412.152
[[Page 53380]]
as the 3-year period from which data are collected in order to
calculate excess readmission ratios and adjustments for the fiscal
year.
Comment: Several commenters urged CMS to consider a shorter
timeframe for measuring performance for readmissions such as a 1-year
or 2-year period. The commenters believed that hospitals should not be
assessed on readmissions that occurred during 2008, long before the
policy addressing this provision was passed in the Affordable Care Act.
Response: In the FY 2012 IPPS/LTCH PPS final rule, we finalized 3
years as the applicable period for the FY 2013 payment adjustment. We
use a 3-year period of index admissions to increase the number of cases
per hospital used for measure calculation, which improves the precision
of each hospital's readmission estimate. Although this approach
utilizes older data, it also identifies more variation in hospital
performance and still allows for improvement from one year of reporting
to the next. We are maintaining the 3-year period as previously
adopted.
Comment: One commenter stated that, although data from across a 3-
year period helps to identify significant improvements over time, there
is a huge lag in the end of the 3-year period and the commencements of
penalties (approximately 15 months).
Response: We decided to use the current timeframe because it
balances the needs for the most recent claims and for sufficient time
to process the claims data and calculate the measures to meet the
program implementation timeline. We will continue to explore the
feasibility of using more up-to-date data sources.
After consideration of the public comments we received, we are
finalizing our proposal to codify our definition of ``applicable
period'' under the regulations at 42 CFR 412.152 without modification.
Excess Readmission Ratio Calculation: In the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51673 through 51676), we finalized the excess
readmission ratio pursuant to section 1886(q)(4)(C) of the Act. We
established the excess readmission ratio as the risk-adjusted
readmission ratio from the NQF-endorsed measures. The ratio is
calculated using hierarchical logistic regression. The method adjusts
for variation across hospitals in how sick their patients are when
admitted to the hospital (and therefore variation in hospital patients'
readmission risk) as well as the variation in the number of patients
that a hospital treats to reveal difference in quality. The method
produces an adjusted actual (or ``predicted'') number in the numerator
and an ``expected'' number in the denominator. The expected calculation
is similar to that for logistic regression--it is the sum of all
patients' expected probabilities of readmission, given their risk
factors and the risk of readmission at an average hospital.
For each hospital, the numerator of the ratio used in the NQF-
endorsed methodology (actual adjusted readmissions) is calculated by
estimating the probability of readmission for each patient at that
hospital and summing up over all the hospital's patients to get the
actual adjusted number of readmissions for that hospital.
Mathematically, the numerator equation can be expressed as:
[GRAPHIC] [TIFF OMITTED] TR31AU12.013
The denominator of the risk-standardized ratio (excess readmission
ratio) under this NQF-endorsed methodology sums the probability of
readmission for each patient at an average hospital. This can be
expressed mathematically as:
[[Page 53381]]
[GRAPHIC] [TIFF OMITTED] TR31AU12.014
Thus, the ratio compares the total adjusted actual readmissions at
the hospital to the number that would be expected if the hospital's
patients were treated at an average hospital with similar patients.
Hospitals with more adjusted actual readmissions than expected
readmissions will have a risk-standardized ratio (excess readmission
ratio) greater than one. In summary, in the FY 2012 IPPS/LTCH PPS final
rule, we defined the ``excess readmission ratio'' as the risk-
standardized readmission ratio of the NQF-endorsed readmission
measures. More in-depth detail surrounding the methodology of excess
readmission ratio calculation can be accessed on the Web site at:
http://qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1219069855841.
In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27958), we
proposed to codify the definition of ``excess readmission ratio'' under
the regulations we proposed at 42 CFR 412.152 as a hospital-specific
ratio for each applicable condition for an applicable period, which is
the ratio (but not less than 1.0) of (1) risk-adjusted readmissions
based on actual readmissions for an applicable hospital for each
applicable condition to (2) the risk-adjusted expected readmissions for
the applicable hospital for the applicable condition.
Comment: Two commenters indicated that almost no hospitals are
statistically significantly different from the U.S. average because the
hierarchical logistic regression model shrinks the coefficients of
small hospitals towards the mean. One commenter expressed concern that
the methodology relies excessively on the ability of the model to
correct for hospital-specific characteristics and may be at odds with
the observed rate. Another commenter suggested that alternatives to the
current method could include looking at more conditions over several
years which would increase the sample size, reduce random variation,
and reduce the need to shrink estimates toward the national mean.
Response: The modeling of the readmission rates takes into account
hospitals' case-mix as well as the sample size of the hospital. For
both of these reasons, the risk-standardized rate may appropriately
differ from the observed rates. These differences are important in
leveling the playing field for hospitals and accounting for uncertainty
in small volume estimates. The hierarchical logistic regression model
that we use to calculate the 30-day measures allows the inclusion of
hospitals with relatively few observations but takes into account the
uncertainty associated with sample size.
Comment: One commenter believed that the statute requires that CMS
calculate an Observed-to-Expected (O/E) ratio for each readmission
condition by hospital and to use that ratio to determine the payment
penalty. The commenter requested that CMS revise its methodology so
that it calculates hospital-specific observed and expected readmission
rates and reports them on Hospital Compare.
Response: We disagree with the commenter's assessment that the
statute requires that we use an observed to expected ratio. Rather, the
statute at section 1886(q)(4)(C) of the Act defines the excess
readmission ratio as the ratio of ``the risk adjusted readmissions
based on actual readmissions,'' and ``the risk adjusted expected
readmissions'' as ``determined consistent with a readmission
methodology that has been endorsed'' by an entity with a contract under
section 1890(a) of the Act (currently the NQF). The readmission
measures that we are using for the Hospital Readmissions Reduction
Program have numerators and denominators consistent with these
definitions. The measures have been endorsed by the NQF, and we
finalized use of these NQF-endorsed readmission measures in the FY 2012
IPPS LTCH PPS final rule.
Comment: One commenter asked for clarification on the calculation
of the readmission rates for multiple readmissions, particularly where
one or more readmissions might be unrelated to the index admission.
Response: As finalized in the FY 2012 IPPS/LTCH PPS final rule, the
readmissions measures are designed to measure whether a patient
experienced at least one readmission within 30 days of an initial (or
``index'') discharge as a single binary (yes/no) event, rather than
counting the number of readmissions experienced within 30 days of
discharge as a separate readmissions. For any given patient, only one
readmission during the 30 days following the discharge from the initial
hospitalization will count as a readmission for purposes of calculating
the ratios set forth in section 1886(q) of the Act. For any given
patient, none of the subsequent readmissions he or she experiences
within 30 days after discharge would be counted as a new ``index''
admission within the same measure (that is, an admission evaluated in
the measure for a subsequent readmission). Any eligible admission after
the 30-day time period will be considered a new index admission. For
[[Page 53382]]
example, if a patient's index admission was for heart failure and the
patient was readmitted with a primary diagnosis of pneumonia, that
hospitalization could count as both a readmission for the health
failure measure and an index admission for the pneumonia measure.
We do not seek to differentiate between related and unrelated
readmissions, or to identify preventable readmissions or ``necessary''
readmissions for several reasons. First, from the patient perspective,
a readmission for any reason is likely to be an undesirable outcome of
care after an acute hospitalization. Second, readmissions not directly
related to the index condition may still be a result of the care
received during the index hospitalization.
After consideration of the public comments we received, we are
finalizing our proposal to codify the definition of ``excess
readmission ratio'' under the regulations at 42 CFR 412.152 without
modification.
3. FY 2013 Proposed and Final Policies for the Hospital Readmissions
Reduction Program
a. Overview
In this final rule, we are addressing the provisions in section
1886(q) of the Act that are related to the Hospital Readmissions
Reduction Program payment adjustment, as well as any other provisions
in section 1886(q) of the Act that were not addressed in the FY 2012
IPPS/LTCH PPS final rule that are effective for discharges beginning on
or after October 1, 2012. Specifically, in this final rule (as we did
in the FY 2013 IPPS/LTCH PPS proposed rule), we are addressing section
1886(q) of the Act related to the following provisions:
Base operating DRG payment amount, including policies for
SCHs and MDHs and hospitals paid under section 1814(b) of the Act;
Adjustment factor (both the ratio and floor adjustment
factor);
Aggregate payments for excess readmissions and aggregate
payments for all discharges;
Applicable hospital;
Limitations on review;
Reporting of hospital-specific information, including the
process for hospitals to review and submit corrections.
b. Base Operating DRG Payment Amount, Including Special Rules for SCHs
and MDHs and Hospitals Paid Under Section 1814 of the Act
(1) Definition of Base Operating DRG Payment Amount (Sec. 412.152)
Under the Hospital Readmissions Reduction Program at section
1886(q) of the Act, payments for discharges from an ``applicable
hospital'' will be an amount equal to the product of the ``base
operating DRG payment amount'' and an ``adjustment factor'' that
accounts for excess readmissions for the hospital for the fiscal year,
for discharges beginning on or after October 1, 2012. Specifically,
section 1886(q)(1) of the Act requires the Secretary to base payments
for a discharge on an amount equal to the product of ``the base
operating DRG payment amount'' and ``the adjustment factor'' for the
hospital in a given fiscal year. The ``base operating DRG payment
amount'' is defined under section 1886(q)(2) of the Act as ``the
payment amount that would otherwise be made under subsection (d)
(determined without regard to subsection (o) [the Hospital VBP
Program]) for a discharge if this subsection did not apply; reduced by
* * * any portion of such payment amount that is attributable to
payments under paragraphs (5)(A), (5)(B), (5)(F), and (12) of
subsection (d).'' Paragraphs (5)(A), (5)(B), (5)(F), and (12) of
subsection (d) of section 1886 of the Act refer to outlier payments,
indirect medical education (IME) payments, disproportionate share (DSH)
payments, and low-volume hospital payments, respectively.
In general, ``the payment amount that would otherwise be made under
subsection (d) * * * for a discharge'' (that is, the discharge payment
amount made under section 1886(d) of the Act) determined without
consideration of the adjustments to payments made under the Hospital
VBP Program (section 1886(o) of the Act) or under the Hospital
Readmissions Reduction Program (section 1886(q) of the Act) is the
applicable average standardized amount adjusted for resource
utilization by the applicable MS-DRG relative weight and adjusted for
differences in geographic costs by the applicable area wage index (and
by the applicable cost-of-living adjustment (COLA) for hospitals
located in Alaska and Hawaii), which is often referred to as the
``wage-adjusted DRG operating payment.'' This payment amount may then
be further adjusted if the hospital qualifies for an IME adjustment
(under section 1886(d)(5)(B) of the Act), a DSH payment adjustment
(under section 1886(d)(5)(F) of the Act), and/or a low-volume payment
adjustment (under section 1886(d)(12) of the Act), or if the discharge
qualifies for an outlier payment (under section 1886(d)(5)(A) of the
Act). Furthermore, certain discharges may qualify for an additional
payment for new medical services or technologies under section
1886(d)(5)(K) of the Act (often referred to as a ``new technology add-
on payment'').
Consistent with section 1886(q)(2) of the Act, in the FY 2013 IPPS/
LTCH PPS proposed rule (77 FR 27959), under the regulations we proposed
at 42 CFR 412.152, we proposed to define the ``base operating DRG
payment amount'' under the Hospital Readmissions Reduction Program as
the wage-adjusted DRG operating payment plus any applicable new
technology add-on payments. As required by the statute, we stated that
the proposed definition of ``base operating DRG payment amount'' does
not include adjustments or add-on payments for IME, DSH, outliers and
low-volume hospitals provided for under sections 1886(d)(5)(B),
(d)(5)(F), (d)(5)(A), and (d)(12) of the Act, respectively. Section
1886(q)(2) of the Act does not exclude new technology payments made
under section 1886(d)(5)(K) of the Act in the definition of ``base
operating DRG payment amount''; therefore, any payments made under
section 1886(d)(5)(K) of the Act are included in the definition of
``base operating DRG payment amount.'' In addition, under the
regulations we proposed at 42 CFR 412.152, we proposed to define
``wage-adjusted DRG operating payment'' as the applicable average
standardized amount adjusted for resource utilization by the applicable
MS-DRG relative weight and adjusted for differences in geographic costs
by the applicable area wage index (and by the applicable COLA for
hospitals located in Alaska and Hawaii). We proposed that, under Sec.
412.154(b)(1), to account for excess readmissions, an applicable
hospital's base operating DRG payment amount would be adjusted for each
discharge occurring during the fiscal year. The payment adjustment for
each discharge is determined by subtracting the product of the base
operating DRG payment amount for such discharge and the hospital's
readmission payment adjustment factor for the fiscal year from the base
operating DRG payment amount for such discharge.
Under this proposal, consistent with section 1886(q)(2)(B)(i) of
the Act and proposed Sec. 412.154(b)(2), for SCHs that receive
payments based on their hospital-specific payment rate, we also
proposed to exclude the difference between the hospital's applicable
hospital-specific payment rate and the Federal payment rate from the
definition of ``base operating DRG payment amount.'' We noted that,
under the Hospital Readmissions Reduction Program at section 1886(q) of
the Act, the proposed definition of ``base
[[Page 53383]]
operating DRG payment amount'' would be used to calculate both the
``aggregate payments for excess readmissions'' and ``aggregate payments
for all discharges'' under sections 1886(q)(4)(A) and (B) of the Act,
which would then be used to determine the readmission adjustment factor
that accounts for excess readmissions under section 1886(q)(3) of the
Act (as discussed in greater detail in section IV.A.3.c. of the
preamble of the proposed rule and this final rule), and would also be
used to determine which payment amounts will be adjusted to account for
excess readmissions. (We note that, as discussed in section IV.G. of
the preamble of the proposed rule and this final rule, under current
law, the MDH program expires at the end of FY 2012 (that is, the MDH
program is currently only applicable to discharges occurring before
October 1, 2012). Therefore, due to the expiration of the MDH program
beginning with FY 2013, we did not include MDHs in the discussion of
our proposals regarding the base operating DRG payment amount in the
proposed rule.)
Comment: Commenters supported the proposed definition of the base
operating DRG payment amount. Commenters also supported our proposal to
exclude IME, DSH, outliers, low-volume adjustment, and additional
payments made due to status as an SCH from the definition of the base
operating DRG payment amount.
Commenters both supported and opposed our proposed inclusion of new
technology payments in the definition of the base operating DRG payment
amount. Commenters recommended that CMS exclude the new technology
payment from the definition of ``base operating DRG payment amount''
because, like payment adjustments for IME and DSH, it is extrinsic to
the base rate. In addition, without any known association between the
use of new technology and the quality and efficiency of care provided
by a hospital, one commenter did not believe there was justification to
incorporate the use of new technology into the structure of a quality
program. Some commenters asserted that the inclusion of the new
technology payments in the base DRG operating payment definition for
the determination of payment reduction adjustments conflicts with the
primary principle of identifying and ensuring adequate payment for new
medical services and technologies for a brief 2- to 3-year period and
should not be altered by our other required initiatives.
Response: We believe the statute is specific with regards to the
definition of base operating DRG payment amount at section 1886(q)(2)
of the Act, which explicitly specifies that any additional payments for
IME, DSH, outliers, and low-volume hospitals provided for under
sections 1886(d)(5)(B), (d)(5)(F), (d)(5)(A), and (d)(12) of the Act,
respectively, are to be excluded. Section 1886(q)(2) of the Act does
not specify an exclusion for new technology payments made under section
1886(d)(5)(K) of the Act, and therefore, we do not believe we have the
flexibility to exclude new technology payments in the definition of
base operating DRG payment amount under the Hospital Readmissions
Reduction Program. We are finalizing our definition of ``base operating
DRG payment,'' as proposed, without modification.
Comment: One commenter stated that cases that receive transfer
adjustments when determining their payment should be accounted for in
the proposed definition of base operating DRG payment amount. The
commenter specified that the base operating DRG payment amount should
also include any payment reductions for patients covered under the
transfer policy as it applies to both post-acute and short-stay acute
hospitals.
Response: We are clarifying that the base operating DRG payment
amount accounts for any applicable transfer adjustment for cases that
are paid under as either an acute care transfer or post-acute care
transfer. In other words, if a case is paid as a transfer in accordance
with our transfer payment policy at 42 CFR 412.4(f), resulting in a
reduced IPPS payment, the reduced transfer-adjusted payment amount is
also reflected in the base operating DRG payment amount. For the FY
2013 IPPS/LTCH PPS proposed rule, the data used to model the proposed
readmission payment adjustment factors actually reflected transfer
adjusted base operating DRG payment amounts, where applicable. As
discussed earlier, the ``base operating DRG payment amount'' would be
used to calculate both the ``aggregate payments for excess
readmissions'' and ``aggregate payments for all discharges'' under
sections 1886(q)(4)(A) and (q)(4)(B) of the Act, which would then be
used to determine the readmissions payment adjustment, and would also
be used to determine which payment amounts will be adjusted to account
for excess readmissions. We are finalizing that the definition of
``base operating DRG payment amount'' includes any applicable payment
adjustments for transfer cases under 42 CFR 412.4(f). In addition, in
this final rule, we are revising the definition of ``wage-adjusted DRG
operating payment'' in the regulations we proposed at 42 CFR 412.152 to
specify that any applicable payment adjustment for transfers under
Sec. 412.4(f) is included. Accordingly, we are finalizing the
definition of ``wage adjusted DRG operating payment'' as the applicable
average standardized amount adjusted for resource utilization by the
applicable MS-DRG relative weight and adjusted for differences in
geographic costs by the applicable area wage index (and by the
applicable COLA for hospitals located in Alaska and Hawaii). This
amount includes an applicable payment adjustment for transfers under
Sec. 412.4(f).
Comment: Commenters recommended that the proposed definition of
base operating DRG payment should be refined to account for the special
payment status of MDHs that are paid under the hospital-specific rate
should the MDH payment status be extended under legislation. In
addition, commenters suggested that CMS make a proposal to exclude the
difference between the hospital's applicable hospital-specific payment
rate and the Federal payment rate from its definition of ``base
operating DRG amount'' for MDHs, similar to our proposal made for SCHs,
which can also be paid under the hospital-specific payment rate.
Response: As stated earlier, under current law, the MDH program
expires at the end of FY 2012 (that is, the MDH program is currently
only applicable to discharges occurring before October 1, 2012). MDHs
are paid the sum of the Federal payment amount plus 75 percent of the
amount by which their hospital-specific rate exceeds the Federal
payment amount. As discussed later in this section, we had proposed to
exclude hospital-specific payments from the definition of base
operating DRG payments in the calculation of a hospital's readmission
payment adjustment factor. Specifically, we stated that because we are
using historical data to determine the base operating DRG payments to
calculate the adjustment factor, we proposed to model their base
operating DRG payment amount as they would have been paid under the
Federal standardized amount, rather than using the information on the
claim (which may represent a payment either made under the hospital-
specific rate or the Federal rate) so that their payments are
consistent with our proposed definition of ``base operating DRG
payment.''
For MDHs, the payment difference between the payment made under the
hospital-specific rate and the payment made under the Federal rate is
not included in the base operating DRG payment amount to determine the
[[Page 53384]]
readmissions adjustment factor; that is, it is neither included in the
numerator of the aggregate dollars for excess readmissions nor in the
denominator of the aggregate dollars for all discharges.
Furthermore, we are clarifying that the difference between the
applicable hospital-specific payment rate and the Federal payment rate
for both SCHs and for MDHs, should the MDH provision be extended beyond
FY 2012, is excluded from base operating DRG payment amount for these
hospitals. This means that, for an SCH or an MDH, the readmissions
payment adjustment under Hospital Readmissions Reduction Program for
each discharge will be calculated by multiplying the SCH's or MDH's
readmission payment adjustment factor by the base-operating DRG payment
amount that is exclusive of the amount by which the hospital-specific
rate payment exceeds the Federal payment rate, where applicable. The
resulting payment adjustment will then be subtracted from the
hospital's payment for the discharge, regardless of whether the
hospital is paid based on the Federal rate or its hospital-specific
rate.
After consideration of the public comments we received, we are
finalizing the proposed definition of ``base operating DRG payment
amount'' at 42 CFR 412.152, noting that it includes any applicable
payment adjustments for transfer cases under 42 CFR 412.4(f). In
addition, we are revising the definition of ``wage-adjusted DRG
operating payment'' in the regulations we proposed at 42 CFR 412.152 to
specify that any applicable payment adjustment for transfers under
Sec. 412.4(f) is included.
(2) Special Rules for Certain Hospitals: Hospitals Paid Under Section
1814(b)(3) of the Act (Sec. 412.154(d))
Although the definition of ``applicable hospital'' under section
1886(q)(5)(C) of the Act also includes hospitals paid under section
1814(b)(3) of the Act (that is, certain Maryland hospitals), section
1886(q)(2)(B)(ii) of the Act allows the Secretary to exempt such
hospitals from the Hospital Readmissions Reduction Program, provided
that the State submits an annual report to the Secretary describing how
a similar program to reduce hospital readmissions in that State
achieves or surpasses the measured results in terms of health outcomes
and cost savings established by Congress for the program as applied to
``subsection (d) hospitals.'' Accordingly, a program established by the
State of Maryland that could serve to exempt the State from the
Hospital Readmissions Reduction Program would focus on those
``applicable'' Maryland hospitals operating under the ``waiver''
provided by section 1814(b)(3) of the Act, that is, those hospitals
that would otherwise have been paid by Medicare under the IPPS, absent
the provision.
In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27960), we
proposed to establish criteria for evaluation of an annual report to
CMS to determine whether Maryland should be exempted from the program
each year. Accordingly, we proposed to evaluate a report submitted by
the State of Maryland documenting how its program (described below)
meets those criteria. Based on the information in the report, we
proposed to determine whether or not Maryland's readmission program met
our criteria to be exempt from the Hospital Readmissions Reduction
Program for FY 2013. We noted that our proposed criteria to evaluate
Maryland's program is for FY 2013, the first year of the program, and
our evaluation criteria may change through notice-and-comment
rulemaking as the Hospital Readmissions Reduction Program evolves. We
proposed to codify this requirement at Sec. 412.154(d) of the
regulations.
Based on preliminary discussions with the State, we understand
that, effective July 1, 2011, Maryland has established the Admission-
Readmission Revenue (ARR) Program. The State has described its program
as a voluntary program for acute care hospitals, of which 30 out of the
46 acute care hospitals in the State are currently enrolled. Under the
program, the State pays hospitals under a case-mix adjusted bundled
payment per episode of care, where the episode of care is defined as
the initial admission and any subsequent readmissions to the same
hospital or linked hospital system that occur within 30 days of the
original discharge. According to the State, an initial admission with
no readmissions provides the hospital with the same weight as an
initial admission with multiple readmissions. Therefore, hospitals
receive a financial reward for decreased readmissions (as determined
through the case mix adjusted, episode of care weights). Unlike the
Hospital Readmissions Reduction Program under section 1886(q) of the
Act, which is currently based on measures for three conditions (HF,
AMI, and PN) for the Medicare FFS population and only adjusts the IPPS
operating payments, Maryland's program applies to all conditions for
all patients. In addition, while the Hospital Readmissions Reduction
Program considers a readmission to be a subsequent admission to either
the original acute care hospital from where the patient was initially
discharged or an admission to another acute care hospital, currently
Maryland only tracks readmissions to the same acute care hospital (or
linked hospital system) from which the patient was originally
discharged. The State had noted that, under its ARR program, the
readmission rates for the hospitals participating in the ARR program
for the first quarter of its fiscal year compared to the first quarter
of its previous fiscal year decreased from 9.86 percent to 8.96
percent.
In the FY 2013 IPPS/LTCH PPS proposed rule, we proposed to evaluate
Maryland's ARR program based on whether the State could demonstrate
that cost savings under its program achieved or exceeded the savings to
the Medicare program due to the Hospital Readmissions Reduction Program
under section 1886(q) of the Act. We also proposed to evaluate whether
Maryland's program could demonstrate similar results in reducing
unnecessary readmissions among hospitals in the State, as described in
more detail below. With specific regard to Maryland's demonstration of
cost savings, we proposed to evaluate whether Maryland's ARR program
could demonstrate savings to the Medicare program that are at least
similar to those expected under the Hospital Readmissions Reduction
Program. As discussed in this proposed rule, we estimated that, under
the Hospital Readmissions Reduction Program, for FY 2013, Medicare IPPS
operating payments would decrease by approximately $300 million (or 0.3
percent) of total Medicare IPPS operating payments. Maryland has
indicated that it believes it can achieve comparable savings because it
intends to reduce the rate update factor for all hospitals by 0.3
percent, regardless of a hospital's performance on readmissions.
In addition, we indicated in the proposed rule that we plan to
propose, in future rulemaking, to evaluate whether Maryland's ARR
program can meet or exceed health outcomes that we expect to improve
under the Hospital Readmissions Reduction Program. Because the Hospital
Readmissions Reduction Program is not effective until October 1, 2012,
we indicated that we do not yet have measured health outcomes against
which we can evaluate Maryland's ARR program. However, we intend to
have outcomes data in the future with which to evaluate Maryland's ARR
program. We anticipate that, under the Hospital Readmissions Reduction
Program, hospitals will experience a reduction in unnecessary
[[Page 53385]]
readmissions. Therefore, in future rulemaking, we intend to propose to
evaluate whether Maryland's ARR program can demonstrate similar
decreases in potential preventable readmissions among hospitals in the
State. Furthermore, in the FY 2013 IPPS/LTCH PPS proposed rule, we
proposed that the State's annual report and request for exemption from
the Hospital Readmissions Reduction Program must be resubmitted and
reconsidered annually in accordance with the statute and as proposed at
Sec. 412.154(d)(2).
Based on preliminary information provided by Maryland, the State
believes that its program can meet our evaluation criteria and
demonstrate that its program achieves or surpasses the measured results
in terms of health outcomes and cost savings. We indicated in the
proposed rule that we are reviewing whether the Maryland's ARR program,
which currently cannot monitor readmissions to other hospitals and
provide a financial reward for hospitals that reduce within-hospital
readmissions, but provides for an across-the-board 0.3 percent
reduction to the annual rate update to account for comparable savings
to the Hospital Readmissions Reduction Program, meets the criteria to
exempt Maryland hospitals from the Hospital Readmissions Reduction
Program. We welcomed public comments on whether the Maryland ARR
program meets the requirements for exemption from the Hospital
Readmissions Reduction Program set forth in section 1886(q)(2)(B)(ii)
of the Act.
Comment: Commenters requested that Maryland hospitals be exempt
from the Hospital Readmissions Reduction Program. Commenters contended
that Maryland's readmissions program meets the criteria for Maryland
hospitals to be waived from the Hospital Readmissions Reduction
Program. One commenter stated that Maryland has already demonstrated
successful reductions in readmissions as a result of the Admission-
Readmission Revenue (ARR) and Total Patient Revenue (TPR) programs. The
commenter described the TPR program as a global budget payment program,
designed to reduce overall volumes and, thus, reduce readmissions. ARR
hospitals have seen a 7.1 percent reduction in Medicare readmissions
since the inception of the program; TPR hospitals have experienced a
6.4 percent decline in readmissions from FY 2009 to FY 2011. The
commenter sought more information on how CMS plans to measure
Maryland's performance relative to the nation prior to implementation
in order to ensure that Maryland's hospitals are prepared to meet our
expectations, and can make the appropriate adjustments in advance of
submitting an exemption request.
Commenters acknowledged that the ARR program provides a financial
incentive for hospitals to reduce readmissions and improve the quality
of care and that the ARR program established a 30-day episode of care
payment instead of a payment per admission, so a hospital that reduces
readmissions keeps the same revenue and increases profits by reducing
costs. However, one commenter suggested that savings are generated by
reducing inter-hospital readmissions and outpatient visits. The
commenter stated that the TPR program generates savings by restricting
revenues and, therefore, providing an incentive for hospitals to reduce
volumes. The commenter stated that this mechanism allows participating
hospitals to focus on patient care and improved outcomes, rather than
generating volume. Furthermore, the commenter pointed out that
Maryland's Health Services Cost Review Commission reduced hospitals' FY
2013 rate update by 0.58 percentage points to guarantee readmissions
savings.
Finally, the State of Maryland also commented that, in future
years, it will work with us to demonstrate cost savings and improved
outcomes, over a multiyear period.
Response: We appreciate the commenters' requests to exempt Maryland
from the Hospital Readmissions Reduction Program for FY 2013. In the FY
2013 IPPS/LTCH PPS proposed rule (77 FR 27959), we proposed to
establish an annual process by which to evaluate Maryland's readmission
program to determine whether the State's program meets or exceeds
measured results in terms of health outcomes and cost savings as
compared to the Hospital Readmissions Reduction Program. For FY 2013,
we indicated that the Hospital Readmissions Reduction Program would
result in an estimated savings of $300 million (-0.3 percent), and we
proposed to evaluate whether Maryland's program could have comparable
savings. As commenters acknowledged, Maryland's readmissions program
provides a financial incentive, not penalty, to hospitals that reduce
their readmissions. Furthermore, commenters acknowledged that the State
has guaranteed savings by reducing the FY 2013 rate by 0.58 percent. We
understand that this is a uniform rate reduction for all hospitals,
regardless of an individual hospital's performance on readmissions. We
understand that the acute care hospitals in Maryland are included
either in the ARR program or the TPR program, which provides incentives
for hospitals to reduce readmissions.
With respect to health outcomes, we proposed that since this is the
first year of the Hospital Readmissions Reduction Program, we do not
have a measured health outcomes by which to evaluate Maryland against.
Thus, for the first year, we would not evaluate Maryland's program with
respect to health outcomes. In the future, we intend to have national
outcomes data to evaluate Maryland's program, and we will work with the
State to measure those outcomes. Similarly, after considering the
commenters' comments, we believe it would be premature to evaluate
Maryland's readmissions program on cost savings, as it is the first
year of the Hospital Readmissions Reduction Program, and Maryland's ARR
Program just completed its first year. As such, we are finalizing to
not evaluate Maryland's ARR Program on measureable health outcomes and
cost savings for the first year. For FY 2013, we are exempting
hospitals paid under section 1814(b)(3) of the Act from the Hospital
Readmissions Reduction Program under our authority under section
1886(q)(2)(B)(ii) of the Act. We are finalizing, as proposed, our plan
to evaluate whether Maryland's readmissions program can demonstrate
similar decreases in potential preventable readmissions and similar
cost savings on an annual basis. However, that evaluation will not
begin until FY 2014. We intend to work with Maryland next year as the
State develops its readmissions programs to be able to measure health
outcomes and to have demonstrable savings. We are finalizing, as
proposed, our requirement that the State's annual report and request
for exemption from the Hospital Readmissions Reduction Program be
resubmitted and reconsidered annually in accordance with the statute,
as finalized at Sec. 412.154(d)(2).
Comment: Commenters sought clarification as to whether an exemption
for Maryland hospitals from the payment requirements under the Hospital
Readmissions Reduction Program would apply to all section 1814(b)
hospitals in Maryland or all of Maryland's acute care hospitals. The
commenters requested that the waiver be applied to all Maryland acute
care hospitals.
Response: Section 1886(q)(2)(B)(ii) of the Act allows the Secretary
to exempt hospitals paid under the ``waiver'' provided by section
1814(b)(3) of the
[[Page 53386]]
Act, that is, those hospitals that would otherwise have been paid by
Medicare under the IPPS, absent the provision. Accordingly, we are
finalizing that, for FY 2013, all acute care hospitals in Maryland,
which are the hospitals that are paid under the waiver at section
1814(b)(3) of the Act, that otherwise would have been paid under the
IPPS, are exempt from the Hospital Readmissions Reduction Program.
Comment: One commenter asked for a definition of base operating DRG
payment for Maryland hospitals, considering that Maryland hospitals
paid under section 1814(b)(3) of the Act are paid at 94 percent of
their charges.
Response: In the FY 2013 IPPS/LTCH PPS proposed rule, we did not
make a proposal regarding the definition of base operating DRG payment
amount with regard to Maryland hospitals. Because we are finalizing our
proposal to exempt Maryland hospitals from the Hospital Readmissions
Reduction Program for FY 2013, we intend to revisit the definition of
base operating DRG payment amount for Maryland hospitals in future
rulemaking.
Comment: Commenters asked that there be a combined exemption
request for Maryland hospitals for the Hospital Readmissions Reduction
Program, the HAC program, and the Hospital VBP Programs in order to be
more efficient and to reduce the administrative burden at the State and
Federal level.
Response: The Hospital Readmissions Reduction Program and the
Hospital VBP Program, effective in FY 2013, are separate hospital
payment programs with different purposes and policy goals. For example,
the Hospital Readmissions Reduction Program reduces payments to
hospitals for excess readmissions, while the Hospital VBP Program
redistributes reductions made to the base operating DRG payment amount,
based on certain performance measures. Because of the varying nature of
these two programs, at this time, we do not believe it is appropriate
for the State to submit one exemption request to determine whether
certain Maryland hospitals should be waived from the requirements under
both the Hospital Readmissions Reduction Program and the Hospital VBP
Program. Because the HAC Program, established under section 1886(p) of
the Act, is not effective until FY 2015, we believe it is premature to
consider the process by which the State can request an exemption from
the requirements of this Program.
For the purposes of modeling the impacts of our proposal, we
modeled under the assumption that Maryland hospitals will not have
Hospital Readmissions Reduction Program adjustment factors applied to
them. Although the adjustment factors do not apply to these hospitals
under our models, Maryland hospitals have excess readmission ratios,
consistent with the definition of excess readmission ratio. Any
readmission to a Maryland hospital from a subsection (d) hospital in
another State is still considered a readmission for purposes of the
original hospital in another State. This is consistent with the
definition of readmissions in section 1886(q)(5)(E) of the Act, which
includes admissions to the same or another ``applicable hospital.'' As
discussed above, we interpret the definition of ``applicable hospital''
under section 1886(q)(5)(C) of the Act to include both subsection (d)
hospitals and hospitals paid under section 1814(b)(3) of the Act that
would, absent the provisions of section 1814(b)(3) of the Act, be paid
under subsection (d).
Although we are exempting Maryland hospitals from the Hospital
Readmissions Reduction Program, Maryland hospitals are still considered
an ``applicable hospital.'' As such, we are finalizing, as proposed,
that we are calculating excess readmission ratios for Maryland
hospitals, consistent with the definition of excess readmission ratio.
In addition, any readmission to a Maryland hospital from a subsection
(d) hospital in another State is still considered a readmission for
purposes of the original hospital in another State, and we are
finalizing, as proposed, to include data from Maryland hospitals in the
calculation of the excess readmission ratios for all applicable
hospitals.
c. Adjustment Factor (Both the Ratio and Floor Adjustment Factor)
(Sec. 412.154(c))
Section 1886(q)(3)(A) of the Act defines the ``adjustment factor''
for an applicable hospital for a fiscal year as equal to the greater of
``(i) the ratio described in subparagraph (B) for the hospital for the
applicable period (as defined in paragraph (5)(D)) for such fiscal
year; or (ii) the floor adjustment factor specified in subparagraph
(C).'' Section 1886(q)(3)(B) of the Act in turn describes the ratio
used to calculate the adjustment factor. Specifically, it states that
the ratio is ``equal to 1 minus the ratio of--(i) the aggregate
payments for excess readmissions * * *; and (ii) the aggregate payments
for all discharges * * *.'' In the FY 2013 IPPS/LTCH PPS proposed rule
(77 FR 27960), we proposed to codify the calculation of this ratio at
Sec. 412.154(c)(1) of the regulations. Section 1886(q)(3)(C) of the
Act specifies the floor adjustment factor, which is set at 0.99 for FY
2013, 0.98 for FY 2014, and 0.97 for FY 2015 and subsequent fiscal
years. We proposed to codify the floor adjustment factor at Sec.
412.154(c)(2) of the regulations.
For FY 2013, under proposed Sec. 412.154(c), we proposed that an
applicable hospital would receive an adjustment factor that is either
the greater of the ratio described in section IV.A.3.d. of the preamble
of the proposed rule or a floor adjustment factor of 0.99. We proposed
that the ratio would be rounded to the fourth decimal place, consistent
with the calculation of other IPPS payment adjustments such as the wage
index, DSH adjustment, and the IME adjustment. In other words, a
hospital included in this program can have an adjustment factor that is
between 1.0 and 0.9900 for FY 2013. Consistent with section 1886(q)(3)
of the Act, under proposed Sec. 412.154(c), we proposed that, for FY
2013, the hospital will receive an adjustment factor under the Hospital
Readmissions Reduction Program that is the greater of the ratio or the
floor of 0.99. Consistent with this proposal, under the regulations we
proposed at 42 CFR 412.152, we proposed to define the ``floor
adjustment factor'' as the value that the readmissions adjustment
factor cannot be less than for a given fiscal year. As noted above, the
floor adjustment factor is set at 0.99 for FY 2013, 0.98 for FY 2014,
and 0.97 for FY 2015 and subsequent fiscal years.
Comment: Commenters supported our proposed calculation of the
adjustment factor as 1 minus the ratio of the hospital's aggregate
payments for excess readmissions for applicable conditions to the
hospital's aggregate payments for all discharges for applicable
conditions. Commenters also supported our proposal to determine a
hospital's actual payment adjustment factor as the higher of its
calculated factor or 0.99, resulting in a maximum reduction of 1
percent of base operating DRG payments for FY 2013.
Response: We thank the commenters for their support of these
proposals.
In this final rule, we are finalizing our proposal to establish an
applicable hospital's adjustment factor as the higher of a ratio or the
floor adjustment factor of 0.99 for FY 2013. We are finalizing, as
proposed, that the ratio will be rounded to the fourth decimal place.
We also are finalizing our proposal to codify these policies in
regulation at Sec. 412.154(c) without modification.
[[Page 53387]]
d. Aggregate Payments for Excess Readmissions and Aggregate Payments
for All Discharges (Sec. 412.152)
As discussed earlier, section 1886(q)(3)(B) of the Act specifies
the ratio used to calculate the adjustment factor under the Hospital
Readmissions Reduction Program. It states that the ratio is ``equal to
1 minus the ratio of--(i) the aggregate payments for excess
readmissions * * *; and (ii) the aggregate payments for all discharges
* * *.'' In the FY 2013 IPPS LTCH PPS proposed rule (77 FR 27961), we
set forth proposals to define aggregate payments for excess
readmissions and aggregate payments for all discharges, as well as a
methodology for calculating the numerator of the ratio (aggregate
payments for excess readmissions) and the denominator of the ratio
(aggregate payments for all discharges).
Section 1886(q)(4) of the Act sets forth the definitions of
``aggregate payments for excess readmissions'' and ``aggregate payments
for all discharges'' for an applicable hospital for the applicable
period. The term ``aggregate payments for excess readmissions'' is
defined in section 1886(q)(4)(A) of the Act as ``for a hospital for an
applicable period, the sum, for applicable conditions * * * of the
product, for each applicable condition, of (i) the base operating DRG
payment amount for such hospital for such applicable period for such
condition; (ii) the number of admissions for such condition for such
hospital for such applicable period; and (iii) the `Excess Readmission
Ratio' * * * for such hospital for such applicable period minus 1.'' We
proposed to include this definition of ``aggregate payments for excess
readmissions'' under the regulations we proposed at 42 CFR 412.152.
We did not receive any public comments on the proposed definition
of ``aggregate payments for excess readmissions'' and are finalizing
our definition as proposed under the regulations at 42 CFR 412.152
without modification.
The ``excess readmission ratio'' is a hospital-specific ratio
calculated for each applicable condition. Specifically, section
1886(q)(4)(C) of the Act defines the excess readmission ratio as the
ratio of ``risk-adjusted readmissions based on actual readmissions''
for an applicable hospital for each applicable condition, to the
``risk-adjusted expected readmissions'' for the applicable hospital for
the applicable condition. The methodology for the calculation of the
excess readmission ratio was finalized in the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51673). ``Aggregate payments for excess
readmissions'' is the numerator of the ratio used to calculate the
adjustment factor under the Hospital Readmissions Reduction Program.
The term ``aggregate payments for all discharges'' is defined at
section 1886(q)(4)(B) of the Act as ``for a hospital for an applicable
period, the sum of the base operating DRG payment amounts for all
discharges for all conditions from such hospital for such applicable
period.'' ``Aggregate payments for all discharges'' is the denominator
of the ratio used to calculate the adjustment factor under the Hospital
Readmissions Reduction Program. In the proposed rule, we proposed to
include this definition of ``aggregate payments for all discharges''
under the regulations we proposed at Sec. 412.152.
We did not receive any public comments on the proposed definition
of ``aggregate payments for all discharges'' and are finalizing our
definition as proposed under the regulations at 42 CFR 412.152 without
modification.
As discussed above, when calculating the numerator (aggregate
payments for excess readmissions), we determined the base operating DRG
payments for the applicable period. ``Aggregate payments for excess
readmissions'' (the numerator) is defined as ``the sum, for applicable
conditions * * * of the product, for each applicable condition, of (i)
the base operating DRG payment amount for such hospital for such
applicable period for such condition; (ii) the number of admissions for
such condition for such hospital for such applicable period; and (iii)
the `Excess Readmission Ratio' * * * for such hospital for such
applicable period minus 1.''
We discussed above our proposed definition of ``base operating DRG
payment amount.'' When determining the base operating DRG payment
amount for an individual hospital for such applicable period for such
condition, we proposed to use Medicare inpatient claims from the MedPAR
file with discharge dates that are within the same applicable period
that was finalized in the FY 2012 IPPS/LTCH PPS final rule (76 FR
51671) to calculate the excess readmission ratio. We proposed to use
MedPAR claims data as our data source for determining aggregate
payments for excess readmissions and aggregate payments for all
discharges, as this data source is consistent with the claims data
source used in IPPS rulemaking to determine IPPS rates. For FY 2013, we
proposed to use data from MedPAR claims with discharge dates that are
on or after July 1, 2008, and no later than June 30, 2011, the
applicable period finalized in the FY 2012 IPPS/LTCH PPS final rule. We
proposed to 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 (that is, the
March updates of the respective Federal fiscal year MedPAR files for
the final rules, as described in greater detail below). These are the
same MedPAR files that are used in the annual IPPS rulemaking for each
Federal fiscal year.
In the FY 2013 IPPS/LTCH PPS proposed rule, for FY 2013, we
proposed to use the March 2009 update of the FY 2008 MedPAR file to
identify claims within FY 2008 with discharges dates that are on or
after July 1, 2008, the March 2010 update of the FY 2009 MedPAR file to
identify claims within FY 2009, the March 2011 update of the FY 2010
MedPAR file to identify claims within FY 2010, and the December 2011
update of the FY 2011 MedPAR file to identify claims within FY 2011
with discharge dates no later than June 30, 2011. For the FY 2013 IPPS/
LTCH PPS final rule, we proposed to use the March 2012 update of the FY
2011 MedPAR file to identify claims within FY 2011, as these would be
the most recently available FY 2011 claims data used for FY 2013
rulemaking. These MedPAR data files are used each year in other areas
of the IPPS, including calculating the IPPS relative weights, budget
neutrality factors, outlier thresholds, and the standardized amount.
Accordingly, we believe it is appropriate to use these same data files
for the purpose of calculating the readmission adjustment factors. The
FY 2008 through FY 2011 MedPAR data files can be purchased from CMS.
Use of these files will allow the public to verify the readmission
adjustment factors. Interested individuals may order these files
through the Web site at: http://www.cms.hhs.gov/LimitedDataSets/ by
clicking on the MedPAR Limited Data Set (LDS)-Hospital (National). This
Web page describes the files and provides directions and further
detailed instructions for how to order the data sets. Persons placing
an order must send the following: a Letter of Request, the LDS Data Use
Agreement and Research Protocol (refer to the Web site for further
instructions), the LDS Form, and a check for $3,655 to:
Mailing address if using the U.S. Postal Service: Centers for
Medicare and Medicaid Services, RDDC Account, Accounting Division, P.O.
Box 7520, Baltimore, MD 21207-0520.
[[Page 53388]]
Mailing address if using express mail: Centers for Medicare and
Medicaid Services, OFM/Division of Accounting- RDDC, Mailstop
C-07-11, 7500 Security Boulevard, Baltimore, MD 21244-1850.
In the proposed rule, we proposed to determine aggregate payments
for excess readmissions and aggregate payments for all discharges using
data from MedPAR claims with discharge dates that are on or after July
1, 2008, and no later than June 30, 2011, which is the applicable
period finalized in the FY 2012 IPPS/LTCH PPS final rule. However, we
noted in the proposed rule, that for the purposes of modeling, we used
excess readmission ratios based on an older performance period of July
1, 2007 to June 30, 2010. As we stated in the proposed rule, for this
final rule, we are using both the excess readmission ratios and MedPAR
claims data to calculate aggregate payments for excess readmissions and
aggregate payments for all discharges based on the applicable period
finalized in the FY 2012 IPPS/LTCH PPS final rule (July 1, 2008 to June
30, 2011).
Comment: Commenters supported the use of MedPAR claims data to
determine base operating DRG payment amounts. However, several
commenters opposed CMS' proposal to use 3 years of data from the period
July 1, 2008 through June 30, 2011, for calculating hospital
readmissions adjustment factors for FY 2013. The commenters stated that
using older data did not reflect current practices of a hospital, and
recommended that CMS use a 1-year period from July 1, 2010 to June 30,
2011, to accurately reflect a hospital's performance on readmissions.
Response: We appreciate the commenters' support for using the
MedPAR data to determine base operating DRG payment amounts to
calculate the readmission payment adjustment factors.
In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27961), we
proposed to calculate the readmission payment adjustment factor using
the same applicable period that is used to calculate the excess
readmission ratios, as finalized in the FY 2012 IPPS/LTCH PPS final
rule. The statute references ``applicable period'' in both the
calculation of the readmissions measures and the readmission payment
adjustment factor, such that it requires that the same time period be
used for both the calculation of the measures and the adjustment
factor. As finalized in the FY 2012 IPPS/LTCH PPS final rule, we use 3
years of data to calculate the readmissions measures (that is, for FY
2013, we are using discharge data from July 1, 2008 through June 30,
2011), and therefore, we are using data from the same time period to
calculate the aggregate payments for excess readmissions and aggregate
payments for all discharges. Using 3 years of claims data increases
precision for the calculation of excess readmission ratios and the
calculation of the readmissions payment adjustment factors.
In this final rule, we are finalizing our proposal to use MedPAR
data from July 1, 2008 through June 30, 2011, and we are finalizing our
proposal to use the March 2009 update of the FY 2008 MedPAR file to
identify claims within FY 2008 with discharges dates that are on or
after July 1, 2008, the March 2010 update of the FY 2009 MedPAR file to
identify claims within FY 2009, the March 2011 update of the FY 2010
MedPAR file to identify claims within FY 2010, and the March 2012
update of the FY 2011 MedPAR file to identify claims within FY 2011
with discharge dates no later than June 30, 2011.
Comment: One commenter asked CMS to ensure that outlier payments
are correctly excluded from the base operating DRG amount using the
MedPAR data source.
Response: We have ensured that we are correctly excluding outlier
payments in the calculation of the base operating DRG amount using our
MedPAR data source.
In order to identify the admissions for each condition for an
individual hospital for calculating the aggregate payments for excess
readmissions, we proposed to identify each applicable condition using
the same ICD-9-CM codes used to identify applicable conditions to
calculate the excess readmission ratios. In the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51669), in our discussion of the methodology of the
readmissions measures, we stated that we identify eligible
hospitalizations and readmissions of Medicare patients discharged from
an applicable hospital having a principal diagnosis for the measured
condition in an applicable period. The discharge diagnoses for each
applicable condition are based on a list of specific ICD-9-CM codes for
that condition. These codes are listed in the 2010 Measures Maintenance
Technical Report: Acute Myocardial Infarction, Heart Failure, and
Pneumonia 30-Day Risk-Standardized Readmission Measures. They also are
posted on the Web site at: http://www.QualityNet.org> Hospital-
Inpatient > Readmission Measures >methodologies.
In order to identify the applicable conditions to calculate the
aggregate payments for excess readmissions, we proposed to identify the
claim as an applicable condition if the ICD-9-CM code for that
condition is listed as the principal diagnosis on the claim, consistent
with the methodology to identify conditions to calculate the excess
readmission ratio. Furthermore, we proposed to only identify Medicare
FFS claims that meet the criteria (that is, claims paid for under Part
C, Medicare Advantage, would not be included in this calculation),
consistent with the methodology to calculate excess readmission ratios
based on readmissions for Medicare FFS patients. The tables below list
the ICD-9-CM codes we proposed to use to identify each applicable
condition to calculate the aggregate payments for excess readmissions
under this proposal. These ICD-9-CM codes will also be used to identify
the applicable conditions to calculate the excess readmission ratios,
consistent with our policy finalized in the FY 2012 IPPS/LTCH PPS final
rule.
ICD-9-CM Codes To Identify Pneumonia Cases
------------------------------------------------------------------------
ICD-9-CM Code Description of code
------------------------------------------------------------------------
480.0.................................. Pneumonia due to adenovirus.
480.1.................................. Pneumonia due to respiratory
syncytial virus.
480.2.................................. Pneumonia due to parainfluenza
virus.
480.3.................................. Pneumonia due to SARS-
associated coronavirus.
480.8.................................. Viral pneumonia: pneumonia due
to other virus not elsewhere
classified.
480.9.................................. Viral pneumonia unspecified.
481.................................... Pneumococcal pneumonia
[streptococcus pneumoniae
pneumonia].
482.0.................................. Pneumonia due to klebsiella
pneumoniae.
482.1.................................. Pneumonia due to pseudomonas.
482.2.................................. Pneumonia due to hemophilus
influenzae [h. influenzae].
482.30................................. Pneumonia due to streptococcus
unspecified.
482.31................................. Pneumonia due to streptococcus
group a.
482.32................................. Pneumonia due to streptococcus
group b.
482.39................................. Pneumonia due to other
streptococcus.
482.40................................. Pneumonia due to staphylococcus
unspecified.
482.41................................. Pneumonia due to staphylococcus
aureus.
482.42................................. Methicillin Resistant Pneumonia
due to Staphylococcus Aureus.
482.49................................. Other staphylococcus pneumonia.
482.81................................. Pneumonia due to anaerobes.
482.82................................. Pneumonia due to escherichia
coli [e.coli].
482.83................................. Pneumonia due to other gram-
negative bacteria.
[[Page 53389]]
482.84................................. Pneumonia due to legionnaires'
disease.
482.89................................. Pneumonia due to other
specified bacteria.
482.9.................................. Bacterial pneumonia
unspecified.
483.0.................................. Pneumonia due to mycoplasma
pneumoniae.
483.1.................................. Pneumonia due to chlamydia.
483.8.................................. Pneumonia due to other
specified organism.
485.................................... Bronchopneumonia organism
unspecified.
486.................................... Pneumonia organism unspecified.
487.0.................................. Influenza with pneumonia.
488.11................................. Influenza due to identified
novel H1N1 influenza virus
with pneumonia.
------------------------------------------------------------------------
ICD-9-CM Codes To Identify Heart Failure Cases
------------------------------------------------------------------------
ICD-9-CM Code Code description
------------------------------------------------------------------------
402.01................................. Hypertensive heart disease,
malignant, with heart failure.
402.11................................. Hypertensive heart disease,
benign, with heart failure.
402.91................................. Hypertensive heart disease,
unspecified, with heart
failure.
404.01................................. Hypertensive heart and chronic
kidney disease, malignant,
with heart failure and with
chronic kidney disease stage I
through stage IV, or
unspecified.
404.03................................. Hypertensive heart and chronic
kidney disease, malignant,
with heart failure and with
chronic kidney disease stage V
or end stage renal disease.
404.11................................. Hypertensive heart and chronic
kidney disease, benign, with
heart failure and with chronic
kidney disease stage I through
stage IV, or unspecified.
404.13................................. Hypertensive heart and chronic
kidney disease, benign, with
heart failure and with chronic
kidney disease stage I through
stage IV, or unspecified
failure and chronic kidney
disease stage V or end stage
renal disease.
404.91................................. Hypertensive heart and chronic
kidney disease, unspecified,
with heart failure and chronic
kidney disease stage V or end
stage renal disease heart
failure and with chronic
kidney disease stage I through
stage IV, or unspecified.
404.93................................. Hypertensive heart and chronic
kidney disease, unspecified,
with heart failure and chronic
kidney disease stage V or end
stage renal disease.
428.xx................................. Heart Failure.
------------------------------------------------------------------------
ICD-9-CM Codes To Identify Acute Myocardial Infarction Cases
------------------------------------------------------------------------
ICD-9-CM Code Description of code
------------------------------------------------------------------------
410.00................................. AMI (anterolateral wall)--
episode of care unspecified.
410.01................................. AMI (anterolateral wall)--
initial episode of care.
410.10................................. AMI (other anterior wall)--
episode of care unspecified.
410.11................................. AMI (other anterior wall)--
initial episode of care.
410.20................................. AMI (inferolateral wall)--
episode of care unspecified.
410.21................................. AMI (inferolateral wall)--
initial episode of care.
410.30................................. AMI (inferoposterior wall)--
episode of care unspecified.
410.31................................. AMI (inferoposterior wall)--
initial episode of care.
410.40................................. AMI (other inferior wall)--
episode of care unspecified.
410.41................................. AMI (other inferior wall)--
initial episode of care.
410.50................................. AMI (other lateral wall)--
episode of care unspecified.
410.51................................. AMI (other lateral wall)--
initial episode of care.
410.60................................. AMI (true posterior wall)--
episode of care unspecified.
410.61................................. AMI (true posterior wall)--
initial episode of care.
410.70................................. AMI (subendocardial)--episode
of care unspecified.
410.71................................. AMI (subendocardial)--initial
episode of care.
410.80................................. AMI (other specified site)--
episode of care unspecified.
410.81................................. AMI (other specified site)--
initial episode of care.
410.90................................. AMI (unspecified site)--episode
of care unspecified.
410.91................................. AMI (unspecified site)--initial
episode of care.
------------------------------------------------------------------------
Comment: Several commenters requested that, in the calculation of
aggregate payments for excess readmissions, CMS remove admissions for
the applicable conditions that were not considered admissions for the
purposes of the calculation of the excess readmission ratio.
Specifically, commenters requested that CMS remove admissions for (1)
Index admissions for beneficiaries who die in the hospital; (2)
admissions for beneficiaries who were transferred to another acute care
hospital; (3) admissions for beneficiaries who were discharged against
medical advice; (4) admissions for beneficiaries without at least 30
days post-discharge enrollment in Medicare Part A fee-for-service; and
(5) multiple admissions within 30 days of a prior index admission.
Commenters argued that these trims are made for the readmissions
measures, and accordingly, they should also be made when determining
which admissions are included in the calculation of aggregate payments
for excess readmissions. One commenter recognized that not all of these
trims can be identified in our proposed data source, MedPAR, so the
commenter requested that CMS estimate an ``additional exclusions
factor'' for the exclusions that we cannot account for based on data
from the Measures Maintenance Technical Report, which lists the
percentage of admissions that are removed by exclusion. The commenter
suggested that the ``additional exclusions factor'' for each exclusion
that cannot be accounted for in our proposed data source be removed for
every hospital. By not excluding these admissions, the commenters
believed that CMS is erroneously inflating the calculation of aggregate
payments for excess readmissions.
Response: In our proposal to calculate the excess payments for
readmissions, we proposed to identify admissions for each condition for
an individual hospital for calculating the aggregate payments for
readmissions by using the same ICD-9-CM codes used to identify the
applicable conditions to calculate the excess readmissions ratios. We
proposed to identify the claim as an applicable condition if the ICD-9-
CM code for that condition is listed as the principal diagnosis on the
claim, consistent with the calculation of the excess readmission
ratios. Similarly, we proposed to limit our admissions to Medicare FFS
claims, consistent with the methodology to calculate the excess
readmission ratios.
As finalized in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51669),
the readmissions conditions of AMI, HF, and PN account for certain
exclusions of admissions from being considered as an index admission.
The NQF-endorsed readmission measures exclude from the group of index
admission: (1) Hospitalizations for patients with an in-hospital death;
(2) hospitalizations for patients without at least 30 days post
discharge enrollment in Medicare FFS; (3) hospitalizations for patients
discharged against medical advice; (4) transfers; and (5) multiple
admissions within 30 days of a prior index admission. In addition, for
AMI, same day discharges are excluded as an index
[[Page 53390]]
admission. Furthermore, we limit admissions to include Medicare Part A
FFS enrollees who are 65 years or older.
We agree with the commenters that the index admissions that are not
considered admissions for the purpose of the readmissions measures,
thus excluded from the calculation of the excess readmission ratio,
should also not be considered admissions for the purposes of
determining a hospital's aggregate payments for excess readmissions.
Accordingly, we are modifying our methodology to identify the
admissions included in the calculation of ``aggregate payments for
excess readmissions.'' For this final rule, using our MedPAR data
source, we will identify admissions for the purposes of calculating
aggregate payments for excess readmissions as follows:
We will exclude admissions that are identified as an
applicable condition based on the ICD-9-CM code listed as the primary
diagnosis, but where the patient had died, as identified by the
discharge status code on the MedPAR claim.
We will exclude admissions identified as an applicable
condition based on the ICD-9-CM code listed as the primary diagnosis,
but where the patient was transferred to another applicable hospital,
as identified by the discharge status code on the MedPAR claim.
We will eliminate admissions identified as an applicable
condition based on the ICD-9-CM code listed as the primary diagnosis,
but where the patient was discharged against medical advice as
identified by the discharge status code on the MedPAR claim.
We will exclude admissions identified as an applicable
condition based on the ICD-9-CM code listed as the primary diagnosis
for patients who are under the age of 65, as identified on the MedPAR
claim.
For conditions identified as AMI, we will exclude claims
that are same day discharges, as identified by the admission date and
discharge date on the MedPAR claim.
As the commenters acknowledged, the MedPAR proposed data set that
we are using to calculate the aggregate payments for excess
readmissions cannot identify all of the exclusions included in the
readmissions measures. Specifically, at this time, we cannot identify
directly multiple admissions within 30 days of a prior index admission
and patients without at least 30 days post discharge enrollment in
Medicare FFS in the MedPAR data. However, the suggestion that we
develop an ``additional exclusions factor'' to apply to the calculation
of the readmissions payment adjustment factor is not within the
statutory authority under section 1886(q) of the Act. We do not believe
we have the authority to calculate an ``additional exclusions factor,''
which would be in lieu of the exclusion of admissions from the
calculation of the aggregate payments for excess readmissions, and then
uniformly applied that amount to all applicable hospitals. We believe
that with the exclusions to the data for the scenarios discussed
earlier, we will have accounted for nearly all of the admissions
excluded in the calculation of the excess readmission ratios. We intend
to work towards modifying our systems to identify these claims for the
two additional scenarios, and we will propose in future rulemaking to
what extent we can include those exclusions from the calculation of the
aggregate payments for excess readmissions.
For FY 2013, we are finalizing a methodology to calculate aggregate
payments for excess readmissions, using MedPAR claims from July 1, 2008
to June 30, 2011, to identify applicable conditions based on same ICD-
9CM codes used to identify the conditions for the readmissions measures
and to apply the exclusions for the types of admissions discussed
above, which are currently identifiable on the claim in MedPAR.
Comment: One commenter stated that a claim that the Recovery Audit
Contractor (RAC) determines should have been provided in the outpatient
setting and subsequently is denied as an inpatient should not be
included in the calculation of a hospital's readmissions adjustment.
The commenter sought clarification on whether the Common Working File
(CWF) has been updated for RAC denials. The commenter stated that if a
claim was subsequently denied for inpatient status, it should be
removed from inpatient claims data set used for calculation of a
hospital's readmission adjustment.
Response: In the FY 2013 IPPS/LTCH PPS proposed rule, we proposed
to use the MedPAR claims data as our data source to calculate the
excess payments for readmissions and payments for all discharges.
Specifically, we proposed to use MedPAR data for discharges from July
1, 2008 through June 30, 2011, and we proposed to use the March 2009
update of the FY 2008 MedPAR file to identify claims within FY 2008
with discharges dates that are on or after July 1, 2008, the March 2010
update of the FY 2009 MedPAR file to identify claims within FY 2009,
the March 2011 update of the FY 2010 MedPAR file to identify claims
within FY 2010, and the March 2012 update of the FY 2011 MedPAR file to
identify claims within FY 2011. We proposed to use these MedPAR
updates, as it is consistent with the inpatient claims data set used in
IPPS ratesetting.
The RACs have up to 3 years to review claims to determine whether a
claim was inappropriately billed as inpatient when it should have been
an outpatient claim. If a claim is denied as an inpatient stay, the
claim is adjusted through the standard Medicare claims processing
systems, going through the CWF and MedPAR. However, given the timing of
the RAC audits and the updates of the MedPAR used to calculate the
readmissions payment adjustments, it is not certain that all denied
claims will be reflected in MedPAR at the time of our analysis. To the
extent that those RAC determinations are made within the timeframe of
the updates of MedPAR, those denied inpatient claims will not be
included in the MedPAR or in the calculation of the readmissions
payment adjustment. We believe that using the updates of the MedPAR
used in annual IPPS rate setting allows for us to use a complete
inpatient claims data set and allows for transparency for the public to
obtain this dataset to replicate our calculations.
In this final rule, we are finalizing our proposal to use MedPAR to
calculate the readmissions payment adjustment factors without
modification.
Section 1886(q)(2) of the Act defines the base operating DRG
payment amount as ``the payment amount that would otherwise be made
under subsection (d) (determined without regard to subsection (o) [the
Hospital VBP Program]) for a discharge if this subsection did not
apply; reduced by * * * any portion of such payment amount that is
attributable to payments under paragraphs (5)(A), (5)(B), (5)(F), and
(12) of subsection (d).'' Paragraphs (d)(5)(A), (d)(5)(B), (d)(5)(F),
and (d)(12) of section 1886 refer to outlier payments, IME payments,
DSH payments, and payments for low-volume hospitals, respectively.
As discussed earlier in section IV.A.3.b.(1) of the preamble of the
proposed rule, we proposed to define ``base operating DRG payment
amount'' under the Hospital Readmissions Reduction Program as the wage-
adjusted DRG operating payment plus any new technology add-on payments.
Thus, in order to calculate the base operating DRG payment amount for
such condition for such hospital, we proposed to identify the base
operating DRG payment amount for such conditions based on the payment
[[Page 53391]]
amounts in the MedPAR files on the claims identified to meet those
conditions based on their ICD-9-CM code.
As discussed in section IV.A.3.b. of the preamble of the proposed
rule, applicable hospitals in the Hospital Readmissions Reduction
Program include SCHs and current MDHs (whose status is set to expire at
the end of FY 2012), as these hospitals meet the definition of
subsection (d) hospitals. SCHs are paid in the interim (prior to cost
report settlement) on a claim-by-claim basis at the amount that is the
higher of the payment based on the hospital-specific rate or the IPPS
Federal rate based on the standardized amount. At cost report
settlement, the fiscal intermediary or MAC determines whether the
hospital would receive higher IPPS payments in the aggregate using the
hospital-specific rate (on all claims) or the Federal rate (on all
claims). MDHs are paid the sum of the Federal payment amount plus 75
percent of the amount by which their hospital-specific rate exceeds the
Federal payment amount. Although MDH status is set to expire at the end
of FY 2012, because we are using historical data to determine the base
operating DRG payments to calculate adjustment factor, the payments
reflected on claims for current MDHs may be based on the hospital-
specific rate. For SCHs and current MDHs, we proposed to model their
base operating DRG payment amount as they would have been paid under
the Federal standardized amount, rather than using the information on
the claim (which may represent a payment either made under the
hospital-specific rate or the Federal rate) so that their payments are
consistent with our proposed definition of base operating DRG payment.
As such, the payment difference between the payment made under the
hospital-specific rate and the payment made under the Federal rate is
not included in the base operating DRG amount to determine the
readmission adjustment factor; that is, it is neither included in the
numerator of the aggregate dollars for excess readmissions nor in the
denominator of the aggregate dollars for all discharges.
We did not receive public comments on our proposal for current MDHs
and SCHs to model the ``base operating DRG payments'' as they would
have been paid under the Federal standardized amount, rather than using
the information on the claim in MedPAR (which may represent a payment
either made under the hospital-specific rate or the Federal rate) to
calculate their ``aggregate payments for excess readmissions, so that
their payments are consistent with our definition of base operating DRG
payment.
As discussed earlier, we proposed to use data from the MedPAR files
that contain claims from the 3-year applicable period of July 1, 2008,
to June 30, 2011, for FY 2013 to calculate aggregate payments for
excess readmissions (the numerator of the ratio). To calculate
aggregate payments for excess readmissions, we proposed to calculate
the base operating DRG payment amounts for all the claims in the 3-year
applicable period that list each applicable condition as the principal
diagnosis (as described above). Once we have calculated the base
operating DRG payment amounts for all the claims that list each
condition as the principal diagnosis, we proposed to sum the base
operating DRG payment amounts by each condition, resulting in three
summed amounts, one amount for each of the three applicable conditions.
We then proposed to multiply each amount for each condition by their
respective excess readmission ratio minus 1. The methodology for the
calculation of the excess readmission ratio was finalized in the FY
2012 IPPS/LTCH PPS final rule (76 FR 51673). We proposed that the
excess readmission ratios for each condition used to calculate the
numerator of this ratio are excess readmission ratios that had gone
through the proposed review and correction process described in the FY
2013 IPPS/LTCH PPS proposed rule. Each product in this computation
represents the payment for excess readmissions for that condition. We
proposed to then sum the resulting products, which represent a
hospital's proposed ``aggregate payments for excess readmissions'' (the
numerator of the ratio).
If a hospital has an excess readmission ratio that is greater than
1 for a condition, that hospital has performed, with respect to
readmissions for that applicable condition, worse than the average
hospital with similar patients. As such, it will have aggregate
payments for excess readmissions. If a hospital has an excess
readmission ratio that is less than (or equal) to one, that hospital
has performed better (or on average), with respect to readmissions for
that applicable condition, than an average hospital with similar
patients. As such, that hospital would not be considered to have
``aggregate payments'' for excess readmissions, and its payments would
not be reduced under section 1886(q) of the Act. As described in
section 1886(q)(4)(C) of the Act, and finalized in the FY 2012 IPPS/
LTCH PPS final rule, the excess readmission ratio used cannot be less
than 1 because the hospital will not have aggregate payments for excess
readmissions and will not be subject to a readmission payment
adjustment, as the hospital will have performed equal to or better than
average. Because this calculation is performed separately for the three
conditions, a hospital's excess readmission ratio must be less than or
equal to 1 on each measure to avoid aggregate payments for excess
readmissions.
Section 1886(q)(4)(B) of the Act defines ``aggregate payments for
all discharges'' (the denominator of the ratio) as ``for a hospital for
an applicable period, the sum of the base operating DRG payment amounts
for all discharges for all conditions from such hospital for such
applicable period.'' In the FY 2013 IPPS/LTCH PPS proposed rule, we
proposed to use the same MedPAR files to calculate the denominator as
we proposed to use to calculate the numerator, for the 3-year
applicable period of July 1, 2008 to June 30, 2011, for FY 2013. We
proposed to calculate base operating DRG payments in the same manner as
we calculate base operating DRG payments for the numerator. We proposed
to sum the base operating DRG payment amounts for all Medicare FFS
claims for such hospital during the 3-year applicable period. We also
proposed that we would model base operating DRG payment amount for SCHs
and current MDHs as they would have been paid under the Federal
standardized amount, rather than using the information on the claim (as
described above).
We did not receive any public comments regarding our proposed
calculation of ``aggregate payments for all discharges'' and we are
finalizing it as proposed without modification.
We proposed that the ratio described in section 1886(q)(3)(B) of
the Act is 1 minus the ratio of the numerator and denominator described
above. In addition, we proposed that the readmission adjustment for an
applicable hospital is the higher of this ratio under section
1886(q)(3)(B) of the Act or the floor of 0.99 for FY 2013. Consistent
with this proposal, under the regulations we proposed at 42 CFR
412.152, we proposed to define ``readmissions adjustment factor'' as
equal to the greater of: (i) 1 minus the ratio of the aggregate
payments for excess readmissions to aggregate payments for all
discharges or (ii) the floor adjustment factor.
For the proposed rule, for the purpose of modeling the proposed
aggregate payments for excess readmissions and the proposed
readmissions adjustment
[[Page 53392]]
factors, we used excess readmission ratios for the applicable hospitals
from the 3-year period of July 1, 2007 to June 30, 2010, because the
underlying data from this period had already been available to the
public on the Hospital Compare Web site (as of July 2011). The data
from the 3-year applicable period for FY 2013 of July 1, 2008 to June
30, 2011, had not been through the review and correct process required
by section 1886(q)(6) of the Act (as discussed below). As we stated in
the proposed rule, for this final rule, we are using excess readmission
ratios based on discharges for the finalized applicable period of July
1, 2008 to June 30, 2011, to calculate the aggregate payments for
excess readmissions and, ultimately, to calculate the readmission
adjustment factors. Applicable hospitals had the opportunity to review
and correct these data before they were made public under our proposal
set forth below regarding the reporting of hospital-specific
readmission rates, consistent with section 1886(q)(6) of the Act.
[GRAPHIC] [TIFF OMITTED] TR31AU12.015
Comment: Several commenters supported our methodology to calculate
the readmissions payment adjustment factor. Commenters supported
calculating the adjustment factor as 1 minus the ratio of the
hospital's aggregate payments for excess readmissions for applicable
conditions to the hospital's aggregate payments for all discharges for
applicable conditions. Commenters supported determining the hospital's
aggregate payments for all discharges for applicable conditions based
on our proposed definition of the base operating DRG payment amount,
and commenters supported our proposal to determine the hospital's
aggregate payments for excess readmissions by multiplying the
hospital's aggregate payments for all discharges for an applicable
condition by 1, minus the hospital's excess readmissions ratio.
Some commenters stated that it is unclear why the proposed
numerator of the readmission payment adjustment factor, or the
calculation of the excess payments for readmissions, is based on total
admissions for each condition, when the purpose of the Hospital
Readmissions Reduction Program is to reduce only preventable
readmissions. Commenters stated that our proposed methodology to
calculate the readmission payment adjustment factor should amend the
legislative language in the formula for calculating the readmissions
adjustment factor. The formula as proposed stipulated that the amount
of aggregate payments due to excess readmission is calculated by
multiplying the number of admissions for the condition times the
average base DRG payment for the condition and the ``excess readmission
ratio.'' The excess readmissions ratio is defined as the ratio of the
number of actual readmissions as compared to the number of expected
readmissions for the clinical condition. However, commenters contended
that the formula should specify that the calculation should be based on
the number of expected readmissions in each condition, not the total
number of admissions. They urged that we replace the words ``number of
admissions'' with ``number of expected readmissions'' so that the
formula for the aggregate payments for excess readmissions calculates
the number of expected readmissions for each condition and not the
total number of admissions.
One commenter believed that the proposed formula produces penalties
that are higher than Medicare payments for excess readmissions,
although the full impact is mitigated because of the proposed maximum
penalty for FY 2013 of 1 percent of base operating DRG payments. The
commenter believed that our proposed methodology to calculate the
readmissions payment adjustment factors conforms to the statute.
However, the commenter suggested long-term changes to the formula to be
more proportionate to the cost of readmissions, such as examining the
issue of shrinking excess readmission computations towards the national
mean and appropriate changes to account for excess payments for
readmissions.
Commenters believe that our proposed methodology to calculate the
readmissions payment adjustment overestimates the excess payments for
readmissions resulting in an excessive readmission payment adjustment
and is not consistent with Congressional intent. Commenters believed
our proposed readmissions payment adjustments are excessive as evident
by the Congressional Budget Office (CBO) score for the provision at
$100 million while our estimates of the Hospital Readmissions Reduction
Program published in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR
28172) was approximately $300 million.
Response: We believe that the statute is prescriptive with respect
to the calculation of ``aggregate payments for excess readmissions''
where the statute
[[Page 53393]]
specifies that the ``aggregate payments for excess readmissions'' is
the sum for each condition of the product of ``the operating DRG
payment amount for such hospital for such applicable period for such
condition'' and ``the number of admissions for such condition'' and
``the excess readmission ratio'' minus one. We believe that section
1886(q)(4)(A) of the Act requires us to include all admissions for a
condition in the calculation of ``aggregate payments for excess
readmissions.''
Our estimate of $300 million in savings associated with the
Hospital Readmissions Reduction Program published in the FY 2013 IPPS/
LTCH PPS proposed rule was based on different data that were not
available to the CBO at the time of the CBO estimate. Furthermore, we
potentially used different assumptions in our methodology to estimate
the savings of this Hospital Readmissions Reduction Program as compared
to CBO. Our proposed readmission payment adjustment factors were
calculated using excess readmission ratios based on hospitals'
readmissions performance from July 1, 2007 to June 30, 2010, which was
not available at the time of the CBO estimate. In addition, our
calculation for ``aggregate payments for excess readmissions'' and
``aggregate payments for all discharges'' were based on MedPAR claims
data from July 1, 2007 to June 30, 2010, which was also not available
at the time of the CBO estimate. Finally, we applied the proposed
readmission payment adjustment factor to our estimated FY 2013 IPPS
base operating DRG payments to determine the savings associated with
the Hospital Readmissions Reduction Program and our FY 2013 IPPS base
operating DRG payments were likely based on different assumptions than
the CBO's estimate published in 2010. Therefore, it is difficult to
assess the precise differences between our estimate of this provision
and the CBO's estimate. Nonetheless, we believe that we are
implementing the provision as required by law.
Comment: Several commenters requested that CMS make additional
adjustments to the calculation of the readmissions payment adjustment
factor to account for differences in the readmissions payment
adjustment factors for hospitals that treat a high proportion of
patients of low socioeconomic status. Commenters made a number of
suggestions as to how to modify the readmissions payment adjustment
factors. One commenter suggested that CMS and Congress could apply a
uniform percentage reduction to all hospitals' expected readmission
rates, which the commenter believed would be a budget neutral change.
The commenter urged CMS and Congress to intervene somehow to correct an
inequity affecting the nation's most vulnerable hospitals and Medicare
beneficiaries.
Another commenter suggested that CMS offer a one-time opportunity
to waive the payment reduction for safety net and other hospitals that
serve a higher-than-average proportion of patients of low socioeconomic
status and are found to be at risk of experiencing a payment reduction.
In return, the commenter suggested that these hospitals would be
required to submit a comprehensive and aggressive preventable
readmission rate improvement plan that centers on collaboratively
engaging with the patients, their families, consumer organizations and
community supports, to address the various factors that are causing
preventable readmissions in their local community. The commenter stated
that this approach should have a time limit (for example, 6 months) on
how long the hospital would have for submitting and implementing the
plan and another well-defined (for example 6 months) timeframe for
monitoring and reporting results to CMS.
Some commenters requested that CMS postpone implementation of the
Hospital Readmissions Reduction Program until it has made adjustments
to the measures to account for socioeconomic status. One commenter
requested postponing the application of the readmissions payment
reduction to safety net hospitals that serve a vulnerable population
while these hospitals develop programs to reduce readmissions.
Commenters suggested that CMS make an adjustment to the readmission
payment adjustment factors to account for a hospital's proportion of
dual-eligible patients. Commenters contended that dual-eligible status
is a better predictor of readmission rates because it reflects Medicare
beneficiaries, which is what the readmissions measures are based on.
In addition, commenters suggested that CMS make a hospital-level
adjustment based on DSH. Commenters asserted that because the number of
hospitals that will receive the maximum penalty in the first year jumps
sharply between the sixth and seventh deciles for hospital's DSH
Patient Percentage, the commenters suggested that any hospital-level
adjustment based on DSH be applied to the top four deciles.
Response: We thank the commenters for their suggestions on
modifying the readmission payment adjustment to account for differences
in the socioeconomic status of patients treated by hospitals. As stated
earlier, we continue to believe that we need to examine the
relationship of patient socioeconomic status and readmissions as it
applies to the readmissions measures. As we have stated earlier, the
readmissions measures, as endorsed by the NQF, do not include risk
adjustments for socioeconomic status. Currently, the NQF does not
support risk adjustments based on socioeconomic status, as the NQF
believes it can create different standards of quality for hospitals
that treat a higher proportion of patients with low socioeconomic
status. Risk adjusting the readmissions measures for socioeconomic
status can obscure differences in the quality of health care.
Similarly, applying an adjustment to the readmissions payment
adjustment factors can also create different standards of quality for
hospitals based on the socioeconomic status of the patients treated.
Applying an adjustment to the readmissions payment adjustment factors
at this point to account for socioeconomic status rather than
determining whether a risk adjustment for socioeconomic status would be
appropriate for the readmissions measures could appear as circumventing
the NQF's position on the application of a risk adjustment for
socioeconomic status on the readmissions measures. We note that, to the
extent that dual eligible patients or patients of low socioeconomic
status have higher readmission rates because they are sicker or have
more comorbidities, we already account for comorbidities in the risk
adjustment for the excess readmission ratios. Since, we believe that
all hospitals should be working towards the goal of reducing
readmissions, on an ongoing basis, regardless of their patient
population, we believe that we do not need to postpone the
implementation of the readmission payment adjustments in order to
provide additional time to hospitals to implement readmission reduction
programs. While we are not incorporating any special adjustments for
SES in the readmissions reduction program at this time, we remain
concerned about the impact of this provision on hospitals that serve a
high proportion of low income patients. We will continue to monitor the
issue of the relationship of a patient's socioeconomic status and a
hospital's readmission performance, and how it affects payments to
hospitals.
Comment: One commenter recommended that CMS apply the
[[Page 53394]]
readmissions adjustment in a manner that norms the calculation of the
adjustment factor on the risk-adjusted readmission rate that is
achieved by at least 25 percent of hospitals rather than on the average
readmission rate.
Response: The excess readmission ratio, finalized in the FY 2012
IPPS/LTCH PPS final rule (76 FR 51673), measures a hospital's
performance on readmissions for a specified condition relative to the
national average. The methodology to calculate the excess readmission
ratio is endorsed by the NQF, as required at section 1886(q)(5)(C) of
the Act. We did not propose any changes to the methodology to calculate
the excess readmission ratio. Accordingly, we are not modifying the
methodology to calculate the excess readmission ratio to compare a
hospital's performance on readmissions relative to the 25th percentile
of national performance, as opposed to the average.
Comment: One commenter questioned the statistical difference in the
excess readmission ratio for a hospital that has an excess readmission
ratio slightly above 1 and thus, subject to the payment penalty, versus
a hospital that has an excess readmission ratio slightly below 1, and
not subject to the penalty. The commenter asked that CMS consider the
equitability of this policy approach and recommended the remunerative
framework account for the confidence intervals surrounding the
estimated Risk Standardized Readmission Rates and Ratios in determining
future penalties for excess readmissions. The commenters believed that
omitting a control for statistical significance exposes a large number
of hospitals to financial penalties based on random variation. They
recommended that CMS account for the confidence intervals surrounding
the estimated Risk Standardized Readmission Rates and Ratios in
determining future penalties for excess readmissions.
Response: We thank the commenter for raising the issue of
statistical reliability of the excess readmission ratio and for
recommending the use of confidence intervals in determining whether or
not to use a hospital's excess readmission ratio in the calculation of
a hospital's readmission payment adjustment factor. We finalized our
methodology of the calculation of the excess readmission ratio in the
FY 2012 IPPS/LTCH PPS final rule, which results in the use of the point
estimate as a hospital's excess readmission ratio.
We will consider the role, if any, of confidence intervals in
determining a hospital's excess readmission ratio. We recognize that
because the excess readmission ratio is a statistical measure, there
may be some degree of variation. However, there are other Medicare
programs, not limited to the Hospital Readmissions Reduction Program,
that use statistical measures as part of their program, so any
consideration to confidence intervals made with respect to the Hospital
Readmissions Reduction Program may have implications for other
programs. We will evaluate this concern and address it in a future
rulemaking, if needed.
Comment: Several commenters suggested that CMS take into
consideration a hospital's improvement on readmissions in the
calculation of the readmissions payment adjustment factor. One
commenter noted that because measurement is based on 3 years' worth of
data, it will be difficult for low performing hospitals to move out of
being penalized, and the Hospital Readmissions Reduction Program does
not reward for improvement as the Hospital VBP Program does, but only
measures achievement. The commenter noted that this could result in low
performing hospitals being unable to ever get out of the penalty phase.
Response: We appreciate the concerns raised by the commenters. The
Hospital Readmissions Reduction Program is structured to apply a
payment reduction to hospitals with excess readmissions, as measured by
having worse performance on readmissions for certain conditions
compared to the average hospital. The readmission payment adjustment
under section 1886(q)(1) of the Act does not allow for us to provide a
reward for quality improvement, which is allowed under section 1886(p)
of the Act for the Hospital VBP Program. We believe that hospitals do
have the opportunity to not be subject to a reduction to payments due
to excess readmissions if they can perform better than the average
hospital in the future. We update the data annually with the most
recently available 3 years of data, and we use 3 years of data in order
to have sufficient data to reliably measure a hospital's performance.
Comment: Commenters sought clarification on how the readmissions
payment adjustment factors would be applied to a hospital's base
operating DRG payment amount. Commenters asked whether the readmissions
payment adjustment factors would be applied on a per claim basis or at
cost report settlement. Commenters asked how the IME, DSH, and outlier
payments would not be affected by the readmissions payment adjustment
factor when the IME, DSH and outlier payments are adjustments currently
determined from the base operating DRG payment amount, and the
readmissions payment adjustment factor reduces the base operating DRG
payment amount. Commenters asked if there would be changes to the cost
report and to the PS&R to account for the implementation of the payment
adjustment for excess readmissions. In addition, commenters noted that
the effective date of the Hospital Readmissions Reduction Program is
October 1, 2012, which straddles the cost reporting period for many
hospitals, and asked for clarification on how that would be accounted
for with respect to the Medicare hospital cost report.
Commenters also stated that the statutory intent of the
readmissions payment adjustment factor is that the factor should not be
applied to payments for all admissions, but rather to payments for
initial admissions with at least one readmission. Commenters requested
clarification whether the readmissions payment adjustment factors will
apply to only Medicare discharges for AMI, PN or HF; or whether the
readmissions payment adjustment factor will apply to all discharges.
The commenters believed that the readmissions payment adjustment factor
should only be applicable to the specific populations included in the
program rather than the entire Medicare population.
Response: We are clarifying that, for FY 2013, a hospital's
payments will be reduced by the amount of the product of the
readmissions payment adjustment factor and the base operating DRG
payment amount (as defined as the wage-adjusted DRG payment amount), on
a per-claim basis for all Medicare FFS discharges occurring on or after
October 1, 2012. In other words, the payment amount the hospital would
otherwise receive in FY 2013 in absence of the Hospital Readmission
Reduction Program will be reduced by the an amount for excess
readmissions (determined as the product of the readmissions payment
adjustment factor and the base operating DRG payment amount). Section
1886(q)(1) of the Act specifies that ``the Secretary shall make
payments * * * in an amount equal to the product of (A) the base
operating DRG payment amount for the discharge; and (B) the adjustment
factor * * *.'' Therefore, it requires us to apply the readmissions
payment adjustment factor to all discharges, not just discharges for
initial admissions with a readmission or admissions for the applicable
conditions. We note that the readmissions payment adjustment factor is
inversely proportional to the
[[Page 53395]]
aggregate payments for all discharges (in the formula determining the
excess readmissions ratio) so the adjustment factor appropriately
reflects the relation between payments for excess readmissions and
aggregate payments for all discharges.
In addition, we intend to modify the Medicare hospital cost report
and the corresponding cost reporting instructions, effective for FY
2013, to account for the reductions to payments under the Hospital
Readmission Reduction Program required by section 1886(q) of the Act
(that is, the payment adjustment for excess readmissions). The current
calculation of the additional payments for IME, DSH, outliers, and low-
volume hospitals will remain unchanged consistent with the statutory
requirement that payments for outliers, IME, DSH, and low-volume
adjustments are not affected by the adjustments made under the Hospital
Readmissions Reduction Program.
Currently, the cost report includes the base operating DRG payment
for the cost reporting period and we use that line to determine add-on
payments including payments for indirect medical education and
disproportionate share hospital payments. This line will remain
unchanged and will continue to be used to determine IPPS add-on
payments, consistent with our policy that add-on payments for outliers,
IME, DSH, and low-volume adjustments are not affected by the
adjustments made under the Hospital Readmissions Reduction Program. We
intend to modify the Medicare hospital cost report to include lines for
base operating DRG payments by Federal fiscal year. For example, we
will have a line that represents base operating DRG payments prior to
October 1, 2012 and a line that represents base operating DRG payments
after October 1, 2012. In addition, we intend to modify the Medicare
hospital cost report with lines for the readmissions payment adjustment
factor by Federal fiscal year and lines with the readmissions payment
amount by Federal fiscal year that would be deducted from a hospital's
Medicare payments. The readmissions payment amounts would be determined
by applying the readmission payment adjustment factor to the base
operating DRG payment amount by Federal fiscal year. We intend to
modify the cost reporting instructions to account for these new
calculations. In addition, for FY 2013, we will ensure that the cost
reporting instructions account for the readmissions adjustment to only
be made to base operating DRG payments for discharges on or after
October 1, 2012. We intend to modify the PS&R to account for these
changes as well.
Comment: One commenter sought clarification as to whether the
Hospital Readmissions Reduction Program is intended to replace the
existing readmission review at Internet Only Manual (IOM) 100-04,
Chapter 3, Section 40.2.5, or if both policies will exist together.
Response: The Hospital Readmissions Reduction Program is not
intended to replace the existing readmission review under IOM 100-04,
Chapter 3, Section 40.2.5. IOM 100-04, Chapter 3, Section 40.2.5 of the
Inpatient Claims Processing Manual provides guidance on appropriate
billing practices for repeat admissions. In accordance with the manual,
``a patient who requires follow-up care or elective surgery may be
discharged and readmitted or may be placed on a leave of absence.
Hospitals may place a patient on a leave of absence when readmission is
expected * * * and providers may not use the leave of absence billing
procedure when the second admission is unexpected.'' If a hospital uses
the leave of absence billing code, two inpatient stay claims for the
original admission and the repeat admissions are bundled as one
inpatient claim with one DRG payment. These claims can be reviewed by a
fiscal intermediary or MAC and referred to the QIOs. This is a separate
billing procedure from the Hospital Readmissions Reduction Program and
will continue to exist.
During the FY 2012 IPPS rulemaking cycle, we received public
comments expressing concern that hospitals that treat a larger
proportion of patients of lower socioeconomic circumstances may have
higher readmission rates and could be unfairly penalized under the
Hospital Readmissions Reduction Program. The table below shows, based
on the excess readmission ratios and the proposed methodology to
calculate the readmissions adjustment factor discussed in the proposed
rule, the estimated distribution of the readmission adjustment factors
among hospitals ranked by their DSH patient percentage (DPP). The DPP
is used as a proxy for low-income patients and is the sum of the
hospital's Medicare fraction and Medicaid fraction. The Medicare
fraction is computed by dividing the number of a hospital's inpatient
days that are furnished to patients who were entitled to both Medicare
Part A and Supplemental Security Income (SSI) benefits by the
hospital's total number of patient days furnished to patients entitled
to benefits under Medicare Part A. The Medicaid fraction is computed by
dividing the hospital's number of inpatient days furnished to patients
who, for such days, were eligible for Medicaid, but were not entitled
to benefits under Medicare Part A, by the hospital's total number of
inpatient days. The DPP is used to determine a hospital's Medicare DSH
payment adjustment. Thus, hospitals with higher percentages of Medicare
patients entitled to SSI and higher percentages of Medicaid patients
have higher DPPs. In the table, the hospitals are ranked by their
estimated DPP and categorized into deciles. The table shows the number
of hospitals within each decile that are subject to no proposed
readmission payment adjustment, the -1 percent floor readmission
payment adjustment, and a readmission payment adjustment that is less
than the -1 percent floor. We invited public comment on this analysis.
Distribution of Hospitals Readmission Adjustment Factor by DSH Patient Percentage (DPP)
----------------------------------------------------------------------------------------------------------------
Payment
Number of adjustment of -1 percent floor No readmission
Decile hospitals less than -1 adjustment adjustment
percent factor
----------------------------------------------------------------------------------------------------------------
Lowest DPP.............................. 339 156 38 145
Second.................................. 339 164 57 118
Third................................... 339 168 44 127
Fourth.................................. 339 170 48 121
Fifth................................... 339 182 42 115
Sixth................................... 339 171 43 125
Seventh................................. 339 187 44 108
Eighth.................................. 339 182 43 114
Ninth................................... 339 179 58 102
[[Page 53396]]
Highest DPP............................. 342 185 61 96
-----------------------------------------------------------------------
Total............................... 3,393 1,744 478 1,171
----------------------------------------------------------------------------------------------------------------
In addition, we examined the estimated distribution of the proposed
readmissions adjustment factor based on the excess readmission ratios
in this proposed rule (determined using the 2007-2010 data discussed
above). The table below shows the number and percentage of hospitals
ranked by the percent reduction received under the Hospital
Readmissions Reduction Program. The table shows that about 71 percent
of hospitals would receive either no adjustment or a readmission
adjustment factor that would reduce their base operating DRG payments
by less than 0.5 percent.
Distribution of Readmission Adjustment Factors
------------------------------------------------------------------------
Number of Percent of
Percent reduction hospitals hospitals
------------------------------------------------------------------------
No Adjustment....................... 1,171 34.5
Up to -.09 Percent.................. 347 10.2
-0.1 Percent to -0.19 Percent....... 280 8.3
-0.20 Percent to -0.29 Percent...... 228 6.7
-0.30 Percent to -0.39 Percent...... 196 5.8
-0.40 Percent to -0.49 Percent...... 180 5.3
-0.50 Percent to -0.59 Percent...... 129 3.8
-0.60 Percent to -0.69 Percent...... 118 3.5
-0.70 Percent to -0.79 Percent...... 110 3.2
-0.80 Percent to -0.89 Percent...... 77 2.3
-0.90 Percent to -0.99 Percent...... 76 2.2
-1.0 Percent........................ 481 14.2
-----------------------------------
Total........................... 3,393 100.0
------------------------------------------------------------------------
Comment: Several commenters addressed the Medicare DSH analysis
that was presented in the proposed rule. Several commenters could not
replicate the DSH analysis and produce the same results presented in
the proposed rule. Some commenters presented different results where
they found that high DSH hospitals are, in fact, subject to higher
readmission penalties. In addition, several commenters contended that
DSH was not a good proxy to determine socioeconomic status. Commenters
indicated that it is not uncommon for hospitals in areas with
relatively affluent Medicare beneficiaries to qualify for DSH
reimbursement due to the high volume of labor and delivery services
provided to non-resident aliens. One commenter asked why CMS did not
present a comparison table of the impacts to the DSH hospitals
(approximately 1,882 hospitals) instead of the entire hospital
population.
Commenters indicated that hospitals with high disproportionate
share patient percentages have higher excess readmission ratios.
Commenters presented other analyses showing that hospitals with high
DSH have higher readmission penalties. Commenters provided analyses
where the results indicate that high DSH hospitals (defined as
hospitals in the top 25th percentile for the DSH percentage) and
hospitals located in large urban areas (defined as those Metropolitan
Statistical Areas with more than one million population) are much more
likely to receive a readmission penalty under the CMS proposal. The
commenter found that high DSH hospitals located in large urban areas
are 1.9954 times more likely to be penalized for heart attack than
other hospitals, 2.5849 times more likely for heart failure, and 2.1915
times more likely for pneumonia.
Response: In the proposed rule, we used the proposed readmissions
payment adjustment factors and the DSH disproportionate patient
percentage (DPP) reported in the FY 2012 IPPS/LTCH PPS final rule
Impact file, as it was the most recently available data at the time of
our analysis. We note that, for hospitals that have a missing DPP, we
assigned them a DPP of zero. We believe that may have been one
potential source for differences in the results.
We understand that there are several ways to measure socioeconomic
status of a hospital's patient population and as we continue to monitor
the issue of the relationship of a patient's socioeconomic status and a
hospital's readmission performance, and how it affects payments to
hospitals, we also can explore different measures of socioeconomic
status, such as dual-eligible status. To the extent differences in
readmission rates among hospitals treating a significant number of
patients with low socioeconomic status are determined to
inappropriately affect their readmission payment adjustment, we can
work with NQF to explore options for improving the readmissions
measures to promote high quality care, as appropriate.
We understand that there have been different conclusions drawn from
review of these data, and we will continue to work with MedPAC and
other stakeholders to complete a more sophisticated analysis.
Comment: One commenter suggested that CMS provide a level of
statistical significance for our DSH analysis, as well as correlation
factors between hospitals' actual DSH patient percentage
[[Page 53397]]
(as opposed their national decile) and the likeliness of receiving a
readmissions adjustment, the magnitude of a readmissions adjustment,
and the likeliness of reaching the maximum readmissions penalty.
Response: At this time, we are unable to produce a rigorous
analysis showing the relationship of a hospital's actual DSH patient
percentage and their likeliness of receiving a readmissions adjustment,
the magnitude of a readmissions adjustment, and the likeliness of
receiving the maximum adjustment of -1.0 percent. However, we will
research these issues in the upcoming year and, if significant, we will
present our findings in future rulemaking.
e. Applicable Hospitals
An ``applicable hospital,'' is defined at section 1886(q)(5)(C) of
the Act as (1) ``a subsection (d) hospital or (2) a hospital that is
paid under section 1814(b)(3).'' Specifically, hospitals subject to the
Hospital Readmissions Reduction Program are hospitals paid under the
IPPS and hospitals paid under the authority of section 1814(b)(3) of
the Act. We are interpreting this reference to section 1814(b)(3) of
the Act to mean those Maryland hospitals that are paid under section
1814(b)(3) of the Act and that, absent the ``waiver'' specified by
section 1814(b)(3) of the Act, would have been paid under the IPPS. A
subsection (d) hospital is defined in section 1886(d)(1)(B) of the Act,
in part, as a ``hospital located in one of the fifty States or the
District of Columbia.'' The term subsection (d) hospital does not
include hospitals located in the Territories or hospitals located in
Puerto Rico. Section 1886(d)(9)(A) of the Act separately defines a
``subsection (d) Puerto Rico hospital'' as a hospital that is located
in Puerto Rico and that ``would be a subsection (d) hospital * * * if
it were located in one of the 50 States.'' Therefore, Puerto Rico
hospitals are not considered applicable hospitals under the Hospital
Readmissions Reduction Program. An Indian Health Services hospital
enrolled as a Medicare provider meets the definition of a subsection
(d) hospital and, therefore, is considered an applicable hospital under
the Hospital Readmissions Reduction Program, even if it is not paid
under the IPPS. In addition, hospitals that are SCHs and current MDHs,
although they may be paid under a hospital-specific rate instead of
under the Federal rate under the IPPS, are subsection (d) hospitals
and, therefore, are included in the definition of an applicable
hospital under the Hospital Readmissions Reduction Program.
A subsection (d) hospital as defined in section 1886(d)(1)(B) of
the Act does not include hospitals and hospital units excluded from the
IPPS, such as LTCHs, cancer hospitals, children's hospitals, IRFs, and
IPFs, and, therefore, these hospitals are not considered ``applicable
hospitals.'' CAHs are not ``applicable hospitals'' because they do not
meet the definition of a ``subsection (d) hospital,'' as they are
separately defined under section 1886(mm) of the Act and are paid under
a reasonable cost methodology under section 1814(l) of the Act.
Therefore, in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27966),
consistent with the statute, we proposed to define ``applicable
hospital'' under the regulations at 42 CFR 412.152 to include both (1)
subsection (d) hospitals, that is, hospitals paid under the IPPS and
(2) hospitals in Maryland that are paid under section 1814(b)(3) of the
Act and that, absent the ``waiver'' specified by section 1814(b)(3) of
the Act, would have been paid under the IPPS.
The term ``applicable hospital'' is also referenced in the
definition of readmission in section 1886(q)(5)(E) of the Act, which
defines ``readmission'' as ``in the case of an individual who is
discharged from an applicable hospital, the admission of the individual
to the same or another applicable hospital within a time period
specified by the Secretary from the date of such discharge.'' In the FY
2012 IPPS/LTCH PPS final rule (76 FR 51666), we finalized the
definition of readmission as ``occurring when a patient is discharged
from the applicable hospital and then is admitted to the same or
another acute care hospital within a specified time period from the
time of discharge from the index hospitalization.'' Furthermore, we
finalized the time period specified for these readmission measures as
30 days. With our proposal to define an applicable hospital as a
subsection (d) hospital or certain Maryland hospitals described above,
we also proposed to refine the definition of readmission to only
include admissions and readmissions occurring from an applicable
hospital (that is, a subsection (d) hospital or certain Maryland
hospitals) to the same or another applicable hospital (again, a
subsection (d) hospital or certain Maryland hospitals) (proposed Sec.
412.152). Accordingly, excess readmission ratios calculated for the
purpose of the Hospital Readmissions Reduction Program would include
only admissions and readmissions to ``applicable hospitals.''
We note that because the Hospital Readmissions Reduction Program
only includes admissions and readmissions to ``applicable hospitals''
to calculate the excess readmission ratios used under section 1886(q)
of the Act, these excess readmission ratios will differ from the
readmission rates reported on Hospital Compare for the purpose of the
Hospital IQR Program. The excess readmission ratios for the purpose of
the Hospital IQR Program were determined based on admissions and
readmissions to all hospitals, not just hospitals specified in sections
1886(d) and 1814(b)(3) of the Act. Therefore, as discussed above, the
excess readmission ratios used in the proposed rule used a subset of
the claims used to calculate the readmission rates reported on Hospital
Compare for the purpose of the Hospital IQR Program and are limited to
admissions and readmissions to ``applicable hospitals'' and are based
on the period of June 30, 2007 to July 1, 2010. In the proposed rule,
we used these excess readmission ratios, as they were based on the most
recent data available and would allow the public to replicate our
methodology to understand how the readmission adjustment factor is
calculated. We believe that the differences between these proposed
excess readmission ratios and those excess readmission ratios currently
published on Hospital Compare under the Hospital IQR Program are
minimal, and it was helpful for hospitals to see the impact of our
proposed methodology to calculate the readmission adjustment using
excess readmission ratios calculated under our methodology finalized in
the FY 2012 IPPS/LTCH PPS final rule. As we stated in the proposed
rule, for this final rule, we are using excess readmission ratios based
on the applicable period of June 30, 2008 to July 1, 2011, as finalized
in the FY 2012 IPPS/LTCH PPS final rule, and hospitals have had the
opportunity to review and correct their data related to their excess
readmission ratios prior to the publication of those excess readmission
ratios.
We specifically invited public comment on our readmissions
proposal, including our proposed definition of base operating DRG
payment, our proposed methodology to calculate the readmission
adjustment factor, the minimum number of cases, and our proposed
definition of applicable hospital.
Comment: Commenters urged CMS to align the Hospital Readmissions
Reduction Program with the clinical quality measure requirements of the
Hospital IQR Program.
[[Page 53398]]
Response: As discussed above, the excess readmission ratios for the
purpose of the Hospital IQR Program were determined based on admissions
and readmissions to all hospitals, not just hospitals specified in
sections 1886(d) and 1814(b)(3) of the Act. Therefore, the excess
readmission ratios used in the final rule use a subset of the claims
used to calculate the readmission rates reported on Hospital Compare
for the purpose of the Hospital IQR Program and would be limited to
admissions and readmissions to ``applicable hospitals.'' We have
aligned the methodology for readmission measures in the Hospital IQR
Program and the Hospital Readmissions Reduction Program as much as is
allowed by statutory requirements.
Comment: Some commenters supported our proposal to include
subsection (d) hospitals and Maryland hospitals in our definition of
``applicable hospital'' for the Hospital Readmissions Reduction
Program. One commenter asked CMS to waive the requirements of the
Hospital Readmissions Reduction Program for hospitals that participate
in an accountable care organization (ACO) under the Medicare Shared
Savings Program or the Pioneer ACO Model. The commenter argued that
hospitals that participate in ACOs are already subject to incentives to
reduce hospital readmissions, are already measured for their
performance on all conditions for readmissions; therefore, to include
these hospitals in the Hospital Readmissions Reduction Program is
redundant. The commenter argued that CMS has the authority to waive
Title XVIII requirements, including the requirements of the Hospital
Readmission Reduction Program, for these hospitals under the waivers
provided under sections 1115A(d)(1) and 1899(f) of the Act.
Response: We appreciate the suggestion submitted by the commenters
to exempt hospitals from the Hospital Readmissions Reduction Program if
they already participate in an ACO under the Medicare Shared Savings
Program or the Pioneer ACO Model. We agree that ACOs are encouraged to
improve quality of care and reduce the rate of growth in expenditures.
We also agree that avoidable readmissions is an area in which we
believe an ACO's coordination of care and accountability can have a
significant impact in improving patient care. To that end, we finalized
an all-condition readmission quality measure in the Medicare Shared
Savings Program Final Rule. This measure is also used to assess quality
of care furnished by ACOs participating in the Pioneer ACO Model.
However, the waivers under sections 3021 and 3022 of the Affordable
Care Act permit us to waive provisions of Title XVIII only to the
extent that such a waiver may be ``necessary'' in order to carry out
those sections. In this case, because the incentives of the Hospital
Readmissions Reduction Program and the Medicare ACO initiatives are
aligned, we see no need to waive the requirements of the Hospital
Readmissions Reduction Program in order to carry out either the
Medicare Shared Savings Program or to test the Pioneer ACO Model.
Indeed, because the incentives of the two programs are aligned, we
believe that hospitals successful in reducing avoidable readmissions
could be important allies for ACOs who share similar goals. Because it
is unlikely that the beneficiaries assigned to ACO will use only a
single inpatient facility, ACOs will need to work effectively with all
local hospitals that their Medicare FFS beneficiaries choose to use.
Finally, as we gain experience with the Shared Savings Program and
other new payment incentives in the Medicare FFS program, we will
monitor their interactions with the Hospital Readmissions Reduction
Program and continue our efforts to align measures and incentives to
achieve the best outcomes for our patients and the program.
Comment: One commenter requested clarification regarding how
hospitals participating in the Rural Hospital Community Demonstration
Program will be impacted by the Hospital Readmissions Reduction
Program.
Response: As described, the applicable hospital is defined as a
subsection (d) hospital or certain Maryland hospitals. Hospitals
participating in the Rural Hospital Community Demonstration Program are
subsection (d) hospitals and, thus, will be included in the Hospital
Readmissions Reduction Program. Accordingly, we have calculated excess
readmission ratios and readmissions payment adjustment factor for
hospitals in the Rural Hospital Community Demonstration Program. If
hospitals in the Rural Hospital Community Demonstration Program are
subject to a readmissions payment reduction, the reduction will be
applied to their base operating DRG amount as if they were paid under
the IPPS. At cost report settlement, the readmissions payment amount
subtracted from the hospital's base operating DRG amount will be
reduced from the payments received under the demonstration.
We are finalizing as proposed our definition of applicable
hospitals under the regulations at 42 CFR 412.152 to include both (1)
subsection (d) hospitals, that is, hospitals paid under the IPPS and
(2) hospitals in Maryland that are paid under section 1814(b)(3) of the
Act and that, absent the ``waiver'' specified by section 1814(b)(3) of
the Act, would have been paid under the IPPS. Furthermore, we note that
the Hospital Readmissions Reduction Program only includes admissions
and readmissions to ``applicable hospitals'' to calculate the excess
readmission ratios used under section 1886(q) of the Act.
4. Limitations on Review (Sec. 412.154(e))
Section 1886(q)(7) of the Act provides that there will be no
administrative or judicial review under section 1869 of the Act, under
section 1878 of the Act, or otherwise for any of the following:
The determination of base operating DRG payment amounts.
The methodology for determining the adjustment factor,
including the excess readmissions ratio, aggregate payments for excess
readmissions, and aggregate payments for all discharges, and applicable
periods and applicable conditions.
In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR27966), we
proposed to include under proposed Sec. 412.154(e) that the provisions
listed above will not be subject to administrative or judicial review,
consistent with section 1886(q)(7) of the Act. We note that section
1886(q)(6) of the Act requires that the Secretary ``make information
available to the public regarding readmissions rates of each subsection
(d) hospital under the [Hospital Readmissions Reduction Program]'' and
also requires the Secretary to ``ensure that a subsection (d) hospital
has the opportunity to review and submit corrections for, the
information to be made public.'' Our proposal for reporting hospital-
specific information, including a hospital's opportunity to review and
submit corrections, consistent with section 1886(q)(7) of the Act, is
discussed below.
We did not receive any public comments on our proposals regarding
the Limitations for Review; therefore, we are finalizing our proposals
without modification, including the regulatory text at Sec.
412.154(e).
[[Page 53399]]
5. Reporting Hospital-Specific Information, Including Opportunity To
Review and Submit Corrections (Sec. 412.154(f))
Section 1886(q)(6)(A) of the Act requires the Secretary to ``make
information available to the public regarding readmissions rates of
each subsection (d) hospital under the [Hospital Readmissions Reduction
Program]''. Section 1886(q)(6)(B) of the Act also requires the
Secretary to ``ensure that a subsection (d) hospital has the
opportunity to review, and submit corrections for, the information to
be made public with respect to the hospital.'' In addition, section
1886(q)(6)(C) of the Act requires the Secretary to post the hospital-
specific readmission information for each subsection (d) hospital on
the Hospital Compare Web site in an easily understood format.
As we stated in the proposed rule, for purposes of the Hospital
Readmissions Reduction Program for FY 2013, we will calculate excess
readmission ratios for each of the three conditions, AMI, HF, and PN,
using the previously finalized 3-year applicable period for the FY 2013
payment determination that spans from July 1, 2008 through June 30,
2011 (76 FR 51671), data sources, and the minimum number of discharges
previously finalized in the FY 2012 IPPS/LTCH PPS final rule for each
applicable hospital (76 FR 51671 through 51672). We stated that we
intended to make these excess readmission ratios available to the
public, consistent with the requirements of section 1886(q)(6)(B) of
the Act, as part of the FY 2013 rulemaking process, in addition to
posting this information on the Hospital Compare Web site in a
subsequent release.
In the FY 2012 IPPS/LTCH PPS final rule, we indicated that we would
provide hospitals an opportunity to review and submit corrections using
a process similar to what is currently used for posting results on
Hospital Compare. We currently provide hospitals with the data elements
necessary to verify the accuracy of their readmission rates for the
Hospital IQR Program prior to posting their rates on Hospital Compare.
Because we believe it is important to provide hospitals with relevant
information available to hospitals for assessing payment impacts for
purposes of the Hospital Readmissions Reduction Program, as we stated
in the proposed rule, we plan to make the excess readmission ratios
used for the Hospital Readmissions Reduction Program adjustment factor
calculation available during the rulemaking cycle. As a result, the
timeline and details of this process must accommodate the rulemaking
timeline in addition to posting on Hospital Compare. In the proposed
rule, we set forth the following details regarding the process for
hospitals to review and submit corrections to their excess readmission
ratios prior to making this information available to the public in
rulemaking and on Hospital Compare.
For FY 2013, we proposed to deliver confidential reports and
accompanying confidential discharge-level information to applicable
hospitals as defined in section IV.A.2. of this preamble, which contain
their excess readmission ratios for the three applicable conditions by
June 20, 2012. These reports will be delivered in hospitals' secure
QualityNet accounts. The information in the confidential reports and
accompanying confidential discharge-level information would be
calculated using the claims information we had available approximately
90 days after the last discharge date in the applicable period, which
is when we would create the data extract for the calculations (we
discuss this practice in more detail later).
The discharge-level information accompanying the excess readmission
ratios would include the risk-factors for the discharges that factor
into the calculation of the excess readmission ratio, as well as
information about the readmissions associated with these discharges
(such as dates, provider numbers, and diagnosis upon readmission). Our
intent in providing this information is twofold: (1) to facilitate
hospitals' verification of the excess readmission ratio calculations we
provide during the review and correction period based upon the
information CMS had available at the time our data extract was created;
and (2) to facilitate hospitals' quality improvement efforts with
respect to readmissions.
We proposed to provide hospitals with a period of 30 days to review
and submit corrections for their excess readmission ratios for the
Hospital Readmissions Reduction Program. This 30-day period would begin
the day hospitals' confidential reports and accompanying discharge-
level information are posted to their QualityNet accounts. Based on
previous experience with public reporting of measures under the
Hospital IQR program, including the 30-day risk standardized
readmission rates, we believe this 30-day period would allow enough
time for hospitals to review their data and notify CMS of calculation
errors, and for CMS to incorporate appropriate corrections to the
excess readmission ratio calculations prior to the publication of the
final rule, at which time the excess readmission ratios would be made
available to the public in a table to be cited in the final rule and
available via the Internet on the CMS Web site. During the review and
correction period, hospitals should notify CMS of suspected errors in
their excess readmission ratio calculations using the technical
assistance contact information provided in their confidential reports.
In order to meet the timelines for this program, we delivered these
confidential reports and discharge-level data files to hospitals for
the review and correction period on June 20, 2012.
The review and correction process we proposed for the excess
readmission ratios above would not allow hospitals to submit additional
corrections related to the underlying claims data we used to calculate
the ratios, or allow hospitals to add new claims to the data extract we
used to calculate the ratios. This is because it is necessary to take a
static ``snapshot'' of the claims in order to perform the calculations.
For purposes of this program, we would calculate the excess readmission
ratios using a static snapshot (data extract) taken at the conclusion
of the 90 day period following the last date of discharge used in the
applicable period. We recognize that under our current timely claims
filing policy, hospitals have up to 1 year from the date of discharge
to submit a claim to CMS. However, in using claims data to calculate
measures for this program, we proposed to create data extracts using
claims in CMS' Common Working File (CWF) 90 days after the last
discharge date in the applicable period which we will use for the
calculations. For example, if the last discharge date in the applicable
period for a measure is June 30, 2011, we would create the data extract
on September 30, 2011 (90 days later), and use that data to calculate
the ratios for that applicable period. Hospitals would then receive the
excess readmission ratio calculations in their confidential reports and
accompanying discharge-level information and they would have an
opportunity to review and submit corrections for the calculations. As
we stated above, hospitals would not be able to submit corrections to
the underlying data that were extracted on September 30, 2011, and
would also not be able to add claims to the data set. Therefore, we
would consider hospitals' claims data to be complete for purposes of
calculating the excess readmission ratios for the Hospital Readmissions
[[Page 53400]]
Reduction Program at the conclusion of the 90-day period following the
last date of discharge used in the applicable period.
We considered a number of factors in determining that a 90-day
``run-out'' period is appropriate for purposes of calculating claims
based measures. First, we seek to provide timely quality data to
hospitals for the purpose of quality improvement and to the public for
the purpose of transparency. Next, we seek to make payment adjustments
to hospitals based on their performance on measures as close in time to
the performance period as possible. Finally, with respect to claims-
based measures, we seek to have as complete a data set as possible,
recognizing that hospitals have up to one year from the date of
discharge to submit a claim under CMS' timely claims filing policy.
After the data extract is created, it takes several months to
incorporate other data needed for the calculations (particularly in the
case of risk-adjusted, and/or episode-based measures). We then need to
generate and check the calculations, as well as program, populate, and
deliver the confidential reports and accompanying data to be delivered
to hospitals. We also are aware that hospitals would prefer to receive
the calculations to be used for the Hospital Readmissions Reduction
Program as soon as possible. Because several months lead time is
necessary after acquiring the data to generate these claims-based
calculations, if we were to delay our data extraction point to 12
months after the last date of the last discharge in the applicable
period, we would not be able to deliver the calculations to hospitals
sooner than 18 to 24 months after the last discharge date. We believe
this would create an unacceptably long delay both for hospitals and for
CMS to deliver timely calculations to hospitals for quality improvement
and transparency, and ultimately timely readmission adjustment factors
for purposes of this program. Therefore, we proposed to extract the
data needed to calculate the excess readmission ratios for this program
90 days after the last date of discharge for the applicable period so
that we can balance the need to provide timely program information to
hospitals with the need to calculate the claims-based measures using as
complete a data set as possible.
During the 30-day review and correction process for the excess
readmission ratios, if a subsection (d) hospital suspects that such
discrepancies exist in the CMS application of the measures'
methodology, it should notify CMS during the review and correction
period using the technical support contacts provided in the hospital's
confidential report. We would investigate the validity of each
submitted correction and notify hospitals of the results. If we confirm
that we made an error in creating the data extract or in calculating
the excess readmission ratios, we would strive to correct the
calculations, issue new confidential reports to subsection (d)
hospitals, and then publicly report the corrected excess readmission
ratios through the rulemaking process, and subsequently on Hospital
Compare. However, if the errors take more time than anticipated to
correct, not allowing for publication of the corrected ratios in the
final rule, we would notify hospitals in the final rule that corrected
ratios will be made available after the final rule through delivery of
confidential reports followed by a second 30-day review and correction
period, subsequent publication, and posting on Hospital Compare. In
addition, we proposed that any corrections to a hospital's excess
readmission ratios would then be used to recalculate a hospital's ratio
under section 1886(q)(4)(B) of the Act in order to determine the
hospital's adjustment factor in accordance with section 1886(q)(3) of
the Act.
We believe that this proposed process would fulfill the statutory
requirements at section 1886(q)(6)(A), section 1886(q)(6)(B), and
section 1886(q)(6)(C) of the Act. We further believe that the proposed
process would allow hospitals to review and correct their excess
readmission ratios. We note that, under the proposed process, hospitals
would retain the ability to submit new claims and corrections to
submitted claims for payment purposes in line with CMS' timely claims
filing policies. However, we emphasize that the administrative claims
data used to calculate the excess readmission ratios reflect the state
of the claims at the time of extraction from CMS' Common Working File.
Under the proposed process, a hospital's opportunity to submit
corrections to the calculation of the excess readmission ratios ends at
the conclusion of the review and correction period. We welcomed public
comments on the proposed review and corrections process for the
Hospital Readmissions Reduction Program.
Comment: One commenter disagreed with the use of the Common Working
File (CWF) to calculate the readmission measures, stating that it does
not contain final-action claims for all of the discharges eligible to
be used to calculate excess readmission ratios.
Response: The excess readmission ratios are calculated using only
the final action claims (that is, we do not include canceled/edited
claims) from the CWF available as of September 30, which are published
in the Inpatient Standard Analytic File (SAF). Calculations include
claims processed by CMS as of the following dates: June 26, 2009 for
July 1, 2007 through June 30, 2008 claims; June 25, 2010 for July 1,
2008 through June 30, 2009 claims; June 24, 2011 for July 1, 2009
through June 30, 2010 claims; and September 30, 2011 for July l, 2010
through June 30, 2011 claims. Claims and corrections processed after
these dates are not reflected in the calculations. Thus data between
2008 and 2010 include more than 6 months of run-out period, and 2011
data contain a 3-month run-out period to allow as many corrected and
final-action claims to be incorporated. These are the most recent final
action data that can be used to meet the timeline of the program need.
We encourage hospitals to submit claim corrections as early as possible
and to ensure the quality of the data they submitted for
reimbursements. If CMS waits for final-action claims for all eligible
discharges to be included in the data, then the excess readmission
ratios will be based on old data, which will limit its usefulness for
hospitals to review and improve their care delivery processes.
Therefore, we have encouraged hospitals to submit claim corrections as
early as possible and to ensure the quality of the data they submitted
for reimbursements. We will continue to research and seek public
comments on alternative data sources that might provide measure results
that are as accurate and are more timely than the CWF. The CWF will be
used for the calculation of excess readmission ratios for the Hospital
Readmissions Reduction Program as finalized in the FY 2012 IPPS/LTCH
final rule (76 FR 51671 through 51672).
Comment: One commenter appreciated the release of additional
hospital specific data and ``excess readmission rates'' data prior to
the implementation of the program, as well as the readmission
information and patient's risk factors.
Response: We thank the commenter for the recognition and we are
committed to foster transparency, provide accurate data to hospitals
for quality improvement, and, ultimately, timely calculate readmission
adjustment factors for base operating DRG payments.
Comment: One commenter thanked CMS for the 30-day review and
correction period while one commenter
[[Page 53401]]
requested the review and correction period be extended to 60 days.
Response: We appreciate the commenter's support of the 30-day
review period. We note that, in the FY 2012 IPPS/LTCH PPS final rule
(76 FR 51672 through 51673), we adopt the same preview and correction
process and timeframe used for subsection (d) hospitals for the rates
calculated for the Hospital Readmissions Reduction Program. That is, we
provide hospitals with an opportunity to preview their readmission
rates for 30 days prior to posting on the Hospital Compare webs site.
This process meets the statutory requirement in section 1886(q)(6)(B)
of the Act which requires the Secretary to ensure that a subsection (d)
hospital has the opportunity to review and submit corrections before
the information to be made public with respect to the hospital * * *
prior to such information being made public.
Aside from the statutory requirements, we also considered hospital
experience with the measure and data production timeline in proposing
the 30-day preview period. In terms of hospital experience with the
measures, while the Hospital Readmissions Reduction Program is new,
subsection (d) hospitals are already familiar with the three 30-day
risk-standardized readmission measures that the Program uses to
determine payment adjustment. In particular, these three measures were
first publicly reported by the former Reporting of Hospital Quality
Data for Annual Payment Update (RHQDAPU) program (currently known as
the Hospital IQR Program), back in 2009. The measure results have been
reported annually since then and have recently been updated in July
2012. To help hospitals understand the methodology for these measures
and the calculation and interpretation of measure results, we have made
publicly available the latest version of the methodology reports, a
Frequently-Asked-Question list, a mock hospital-specific report, and a
mock discharge-level data file for these measures on the QualityNet Web
site. The measures methodology for the Hospital Readmissions Reduction
Program is the same as that for the Hospital IQR Program. Because
hospitals are working with measures in which they have prior experience
from the Hospital IQR Program, we believe that a 30-day preview period
is sufficient for hospitals to review and correct their excess
readmission ratios.
In terms of data production timeline, due to the complexity of
these measures and the need for bootstrapping in measure calculations,
a significant amount of programming resources is needed. It took
several months to complete the production and extensive quality
assurance procedures for the results for more than 3,500 hospitals. As
a result, we will not be able to begin the preview period earlier than
late June. Also, we will not be able to extend the preview period to
more than 30 days. This is because if hospitals find data problems that
we determine to be attributable to our calculation or programming
errors, we will need adequate time between mid-July and the end of
September to: (1) Recalculate the excess readmission ratios; (2)
regenerate and redisseminate corrected results to hospitals in time for
payment adjustment in early October (the beginning of the subsequent
fiscal year); and (3) publicly report the excess readmission ratios on
the Hospital Compare Web site in mid-October to meet the statutory
reporting requirements under section 1886(q)(6) of the Act. Based on
the above reasons, we cannot change the review and correction timeframe
to 60 days.
Comment: One commenter requested that, for self-validation
purposes, CMS provide each hospital with a downloadable database
containing all of the claims data used to calculate the hospital's
readmission rates. One commenter recommended that CMS provide hospitals
with additional claim information documenting the first physician/
licensed independent practitioner visit post index discharge and prior
to readmit (days from discharge to first visit). The commenter stated
that the first follow-up provider information is critical to decreasing
readmissions. Another commenter was concerned that limited access to
the claims data will impair hospitals' ability to self-validate our
results.
Response: We considered several factors in deciding the amount of
information that CMS provides to hospitals for the review and
correction process. These factors are: Confidentiality of information,
our resources, and feasibility for hospital providers to process the
data.
For the purposes of the Hospital Readmissions Reduction Program
data, we have decided to provide as much of the claims-based
information that is pertinent to the calculation of the excess
readmission ratio so that hospitals can verify the accuracy of these
calculations and engage in outreach and coordination with readmitting
hospitals. Providing the entire raw claims history for index admissions
and for subsequent services after discharge would provide more
information than would be necessary in hospitals' effort to review
their excess readmission ratios. To protect sensitive patient
information, and to avoid burden and confusion to hospitals, we are
careful not to include data elements that are not relevant for the
review and correction process.
Furthermore, providing all subsection (d) and Maryland hospitals
with all the claims data will require a large amount of resources,
infrastructure changes and exert significant financial burden on these
hospitals and on taxpayers. We have already provided supplemental
discharge-level data to hospital providers to review qualified
individual readmissions, including primary diagnosis at index and
readmission stays, where the patient was readmitted, dates of index and
readmission stays, and individual risk factors, and instructions for
replicating their excess readmission ratios.
Additionally, we have also set up a Help Desk for hospitals to
inquire about their results. This Help Desk has access to all the
claims data used for the calculation of the hospitals' excess
readmission ratios, and is highly experienced in assisting hospitals
with the results of the 30-day risk-standardized readmission measures.
Therefore, we believe that the proposed review correction policies are
adequate. We are working to identify new methods to provide hospitals
with accurate and timely data to improve their care delivery processes
to reduce readmission rates. We encourage hospitals and other
healthcare providers to provide us with recommendations for this
effort.
After consideration of the public comments received, for the review
and correction process, we are finalizing the policies of providing
applicable hospitals with: (1) a period of 30 days to review and submit
corrections for their excess readmission ratios for the Hospital
Readmissions Reduction Program; and (2) confidential reports and
accompanying confidential discharge-level information (this includes
the excess readmission ratios, the risk-factors for the discharges that
factor into the calculation of the excess readmission ratio, as well as
information about the readmissions associated with these discharges).
B. Sole Community Hospitals (SCHs) (Sec. 412.92)
1. Background
Section 1886(d)(5)(D)(iii) of the Act defines a sole community
hospital (SCH) generally as a hospital that is located more than 35
road miles from another hospital or that, by reason of factors such as
isolated location,
[[Page 53402]]
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 463897).
2. Reporting Requirement and Clarification for Duration of
Classification for Hospitals Incorrectly Classified as Sole Community
Hospitals (Sec. 412.92(b)(3)(iv))
The regulations at Sec. 412.92(b)(2) and (b)(3) address the
effective dates of a classification as an SCH and the duration of this
classification. Currently, a hospital's SCH classification status
remains in effect without the need for reapproval unless there is a
change in the circumstances under which the classification was
approved. Section 412.92(b)(3) requires a hospital to notify the fiscal
intermediary or Medicare administrative contractor (MAC) within 30 days
of a change that could affect its classification as an SCH.
Specifically, the regulations require an SCH to notify its fiscal
intermediary or MAC if any of the following changes specified in
Sec. Sec. 412.92(b)(3)(ii)(A) through (b)(3)(ii)(E) occur:
The opening of a new hospital in its service area.
The opening of a new road between itself and a like
provider within 35 miles.
An increase in the number of beds to more than 50, if the
hospital qualifies as an SCH under Sec. 412.92(a)(1)(ii).
Its geographic classification changes.
Any changes to the driving conditions that result in a
decrease in the amount of travel time between itself and a like
provider if the hospital qualifies as an SCH under Sec. 412.92(a)(3).
As discussed in the FY 2007 IPPS final rule (71 FR 48060), in the
context of CMS becoming aware of several hospitals that had been paid
based on SCH status, even after the original circumstances of the
classification changed, CMS determined that an SCH's classification
status would generally end 30 days after CMS notifies the SCH that it
no longer meets the requirements to be classified as an SCH. However,
if a hospital does not report when any one of the changes listed above
occurs, CMS will cancel the hospital's SCH classification effective
with the date that the hospital no longer met the criteria for SCH
classification, subject to the reopening rules at 42 CFR 405.1885
(Sec. 412.92(b)(3)(i)).
For any change that is not listed under Sec. Sec.
412.92(b)(3)(ii)(A) through (b)(3)(ii)(E) that affects an SCH's
classification status, CMS requires a hospital to report that change to
the fiscal intermediary or MAC if it ``becomes aware'' of the change.
If a hospital does not report a change, other than those listed under
Sec. Sec. 412.92(b)(3)(ii)(A) through (b)(3)(ii)(E), and it becomes
known to CMS that the hospital had knowledge of that change, CMS will
cancel the hospital's SCH classification effective with the date the
hospital became aware of the event. Specifically, Sec.
412.92(b)(3)(iii) states that ``a sole community hospital must report
to the fiscal intermediary if it becomes aware of any change that would
affect its classification as a sole community hospital beyond the
events listed in paragraph (b)(3)(ii) of this section within 30 days of
the event. If CMS determines that a sole community hospital has failed
to comply with this requirement, CMS will cancel the hospital's
classification as a sole community hospital effective with the date the
hospital became aware of the event that resulted in the sole community
hospital no longer meeting the criteria for such classification,
consistent with the provisions of Sec. 405.1885 of this chapter.''
(Emphasis added.)
The existing language at Sec. 412.92(b)(3)(iii) only refers to a
hospital becoming aware of a ``change,'' because it deals specifically
with a situation where a hospital was appropriately classified as an
SCH because it had previously met the requirements to become an SCH. We
believe that this requirement was not intended to preclude situations
where a hospital was incorrectly classified as an SCH. However, the
regulations did not explicitly address the situation where a hospital
never met the requirements to be classified as an SCH, but was
incorrectly classified as an SCH. Therefore, we believe it would be
prudent to explicitly address this situation in the regulations.
In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27968 and 27969),
we proposed to add a new paragraph (b)(3)(iv) to Sec. 412.92 to
clarify our current authority that if CMS determines that the hospital
was incorrectly classified as an SCH, SCH status could be cancelled
retroactively, consistent with the provisions at Sec. 405.1885. We
proposed that any factor or information, not only a change or an event
that could have affected a hospital's initial SCH classification must
be reported by the SCH to its fiscal intermediary or MAC.
Our proposed regulation stated explicitly our current authority
that if a determination is subsequently made that, in fact, a hospital
did not ever qualify as an SCH, the withdrawal of SCH status could be
made retroactively to revoke payments associated with the incorrect SCH
classification for the entire time period, consistent with the
reopening rules at Sec. 405.1885.
Comment: Many commenters contended that a hospital should not be
accountable for any errors it made inadvertently and is unaware of or
for any errors made by CMS or the Medicare contractor. Commenters
requested confirmation and clarification regarding a number of issues,
such as: (1) The circumstances under which the reporting obligation is
triggered; (2) the timeframe involved in making a report to CMS; and
(3) what factor or information must be reported.
Response: We realize that a hospital could have been incorrectly
classified as an SCH based on an inadvertent error by the hospital,
CMS, or the contractor. However, an error is not adequate justification
to maintain a hospital's SCH status and to provide higher payments
under the Medicare program. However, in light of the public comments,
we are modifying our proposed change in this final rule so that,
effective October 1, 2012, if a hospital reports any factor or
information that could have affected its initial classification as an
SCH, and CMS determines that, based on the additional information, the
hospital should not have qualified for SCH status, we will only revoke
SCH status prospectively, effective 30 days from CMS' date of
determination. We note that this reopening limitation does not apply to
situations where there was fraud involved. If a hospital knowingly
misled CMS or deliberately submitted incorrect information in its
initial classification, different procedures would apply. These
procedures would include recouping incorrect payments associated with
the fraudulently awarded SCH classification.
This policy, as revised in this final rule, will allow a hospital
that reports to CMS any factor or information that could have affected
its initial classification as an SCH to have its SCH classification
removed prospectively only. A hospital is only required to report to
CMS any available information that would have affected its initial
classification as an SCH under the regulations that were effective at
that time. We are not requiring hospitals to
[[Page 53403]]
continuously monitor subsequent year data from other hospitals such as
changes in patient origin data. However, information that could have
affected its classification as an SCH at the time of its initial SCH
determination is required to be reported to CMS.
For example, if hospital A is classified as an SCH and the distance
between itself and hospital B is such that it may have been classified
as an SCH in error, hospital A would be required to report this to CMS.
If the hospital reports this issue to CMS, and CMS determines in fact
that the distance between hospital A and hospital B would have
precluded hospital A from being classified as an SCH using the
qualification criteria that were in place at the time of its initial
classification, we would remove the hospital's SCH status effective 30
days from the date that CMS determines that Hospital A should not have
qualified for SCH status. However, if hospital A does not report to CMS
that hospital B's proximity to hospital A may have been overlooked in
its initial classification as an SCH, and CMS finds that hospital A
should never have qualified as an SCH, CMS has the discretion to recoup
the overpayments associated with erroneous SCH status, in accordance
with cost reporting reopening rules at Sec. 405.1885, that is, for
cost reporting periods that are within the 3-year reopening period. We
believe this distinction between the effective date for hospitals that
do and do not notify CMS of the possible error will encourage self-
reporting of possible errors. In cases where hospitals fail to report,
CMS would have the discretion to reopen back to the earliest date
possible in accordance with Sec. 405.1885. Such discretion would be
available to rectify situations where hospitals were paid as SCHs even
though they never initially met the classification standards for such
status, and never reported the error to CMS.
Accordingly, if a hospital suspects that it should not have
qualified as an SCH at the time of its initial classification and the
hospitals comes to CMS and requests that CMS determine whether it meets
all of the requirements for SCH status, if CMS confirms that suspicion
and the hospital in fact should never have been approved as an SCH, CMS
will remove SCH status effective 30 days from CMS' date of
determination.
We note that this policy, as revised, is in addition to the
requirements already in place in the regulations at Sec. Sec.
412.92(b)(3)(i) through (b)(3)(iii) that require a hospital to notify
CMS (that is, the fiscal intermediary or MAC servicing the hospital) of
any changes that would affect its SCH status.
Comment: Several commenters were concerned that our proposal could
potentially revoke SCH status from a hospital's initial classification
as an SCH, which could potentially span a few decades. One commenter
suggested that CMS establish a ``look back'' period on which hospitals
can rely and that CMS not reopen a prior SCH classification more than 3
years after the initial determination simply because there is an open
cost report due to an appeal or delayed payment. Many commenters
objected to the retroactive cancellation of SCH classification claiming
that this would be punitive.
Response: We understand and appreciate the need to establish a
limit to how far back CMS may rescind SCH status. Our proposal clearly
stated that the withdrawal of SCH status could be made retroactively,
consistent with the provisions at Sec. 405.1885, meaning that we may
withdraw SCH status for cost reporting periods that are within the 3-
year reopening period only. Therefore, if a hospital was incorrectly
approved as an SCH and the effective date of the original
classification is still within the 3-year cost report reopening period,
we could withdraw SCH status for all those periods in which it was paid
incorrectly as an SCH starting with its initial date of classification.
However, if the effective date of the original classification as an SCH
was not within the 3-year cost report reopening period, we could only
withdraw SCH status and any payments associated with that SCH status
for those cost reporting periods subject to the reopening period. This
is consistent with our reopening rules, and applies to any open cost
report, regardless of the reason the report is still in an open cost
reporting period. We note that our ordinary reopening rules do not
distinguish the period available for reopening based on why a cost
report may still be open. Finally, as stated above, CMS would have the
discretion to reopen to the earliest date possible, consistent with
Sec. 405.1885.
Comment: Some commenters contended that the proposal undermines
CMS' longstanding principle favoring prospective policy and that a
hospital would never have total certainty that it qualifies as an SCH.
Response: While we appreciate the commenters' concerns, we also
believe that overpaying hospitals based on an erroneous classification
that should never have been awarded undermines a payment system, and
could even encourage attempts at misclassification. Our reopening rules
have always provided authority to revoke overpayments associated with
an erroneous SCH classification retroactively and in accordance with
the cost report reopening rules. Our clarification in the regulation is
merely codifying this already existing authority. We are simply making
explicit what is already implicit in our authority and is not
introducing a change in policy.
Comment: Several commenters asserted that CMS' proposed regulation
is unfair in that it would impose an unfair and burdensome obligation
to continuously monitor data that may not be within a hospital's
control. Other commenters suggested that CMS modify the proposed
regulation to make it more consistent with the regulations at
Sec. Sec. 412.92(b)(3)(ii) and (b)(3)(iii) which describe the way CMS
handles the cancellation of SCH for a hospital where there was a change
in circumstances under which the classification was approved.
Response: We are not requiring hospitals to continuously monitor
data nor are we requiring hospitals to report data that may not be
within their control. A hospital would only be required to report any
factor or information that would have affected its initial
classification. We note that this policy is in addition to the
requirements already in place in the regulations at Sec. Sec.
412.92(b)(3)(i) through (b)(3)(iii) that require a hospital to notify
CMS (that is, the hospital's fiscal intermediary or MAC) of any changes
that would affect its SCH status. The information in question is data
that are germane to the information on which the SCH classification was
based. The factors and information that a hospital must report are a
limited universe of data that was used during the hospital's initial
classification.
The modifications that we have made to the proposed regulation in
this final rule would make the final regulation consistent with our
existing regulations at Sec. Sec. 412.92(b)(3)(i) and (b)(3)(ii) where
CMS cancels SCH classification in accordance with our reopening rules
when the SCH fails to disclose a change in circumstance.
Comment: Several commenters requested classification as to (1)
whether the proposed regulation would apply to hospitals that were
classified as SCHs before the implementation of IPPS; and (2) which
standards and criteria would be used by CMS to determine whether or not
the hospital qualified as an SCH in its initial classification.
Response: We note that there are a few types of SCHs that have been
classified as such under different sets of requirements:
(1) A hospital that was granted SCH status and was granted an
exemption
[[Page 53404]]
from cost limits pre-IPPS. Our regulations at Sec. 412.92(b)(5) state
that a hospital that has been granted an exemption from the hospital
cost limits before October 1, 1983, or whose request for the exemption
was received by the appropriate intermediary before October 1, 1983,
and was subsequently approved, is automatically classified as an SCH.
In the September 1, 1983 final rule (48 FR 39780), we stated that a
hospital would be classified as an SCH for purposes of the IPPS if the
hospital has an approved exemption from hospital cost limits as an SCH
prior to October 1, 1983, and that the hospital would retain SCH status
unless there was a change in the circumstances affecting this
classification under the cost limits.
(2) A hospital that was classified as an SCH before the change in
the law under section 6003(e)(3) of the Omnibus Budget Reconciliation
Act of 1989 (Pub. L. 101-239). In the August 18, 2006 final rule (71 FR
48061), we discussed that changes in criteria for being eligible for
SCH status that were made by section 6003(e)(3) of Public Law 101-239.
The law changed SCH criteria by reducing the number of miles between
providers from 50 to 35 and by requiring the Secretary to establish a
criterion that takes into consideration the travel time between two
providers. Section 6003(e)(3) of Public Law 101-239 exempted hospitals
that already had SCH status from meeting either of these requirements.
In other words, any hospital that was correctly an SCH in 1989 is
protected under this grandfathering provision from the new mileage
criterion and whether or not it meets the new criterion for
classification concerning travel time at Sec. 412.92(a)(3). However,
we noted that this grandfathering provision is limited to these two
circumstances. Hospitals with SCH designations in effect prior to 1989
can lose SCH status if they fail to meet any of the other eligibility
criteria.
(3) A hospital that was designated as an EACH prior to October 1,
1997. Under the regulations at Sec. 412.109, a hospital designated as
an EACH is paid as an SCH as long as the hospital continues to comply
with the terms, conditions, and limitations that were applicable at the
time of designation.
These hospitals are grandfathered in and are protected against
later changes to SCH criteria or new interpretations of those criteria.
Accordingly, these grandfathered SCHs would maintain their SCH status
as long as they continue to meet the criteria under which they
classified for payments as SCHs.
In this final rule, we also are clarifying that we would apply the
standards and regulations that were in effect at the time the hospital
was initially classified as an SCH. That is, when CMS determines that a
hospital never met the requirements to be classified as an SCH, we are
referring to the requirements that were in place during the hospital's
initial classification as an SCH. However, we note that the criteria
for SCH classification have not been modified since we made changes to
implement section 6003(e)(3) of the Omnibus Budget Reconciliation Act
of 1989 (Pub. L. 101-239). Since that time, we have issued minimal
reinterpretations in the actual criteria for classification. Therefore,
we are confirming that we would not apply SCH criteria, standards, or
interpretations that were not effective at the time of initial SCH
classification to any hospital.
Comment: Some commenters argued that the proposed regulation change
is irreconcilable with our existing regulation which states that a
hospital retains SCH status unless there is a change in the
circumstances under which the classification was approved.
Response: The commenters' argument is based on an incorrect
assumption about the applicability of the existing regulations. That
is, the existing regulations only address situations where a hospital
was correctly classified as an SCH. The regulations were silent on
hospitals that were initially classified incorrectly. If a hospital was
classified as an SCH in error, clearly it would not take a ``change in
circumstances'' to revoke SCH status.
After consideration of the public comments we received, we are
finalizing our proposed codification of our current authority to recoup
any overpayments associated with incorrect SCH classification,
consistent with cost report reopening rules at Sec. 405.1885. We also
are making one modification to specify that, effective October 1, 2012,
if a hospital subsequently reports any factors or information to CMS
that could have affected its initial classification as an SCH and CMS
determines that, based on the additional information, the hospital
should not have qualified for SCH status, CMS will cancel SCH status
effective 30 days from CMS' date of determination.
As stated above, we also note that reopening limitation does not
apply to situations where there was fraud involved. If a hospital
knowingly misled CMS or deliberately submitted incorrect information in
its initial classification, CMS will recoup incorrectly paid amounts
from the date of the hospital's initial SCH classification.
3. Change to Effective Date of Classification for MDHs Applying for SCH
Status Upon the Expiration of the MDH Program (Sec. 412.92(b)(2)(v))
Under existing regulations at Sec. 412.92(b)(2), an SCH's status
is generally effective 30 days after CMS's written notification of
approval. It has come to our attention that there may be a number of
hospitals currently classified as MDHs, under Sec. 412.108 of the
regulations, that intend to apply for classification as SCHs, under
Sec. 412.92 of the regulations, upon the expiration of the MDH program
provision on September 30, 2012. Those hospitals may be reluctant to
apply for SCH classification status well before the expiration of their
MDH status because they would prefer to maintain their MDH status for
as long as possible. Conversely, if those hospitals were to wait to
apply for SCH classification status after expiration of their MDH
status, they could experience a financial hardship if there were a
delay in the approval for SCH classification status. In order to
facilitate a seamless transition for hospitals that are currently
classified as MDHs and that will qualify as SCHs, in the FY 2013 IPPS/
LTCH PPS proposed rule (77 FR 27969), we proposed to add an exception
to the effective dates of SCH classification by adding a new paragraph
(v) under Sec. 412.92(b)(2). We proposed that for any MDH that applies
for SCH classification status at least 30 days prior to the expiration
of the MDH program provision and requests that SCH classification
status be effective with the expiration of the MDH program provision,
and the MDH is approved for SCH classification status, the effective
date of the hospital's classification as an SCH would be the day
following the expiration date of the MDH program provision (that is,
October 1, 2012). For example, Hospital A is an MDH that would like to
maintain its MDH status for as long as possible and be classified as an
SCH only after its MDH status expires. In order to seamlessly
transition from MDH status to SCH status, Hospital A must apply for SCH
status by August 31, 2012, and must request that, if approved, SCH
classification status be effective with the expiration of the MDH
program provision. If CMS determines that Hospital A qualifies for SCH
status, the effective date of its SCH classification will be October 1,
2012.
Comment: Commenters supported the proposal to provide for a
seamless transition for MDHs than can qualify as SCHs, in anticipation
of the expiration
[[Page 53405]]
of the MDH program. Commenters also requested that CMS provide
hospitals with the ability to, in turn, rescind their new SCH status
retroactively and reinstate their MDH status in a seamless manner if a
retroactive extension to the MDH program is made.
Response: We appreciate the commenters' support. The commenters'
request that CMS make provisions for hospitals to transition from SCH
status back to MDH status depends on legislation being passed for the
MDH program. We typically do not create policy around actions that
Congress may take in the future. However, if legislation is passed to
continue the MDH program, we will develop policy to implement the
specific provisions of such legislation.
After consideration of the public comments received, we are
finalizing our proposed change to the effective date of SCH status for
MDHs losing their MDH status with the expiration of the MDH program. In
order for an MDH to receive SCH status effective October 1, 2012, it
must apply for SCH status at least 30 days before the end of the MDH
program; that is, the MDH must apply for SCH status by August 31, 2012.
The MDH also must request that, if approved as an SCH, the SCH status
be effective with the expiration of the MDH program provision; that is,
MDH must request that the SCH status, if approved, be effective October
1, 2012, immediately after its MDH status expires with the expiration
of the MDH program at the end of FY 2012, on September 30, 2012.
C. Rural Referral Centers (RRCs): Annual Update to Case-Mix Index (CMI)
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 some special treatment under both the DSH payment
adjustment and the criteria for geographic reclassification.
Section 402 of Public Law 108-173 raised the DSH payment adjustment
for RRCs such that they are not subject to the 12-percent cap on DSH
payments that is applicable to other rural hospitals. RRCs are also not
subject to the proximity criteria when applying for geographic
reclassification. In addition, they do not have to meet the requirement
that a hospital's average hourly wage must exceed, by a certain
percentage, the average hourly wage of the labor market area where the
hospital is located.
Section 4202(b) of Public Law 105-33 states, in part, ``[a]ny
hospital classified as an RRC by the Secretary * * * for fiscal year
1991 shall be classified as such an RRC for fiscal year 1998 and each
subsequent year.'' In the August 29, 1997 IPPS final rule with comment
period (62 FR 45999), CMS reinstated RRC status for all hospitals that
lost the status due to triennial review or MGCRB reclassification.
However, CMS did not reinstate the status of hospitals that lost RRC
status because they were now urban for all purposes because of the OMB
designation of their geographic area as urban. Subsequently, in the
August 1, 2000 IPPS final rule (65 FR 47089), we indicated that we were
revisiting that decision. Specifically, we stated that we would permit
hospitals that previously qualified as an RRC and lost their status due
to OMB redesignation of the county in which they are located from rural
to urban, to be reinstated as an RRC. Otherwise, a hospital seeking RRC
status must satisfy all of the other applicable criteria. We use the
definitions of ``urban'' and ``rural'' specified in Subpart D of 42 CFR
Part 412. One of the criteria under which a hospital may qualify as an
RRC is to have 275 or more beds available for use (Sec.
412.96(b)(1)(ii)). A rural hospital that does not meet the bed size
requirement can qualify as an RRC if the hospital meets two mandatory
prerequisites (a minimum CMI and a minimum number of discharges), and
at least one of three optional criteria (relating to specialty
composition of medical staff, source of inpatients, or referral
volume). (We refer readers to Sec. 412.96(c)(1) through (c)(5) and the
September 30, 1988 Federal Register (53 FR 38513).) With respect to the
two mandatory prerequisites, a hospital may be classified as an RRC
if--
The hospital's CMI is at least equal to the lower of the
median CMI for urban hospitals in its census region, excluding
hospitals with approved teaching programs, or the median CMI for all
urban hospitals nationally; and
The hospital's number of discharges is at least 5,000 per
year, or, if fewer, the median number of discharges for urban hospitals
in the census region in which the hospital is located. (The number of
discharges criterion for an osteopathic hospital is at least 3,000
discharges per year, as specified in section 1886(d)(5)(C)(i) of the
Act.)
1. Case-Mix Index (CMI)
Section 412.96(c)(1) provides that CMS establish updated national
and regional CMI values in each year's annual notice of prospective
payment rates for purposes of determining RRC status. The methodology
we used to determine the national and regional CMI values is set forth
in the regulations at Sec. 412.96(c)(1)(ii). The national median CMI
value for FY 2013 includes data from all urban hospitals nationwide,
and the regional values for FY 2013 are the median CMI values of urban
hospitals within each census region, excluding those hospitals with
approved teaching programs (that is, those hospitals that train
residents in an approved GME program as provided in Sec. 413.75).
These values are based on discharges occurring during FY 2011 (October
1, 2010 through September 30, 2011), and include bills posted to CMS'
records through March 2012.
In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27969), we
proposed that, in addition to meeting other criteria, if rural
hospitals with fewer than 275 beds are to qualify for initial RRC
status for cost reporting periods beginning on or after October 1,
2012, they must have a CMI value for FY 2011 that is at least--
1.5378; or
The median CMI value (not transfer-adjusted) for urban
hospitals (excluding hospitals with approved teaching programs as
identified in Sec. 413.75) calculated by CMS for the census region in
which the hospital is located. (We refer readers to the table set forth
in the FY 2013 IPPS/LTCH PPS proposed rule at 77 FR 27970.)
The final CMI criteria for FY 2013 are based on the latest
available data (FY 2011 bills received through March 2012). 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, 2012, they must have a CMI value for
FY 2011 that is at least--
1.5378; or
The median CMI value (not transfer-adjusted) for urban
hospitals (excluding hospitals with approved teaching programs as
identified in Sec. 413.75) calculated by CMS for the census region in
which the hospital is located.
The final median CMI values by region are set forth in the
following table:
[[Page 53406]]
------------------------------------------------------------------------
Case-mix index
Region value
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT)............... 1.3146
2. Middle Atlantic (PA, NJ, NY)....................... 1.3744
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV) 1.4640
4. East North Central (IL, IN, MI, OH, WI)............ 1.4533
5. East South Central (AL, KY, MS, TN)................ 1.4045
6. West North Central (IA, KS, MN, MO, NE, ND, SD).... 1.4899
7. West South Central (AR, LA, OK, TX)................ 1.5855
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY).......... 1.6461
9. Pacific (AK, CA, HI, OR, WA)....................... 1.5298
------------------------------------------------------------------------
A hospital seeking to qualify as an RRC should obtain its hospital-
specific CMI value (not transfer-adjusted) from its fiscal intermediary
or MAC. Data are available on the Provider Statistical and
Reimbursement (PS&R) System. In keeping with our policy on discharges,
the CMI values are computed based on all Medicare patient discharges
subject to the IPPS MS-DRG-based payment.
2. Discharges
Section 412.96(c)(2)(i) provides that CMS set forth the national
and regional numbers of discharges in each year's annual notice of
prospective payment rates for purposes of determining RRC status. As
specified in section 1886(d)(5)(C)(ii) of the Act, the national
standard is set at 5,000 discharges. We would normally update the
regional standards based on discharges for urban hospitals' cost
reporting periods that began during FY 2010 (that is, October 1, 2009
through September 30, 2010), which would normally be the latest cost
report data available at the time of the development of this final
rule. However, due to a transition in our data system, in lieu of a
full year of FY 2010 cost report data, we needed to use a combination
of FY 2009 and FY 2010 cost report data in order to create a full
fiscal year of cost report data for this analysis. Due to CMS'
transition to a new cost reporting form effective for cost reporting
periods beginning on or after May 1, 2010, cost reports with fiscal
year begin dates of May 1, 2010 through September 30, 2010 were not
accessible on our system for analysis at the time of the development of
this final rule. Therefore, in order to have a complete fiscal year of
cost report data, we utilized FY 2009 cost report data for providers
with fiscal years beginning on or after May 1, 2010 and by September
30, 2010, in addition to the FY 2010 cost report data for providers
with fiscal years beginning on or after October 1, 2009 and before May
1, 2010.
In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27970), we
proposed that, in addition to meeting other criteria, a hospital, if it
is to qualify for initial RRC status for cost reporting periods
beginning on or after October 1, 2012, must have, as the number of
discharges for its cost reporting period that began during FY 2010
(based on a combination of FY 2009 and FY 2010 cost report data as
explained in the preceding paragraph), at least--
5,000 (3,000 for an osteopathic hospital); or
The median number of discharges for urban hospitals in the
census region in which the hospital is located. (We refer readers to
the table set forth in the FY 2013 IPPS/LTCH PPS proposed rule at 77 FR
27970.)
Based on the latest discharge data available at this time (that is,
based on a combination of FY 2009 and FY 2010 cost report data as
explained earlier in this section), the final median number of
discharges for urban hospitals by census region are set forth in the
following table:
------------------------------------------------------------------------
Number of
Region discharges
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT)............... 8,159
2. Middle Atlantic (PA, NJ, NY)....................... 11,448
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV) 11,755
4. East North Central (IL, IN, MI, OH, WI)............ 8,749
5. East South Central (AL, KY, MS, TN)................ 7,234
6. West North Central (IA, KS, MN, MO, NE, ND, SD).... 8,129
7. West South Central (AR, LA, OK, TX)................ 6,232
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY).......... 9,336
9. Pacific (AK, CA, HI, OR, WA)....................... 8,745
------------------------------------------------------------------------
We note that the median number of discharges for hospitals in each
census region is greater than the national standard of 5,000
discharges. Therefore, 5,000 discharges is the minimum criterion for
all hospitals under this final rule.
We reiterate that, if an osteopathic hospital is to qualify for RRC
status for cost reporting periods beginning on or after October 1,
2012, the hospital would be required to have at least 3,000 discharges
for its cost reporting period that began during FY 2010 (based on a
combination of FY 2009 and FY 2010 cost report data as explained
earlier in this section).
D. Payment Adjustment for Low-Volume Hospitals (Sec. 412.101)
1. Expiration of the Affordable Care Act Provisions for FYs 2011 and
2012
For FYs 2011 and 2012, the Affordable Care Act expanded the
definition of low-volume hospital and modified the methodology for
determining the payment adjustment for hospitals meeting that
definition. Beginning with FY 2013, the low-volume hospital qualifying
criteria and payment adjustment will revert to the statutory
requirements that were in effect prior to the amendments made by the
Affordable Care Act. We discuss the payment policies for FY 2013 in
section IV.D.4. of this preamble.
2. Background
Section 1886(d)(12) of the Act, as added by section 406(a) of
Public Law 108-173, provides for a payment adjustment to account for
the higher
[[Page 53407]]
costs per discharge for low-volume hospitals under the IPPS, effective
beginning FY 2005. The additional payment adjustment to a low-volume
hospital provided for under section 1886(d)(12) of the Act is ``in
addition to any payment calculated under this section.'' Therefore, the
additional payment adjustment is based on the per discharge amount paid
to the qualifying hospital under section 1886 of the Act. In other
words, the low-volume payment amount is based on total per discharge
payments made under section 1886 of the Act, including capital, DSH,
IME, and outliers. For SCHs and MDHs, the low-volume payment amount is
based on either the Federal rate or the hospital-specific rate,
whichever results in a greater operating IPPS payment.
Section 1886(d)(12)(C)(i) of the Act defined a low-volume hospital
as ``a subsection (d) hospital (as defined in paragraph (1)(B)) that
the Secretary determines is located more than 25 road miles from
another subsection (d) hospital and has less than 800 discharges during
the fiscal year.'' Section 1886(d)(12)(C)(ii) of the Act further
stipulates that the term ``discharge'' means ``an inpatient acute care
discharge of an individual regardless of whether the individual is
entitled to benefits under Part A.'' Therefore, the term ``discharge''
refers to total discharges, regardless of payer (that is, not only
Medicare discharges). Furthermore, under section 406(a) of Public Law
108-173, which initially added subparagraph (12) to section 1886(d) of
the Act, the provision requires the Secretary to determine an
applicable percentage increase for these low-volume hospitals based on
the ``empirical relationship'' between ``the standardized cost-per-case
for such hospitals and the total number of discharges of such hospitals
and the amount of the additional incremental costs (if any) that are
associated with such number of discharges.'' The statute thus mandates
that the Secretary develop an empirically justifiable adjustment based
on the relationship between costs and discharges for these low-volume
hospitals. Section 1886(d)(12)(B)(iii) of the Act limits the applicable
percentage increase adjustment to no more than 25 percent.
Based on an analysis we conducted for the FY 2005 IPPS final rule
(69 FR 49099 through 49102), a 25-percent low-volume adjustment to all
qualifying hospitals with less than 200 discharges was found to be most
consistent with the statutory requirement to provide relief to low-
volume hospitals where there is empirical evidence that higher
incremental costs are associated with low numbers of total discharges.
In the FY 2006 IPPS final rule (70 FR 47432 through 47434), we stated
that multivariate analyses supported the existing low-volume adjustment
implemented in FY 2005. Therefore, the low-volume adjustment of an
additional 25 percent continues to be provided for qualifying hospitals
with less than 200 discharges.
3. Affordable Care Act Provisions for FYs 2011 and 2012
Sections 3125 and 10314 of the Affordable Care Act amended section
1886(d)(12) of the Act, modifying the definition of a low-volume
hospital and the methodology for calculating the payment adjustment for
low-volume hospitals, effective only for discharges occurring during
FYs 2011 and 2012. Beginning with FY 2013, the preexisting low-volume
hospital qualifying criteria and payment adjustment, as implemented in
FY 2005, will resume.
Sections 3125(3) and 10314(1) of the Affordable Care Act amended
the qualifying criteria for low-volume hospitals under section
1886(d)(12)(C)(i) of the Act to make it easier for hospitals to qualify
for the low-volume adjustment. Specifically, the provision specifies
that, for FYs 2011 and 2012, a hospital qualifies as a low-volume
hospital if it is more than 15 road miles from another subsection (d)
hospital and has less than 1,600 discharges of individuals entitled to,
or enrolled for, benefits under Part A during the fiscal year. In
addition, section 1886(d)(12)(D) of the Act, as added by section
3125(4) and amended by section 10314 of the Affordable Care Act,
provides that the payment adjustment (the applicable percentage
increase) is to be determined ``using a continuous linear sliding scale
ranging from 25 percent for low-volume hospitals with 200 or fewer
discharges of individuals entitled to, or enrolled for, benefits under
Part A in the fiscal year to 0 percent for low-volume hospitals with
greater than 1,600 discharges of such individuals in the fiscal year.''
In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50238 through 50275
and 50414), we revised our regulations at 42 CFR 412.101 to reflect the
changes to the qualifying criteria and the payment adjustment for low-
volume hospitals according to the provisions of the Affordable Care
Act. In addition to changing the regulations to conform them to the
Affordable Care Act changes, we also defined, at Sec. 412.101(a), the
term ``road miles'' to mean ``miles'' as defined at Sec. 412.92(c)(i).
The definition of ``road miles'' continues to apply even after the
Affordable Care Act provisions expire at the end of FY 2012. We also
clarified the existing regulations to indicate that a hospital must
continue to qualify as a low-volume hospital in order to receive the
payment adjustment in that year; that is, it is not based on a one-time
qualification. Furthermore, in that same final rule, we discussed the
process for requesting and obtaining the low-volume hospital payment
adjustment (75 FR 50240).
4. Payment Adjustment for FY 2013 and Subsequent Fiscal Years
As we discussed in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR
27971 through 27973), in accordance with section 1886(d)(12) of the
Act, beginning with FY 2013, the low-volume hospital definition and
payment adjustment methodology will revert back to the statutory
requirements that were in effect prior to the amendments made by the
Affordable Care Act. Therefore, as specified under the existing
regulations at Sec. 412.101, effective for FY 2013 and subsequent
years, in order to qualify as a low-volume hospital, a subsection (d)
hospital must be more than 25 road miles from another subsection (d)
hospital and have less than 200 discharges (that is, less than 200
discharges total, including both Medicare and non-Medicare discharges)
during the fiscal year. As discussed above, the statute specifies that
a low-volume hospital must have less than 800 discharges during the
fiscal year, but also requires that the applicable percentage increase
for qualifying low-volume hospitals be based on the ``empirical
relationship'' between ``the standardized cost-per-case for such
hospitals and the total number of discharges of such hospitals and the
amount of the additional incremental costs (if any) that are associated
with such number of discharges.'' Based on an analysis we conducted for
the FY 2005 IPPS final rule (69 FR 49099 through 49102), a 25-percent
low-volume adjustment to all qualifying hospitals with less than 200
discharges was found to be most consistent with the statutory
requirements set forth in section 1886(d)(12)(B) of the Act to provide
relief for low-volume hospitals where there is empirical evidence that
higher incremental costs are associated with low numbers of total
discharges. (Under the policy we established in that same final rule,
hospitals with between 200 and 799 discharges do not receive a low-
volume hospital adjustment.)
As described above, for FYs 2005 through 2010 and FY 2013 and
subsequent years, the discharge
[[Page 53408]]
determination is made based on the hospital's number of total
discharges, that is, Medicare and non-Medicare discharges. The
hospital's most recently submitted cost report is used to determine if
the hospital meets the discharge criterion to receive the low-volume
payment adjustment in the current year (Sec. 412.101(b)(2)(i)). We use
cost report data to determine if a hospital meets the discharge
criterion because this is the best available data source that includes
information on both Medicare and non-Medicare discharges. We note that,
for FYs 2011 and 2012, CMS used the most recently available MedPAR data
to determine the hospital's Medicare discharges because only Medicare
discharges were used to determine if a hospital met the discharge
criterion for those years.
For FY 2013 and subsequent fiscal years, in addition to a discharge
criterion, the eligibility for the low-volume payment adjustment is
also dependent upon the hospital meeting the mileage criterion
specified at Sec. 412.101(b)(2)(i). Specifically, to meet the mileage
criterion to qualify for the low-volume payment adjustment for FY 2013
and subsequent fiscal years, a hospital must be located more than 25
road miles from the nearest ``subsection (d) hospital.'' As mentioned
above, we define, at Sec. 412.101(a), the term ``road miles'' to mean
``miles'' as defined at Sec. 412.92(c)(i) (75 FR 50238 through 50275
and 50414).
As discussed in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50238
through 50275 and 50414), we discussed the process for requesting and
obtaining the low-volume hospital payment adjustment. In order to
qualify for the low-volume hospital payment adjustment, a hospital must
provide to its fiscal intermediary or MAC sufficient evidence to
document that it meets the discharge and distance requirements. The
fiscal intermediary or MAC will determine, based on the most recent
data available, if the hospital qualifies as a low-volume hospital, so
that the hospital will know in advance whether or not it will receive a
payment adjustment. The fiscal intermediary or MAC and CMS may review
available data, in addition to the data the hospital submits with its
request for low-volume hospital status, in order to determine whether
or not the hospital meets the qualifying criteria.
In order to receive a low-volume hospital payment adjustment under
Sec. 412.101, a hospital must notify and provide documentation to its
fiscal intermediary or MAC that it meets the mileage criterion. The use
of a Web-based mapping tool, such as MapQuest, as part of documenting
that the hospital meets the mileage criterion for low-volume hospitals,
is acceptable. The fiscal intermediary or 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 (in
road miles, as defined in the regulations at Sec. 412.101(a)) from the
hospital requesting low-volume hospital status, is sufficient to
document that it meets the mileage criterion. If not, the fiscal
intermediary or MAC will follow up with the hospital to obtain
additional necessary information to determine whether or not the
hospital meets the low-volume mileage criterion. In addition, the
fiscal intermediary or MAC will refer to the hospital's most recently
submitted cost report to determine whether or not the hospital meets
the discharge criterion. 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 noted previously, a hospital
must continue to meet the qualifying criteria at Sec. 412.101(b)(2)(i)
as a low-volume hospital (that is, the discharge criterion and the
mileage criterion) in order to receive the payment adjustment in that
year; that is, low-volume hospital status is not based on a ``one-
time'' qualification.
In order to be a low-volume hospital in FY 2013 and subsequent
fiscal years, in accordance with our previously established procedure,
a hospital must make its request for low-volume hospital status in
writing to its fiscal intermediary or 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 25 percent
low-volume add-on 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 fiscal intermediary or MAC
determines the hospital meets the criteria to qualify as a low-volume
hospital, the fiscal intermediary or MAC will apply the 25 percent low-
volume add-on payment adjustment to determine payment for the
hospital's discharges for the fiscal year, effective prospectively
within 30 days of the date of the fiscal intermediary's or MAC's low-
volume status determination.
Specifically, for FY 2013, a hospital must make its request for
low-volume hospital status in writing to its fiscal intermediary or MAC
by September 1, 2012, in order for the 25-percent low-volume add-on
payment adjustment to be applied to payments for its discharges
beginning on or after October 1, 2012 (through September 30, 2013). If
a hospital's request for low-volume hospital status for FY 2013 is
received after September 1, 2012, and if the fiscal intermediary or MAC
determines the hospital meets the criteria to qualify as a low-volume
hospital, the fiscal intermediary or MAC will apply the 25 percent low-
volume add-on payment adjustment to determine the payment for the
hospital's FY 2013 discharges, effective prospectively within 30 days
of the date of the fiscal intermediary's or MAC's low-volume status
determination. For additional information on our established
application process for the low-volume hospital payment adjustment, we
refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50274
through 50275), Transmittal 2060 (Change Request 7134; October 1,
2010), and the FY 2012 IPPS/LTCH PPS final rule (76 FR 51680).
In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50238 through 50275
and 50414), in addition to implementing the Affordable Care Act
provisions affecting low-volume hospitals for FYs 2011 and 2012, we
also implemented changes to the regulations at 42 CFR 412.101 to
conform them to the statutory requirements to require that, beginning
with FY 2013, the low-volume hospital qualifying criteria and payment
adjustment methodology will return to that which was in effect prior to
the amendments made by the Affordable Care Act (that is, the low-volume
hospital payment policy in effect for FYs 2005 through 2010).
Therefore, no further revisions to the policy or to the regulations at
Sec. 412.101 are required to conform them to the statutory requirement
that the low-volume hospital policy in effect prior to the Affordable
Care Act returns for FY 2013 and subsequent years.
Comment: A few commenters expressed concern about the financial
impact of the expiration of the temporary expansion of the low-volume
hospital payment adjustment provided for by the Affordable Care Act.
Some commenters encouraged CMS to promote legislative action that would
continue the Affordable Care Act's modification of the low-volume
hospital payment adjustment. Other commenters urged CMS to mitigate the
impact of the expiration of the 2-year enhancement of the low-volume
hospital payment
[[Page 53409]]
adjustment provided for by the Affordable Care Act by using the
existing statutory authority to make the low-volume adjustment to
qualifying hospitals that have up to less than 800 total discharges
rather than only to qualifying hospitals that have less than 200 total
discharges. The commenters provided no data analysis in support of
their comments to expand the low-volume hospital adjustment to
qualifying hospitals that have up to less than 800 total discharges.
Response: To implement the original low-volume hospital provision,
and as mandated by statute, we developed an empirically justified
adjustment based on the relationship between costs and total discharges
of hospitals with less than 800 total (Medicare and non-Medicare)
discharges. Specifically, we performed several regression analyses to
evaluate the relationship between hospitals' costs per case and
discharges, and found that an adjustment for hospitals with less than
200 total discharges is most consistent with the statutory requirement
to provide for additional payments to low-volume hospitals where there
is empirical evidence that higher incremental costs are associated with
lower numbers of discharges (69 FR 49101 through 49102). Based on these
analyses, we established a low-volume hospital policy where qualifying
hospitals with less than 200 total discharges receive a payment
adjustment of an additional 25 percent. (Section 1886(d)(12)(B)(iii) of
the Act limits the applicable percentage increase adjustment to no more
than 25 percent.) We may, in the future, reevaluate the low-volume
hospital adjustment policy, that is, the definition of a low-volume
hospital and the payment adjustment. However, because we did not make
any proposals regarding the low-volume hospital payment adjustment for
FY 2013, we are not making any changes to the low-volume hospital
payment adjustment policy in this final rule. As discussed above, the
low-volume hospital definition and payment adjustment methodology will
revert back to the policy established under statutory requirements that
were in effect prior to the amendments made by the Affordable Care Act,
which is currently implemented in the existing regulations at Sec.
412.101.
E. Indirect Medical Education (IME) Payment Adjustment (Sec. 412.105)
1. IME Adjustment Factor for FY 2013
Under the IPPS, an additional payment amount is made to hospitals
that have residents in an approved graduate medical education (GME)
program in order to reflect the higher indirect patient care costs of
teaching hospitals relative to nonteaching hospitals. The payment
amount is determined by use of a statutorily specified adjustment
factor. The regulations regarding the calculation of this additional
payment, known as the IME adjustment, are located at Sec. 412.105. We
refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51680) for
a full discussion of the IME adjustment and IME adjustment factor.
Section 1886(d)(5)(B) of the Act states that, for discharges occurring
during FY 2008 and fiscal years thereafter, the IME formula multiplier
is 1.35. Accordingly, for discharges occurring during FY 2013, the
formula multiplier is 1.35. We estimate that application of this
formula multiplier for the FY 2013 IME adjustment will result in an
increase in IPPS payment of 5.5 percent for every approximately 10-
percent increase in the hospital's resident-to-bed ratio.
Comment: One commenter supported the continuation of the IME
adjustment factor because IME payments are an important part of
guaranteeing a strong general surgery workforce in which there is
currently a growing shortage. Another commenter stated that it
supported the Nation's teaching hospitals and, therefore, supported
continuation of the IME adjustment factor. A third commenter stated
that, because of its commitment to GME, academic medicine, and
residency training in cardiothoracic surgery, it supported the
continuation of the IME adjustment factor. The commenter stated that
IME payments are an important part of guaranteeing a strong
cardiothoracic surgery workforce ``* * * which is currently
experiencing a growing shortage as cited in the report Shortage of
Cardiothoracic Surgeons is Likely by 2020, published in the journal
Circulation, July 27, 2009.''
Response: We appreciate the commenters' support. We note that the
IME formula multiplier is set by Congress.
We are finalizing our proposal that the IME formula multiplier for
FY 2013 be set at 1.35, which we estimate will result in an increase in
IPPS payments of 5.5 percent for every approximately 10-percent
increase in the hospital's resident-to-bed ratio.
2. Timely Filing Requirements under Fee-for-Service Medicare
a. IME and Direct GME
The Balanced Budget Act of 1997 (Pub. L. 105-33) amended sections
1886(d) and 1886(h) of the Act by adding paragraphs (d)(11) and
(h)(3)(D), respectively, to establish payment provisions for IME and
direct GME costs to hospitals providing services to Medicare+Choice
(now Medicare Advantage) enrollees. Sections 1886(d)(11) and
1886(h)(3)(D) of the Act specify that the Secretary shall provide for
an ``additional payment amount'' for services furnished to individuals
who are enrolled in a Medicare Advantage plan under Medicare Part C. To
implement sections 1886(d)(11) and 1886(h)(3)(D) of the Act, we issued
two final rules in the Federal Register that specifically addressed IME
and direct GME payments to teaching hospitals for services provided to
Medicare Advantage enrollees (the FY 1997 IPPS final rule (62 FR 46003)
and the FY 1998 IPPS final rule (63 FR 26341)). Subsequent to the FY
1998 IPPS final rule, we (then HCFA) issued a Program Memorandum (PM),
A-98-21, in July 1998, which outlined fiscal intermediary and standard
system changes needed to process requests for IME and direct GME
supplemental payments for services provided to Medicare Advantage
enrollees. The PM explained that hospitals must submit their Medicare
claims to the fiscal intermediary in UB-92 format in order for the
standard system to process the claims so that hospitals may be paid the
supplemental IME and direct GME payments for services provided to
Medicare Advantage enrollees. It was always our intent that the claims
filing requirements under 42 CFR Part 424, including the time limits at
42 CFR 424.44, fully applied to these claims submissions.
Existing Sec. 424.44 of the regulations contains the time limits
for filing all Medicare claims. In the FY 2013 IPPS/LTCH PPS proposed
rule (77 FR 27973), we again included a clarification that the
regulations governing time limits for filing claims at Sec. 424.44
apply to claims submitted for IME and direct GME payments associated
with services provided to Medicare Advantage enrollees. The process
that was established by PM A-98-21 is within the same framework of the
preexisting methodology for submitting claims under Medicare Part A.
Therefore, because IME and direct GME payments for services provided to
Medicare Advantage enrollees are also made under Medicare Part A, the
same timely filing requirements that apply to other Part A claims for
payments also apply to claims for IME and direct GME payments for
services provided to Managed Advantage enrollees. We also clarified
once again in the proposed rule
[[Page 53410]]
that when hospitals submit claims for services provided to Medicare
Advantage enrollees for additional IME and direct GME payments, the
hospitals must comply with the regulations governing time limits for
filing claims at Sec. 424.44.
b. Nursing and Allied Health Education
Section 541 of the Balanced Budget Refinement Act (BBRA) of 1999
(Pub. L. 106-113) further amended section 1886 of the Act by adding
subsection (l) to provide for additional payments to hospitals that
operate nursing or allied health education programs and incur costs
associated with services provided to Medicare+Choice (now Medicare
Advantage) enrollees. Section 512 of the Benefits Improvement and
Protection Act (BIPA) (Pub. L. 106-554) changed the formula for
determining the additional payment amount paid to hospitals that
operate nursing or allied health education programs and incur costs for
services provided to Medicare+Choice (now Medicare Advantage)
enrollees. We issued several PMs (Transmittals A-00-86 on November 22,
2000, and A-03-043 on May 23, 2003) to implement section 541 of the
BBRA and section 512 of the BIPA. We also issued related Transmittal A-
03-007 on February 3, 2003, and Transmittal A-03-045 on May 30, 2003,
to instruct hospitals that operate a nursing or allied health education
program and that qualify for additional payment related to services
provided to Medicare Advantage enrollees to also submit those claims
for processing as no-pay bills in the UB-92 format. These transmittals
also instructed hospitals that are not paid under the IPPS, hospitals
with rehabilitation and psychiatric units, and hospitals that operate
approved nursing or allied health education programs (but may not have
approved GME residency programs) to submit claims for services provided
to Medicare Advantage enrollees to their fiscal intermediary in UB-92
format with specific condition codes present. In the FY 2013 IPPS/LTCH
PPS proposed rule (77 FR 27973), we clarified that the regulations
governing the time limits for filing claims at Sec. 424.44 also apply
to claims submitted for nursing or allied health education program
payments for services provided to Medicare Advantage enrollees.
c. Disproportionate Share Hospital (DSH) Payments
On July 20, 2007, we issued Change Request 5647 instructing
applicable hospitals to submit no pay bills for their Medicare
Advantage patients for FY 2007 forward in order for these days to be
captured in the DSH calculation. Because we issued this request in the
middle of FY 2007, we extended the deadline for submission of FY 2007
and FY 2008 no pay Medicare Advantage bills to August 31, 2010.
In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27973), we
proposed to adopt a policy that hospitals that are required to submit
no pay bills for services furnished on a prepaid capitation basis by a
Medicare Advantage organization, or through cost settlement with either
a health maintenance organization (HMO), a competitive medical plan
(CMP), a health care prepayment plan (HCPP), or a demonstration, for
the purpose of calculating the DSH patient percentage (DPP) must also
do so within the time limits for filing claims specified at Sec.
424.44. In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50282), we
changed our methodology for calculating the SSI fraction of the DSH
adjustment, in part, by using claims information that is updated 15
months after the close of each Federal fiscal year. We believed that
allowing for a 15-month run-out period would more closely align the
timing of the match process with the requirements for the timely
submission of claims. As we stated in that final rule, hospitals may
not have an incentive to submit no pay bills in as timely a manner as
they would for fee-for-service claims. In order to ensure that no pay
claims are properly incorporated into the DSH calculation, in the FY
2013 IPPS/LTCH PPS proposed rule (77 FR 27973), we proposed to extend
our rules regarding the timely submission of claims to no pay bills
submitted for the purposes of calculating the DPP.
We proposed to revise the regulations at Sec. 424.30 to (1)
clarify our existing policy that hospitals must file timely claims in
order to receive supplemental IME, direct GME, and/or nursing or allied
health education payments for Medicare Advantage enrollees and (2)
propose that hospitals that are required to submit no pay bills for the
purpose of calculating the DPP must also follow the time limits for
filing claims.
d. Summary of Public Comments, Our Responses, and Final Policies
Comment: Two commenters stated that, although it is more time
consuming to submit no pay bills, it is reasonable to apply the same
timely filing requirements to no pay bills for supplemental direct GME,
IME, nursing and allied health education, and DSH payments that are
applied to other Medicare Part A claims.
Response: We appreciate the commenters' support.
Comment: Several commenters specifically addressed the
clarification concerning the timely filing requirements that need to be
met to receive supplemental IME and direct GME payments for Medicare
Advantage enrollees. The commenters asked that CMS recognize that there
are nuances related to shadow billing and that ``inherent
complexities'' can delay the processing of these claims. The commenters
requested CMS to include in the final rule ``* * * an estimate of the
administrative and cost burdens to hospitals that result from the
requirement to file a second shadow bill for each Medicare managed care
discharge.'' The commenters also urged CMS to recognize that the policy
related to GME payments is a new rule rather than a clarification of
existing policy.
Response: We do not agree with the commenters that the
clarification related to the timely filing requirements for
supplemental direct GME and IME payments is a new rule as opposed to a
clarification. As noted earlier in this preamble and in the proposed
rule (77 FR 27973), to implement sections 1886(d)(11) and 1886(h)(3)(D)
of the Act, which provide for an ``additional payment amount'' for
services furnished to individuals who are enrolled in a Medicare
Advantage plan under Medicare Part C, we issued two final rules in the
Federal Register that specifically addressed IME and direct GME
payments to teaching hospitals for services provided to Medicare
Advantage enrollees (the FY 1997 IPPS final rule (62 FR 46003) and the
FY 1998 IPPS final rule (63 FR 26341)). In addition, in July 1998, we
(then HCFA) issued a Program Memorandum (PM), A-98-21, which outlined
fiscal intermediary and standard system changes needed to process
requests for IME and direct GME supplemental payments for services
provided to Medicare Advantage enrollees. The PM explained that
hospitals must submit their Medicare claims to the fiscal intermediary
in UB-92 format in order for the standard system to process the claims
so that hospitals may be paid the supplemental IME and direct GME
payments for services provided to Medicare Advantage enrollees. All
claims submitted in UB-92 format are subject to the timely filing
regulations at Sec. 424.44. Therefore, in accordance with PM A-98-21,
UB-92 claims submitted on behalf of Medicare Advantage enrollees have
always been subject to the timely filing regulations at Sec. 424.44.
In this final rule, as we did in the proposed rule, we are clarifying
that in
[[Page 53411]]
order for a hospital to receive supplemental direct GME, IME, and/or
nursing and allied health payments for Medicare Advantage enrollees, it
must follow the regulations governing time limits for filing claims at
Sec. 424.44.
In response to the commenters who requested an estimate of the
administrative and cost burden associated with the submission of a no
pay bill for Medicare Advantage enrollees, the requirement for
hospitals to follow the timely filing requirements in order to receive
supplemental direct GME, IME, and/or nursing and allied health
education payments for Medicare Advantage enrollees is a clarification
and not a new policy proposal. Because we are clarifying this
requirement rather than implementing a new requirement, we have
concluded that there is no new cost or administrative burden associated
with this requirement.
Comment: One commenter asserted that the policy of treating the
submission of Part C claims for purposes of calculating direct GME and
IME payments as subject to the Part A regulations regarding timely
filing constituted a substantive rule, rather than an interpretive
rule. As a result, the commenter stated that CMS could not have imposed
this requirement without first undertaking rulemaking, and, thus, it
was inappropriate for CMS to attempt to clarify this policy in the FY
2013 IPPS/LTCH PPS proposed rule. The commenter noted that this
argument had also been raised in Loma Linda v. Sebelius (D.D.C.
(2010)).
Response: We disagree. As a preliminary matter, we note that this
issue was not addressed directly in the court's decision in Loma Linda
v. Sebelius because the case was decided on other grounds. Furthermore,
as discussed in more detail above, IME and direct GME payments for
services provided to Medicare Advantage enrollees are made under
Medicare Part A. It has always been CMS' intent that the claims filing
requirements under 42 CFR part 424, including the time limits at 42 CFR
424.44, apply to those claims. Thus, we continue to believe it was
appropriate for CMS to characterize the discussion in the proposed rule
as a clarification of an existing policy, rather than as a new
proposal.
After consideration of the public comments we received, in this
final rule, we are restating our clarifications that when hospitals
submit claims for services provided to Medicare Advantage enrollees for
additional IME and direct GME payments, and for claims for nursing or
allied health education program payments, the hospital must comply with
the regulations governing time limits for filing claims at Sec.
424.44. In addition, we are finalizing our proposal that hospitals that
are required to submit no pay bills for the purpose of calculating the
DPP must also follow the time limits for filing claims, and the
proposed amendments to the regulations at Sec. 424.30 to incorporate
these requirements. Further, in this final rule, we are making minor
technical revisions to the regulations at Sec. 424.30 in order to
further clarify the claims submission requirements.
3. Other Related Policy Changes
In sections IV.F. and IV.I. of the preamble of the FY 2013 IPPS/
LTCH PPS proposed rule, we present other proposed policy changes
relating to determining labor and delivery bed counts for purposes of
the DSH payment adjustment and relating to determining FTE resident
caps for direct GME and IME payment purposes that would have an effect
on the IME payment adjustment. We refer readers to these same two
sections of the preamble of this final rule where we address any public
comments received and present the final policies.
F. Payment Adjustment for Medicare Disproportionate Share Hospitals
(DSHs) and Indirect Medical Education (IME) (Sec. Sec. 412.105 and
412.106)
1. Background
For the most recent background discussion regarding the Medicare
payment adjustment for subsection (d) hospitals that serve a
significantly disproportionate number of low-income patients, we refer
readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51681).
As we did in the FY 2012 IPPS/LTCH PPS final rule, we are
combining, under section IV.F.2. of this preamble, our discussion of FY
2013 proposed and final changes to the policies for counting beds in
relation to the calculations for the IME adjustment at Sec. 412.105(b)
and the DSH payment adjustment at Sec. 412.106(a)(1)(i) because the
underlying concepts are similar, and we believe they should generally
be interpreted in a consistent manner for both purposes.
2. Policy Change Relating to Treatment of Labor and Delivery Beds in
the Calculation of the Medicare DSH Payment Adjustment and the IME
Payment Adjustment
a. Background
Medicare's policy with respect to the treatment of labor and
delivery services in the calculation of the Medicare DSH payment
adjustment has undergone a number of changes over the years. (We refer
readers to the background discussion regarding these policy changes in
the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43899 through
43901)). The most recent change in policy was adopted in the FY 2010
IPPS/RY 2010 LTCH PPS final rule. Prior to FY 2010, our policy was to
exclude from the count of inpatient days, for purposes of the Medicare
DSH calculation, labor and delivery patient days associated with beds
used for ancillary labor and delivery services when the patient did not
occupy a routine bed prior to occupying an ancillary labor and delivery
bed. This policy applied whether the hospital maintained separate labor
and delivery rooms and postpartum rooms, or whether it maintained
``maternity suites'' in which labor, delivery, and postpartum services
all occurred in the same bed. However, in the latter case, patient days
were counted proportionally based on the proportion of (routine/
ancillary) services furnished. (We refer readers to the example
provided in the FY 2004 IPPS final rule (68 FR 45420) that describes
how routine and ancillary days are allocated under this policy.)
In the FY 2010 IPPS/RY 2010 LTCH PPS final rule, we revised our
regulations to include in the disproportionate patient percentage (DPP)
of the Medicare DSH payment adjustment all patient days associated with
patients occupying labor and delivery beds once the patient has been
admitted to the hospital as an inpatient, regardless of whether the
patient days are associated with patients who occupied a routine bed
prior to occupying an ancillary labor and delivery bed. Our rationale
for adopting this change was that the costs associated with labor and
delivery patient days are generally payable under the IPPS. Although we
adopted this change with respect to labor and delivery patient days, we
did not make a similar change to our policy for counting hospital beds.
b. Policy Change
As we stated in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51682),
our policy for counting hospital beds is to include bed days available
for IPPS-level acute care hospital services. In the FY 2004 IPPS final
rule (68 FR 45417), we stated that beds in a particular unit would be
considered available for IPPS-level acute care hospital services if the
services furnished in that unit were generally payable under the IPPS.
Moreover, as stated above, our policy for counting patient days with
respect to
[[Page 53412]]
the Medicare DSH payment adjustment is to include patient days in units
that provide services that are generally payable under the IPPS. Under
our current policy, the services furnished to a labor and delivery
patient are considered to be generally payable under the IPPS (74 FR
43900).
We recognize that, under our current policy, while the services
furnished to a labor and delivery patient are considered to be
generally payable under the IPPS, under Sec. 412.105(b)(4), the bed
where the services are furnished is not considered to be available for
IPPS-level acute care hospital services.
As we discussed in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR
27974 through 27975), upon further examination of our existing
policies, we believe that if a patient day is counted because the
services furnished are generally payable under the IPPS, the bed in
which the services were furnished should also be considered to be
available for IPPS-level acute care hospital services. Accordingly, we
believe it is appropriate to extend our current approach of including
labor and delivery patient days in the DPP of the Medicare DSH payment
adjustment to our rules for counting hospital beds for purposes of both
the IME payment adjustment and the Medicare DSH payment adjustment.
Specifically, because we have described labor and delivery patient days
as being generally payable under the IPPS (74 FR 43900), we believe
that the bed in which such services are furnished should also be
considered to be available for IPPS-level acute care hospital services,
and should be included in the count of beds available for IPPS-level
acute care hospital services. The rules for counting hospital beds for
purposes of the IME payment adjustment are codified in the IME
regulations at Sec. 412.105(b), which are cross-referenced in Sec.
412.106(a)(1)(i) for purposes of determining the DSH payment
adjustment.
In light of the similar policy rationales for determining patient
days in the calculation of the Medicare DSH payment adjustment, and for
determining bed days for both the Medicare DSH payment adjustment and
the IME payment adjustment, we proposed to include labor and delivery
bed days in the count of available beds used in the IME and DSH
calculations. Moreover, we stated that our proposal to treat labor and
delivery patient days and bed days the same is consistent with our
approach with respect to the observation, swing-bed, and hospice days,
which are excluded from both the patient day count and the available
bed count. Accordingly, we proposed to revise the regulations at Sec.
412.105(b)(4) to remove from the list of currently excluded beds those
beds associated with ``ancillary labor/delivery services.'' We proposed
that this regulation change would be effective for cost reporting
periods beginning on or after October 1, 2012.
As we noted in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR
43900), our policy for counting labor and delivery patient days does
not allow for the inclusion of days of labor and delivery patients who
are not admitted to the hospital as inpatients. For example, if a woman
presents at a hospital for labor and delivery services, but is
determined by medical staff to be in false labor and is sent home
without ever being admitted to the hospital as an inpatient, any days
associated with such services furnished by the hospital would not be
included in the DPP for purposes of the calculation of the Medicare DSH
payment adjustment. For the same reason, days on which labor and
delivery beds are used for such services also would be excluded from
the count of available bed days.
Comment: A number of commenters stated that the current discrepancy
in the treatment of labor and delivery for purposes of the patient day
count and the bed day count is appropriate because labor and delivery
services are typically not paid for by the Medicare program. The
commenters further stated that, to the extent Medicare does pay for
labor and delivery services, the Medicare program only pays for 1
percent of all births in the United States, as opposed to Medicaid,
which, according to the National Bureau of Economic Research, pays for
41 percent of all births in the country. The commenters also stated
that the low volume of Medicare labor and delivery patients justifies
excluding labor and delivery beds from a hospital's bed count for
purposes of determining a hospital's qualification for status as an
MDH.
Response: As we stated in the FY 2010 IPPS/RY 2010 LTCH PPS final
rule (74 FR 43900), we believe that the costs associated with services
provided in a labor and delivery room are generally payable under the
IPPS. The volume of labor and delivery services paid under the Medicare
program, regardless of whether it is as low as asserted by the
commenters, does not alter the fact that patients receiving these
services are inpatients who are receiving an IPPS-level of care,
whether or not paid under the Medicare program. A policy to exclude
beds from a hospital's number of available beds based on the volume of
services paid for by Medicare would create unpredictability with
respect to the DSH and IME payment adjustments and could impose an
undue burden on the agency and hospitals to monitor the volume of
individual services to determine appropriate exclusions.
Comment: Commenters pointed to CMS' current policy with respect to
nursery days. Specifically, the commenters noted that, under CMS'
current policy, patient stays in a newborn nursery unit are included in
the patient day count for purposes of the DSH calculation but are
excluded from the DSH and IME bed counts. The commenters believed that
this distinction is appropriate and, therefore, believed it would be
appropriate for CMS to take a similar approach with respect to labor
and delivery days.
Response: As we stated above, we believe inconsistencies between
the patient day policies and the bed count policies are generally an
inappropriate approach for implementing the DSH and IME payment
adjustments. We appreciate the commenters' pointing out the potential
inconsistency with respect to the treatment of newborn nursery units.
We will review our current approach to newborn nursery units and will
consider addressing this issue in future rulemaking.
Comment: Commenters expressed concern that the Medicare hospital
cost report and the cost reporting instructions would need to be
amended to implement the policy proposal. Specifically, the commenters
noted that the current definition of a labor and delivery bed on the
cost report is inconsistent with CMS' policy proposal. The commenters
also stated that the current hospital cost report does not allow for
hospitals to report excluded labor and delivery bed days such as an
outpatient bed day in a labor and delivery room.
Response: We appreciate the commenters' information regarding the
need for changes to the Medicare hospital cost report and the cost
reporting instructions. We plan to amend the cost reporting
instructions to reflect our finalized change in policy and to allow for
the proper reporting of labor and delivery bed days.
Comment: A number of commenters requested additional clarity
regarding beds that would be included in the bed count. Specifically,
the commenters asked if ``maternity suites'' in which labor, delivery,
and postpartum services all occur in the same bed would be counted and
if so whether the bed count would be split in the same manner that
costs are split for apportionment purposes. The commenters also
expressed confusion regarding hospitals
[[Page 53413]]
that maintain separate labor and delivery rooms and postpartum rooms.
The commenters stated that, in these situations, providers are
concerned that including the ancillary beds would result in a ``double
counting'' of beds. Additionally, the commenters asked CMS to
specifically identify whether certain beds, such as triage labor and
delivery beds used for preadmission evaluation and assessment, are to
be included in the bed count. In addition to expressing confusion about
CMS' proposal, the commenters stated that they believed labor and
delivery beds should not be counted if they are not licensed as routine
beds.
Response: As stated above, our policy is to include in the bed
count the bed days available for IPPS-level acute care services, or
more specifically, the bed days of a particular unit if the services
furnished in that unit are generally payable under the IPPS. We do not
consider whether a bed is licensed under State law as a routine or
ancillary bed, but rather whether the unit in which the bed is located
is providing services generally payable under the IPPS. To the extent
that the beds in a particular unit, whether maternity suite beds or
ancillary labor and delivery beds, are furnishing services that are
generally payable under the IPPS, such beds should be included in the
bed count under our proposal. Furthermore, as stated in the FY 2013
IPPS/LTCH PPS proposed rule (77 FR 27974 through 27975), the bed days
of a patient not admitted as an inpatient are not included in a
hospital's bed count. Because our proposal is intended to align our
patient day and bed day policies, we also refer readers to our
discussion in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43899
through 43901) for further information regarding our policy on counting
labor and delivery patient days.
We also do not share the commenters' concern regarding the ``double
counting'' of bed days for the IME and DSH payment adjustments. Under
our existing policies, we include all beds in a unit that is providing
services that are generally payable under the IPPS because we believe
such beds to be available for IPPS-level acute care hospital services.
Therefore, unoccupied ancillary labor and delivery beds would still be
included in a hospital's bed count under our proposal because they are
available for IPPS-level acute care hospital services.
Comment: Commenters noted that currently the Medicare hospital cost
report does not allow for labor and delivery patient days to be counted
in the direct GME patient load. The commenters believed that, because
these patient days are considered inpatient days, they should be
considered a patient day for purposes of allocating costs for direct
GME.
Response: We thank the commenters for bringing this issue to the
agency's attention. We will undertake a further review to determine if
it is necessary to make any changes to the way patient days are
reported on the cost report, and whether those patient days should be
included or excluded from the calculation of the Medicare patient load.
Comment: One commenter requested that CMS begin implementation of
the Affordable Care Act amendments to the DSH payment adjustment
provisions of the Act through this rulemaking.
Response: We believe that this comment is outside of the scope of
the FY 2013 proposed rule. The statutory changes made by the Affordable
Care Act relating to the DSH payment adjustment do not go into effect
in FY 2013 and were not addressed in the FY 2013 proposed rule.
Comment: Commenters expressed concern about the impact of our
proposal on the calculation of transitional corridor payments under the
OPPS for SCHs. The commenters noted that the outpatient hold harmless
payments are derived by comparing Medicare payments to adjusted
Medicare costs. Because these payments and costs do not reflect costs
associated with labor and delivery beds, the commenters stated that
they believe these costs should not count toward determining whether a
hospital qualifies for hold harmless payments under the OPPS.
Response: We agree with the commenters that the revision to the
regulations at Sec. 412.105(b)(4) to remove from the list of currently
excluded beds those beds associated with ``ancillary labor/delivery
services'' could impact the qualification of certain hospitals for hold
harmless payments under the OPPS, Under section 3002 of the Middle
Class Tax Relief and Job Creation Act of 2012 (Pub. L. 112-96),
temporary outpatient hold harmless payments to small rural hospitals,
small SCHs, and small Essential Access Community Hospitals (EACHs) are
extended through the end of CY 2012. Under the hold harmless provisions
at Sec. 419.70(d), hospitals that have 100 or fewer beds, as defined
in Sec. 412.105(b), may result in bed counts for hospitals currently
eligible for OPPS hold harmless payments going above the 100-bed limit.
However, we do not agree with the commenters that labor and delivery
beds should be excluded from the bed count under Sec. 412.105(b) as it
applies to the qualification for OPPS hold harmless payments. Rather,
we believe that it is appropriate to continue to determine hospital
size with regard to OPPS hold harmless eligibility based on the
hospital's bed count as determined under Sec. 412.105(b)(4).
After consideration of the public comments we received, we are
adopting our proposed policy without modification. In summary, we are
revising the regulations at Sec. 412.105(b)(4) to remove from the list
of currently excluded beds those beds associated with ``ancillary
labor/delivery services.''
G. Expiration of the Medicare-Dependent, Small Rural Hospital (MDH)
Program (Sec. 412.108)
Under current law, separate special payment protections are
provided to a Medicare-dependent, small rural hospital (MDH) under the
IPPS through the end of FY 2012. (For additional information on the MDH
program and the payment methodology, we refer readers to the FY 2012
IPPS/LTCH PPS final rule (76 FR 51683 through 51684.) The provisions
for MDHs at section 1886(d)(5) of the Act expire at the end of FY 2012
(that is, with discharges occurring on September 30, 2012). As we
discussed in the FY 2012 IPPS/LTCH PPS final rule, section 3124 of the
Affordable Care Act extended the MDH program from the end of FY 2011
(that is, for discharges occurring before October 1, 2011) to the end
of FY 2012 (that is, for discharges occurring before October 1, 2012).
Under prior law, as specified in section 5003(a) of Public Law 109-171
(DRA 2005), the MDH program was to be in effect through the end of FY
2011 only. Section 3124(a) of the Affordable Care Act amended sections
1886(d)(5)(G)(i) and 1886(d)(5)(G)(ii)(II) of the Act to extend the MDH
program and payment methodology from the end of FY 2011 to the end of
FY 2012, by striking ``October 1, 2011'' and inserting ``October 1,
2012''. Section 3124(b) of the Affordable Care Act also made conforming
amendments to sections 1886(b)(3)(D) and 1886(b)(3)(D)(iv) of the Act.
Section 3124(b)(2) of the Affordable Care Act also amended section
13501(e)(2) of OBRA 1993 to extend the provision permitting hospitals
to decline reclassification through FY 2012. In the FY 2011 IPPS/LTCH
PPS final rule (75 FR 50287 and 50414), we amended the regulations at
Sec. 412.108(a)(1) and (c)(2)(iii) to reflect the statutory extension
of the MDH program through FY 2012. In the FY 2012 IPPS/LTCH PPS final
rule (76 FR 51683 through 51684), we did not make
[[Page 53414]]
any additional changes to the MDH regulatory text for FY 2012.
Because the MDH program is not authorized by statute beyond FY
2012, beginning in FY 2013, all hospitals that previously qualified for
MDH status will no longer have MDH status and will be paid based on the
Federal rate. (We note that, in section IV.B.3. of this preamble, we
are finalizing our proposal to revise our SCH policies to allow MDHs to
apply for SCH status and be paid as such under certain proposed
conditions, following expiration of the MDH program.) For the FY 2013
impact of the expiration of the MDH program at the end of FY 2012, we
refer readers to section I.G.2.j. of Appendix A to this final rule.
Comment: Several commenters expressed concern with the expiration
of the MDH program, citing serious detrimental effects that would
result to patients, hospitals, and communities. The commenters strongly
encouraged the continuation of the MDH program.
Response: The MDH program, which provides special treatment of and
payment to small, rural, Medicare-dependent hospitals, was authorized
by statute. In order for the MDH program to continue, or in order to
reinstate it once it expires, legislation is required. CMS does not
have the authority, without statutory provision, to continue the MDH
program.
H. Changes in the Inpatient Hospital Update
1. FY 2013 Inpatient Hospital Update
In accordance with section 1886(b)(3)(B)(i) of the Act, each year
we update the national standardized amount for inpatient operating
costs by a factor called the ``applicable percentage increase.'' Prior
to enactment of the Affordable Care Act, section 1886(b)(3)(B)(i)(XX)
of the Act set the applicable percentage increase equal to the rate-of-
increase in the hospital market basket for subsection (d) hospitals
(hereafter referred to as ``IPPS hospitals'') in all areas, subject to
the hospital submitting quality information under rules established by
the Secretary in accordance with section 1886(b)(3)(B)(viii) of the
Act. For hospitals that did not provide these data, the update was
equal to the market basket percentage increase less an additional 2.0
percentage points. The update for the hospital-specific rates for SCHs
is set by section 1886(b)(3)(B)(iv) of the Act as discussed further
below.
Section 1886(b)(3)(B) of the Act, as amended by sections 3401(a)
and 10319(a) of the Affordable Care Act, sets the applicable percentage
increase under the IPPS for FY 2013 as equal to the rate-of-increase in
the hospital market basket for IPPS hospitals in all areas (which is
currently based on a forecast of the FY 2006-based IPPS market basket),
subject to a reduction of 2.0 percentage points if the hospital fails
to submit quality information under rules established by the Secretary
in accordance with section 1886(b)(3)(B)(viii) of the Act, and then
subject to an adjustment based on changes in economy-wide productivity
(the multifactor productivity (MFP) adjustment), and an additional
reduction of 0.1 percentage point. Sections 1886(b)(3)(B)(xi) and
(b)(3)(B)(xii) of the Act, as added by section 3401(a) of the
Affordable Care Act, state that application of the MFP adjustment and
the additional FY 2013 adjustment of 0.1 percentage point may result in
the applicable percentage increase being less than zero.
In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27975 and 27976),
we stated that, in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689
through 51692), we finalized our methodology for calculating and
applying the MFP adjustment. We also stated in the proposed rule that,
for FY 2013, we were not proposing to make any change in our
methodology for calculating and applying the MFP adjustment. Similar to
the market basket increase, we are using the most recent data available
for this final rule to compute the MFP adjustment. Using the
methodology that we finalized in the FY 2012 IPPS/LTCH PPS final rule
(76 FR 51690), in accordance with section 1886(b)(3)(B) of the Act, as
amended by section 3401(a) of the Affordable Care Act, in the FY 2013
IPPS/LTCH PPS proposed rule (77 FR 27975), based on IHS Global Insight,
Inc.'s (IGI's) first quarter 2012 forecast of multifactor productivity
(MFP), we proposed an MFP adjustment (the 10-year moving average of MFP
for the period ending FY 2013) of 0.8 percent.
Consistent with current law, and based on IGI's first quarter 2012
forecast of the FY 2013 market basket increase, we proposed an
applicable percentage increase to the FY 2013 operating standardized
amount of 2.1 percent (that is, the FY 2013 estimate of the market
basket rate-of-increase of 3.0 percent less an adjustment of 0.8
percentage points for economy-wide productivity (the MFP adjustment)
and less 0.1 percentage point) for hospitals in all areas, provided the
hospital submits quality data in accordance with our rules. For
hospitals that do not submit quality data, we proposed an applicable
percentage increase to the operating standardized amount of 0.1 percent
(that is, the FY 2013 estimate of the market basket rate-of-increase of
3.0 percent, less 2.0 percentage points for failure to submit quality
data, less an adjustment of 0.8 percentage points for economy-wide
productivity, and less an additional adjustment of 0.1 percentage
point). In the proposed rule, we stated that if more recent data are
subsequently available (for example, a more recent estimate of the
market basket and MFP adjustment), we would use such data, if
appropriate, to determine the FY 2013 market basket update and MFP
adjustment in the final rule.
We did not receive any public comments on these proposals to
implement the applicable percentage increase. For this final rule,
using the most recent data available, consistent with current law, and
based on IGI's second quarter 2012 forecast of the FY 2013 market
basket increase, we are finalizing an applicable percentage increase to
the FY 2013 operating standardized amount of 1.8 percent (that is, the
FY 2013 estimate of the market basket rate-of-increase of 2.6 percent
less an adjustment of 0.7 percentage point for economy-wide
productivity (that is, the MFP adjustment) and less 0.1 percentage
point) for hospitals in all areas, provided the hospital submits
quality data under rules established in accordance with section
1886(b)(3)(B)(viii) of the Act in accordance with our rules. For
hospitals that do not submit these quality data, we are finalizing an
applicable percentage increase to the operating standardized amount of
-0.2 percent (that is, the FY 2013 estimate of the market basket rate-
of-increase of 2.6 percent, less 2.0 percentage points for failure to
submit quality data, less an adjustment of 0.7 percentage point for the
MFP adjustment, and less an additional adjustment of 0.1 percentage
point).
In the proposed rule, we proposed to revise the existing
regulations at 42 CFR 412.64(d)(1)(iv) to reflect the current law for
the FY 2013 update. Specifically, in accordance with section
1886(b)(3)(B) of the Act, we proposed to revise paragraph (d)(1)(iv) to
reflect the applicable percentage increase to the FY 2013 operating
standardized amount as the percentage increase in the market basket
index, subject to a reduction of 2.0 percentage points if the hospital
fails to submit quality information under rules established by the
Secretary in accordance with section 1886(b)(3)(B)(viii) of the Act,
and then subject to a multifactor productivity adjustment and, lastly,
subject to the additional reduction of 0.1 percentage
[[Page 53415]]
point. We did not receive any public comments on this proposal.
Therefore, in this final rule, we are adopting as final, without
modification, the proposed changes to Sec. 412.64(d)(1)(iv) to reflect
current law.
Section 1886(b)(3)(B)(iv) of the Act provides that the applicable
percentage increase to the hospital-specific rates for SCHs equals the
applicable percentage increase set forth in section 1886(b)(3)(B)(i) of
the Act (that is, the same update factor as for all other hospitals
subject to the IPPS). Therefore, the update to the hospital-specific
rates for SCHs is also subject to section 1886(b)(3)(B)(i) of the Act,
as amended by sections 3401(a) and 10319(a) of the Affordable Care Act.
Accordingly, in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27976),
we proposed an update to the hospital-specific rates applicable to SCHs
of 2.1 percent for hospitals that submit quality data or 0.1 percent
for hospitals that fail to submit quality data. For FY 2013, the
regulations in Sec. Sec. 412.73(c)(16), 412.75(d), 412.77(e) and
412.78(e) already contain provisions that set the update factor for
SCHs equal to the update factor applied to the national standardized
amount for all IPPS hospitals. Therefore, we did not propose to make
further changes to these four regulatory provisions to reflect the FY
2013 update factor for the hospital-specific rates of SCHs. We did not
receive any public comments on this proposal. Therefore, for this final
rule, we are finalizing an update to the hospital-specific rates
applicable to SCHs of 1.8 percent for hospitals that submit quality
data or -0.2 percent for hospitals that fail to submit quality data. As
we noted above, for the proposed rule, we used the first quarter 2012
forecast of the FY 2006-based IPPS market basket with historical data
through fourth quarter 2011. For this final rule, we used the most
recent data available, which was the second quarter 2012 forecast of
the FY 2006-based IPPS market basket with historical data through first
quarter 2012. Similarly, for the proposed rule, we used IGI's first
quarter 2012 forecast of MFP. For this final rule, we used the most
recent data available, which was IGI's second quarter 2012 forecast of
MFP.
We note that, as discussed in section IV.G. of this preamble,
section 3124 of the Affordable Care Act extended the MDH program from
the end of FY 2011 (that is, for discharges occurring before October 1,
2011) to the end of FY 2012 (that is, for discharges occurring before
October 1, 2012). Under prior law, the MDH program was to be in effect
through the end of FY 2011 only. Absent additional legislation further
extending the MDH program, the MDH program will expire for discharges
beginning in FY 2013. Accordingly, we are not including MDHs in our
update to the hospital-specific rates for FY 2013.
2. FY 2013 Puerto Rico Hospital Update
Puerto Rico hospitals are paid a blended rate for their inpatient
operating costs based on 75 percent of the national standardized amount
and 25 percent of the Puerto Rico-specific standardized amount. Section
1886(d)(9)(C)(i) of the Act is the basis for determining the applicable
percentage increase applied to the Puerto Rico-specific standardized
amount. Section 401(c) of Public Law 108-173 amended section
1886(d)(9)(C)(i) of the Act, which states that, for discharges
occurring in a fiscal year (beginning with FY 2004), the Secretary
shall compute an average standardized amount for hospitals located in
any area of Puerto Rico that is equal to the average standardized
amount computed under subclause (I) for fiscal year 2003 for hospitals
in a large urban area (or, beginning with FY 2005, for all hospitals in
the previous fiscal year) increased by the applicable percentage
increase under subsection (b)(3)(B) for the fiscal year involved.
Therefore, the update to the Puerto Rico-specific operating
standardized amount equals the applicable percentage increase set forth
in section 1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a)
and 10319(a) of the Affordable Care Act (that is, the same update
factor as for all other hospitals subject to the IPPS). Accordingly, in
the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27976), we proposed an
applicable percentage increase to the Puerto Rico-specific operating
standardized amount of 2.1 percent for FY 2013. The regulations at
Sec. 412.211(c) already set the update factor for the Puerto Rico-
specific operating standardized amount equal to the update factor
applied to the national standardized amount for all IPPS hospitals.
Therefore, it is not necessary for us to make changes to the existing
regulatory text.
We did not receive any public comments on this proposal. Therefore,
for this final rule, we are finalizing an applicable percentage
increase to the Puerto Rico-specific operating standardized amount of
1.8 percent for FY 2013. As we noted above, for the proposed rule, we
used the first quarter 2012 forecast of the FY 2006-based IPPS market
basket with historical data through fourth quarter 2011. For this final
rule, we used the most recent data available, which was the second
quarter 2012 forecast of the FY 2006-based IPPS market basket with
historical data through first quarter 2012. Similarly, for the proposed
rule, we used IGI's first quarter 2012 forecast of MFP. For this final
rule, we used the most recent data available, which was IGI's second
quarter 2012 forecast of MFP.
I. Payment for Graduate Medical Education (GME) and Indirect Medical
Education (IME) Costs (Sec. Sec. 412.105, 413.75 through 413.83)
1. Background
Section 1886(h) of the Act, as added by section 9202 of the
Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 (Pub. L.
99-272) and as currently implemented in the regulations at 42 CFR
413.75 through 413.83, establishes a methodology for determining
payments to hospitals for the direct costs of approved graduate medical
education (GME) programs. Section 1886(h)(2) of the Act sets forth a
methodology for the determination of a hospital-specific base-period
per resident amount (PRA) that is calculated by dividing a hospital's
allowable direct costs of GME in a base period by its number of full-
time equivalent (FTE) residents in the base period. The base period is,
for most hospitals, the hospital's cost reporting period beginning in
FY 1984 (that is, October 1, 1983 through September 30, 1984). The base
year PRA is updated annually for inflation. In general, Medicare direct
GME payments are calculated by multiplying the hospital's updated PRA
by the weighted number of FTE residents working in all areas of the
hospital complex (and at nonprovider sites, when applicable), and the
hospital's Medicare share of total inpatient days.
Section 1886(d)(5)(B) of the Act provides for a payment adjustment
known as the indirect medical education (IME) adjustment under the
hospital inpatient prospective payment system (IPPS) for hospitals that
have residents in an approved GME program, in order to account for the
higher indirect patient care costs of teaching hospitals relative to
nonteaching hospitals. The regulations regarding the calculation of
this additional payment are located at 42 CFR 412.105. The hospital's
IME adjustment applied to the DRG payments is calculated based on the
ratio of the hospital's number of FTE residents training in either the
inpatient or outpatient departments of the IPPS hospital to the number
of inpatient hospital beds.
[[Page 53416]]
The calculation of both direct GME and IME payments is affected by
the number of FTE residents that a hospital is allowed to count.
Generally, the greater the number of FTE residents a hospital counts,
the greater the amount of Medicare direct GME and IME payments the
hospital will receive. In an attempt to end the implicit incentive for
hospitals to increase the number of FTE residents, Congress, through
the Balanced Budget Act of 1997 (Pub. L. 105-33), established a limit
on the number of allopathic and osteopathic residents that a hospital
may include in its FTE resident count for direct GME and IME payment
purposes. Under section 1886(h)(4)(F) of the Act, for cost reporting
periods beginning on or after October 1, 1997, a hospital's unweighted
FTE count of residents for purposes of direct GME may not exceed the
hospital's unweighted FTE count for direct GME in its most recent cost
reporting period ending on or before December 31, 1996. Under section
1886(d)(5)(B)(v) of the Act, a similar limit based on the FTE count for
IME during that cost reporting period is applied effective for
discharges occurring on or after October 1, 1997. Dental and podiatric
residents are not included in this statutorily mandated cap.
The Affordable Care Act made a number of statutory changes relating
to the determination of a hospital's FTE resident count for direct GME
and IME payment purposes and the manner in which FTE resident limits
are calculated and applied to hospitals under certain circumstances.
Section 5503 of the Affordable Care Act added a new section 1886(h)(8)
to the Act to provide for the reduction in FTE resident caps for direct
GME under Medicare for certain hospitals training fewer residents than
their caps, and to authorize the ``redistribution'' of the estimated
number of excess FTE resident slots to other qualified hospitals. In
addition, section 5503 amended section 1886(d)(5)(B)(v) of the Act to
require the application of the section 1886(h)(8) of the Act provisions
``in the same manner'' to the IME FTE resident caps. The regulations
implementing section 5503 of the Affordable Care Act were included in
the November 24, 2010 final rule with comment period (75 FR 72263).
2. Teaching Hospitals: Change in New Program Growth From 3 Years to 5
Years
Section 1886(h)(4)(H)(i) of the Act requires CMS to establish rules
for calculating the direct GME caps of teaching hospitals training
residents in new programs established on or after January 1, 1995.
Under section 1886(d)(5)(B)(viii) of the Act, these rules also apply to
the establishment of a hospital's IME cap. CMS implemented these
statutory requirements in the August 29, 1997 Federal Register (62 FR
46005) and in the May 12, 1998 Federal Register (63 FR 26333).
Generally, under existing regulations at 42 CFR 413.79(e)(1) and 42 CFR
412.105(f)(1)(vii), if a hospital did not train any allopathic or
osteopathic residents in its most recent cost reporting period ending
on or before December 31, 1996, and it begins to participate in
training residents in a new residency program (allopathic or
osteopathic) on or after January 1, 1995, the hospital's unweighted FTE
resident cap (which would otherwise be zero) may be adjusted based on
the sum of the product of the highest number of FTE residents in any
program year during the third year of the first new program, for each
new residency training programs established during that 3-year period,
and the minimum accredited length for each type of program. The number
of FTE resident cap slots that a teaching hospital receives for each
new program may not exceed the number of accredited slots that are
available for each new program. Once a hospital's FTE resident cap is
established, no subsequent cap adjustments may be made for new programs
unless the teaching hospital is a rural hospital. A rural hospital's
FTE resident caps may be adjusted for participation in subsequent new
residency training programs. As a reminder, a hospital that did not
train any allopathic or osteopathic residents in its most recent cost
reporting period ending on or before December 31, 1996, may only
receive a permanent FTE resident cap adjustment for training residents
in a truly ``new'' residency training program; no permanent cap
adjustment would be given for training residents associated with an
existing program. That is, if a hospital that did not train any
allopathic or osteopathic residents in its most recent cost reporting
period ending on or before December 31, 1996, serves as a training site
for residents in a program that exists or existed previously at another
teaching hospital that remains open, that ``new'' teaching hospital
does not receive a ``new program'' cap adjustment because it is not
participating in training residents in a truly ``new'' program.
However, it is possible for that hospital to receive a temporary cap
adjustment if it enters into a Medicare GME affiliation agreement with
the existing teaching hospital as specified at 42 CFR 413.79(f) and
412.105(f)(1)(vi). (For a detailed discussion of the distinctions
between a new residency program and an existing residency program, we
refer readers to the August 27, 2009 final rule (74 FR 43908).)
As stated previously, the existing regulations provide for a 3-year
period in which a teaching hospital can ``grow'' its programs, for the
purpose of establishing its FTE resident caps. This 3-year period,
which we will refer to as the ``3-year window'' for ease of reference,
starts when the teaching hospital first begins to train residents in
its first new program, typically on July 1, and it ends when the third
program year of that first new program ends. For example, assume
residents begin training in a new program for the first time on July 1,
2012. The 3-year window begins on July 1, 2012, and ends on June 30,
2015, the end of the third program year of that (first) new program. At
this point in time, regardless of the actual accredited length of the
new program, or the number of new programs started, the teaching
hospital's FTE resident caps are established permanently and are
effective beginning with the fourth program year from the date the
first new program started (using the same example, this would be July
1, 2015). We note that there are several ``types'' of hospitals that
can receive a permanent cap adjustment for training FTE residents in a
new program. A hospital that has never before trained any residents and
begins training FTE residents in its first new program can receive a
permanent cap adjustment. A hospital that previously trained FTE
residents in an existing program(s) and begins training FTE residents
in its first new program can receive a permanent cap adjustment. A
rural hospital can always receive a permanent cap adjustment for each
new program it begins. That is, a rural hospital enters a cap-building
period for each new residency training program it begins, not just for
its first new residency training program. Because all of these
hospitals could qualify to receive a permanent cap adjustment for
training FTE residents in a new residency training program, we refer to
these hospitals as ``qualifying'' hospitals throughout the remainder of
this preamble.
Prior to issuance of the proposed rule, the provider community
expressed concerns that 3 years do not provide for a sufficient amount
of time for a hospital to ``grow'' its new residency programs and to
establish FTE resident caps that are properly reflective of the number
of FTE residents that it will
[[Page 53417]]
actually train, once the programs are fully grown. Providers explained
that 3 years is an insufficient amount of time primarily because a
period of 3 years is not compatible with program accreditation
requirements, particularly in instances where the qualifying teaching
hospital wishes to start more than one new program. For example, we
understand that a qualifying teaching hospital may not begin all of its
new programs at the same time because of accreditation prerequisites;
rather, a qualifying teaching hospital must wait until the first
program is in place for a specified amount of time before it can begin
training residents in a second or third program. This potential delay
means that a qualifying teaching hospital may not be able to
sufficiently ``grow'' all of its new programs by the end of the ``3-
year window.'' We understand, for example, that the Accreditation
Council for Graduate Medical Education (ACGME) requires that, for a
hospital to sponsor an anesthesiology program, the hospital must
sponsor or be affiliated with at least one internal medicine program
and one general surgery program. Furthermore, we understand that the
ACGME can require new residency training programs to pass through an
``initial'' accreditation period of up to 3 years until they can be
granted ``continued'' accreditation. During this initial accreditation
period, a hospital is not allowed to add any additional positions to
its new program. Therefore, even if a hospital has plans to expand its
new training program beyond the number of positions for which it is
initially accredited, it may not be possible for the hospital to
actually do so until this initial period has expired. Lastly, we were
made aware that providers may want to stagger the start dates for their
residency training programs if they plan on training residents in
several programs because they may want to gain some experience in
residency training before they begin all of their new programs.
Given the concerns about teaching hospitals having insufficient
time to ``grow'' their new residency training programs and to establish
an appropriately reflective permanent FTE resident cap within a 3-year
window, in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27978), we
proposed that a teaching hospital will have 5 years, or a ``5-year
window,'' in which to establish and grow new programs. At the end of
the fifth program year of the first new program in which the teaching
hospital participates, the teaching hospital's FTE resident caps would
be determined, and set permanently, effective with the beginning of the
sixth program year. We proposed that this change would apply to
teaching hospitals that begin training residents in new programs for
the first time on or after October 1, 2012. Although we understand that
many residency training programs begin July 1 of the calendar year,
consistent with the proposed effective date of the FY 2013 IPPS
provisions in the proposed rule, we proposed an effective date for this
change of October 1, 2012. We proposed to amend the regulations at
Sec. 413.79(e)(1) to state that if a teaching hospital participates in
training residents in a new program for the first time on or after
October 1, 2012, the teaching hospital's FTE resident cap may be
adjusted based on the product of the highest number of FTE residents
training in any program year during the fifth year of the first
program's existence for all new residency training program(s) and the
number of years in which residents are expected to complete the program
based on the minimum accredited length for each type of program. We
proposed that this policy would apply to the establishment of a
hospital's cap for both direct GME and IME payment purposes. The IME
regulations at Sec. 412.105(f)(1)(vii) refer to the direct GME
regulations at Sec. 413.79(e)(1) through (e)(4) for the rules for the
establishment of a new teaching hospital's cap. As is required under
existing regulations, the number of cap slots associated with each new
program cannot exceed the number of accredited slots available to the
hospital for that new program.
We note that we did not propose to make any changes to regulations
governing treatment of the rolling average and the intern and resident-
to-bed (IRB) ratio for new programs. That is, new program FTE residents
will continue to be exempt from the rolling average and the cap on the
IRB ratio for the minimum accredited length for the specific type of
residency training program. These exceptions are discussed in the
regulations at Sec. Sec. 412.105(a)(1)(i) through (a)(1)(ii) and
413.79(d)(5). The current cost report instructions for Form CMS-2552-
10, Worksheet E-4, Line 6 (current year unweighted allopathic and
osteopathic FTE count) instruct hospitals to contact their Medicare
contractor for instructions on how to complete that line if the
hospital has a new program for which the period of years is less than
or greater than 3 years. Similarly, in the case of the proposed policy
where the exemption from the rolling average for a new program could
expire prior to the hospital's cap being set in the sixth year of the
first new program, we stated that we would encourage hospitals to
contact CMS if they have questions on the method of reporting FTE
resident counts for FTE residents in new programs that are subject to
the rolling average but not subject to the cap.
We also proposed to revise the regulations at Sec. 413.79(e)(1)(i)
that discuss the methodology used to calculate a qualifying teaching
hospital's cap adjustment for a new residency training program if
residents training in the new program are rotating to more than one
hospital during the 5-year window. We proposed to revise the
regulations to specify that, in calculating the cap adjustment for each
new program started within the 5-year window, we would look at the
highest total number of FTE residents training in any program year
during the fifth academic year of the first new program's existence at
all participating hospitals to which these residents rotate and
multiply that highest FTE resident count by the number of years in
which residents are expected to complete the program, based on the
minimum accredited length of the specific program. Furthermore, we
proposed that, for each new program started within the 5-year window,
we would take that product and multiply it by each hospital's ratio of
the number of FTE residents in that new program training over the
course of the 5-year period at each hospital to the total number FTE
residents training in that new program at all participating hospitals
over the course of the 5 years. We believed it was appropriate to
propose to apportion the overall FTE cap among the hospitals
participating in training residents in the new program based on the
percentage of FTE residents each hospital trained over the course of
the entire 5-year period, rather than the percentage of FTE residents
each hospital trained only during the fifth academic year, because the
trend of training over the entire 5 years may reflect more completely
the patterns in the training in years subsequent to the fifth academic
year. Otherwise, a hospital's FTE cap adjustment, which is permanent,
may reflect too heavily the share of training time solely in the fifth
academic year, which may or may not be beneficial to the hospital. We
noted that a hospital's cap adjustment could differ, depending on
whether we look only at the fifth academic year of the first new
program or look at every available year (up to 5 years) for which
training occurred to calculate each
[[Page 53418]]
hospital's share of the aggregate cap for a specific program.
In addition, we proposed to revise the existing regulation text at
Sec. 413.79(e)(1)(i) to include the phrase ``the number of years in
which residents are expected to complete the program based on the
minimum accredited length for the type of program.'' This proposed
language is consistent with our past, current, and proposed policy. We
also noted that Sec. 413.79(e)(1) applies in instances where the
residents in the new program train only at one hospital; Sec.
413.79(e)(1)(i) applies when residents in the new program train at more
than one hospital, regardless of whether each of those hospitals are
hospitals that qualify for a permanent cap adjustment or existing
teaching hospitals with previously established caps. The example below
illustrates the methodology we proposed to use to calculate a
qualifying teaching hospital's cap if we changed the cap-building
period from 3 years to 5 years. In this example, as explained above, we
proposed that we would calculate the cap based on what is occurring at
the qualifying teaching hospital(s) during the fifth academic year of
the qualifying teaching hospital's first new program (or the fifth
academic year of the rural teaching hospital's new residency training
program). The provider community has requested that the cap-building
period be increased from 3 years to 5 years. Therefore, we proposed
that we would only look at the training that is occurring during the
fifth academic year of the first new program to calculate the aggregate
cap adjustment. However, we proposed that we would look at the FTE
residents training at the hospital(s) during all 5 years to determine
how we would distribute the aggregate cap adjustment among the
participating hospitals. We included the following example in the
proposed rule:
Example: Hospital A is a hospital that becomes a new teaching
hospital by training residents in a new family medicine program in
academic year 1. Within its 5-year window, it also begins a new surgery
program in academic year 4 of the first new program, the family
medicine program. The family medicine program is accredited for 15
positions, 5 positions per year (the minimum accredited length of a
family medicine program is 3 years). The surgery program is accredited
for 20 positions, 4 positions per year (the minimum accredited length
of a surgery program is 5 years). Residents in both the family medicine
program and the surgery program also rotate to Hospital B. Hospital B
is an existing teaching hospital (nonrural) with a cap that is already
established; therefore, it will not receive any cap adjustments for
training FTE residents in the new family medicine program or the new
surgery program. However, because both of these programs are approved
programs and FTE residents are training at Hospital B for part of the
time, Hospital B can receive payment for the FTE residents training in
the family medicine program and the surgery program at its hospital if
it has room under its caps.
First, we would determine the cap adjustment that Hospital A will
receive for training FTE residents in the family medicine program. The
following table includes the allowable FTE resident counts in the
family medicine program at both Hospital A and Hospital B during the 5-
year window. These numbers are FTE resident counts because they reflect
the share of training time spent at Hospital A and Hospital B, and also
assume for this example that we have excluded some nonallowable time,
such as the time residents spend training in didactic activities in a
medical school lecture hall.
Hospital A
----------------------------------------------------------------------------------------------------------------
Year 1 Year 2 Year 3 Year 4 Year 5
----------------------------------------------------------------------------------------------------------------
0.75 PGY 1...................... 2.60 PGY 1........ 4.00 PGY 1........ 4.10 PGY 1........ 4.20 PGY 1
0.00 PGY 2...................... 2.80 PGY 2........ 3.40 PGY 2........ 3.40 PGY 2........ 3.70 PGY 2
0.00 PGY 3...................... 0.00 PGY 3........ 2.40 PGY 3........ 2.80 PGY 3........ 2.80 PGY 3
----------------------------------------------------------------------------------------------------------------
Total 0.75...................... Total 5.40........ Total 9.80........ Total 10.30....... Total 10.70
----------------------------------------------------------------------------------------------------------------
Hospital A's 5 year total = 36.95.
Hospital B
----------------------------------------------------------------------------------------------------------------
Year 1 Year 2 Year 3 Year 4 Year 5
----------------------------------------------------------------------------------------------------------------
3.75 PGY 1...................... 2.20 PGY 1........ 0.90 PGY 1........ 0.80 PGY 1........ 0.60 PGY 1
0.00 PGY 2...................... 2.00 PGY 2........ 1.50 PGY 2........ 1.50 PGY 2........ 1.20 PGY 2
0.00 PGY 3...................... 0.00 PGY 3........ 2.40 PGY 3........ 2.00 PGY 3........ 2.00 PGY 3
----------------------------------------------------------------------------------------------------------------
Total 3.75...................... Total 4.20........ Total 4.80........ Total 4.30........ Total 3.80
----------------------------------------------------------------------------------------------------------------
Hospital B's 5 year total = 20.85.
Total Hospital A and Hospital B over 5 years = 36.95 + 20.85 =
57.80 FTEs.
To calculate the cap adjustment for Hospital A with respect to the
family medicine program, we need to take the highest number of FTE
residents training in any program year in this program (that is, FTE
residents training at both Hospital A and Hospital B) in the fifth year
of the first new program's existence (which is the family medicine
program). If we add the PGY 1s, the PGY 2s, and the PGY 3s at both
hospitals, in year 5, we see that we would use the total number of PGY
2s to calculate the FTE cap adjustment for the family medicine program,
because the total number of PGY 2s at both hospitals is 4.90 FTEs (3.70
+ 1.20), whereas the total number of PGY 1s and PGY 3s is only 4.80. We
multiply 4.90 by the minimum accredited length of the family medicine
program to get the total possible cap adjustment for the family
medicine program (4.90 x 3 = 14.70). The cap adjustment that Hospital A
receives for the family medicine program will be some number less than
14.70 based on the ratio of the number of FTEs in the new program
training over the course of the 5-year period at Hospital A to the
total number FTE
[[Page 53419]]
residents training at both hospitals over the course of the 5-year
period.
To determine this ratio, note that Hospital A's total FTE residents
in the new family medicine program over the course of 5 years is the
numerator, 36.95. The total FTE residents at Hospitals A and B in the
new family medicine program over the course of 5 years is the
denominator, 57.80 (that is, 36.95 + 20.85). The ratio of training that
occurred at Hospital A is 36.95/57.80 = 0.64. Therefore, Hospital A's
cap for its share of the family medicine program is 0.64 x 14.70, or
9.41. (If Hospital B had been eligible to receive a cap adjustment, its
ratio of the cap would have been 0.36, that is, (20.85/57.80), and its
share would have been 5.30 (0.36 x 14.70). If we add 9.41 to 5.30, we
get 14.71 (we note that 14.71 is ``approximately'' equal to 14.70, the
total cap determined for the entire family medicine program, with a
slight difference due to rounding). Thus, we have ensured that, in
assigning a cap of 9.41 to Hospital A on behalf of its family medicine
program, the total allowable and accredited number of slots has not
been exceeded).
Now we will determine the cap adjustment that Hospital A will
receive for training FTE residents in the new surgery program that
began in year 4 of the first new program. The following tables include
the allowable FTE resident counts in the surgery program at Hospital A
and Hospital B, respectively, during the hospital's 5-year window.
Again, assume we have excluded nonallowable time, such as time
residents spent training in didactic activities in a medical school
lecture hall.
Hospital A
----------------------------------------------------------------------------------------------------------------
Year 1 Year 2 Year 3 Year 4 Year 5
----------------------------------------------------------------------------------------------------------------
0.00 PGY 1...................... 0.00 PGY 1........ 0.00 PGY 1........ 4.10 PGY 1........ 4.20 PGY 1
0.00 PGY 2...................... 0.00 PGY 2........ 0.00 PGY 2........ 0.00 PGY 2........ 2.70 PGY 2
0.00 PGY 3...................... 0.00 PGY 3........ 0.00 PGY 3........ 0.00 PGY 3........ 0.00 PGY 3
0.00 PGY 4...................... 0.00 PGY 4........ 0.00 PGY 4........ 0.00 PGY 4........ 0.00 PGY 4
0.00 PGY 5...................... 0.00 PGY 5........ 0.00 PGY 5........ 0.00 PGY 5........ 0.00 PGY 5
----------------------------------------------------------------------------------------------------------------
Total 0.00...................... Total 0.00........ Total 0.00........ Total 4.10........ Total 6.90
----------------------------------------------------------------------------------------------------------------
Hospital A's 5 year total = 11.00.
Hospital B
----------------------------------------------------------------------------------------------------------------
Year 1 Year 2 Year 3 Year 4 Year 5
----------------------------------------------------------------------------------------------------------------
0.00 PGY 1...................... 0.00 PGY 1........ 0.00 PGY 1........ 1.70 PGY 1........ 0.60 PGY 1
0.00 PGY 2...................... 0.00 PGY 2........ 0.00 PGY 2........ 0.00 PGY 2........ 1.50 PGY 2
0.00 PGY 3...................... 0.00 PGY 3........ 0.00 PGY 3........ 0.00 PGY 3........ 0.00 PGY 3
0.00 PGY 4...................... 0.00 PGY 4........ 0.00 PGY 4........ 0.00 PGY 4........ 0.00 PGY 4
0.00 PGY 5...................... 0.00 PGY 5........ 0.00 PGY 5........ 0.00 PGY 5........ 0.00 PGY 5
----------------------------------------------------------------------------------------------------------------
Total 0.00...................... Total 0.00........ Total 0.00........ Total 1.70........ Total 2.10
----------------------------------------------------------------------------------------------------------------
Hospital B's 5 year total = 3.80.
Total Hospital A and Hospital B over 5 years = 11.00 + 3.80 = 14.80
FTEs.
To calculate the cap adjustment for Hospital A with respect to the
surgery program, we need to take the highest number of FTE residents
training in this program (that is, FTE residents training at both
Hospital A and Hospital B) in the fifth year of the first new program's
existence (which is the family medicine program). Because the surgery
program only started in Year 4 of the family medicine program, there
are only PGY 1s and PGY 2s training at both Hospitals A and B in year
5; thus, we consider the surgery PGY 1s and PGY 2s in year 5 of the
family medicine program. If we add the PGY 1s and the PGY 2s at both
hospitals in year 5, we see that we would use the total number of PGY
1s to calculate the FTE cap adjustment for the surgery program, because
the total number of PGY 1s is 4.80 FTEs (4.20 + 0.60), whereas the
total number of PGY 2s is only 4.20. However, because the regulations
do not permit a hospital to count more FTE residents in each program
year than what the program is approved for (in this example, 4 FTE
residents for each program year), we must multiply 4.0 by the minimum
accredited length of the surgery program to get the total possible cap
adjustment for the surgery program (4.0 x 5 = 20). That is, because the
surgery program is only accredited for 20 positions, the overall FTE
resident cap associated with the surgery program that is to be
apportioned between Hospital A and Hospital B is limited to a maximum
of 20. The cap adjustment that Hospital A receives for the surgery
program will be some number less than 20 and is based on the ratio of
the number of FTE residents in the new program training over the course
of the 2-year period at Hospital A to the total number FTEs training at
both hospitals over the course of the 2-year period.
To determine this ratio, note that Hospital A's total FTE residents
in the new surgery program over the course of 2 years is the numerator,
11.00. The total number of FTE residents at Hospitals A and B in the
new surgery program over the course of 5 years is the denominator,
14.80 (that is, 11.00 + 3.80). The ratio of training that occurred at
Hospital A is 11.00/14.80 = 0.74. Hospital A's cap for its share of the
surgery program is 0.74 x 20 = 14.80. (If Hospital B had been eligible
to receive a cap adjustment, its share of the cap would have been 5.20
((3.80/14.80) x 20) = 5.20. Thus, we have ensured that, in assigning a
cap of 14.80 to Hospital A on behalf of its surgery program, the total
allowable and accredited number of slots has not been exceeded).
Adding together the cap adjustment Hospital A receives for the new
family medicine program and the cap adjustment it receives for the new
surgery program, Hospital A's total permanent cap is 24.21 (9.41 +
14.80 = 24.21).
[[Page 53420]]
In summary, we proposed to revise the regulations at Sec.
413.79(e)(1) for the purposes of direct GME and, by reference, Sec.
412.105(f)(1)(vii) for purposes of IME to state that if a hospital
begins training residents in a new program for the first time on or
after October 1, 2012, that hospital's caps may be adjusted based on
the product of the highest number of FTE residents training in any
program year during the fifth academic year of the first program's
existence for all new residency training programs and the number of
years in which residents are expected to complete the program based on
the minimum accredited length for the type of program. The cap would be
applied beginning with the sixth academic year of the first new
program. We also proposed conforming changes throughout paragraph
(e)(1) of Sec. 413.79 to correspond with the proposed change to
increase the length of the cap-building period from 3 to 5 years. In
addition, we proposed to change the regulation text at Sec.
413.79(e)(1)(i) to reflect a methodology to calculate a qualifying
teaching hospital's cap adjustment if the residents in the new training
program are training at more than one hospital. We proposed that these
changes would be effective for a hospital that begins training
residents for the first time on or after October 1, 2012. Lastly, we
proposed to make a clarification to the existing regulation text at
Sec. 413.79(e)(1)(i) to insert the missing phrase ``and the number of
years in which residents are expected to complete the program based on
the minimum accredited length for the type of program.'' This change is
consistent with our past, current, and proposed policy.
Comment: Commenters supported extending the cap-building period for
a new teaching hospital from 3 years to 5 years. Commenters stated that
the proposal provided an accurate characterization of challenges that a
hospital may face with trying to establish a cap within a 3 year
period. Commenters stated that extending the cap-building period from 3
years to 5 years would permit new teaching hospitals to meet
accreditation requirements and grow programs in order to help address
the country's physician shortage and provide greater flexibility in the
timeline for starting new programs. Another commenter stated that the
extension from 3 to 5 years is generally an improvement and provides
teaching hospitals with time to reach a steady number of FTE residents
and allows the hospital to find residents that may be a better fit for
a specific residency training program. The commenters stated they
believe that 5 years is likely a sufficient period of time because many
new programs will fill their higher PGY levels by accepting transfer
residents from other programs rather than just filling up only the PGY1
level.
Several commenters supported extending the cap-building period from
3 to 5 years because creating a new teaching hospital involves
collaboration among several different participants, for example medical
schools and nonteaching hospitals, and also requires interactions with
regulatory bodies and accrediting agencies. The commenters stated that,
in addition to a 3-year window being a challenge due to the number and
variety of participants involved in establishing a new teaching
hospital, 3 years is based on ``* * * an unreasonable and aggressive
expectation that an organization can establish its desired complement
of training programs nearly simultaneously in such a period while
ensuring a high-quality educational experience for residents and
fellows and a seamless transition from a nonteaching to a teaching
service care model for Medicare beneficiaries.'' The commenters stated
it is not appropriate to limit hospitals' access to GME payments based
on factors that the hospitals cannot control, such as ACGME and
National Resident Matching Program requirements and timelines. Another
commenter stated that a cap-building period of 5 years will permit four
community hospitals that are considering building GME programs in
Northeast Georgia to grow their programs more fully and with greater
flexibility. One commenter stated that extending the cap-building
period to 5 years will aid it in its collaboration with a school of
medicine to support their efforts of training residents in areas across
Indiana where no residency training programs previously existed.
Another commenter stated the proposed change from 3 years to 5 years
will promote the establishment of needed residency programs by
establishing caps that reflect the number of FTE residents that a
hospital will be able to train once the programs have matured and will
give new teaching hospitals more time to make the necessary initial
investment of resources. The commenter stated that expanding residency
training programs will help address the physician shortage in Arizona
that is expected to grow as a result of an aging population and
increased insurance coverage under the Affordable Care Act. One
commenter stated that it supported a 5-year window because it will aid
in developing new emergency medicine residencies, extending emergency
medical residencies from 3 years to 4 years, and meeting the needs of
other specialty residency training programs that want to expand their
programs to the maximum number of accredited positions. Another
commenter supported the expansion from a 3-year window to a 5-year
window and encouraged CMS to revisit this policy in several years to
confirm that 5 years is an adequate amount of time for the cap-building
process.
One commenter stated it understood that, due to accreditation
rules, it is very difficult for a new teaching hospital to start
several residency training programs within the current 3-year window.
The commenter stated that it understood that if a new teaching hospital
tries to start a second program during its 3-year window, it is almost
impossible to start that second program before the third year of the
hospital's 3-year window. The commenter noted that it understood the
ACGME has a reasonable expectation that new teaching hospitals need to
gain experience training residents and have a strong educational
infrastructure in place before they start to train residents in
specialty residency training programs. The commenter stated that if a
new teaching hospital is only really provided with one year to start a
second residency training program, the hospital is forced to be
aggressive in filling a full cohort of first-year residents, which may
be neither in the hospital's nor the residents' best interest. The
commenter stated that extending the cap-building period from 3 years to
5 years will allow teaching hospitals to build residency training
programs ``* * * that will best serve the patients in their community
and provide a strong educational infrastructure for their residents.''
Response: We appreciate the commenters' support of our proposal to
expand the cap-building period from 3 years to 5 years. Therefore, we
are finalizing our proposal to provide qualifying teaching hospitals
with a 5-year window to grow their cap. The 5-year window will begin
once the qualifying teaching hospital first starts training residents
in its first new program and the cap will apply beginning with the
sixth program year of the first new program. In response to the
commenters who stated that a 5-year window is a sufficient period of
time for building a hospital's cap because new programs may accept
transfer residents from other programs rather than filling only PGY1
slots, we remind hospitals that filling a program with transfer
residents from other hospitals' existing
[[Page 53421]]
residency training programs may jeopardize the program's status as
``new.'' As we explained in the August 27, 2009 Federal Register (74 FR
43908), one of the factors CMS considers in determining whether a
residency training program can be considered a new program for Medicare
GME payment purposes is whether residents entering a program are new
residents or residents transferring from an existing program(s).
Comment: Although commenters supported extending the cap-building
period from 3 years to 5 years, many did not support making the policy
effective for new teaching hospitals that first begin to train
residents in their first new program on or after October 1, 2012.
Commenters requested that the extension of the cap-building period from
3 to 5 years apply to new teaching hospitals that are currently within
their 3-year window, new teaching hospitals that started training
residents for the first time in a new program on or after July 1, 2010,
or at the very least apply effective July 1, 2012. Commenters stated
that new teaching hospitals that are currently within the 3-year window
are facing the same challenges that CMS described in the proposed rule
and deserve to benefit from a 5-year window. Commenters stated that CMS
would be able to apply the 5-year window without any additional
administrative burden on its part. One commenter requested that,
because a new teaching hospital that begins training residents July
2010 would begin the third year of its cap-building period July 1, 2012
and would not have its caps set until July 1, 2013, CMS amend its
proposed regulation text to apply the 5-year window to a hospital that
first begins training residents in a new program for the first time on
or after July 1, 2010. The commenter stated that, if CMS does not agree
to apply the 5-year window to hospitals that are still within their 3-
year window on October 1, 2012, CMS at least apply the 5-year window to
new teaching hospitals that had not been training residents as of the
publication of the proposed rule, that is, effective July 1, 2012. The
commenter stated that this application would be prospective and would
result in an even smaller cost than applying the 5-year window to all
hospitals that are still within their 3-year window for establishing a
cap. One commenter stated that making the 5-year window effective for
hospitals that are still within their 3-year window as of October 1,
2012, would allow it to continue to develop its fellowships in
geriatrics and palliative care and expand its internal medicine
program, and that without the possibility of this additional payment,
it may not be able to support these programs which would increase the
community's access to primary care and support the future physician
workforce. Another commenter stated that it is just about to start the
third year of its new residency program and there is nothing precluding
CMS from applying the 5-year window to hospitals that are currently
growing their caps. The commenter stated that, given the likely
upcoming physician shortage, there is a public health benefit to
applying the 5-year window as broadly as possible.
Another commenter stated that the proposal to expand the cap-
building period is long overdue especially due to the fact that in the
last decade residency training has been expanded to address physician
shortage and complement new medical schools. The commenter stated that
two of its member hospitals have recently or currently are establishing
new programs and will be negatively affected by the 3-year window.
Therefore, the commenter requested the 5-year window be applied to all
hospitals currently growing their caps as of October 1, 2012.
One commenter requested that CMS provide for an exception for
hospitals that may have had a cap based on very few residency rotations
but want to be able to train more residents because of a new medical
school or an expansion of an existing medical school. The commenter
stated that it has been a leader in Wisconsin in developing a report
that addresses the potential physician shortage and in establishing a
task force to address the need to train new physicians. The commenter
stated that one of its State's medical schools may be able to expand
into at least one new area in the State and that hospitals that want to
grow their residency training programs as a result of this expansion
should be provided with special consideration and an exemption from
their caps.
Another commenter stated that it is beginning a family medicine and
internal medicine program and if it were to have a 5-year window it
would be able to expand the number of primary care residents that it
trains. The commenter requested that the 5-year window apply
retroactively to any hospital that has not yet established a cap.
Response: We disagree with the commenters who suggested applying
the 5-year window to hospitals that are still within their 3-year
window effective October 1, 2012, or to hospitals that begin training
in July 2012. We believe it is appropriate that the policies included
in this final rule will be effective with the start date of the next
fiscal year, in this case, October 1, 2012. Therefore, we are
finalizing the policy to extend the cap-building period from 3 years to
5 years, effective for hospitals that first begin to train residents in
their first new program on or after October 1, 2012.
Comment: Some commenters supported CMS' proposed methodology for
calculating a new teaching hospital's cap adjustment if residents in
the new program are training at more than one hospital (proposed Sec.
413.79(e)(1)(i)). However, some commenters also expressed concern
regarding the proposed methodology to consider all 5 years of the cap-
building period for purposes of determining a participating hospital's
cap adjustment. Commenters stated that considering all 5 years prevents
nonteaching hospitals from training residents in the new program if it
wants to establish its own programs in the future. The commenters
stated that, under the proposed methodology, a new teaching hospital
could ``lose'' cap slots if it rotated residents in a new program at
any time during the 5-year window to another hospital, even if by the
last year of the 5-year window, it would be able to offer all of the
rotations at its facility. Commenters stated that if a methodology for
allocating cap slots among participating hospitals is adopted, it
should only consider the training that is occurring during the fifth
year after training starts.
One commenter stated that it is in the process of developing
residency training programs and is seeking a Trauma designation. The
commenter stated that until it receives its Trauma designation, it
plans to send its Emergency Medicine residents to other facilities for
the program's Trauma rotation. The commenter stated that due to these
outside rotations, its cap will be reduced and it will not be able to
receive a cap adjustment for those FTE residents it would have the
capacity to train later on.
Commenters stated that while they believe the proposed calculation
of the total cap is appropriate, the proposed apportionment of FTE
residents among participating hospitals may result in inappropriate cap
determinations if the programs were in existence for less than their
minimum accredited length by the fifth year of the cap-building period.
One commenter stated ``* * * the result of utilizing a limited data set
and extrapolating those resident counts to represent the anticipated
resident rotation activity for the entire program may result in an
apportionment of
[[Page 53422]]
resident FTEs that is misaligned and varies markedly from the actual
experience of the training program.'' Commenters stated that while
existing teaching hospitals may participate in Medicare GME affiliation
agreements to temporarily adjust their caps, new teaching hospitals are
not permitted to temporarily lend some of their cap through an
affiliation agreement and, therefore, it is not feasible for a new
teaching hospital to use a Medicare GME affiliation agreement to
alleviate the effects of an inappropriate cap determination. Commenters
therefore requested that if the new program has been in existence for
less than its minimum accredited length by the fifth year of the cap
building period, participating hospitals should be permitted to
collaborate and submit an attestation certifying a preferred way of
dividing the cap slots. The commenters stated that the total cap
adjustment should be calculated as proposed; however the individual cap
determinations should be adjusted as follows:
For any program that has operated for a period of time
less than the number of years equal to the minimum accredited program
length as of Year 5 (the cap adjustment year), if consensus is reached
among all of the hospitals participating in the development of the new
program that the apportionment as determined by the CMS formula does
not appropriately reflect the anticipated deployment of residents
across the full program and accordingly advantages or disadvantages one
or more of the new teaching hospitals, the hospitals may collectively
recommend, certify, and submit to CMS an alternative apportionment for
the resident FTE counts that are associated with that particular
program and that will be assigned to the hospitals.
For any program that has operated for a period of time
equal to or greater than the minimum accredited program length by Year
5, the hospitals will not have an opportunity to recommend an
alternative apportionment of resident FTEs for cap adjustment purposes.
Several commenters recommended changing the regulation text at 42
CFR 413.79(e)(1)(i) by replacing the phrase ``an entire program year
(or years)'' with ``portions of a program year (or years)'' because it
more accurately describes the proposed methodology for determining an
individual hospital's cap adjustment.
Response: We appreciate the commenters' support of the methodology
we proposed to use to calculate a qualifying teaching hospital's total
cap adjustment for a new program. We disagree with commenters who
stated that it is inappropriate to consider all 5 years of the cap-
building period in determining a specific qualifying teaching
hospital's cap adjustment for a new program. There may be some merit to
the commenters' suggestions that it may take several years until a
program is fully operational so by the end of the 5-year window a
hospital may be able to have all the rotations occur at its facility.
However, we believe that considering all 5 years of the cap-building
period in calculating a qualifying teaching hospital's cap adjustment
is appropriate, as it provides a more complete picture of the actual
rotations that will be part of the approved residency training program
as opposed to just taking into account what is happening in the new
program during the final year of the cap building period, which may not
accurately reflect the hospitals' plans for dividing rotations among
participating hospitals which may fluctuate from year to year. We do
not believe it would be appropriate to allow participating hospitals to
submit alternative methodologies for dividing the total cap adjustment
if they do not agree with the cap calculations that have been
determined by CMS. The policy used to apportion a total cap adjustment
among participating hospitals must be a single national policy.
Permitting hospitals to develop and apply their own methodologies may
lead to disparate treatment among qualifying teaching hospitals.
Furthermore, requiring Medicare contractors to apply specific
individual policies for determining a hospital's cap adjustment, as
opposed to applying one national policy, would prove to be
administratively difficult and could significantly delay the
determination of a hospital's cap.
After considering the public comments we received on the proposed
methodology to be used in determining individual cap adjustments for
qualifying teaching hospitals that participate in training residents in
a new program, we are finalizing our methodology as proposed. That is,
in order to determine a qualifying teaching hospital's cap adjustment
for a new program(s), we will take the sum of the products of three
factors (limited to the number of accredited slots for each program):
(1) The highest total number of FTE residents trained in any program
year, during the fifth year of the first new program's existence at all
of the hospitals to which the residents in that program rotate; (2) the
number of years in which residents are expected to complete the
program, based on the minimum accredited length for each type of
program; and (3) the ratio of the number of FTE residents in the new
program that trained at the hospital over the entire 5-year period to
the total number of FTE residents that trained at all hospitals over
the entire 5-year period.
Because we are finalizing the methodology as proposed, we refer
readers to the examples provided in the proposed rule and also included
earlier in this preamble for further guidance. We agree with the
commenters who suggested that we replace the phrase ``an entire program
year (or years)'' at 42 CFR 413.79(e)(1)(i) with the phrase ``portions
of a program year (or years)'' and, therefore, are amending this
regulation text to include this change. We also are amending the
regulation text at 42 CFR 413.79(e)(1)(i) to more clearly describe that
an individual hospital's cap adjustment for a new program that rotates
residents to more than one hospital is based on the product of three
factors, which are described earlier in this paragraph. Furthermore, in
this final rule, we are making minor revisions to the regulation text
at 42 CFR 413.79(e)(2) through (e)(4) for purposes of maintaining
consistency throughout 42 CFR 413.79(e).
Comment: Several commenters referred to a statement reiterated in
the proposed rule (77 FR 27977) that a new teaching hospital can only
receive a cap adjustment for training residents in a truly ``new''
program and to the August 27, 2009 final rule (74 FR 43908) in which
CMS discussed the requirements that a residency training program must
meet in order to be considered a new program. The commenters requested
that CMS clarify the definition of a new residency training program so
that hospitals can use the 5-year window for building their caps.
Commenters stated that because of CMS' ``ambiguous criteria'' used to
define a new program, hospitals hoping to start brand new programs have
not been able to get a clear opinion from CMS or legal counsel as to
whether a program is, in fact, new. Commenters stated that this lack of
clarity leads to financial risks for a hospital and does not provide
any incentives for hospitals to participate in residency training.
Commenters stated that hospitals are concerned that if they hire a
program director with significant experience to meet ACGME
requirements, their program will not be considered new. Commenters
requested that CMS develop a bright line policy regarding the
definition of a new program and suggested that CMS consider a program
to be new if all PGY 1 residents are new and 90 percent of
[[Page 53423]]
residents in later PGY years are new. Commenters requested CMS clarify
that prior experience and status of the program director and teaching
physicians are not relevant in determining whether a program is
considered new.
Several commenters referred to CMS' existing policy that when a
nonteaching hospital starts training residents in a new program, it
enters a cap-building period and receives a PRA. Commenters stated that
such a policy hinders the development of GME training at small
hospitals in rural and underserved areas because the result of a
resident rotation of short duration is a low PRA and small cap which
will prevent the hospitals from establishing their own viable residency
training programs later on. Commenters stated that assigning a cap and
PRA to a nonteaching hospital that does not have a rotation of long
duration does not permit these small nonteaching hospitals to determine
whether residency training would be a viable option for them.
Commenters requested that CMS consider one or more of the following
proposals:
A teaching hospital should be allowed to rotate residents
for a period equal to or less than 3 months (or a maximum percentage of
training time) per resident per year without triggering the cap or PRA
in a nonteaching hospital.
A new teaching hospital should be allowed to rotate
residents in high-need specialties (for example, primary care, general
surgery) without triggering a cap or PRA in a nonteaching hospital.
Small rural hospitals and hospitals located in remote or
underserved areas should be allowed to rotate residents to non-teaching
hospitals without triggering caps or PRAs in those institutions.
One commenter offered a fourth recommendation to be used if CMS
continues with its current policy of assigning a PRA and cap to
nonteaching hospitals that train residents in a new program for a
rotation of short duration. The commenter stated that if a hospital has
not had residents rotating to its site for a reasonable period of time
(the commenter suggested 3 or 5 years), the hospital's cap should
expire and the hospital should be considered a nonteaching hospital.
Response: We do not consider these comments to be within the scope
of the provisions of the FY 2013 IPPS/LTCH PPS proposed rule. In terms
of the comment regarding the definition of a new residency training
program, we did not propose to redefine the requirements that a program
must meet in order to be considered a new program. The discussion cited
was part of the background discussion of existing policies. These
public comments may be considered for future rulemaking. In terms of
the commenters' concerns regarding nonteaching hospitals that receive a
cap adjustment and PRA for participating in training residents in a new
program even if the rotation to the nonteaching hospital is of short
duration, perhaps these concerns could be potential topics for future
rulemaking because they have ramifications that go beyond the
establishment of a cap for a new program, for example, for establishing
the PRA of a ``new'' teaching hospital training residents in an
existing program. Some commenters seemed to suggest that if an existing
teaching hospital sends residents to a nonteaching hospital for a
rotation of very short duration, the existing teaching hospital should
be able to count the residency training time at the nonteaching
hospital. We remind readers that a hospital cannot count the residency
training time that is occurring at another hospital. Therefore, it
would not be possible for one hospital to count rotations occurring at
other hospitals even if the rotations are of a short duration.
Comment: One commenter asked ``when CMS refers to the accredited
length for the `type' of program, is CMS referring to a specific
program with a specific accreditation time period, or the average
accredited time for a type of specialty, such as primary care?'' The
commenter recommended ``* * * that the minimum length of time for each
training program is based on the accreditation for a specific program,
rather than on the average training time for a general type of
program.'' Another commenter requested that CMS clarify the following
language included in the proposed rule (77 FR 27979): ``However,
because both of these programs are approved programs and FTE residents
are training at Hospital B for part of the time, Hospital B can count
the FTE residents training in the family medicine program and the
surgery program at its facility if it has room under its caps to do
so.'' The commenters stated they believed hospitals should count FTE
residents regardless of whether the hospital has room under its caps.
The commenters requested CMS ``* * * clarify whether or not a hospital
should report all allowable resident FTEs when a hospital does not have
room under its caps * * *''.
Response: When we refer to the accredited length of a ``type'' of
program in the proposed rule and in this final rule, we are referring
to the minimum accredited length for a specific specialty program, that
is, the number of years of residency training that a resident must
complete in order to be board certified in that specialty. For example
the minimum accredited length for family medicine is 3 years and the
minimum accredited length for surgery is 5 years.
In response to the commenter's request that CMS clarify whether a
hospital should report all allowable FTE residents when a hospital does
not have room under its caps, if an existing teaching hospital with an
already established cap participates in training residents in a new
program, unless it is a rural hospital, it cannot receive a permanent
cap adjustment for training residents in the new program. If the new
program is an approved program and the existing teaching hospital is
training below its caps, the existing teaching hospital can count and
receive payment for the residents training in the new program at its
facility up to its caps. The commenter is correct that if the existing
teaching hospital is training residents in an approved program(s) it
should report those FTE residents on its cost report regardless of
whether or not it is training over its caps. However, the existing
teaching hospital would only be able to receive Medicare payment for
training residents in the new program up to its cap limit.
Comment: One commenter requested that CMS provide new teaching
hospitals with additional flexibility to grow GME programs and provide
additional investments in GME that will be required to grow and improve
the geriatrics workforce. One commenter also requested that CMS provide
GME funding for second year pharmacy residency programs. One commenter
expressed concern that the policy of assigning a cap and PRA after a
short rotation to a formerly nonteaching hospital may be a policy that
is applied to teaching hospital centers, which it believed would have a
negative effect on the creation of new teaching health centers.
Response: We consider these public comments to be outside the scope
of the proposed rule and, therefore, we are not addressing them in this
final rule.
In summary, we are finalizing our proposal to increase the cap-
building period from 3 years to 5 years. We also are finalizing the
proposed methodology used to calculate a cap adjustment for an
individual hospital if a new program rotates residents to more than one
hospital (or hospitals). The methodology is based on the sum of the
products of the following three factors: (1) The highest total number
of FTE residents trained in any program year, during the
[[Page 53424]]
fifth year of the first new program's existence at all of the hospitals
to which the residents in that program rotate; (2) the number of years
in which residents are expected to complete the program, based on the
minimum accredited length for each type of program; and (3) the ratio
of the number of FTE residents in the new program that trained at the
hospital over the entire 5-year period to the total number of FTE
residents that trained at all hospitals over the entire 5-year period.
In addition, we are making minor revisions to the regulation text at 42
CFR 413.79(e)(2) through (e)(4) for purposes of maintaining consistency
throughout 42 CFR 413.79(e).
3. Policies and Clarification Related to 5-Year Period Following
Implementation of Reductions and Increases to Hospitals' FTE Resident
Caps for GME Payment Purposes Under Section 5503 of the Affordable Care
Act
As previously discussed, in an attempt to end the implicit
incentive for hospitals to increase the number of FTE residents,
Congress instituted a cap on the number of allopathic and osteopathic
residents a hospital is allowed to count for direct GME and IME
purposes. Some hospitals have trained a number of allopathic and
osteopathic residents in excess of their FTE resident caps, while other
hospitals are training a number of allopathic and osteopathic residents
at some level below their FTE resident caps. Section 5503 of the
Affordable Care Act added a new section 1886(h)(8) to the Act to
provide for reductions in the statutory FTE resident caps for direct
GME payment purposes under Medicare for certain hospitals that are
training allopathic and osteopathic residents at a level below their
FTE resident caps, and to authorize a ``redistribution'' to certain
hospitals of the estimated number of FTE resident slots resulting from
the reductions. Section 5503 of the Affordable Care Act also amended
section 1886(d)(5)(B)(v) of the Act to require application of the
provisions of section 1886(h)(8) of the Act ``in the same manner'' to
the FTE resident caps for IME payment purposes.
Section 1886(h)(8)(A)(i) of the Act provides that, effective for
portions of cost reporting periods occurring on or after July 1, 2011,
a hospital's FTE resident cap will be reduced by 65 percent of the
difference between the hospital's ``otherwise applicable resident
limit'' and its ``reference resident level,'' if its ``reference
resident level'' is less than its ``otherwise applicable resident
limit'' (as defined at section 1886(h)(8)(H) of the Act). (We refer
readers to the November 24, 2010 final rule with comment period (75 FR
72155 through 72161) for a discussion of these terms.) Section
1886(h)(8)(A)(ii) of the Act and the November 24, 2010 final rule with
comment period (75 FR 72147) describe which hospitals are exempt from a
cap reduction under section 5503 of the Affordable Care Act, including
rural hospitals with fewer than 250 acute care inpatient beds.
Under section 1886(h)(8)(B) of the Act, the Secretary is authorized
to increase the FTE resident caps for certain categories of hospitals
for portions of cost reporting periods occurring on or after July 1,
2011, in the aggregate, by a number that does not exceed the estimated
overall reduction in FTE resident caps for all hospitals under section
1886(h)(8)(A) of the Act. In determining which hospitals will receive
an increase in their FTE resident caps, sections 1886(h)(8)(C) through
1886(h)(8)(E) of the Act direct us to do all of the following:
Take into account the demonstrated likelihood of the
hospital filling the additional positions within the first three cost
reporting periods beginning on or after July 1, 2011.
Take into account whether the hospital has an accredited
rural training track program.
Distribute 70 percent of the resident slots to hospitals
located in States with resident-to-population ratios in the lowest
quartile.
Distribute 30 percent of the resident slots to hospitals
located in a State, a territory of the United States, or the District
of Columbia that are among the top 10 States, territories, or the
District in terms of the ratio of the total population living in an
area designated as a health professional shortage area (HPSA), as of
March 23, 2010, to the total population, and/or to hospitals located in
rural areas.
A comprehensive description of the rules implementing the cap slot
redistribution under section 1886(h)(8) of the Act can be found in the
November 24, 2010 final rule with comment period (75 FR 72168). Section
1886(h)(8)(B)(ii) of the Act, as added by section 5503(a)(4) of the
Affordable Care Act, specifies that a hospital that receives an
increase in its cap shall ensure, during the 5-year period beginning on
the date of such increase (July 1, 2011), that certain requirements,
referred to as the primary care average and the 75-percent threshold,
are met in order to retain those slots. Otherwise, section
1886(h)(8)(B)(iii)(I) of the Act authorizes the Secretary to reduce the
FTE resident caps of the hospital by the same number of FTE residents
by which the hospital's FTE resident caps were increased if the
hospital fails to meet either requirement; and section
1886(h)(8)(B)(iii)(II) of the Act authorizes the Secretary to
redistribute those positions.
Specifically, section 1886(h)(8)(B)(ii) of the Act states, ``* * *
a hospital that receives an increase in the otherwise applicable
resident limit under this subparagraph shall ensure, during the 5-year
period beginning on the date of such increase, that--
(I) The number of full-time equivalent primary care residents, as
defined in paragraph (5)(H) (as determined by the Secretary), excluding
any additional positions under subclause (II), is not less than the
average number of fulltime equivalent primary care residents (as so
determined) during the 3 most recent cost reporting periods ending
prior to the date of enactment of this paragraph; and
(II) Not less than 75 percent of the positions attributable to such
increase are in a primary care or general surgery residency (as
determined by the Secretary).
The Secretary may determine whether a hospital has met the
requirements under this clause during such 5-year period in such manner
and at such time as the Secretary determines appropriate, including at
the end of such 5-year period.''
In a case where the Secretary determines that a hospital did not
meet the requirements in a cost reporting year during the 5-year time
period, section 1886(h)(8)(B)(iii) of the Act states that ``* * * the
Secretary shall--
(I) Reduce the otherwise applicable resident limit of the hospital
by the amount by which such limit was increased under this paragraph;
and
(II) Provide for the distribution of positions attributable to such
reduction in accordance with the requirements of this paragraph.''
In the November 24, 2010 final rule with comment period (75 FR
72195 through 72203), we stated that the ``5-year period beginning on
the date of such increase'' is July 1, 2011 through June 30, 2016, and
we provided a detailed discussion of what the two requirements under
sections 1886(h)(8)(B)(ii)(I) and 1886(h)(8)(B)(ii)(II) of the Act
entail. In that final rule, we noted that section 1886(h)(8)(B)(ii) of
the Act allows the Secretary to ``determine whether a hospital has met
the requirements * * * during such 5-year period in such manner and at
such time as the Secretary determines appropriate, including at the end
of such 5-year period,'' and section 1886(h)(8)(B)(iii) of the Act
instructs the Secretary to
[[Page 53425]]
``reduce the otherwise applicable resident limit of the hospital by the
amount by which such limit was increased * * *.'' We also explained
that we believe the Secretary has the discretion to consider a
hospital's performance over more than one year or to review each year
during the 5 years independently in determining whether or not a
hospital is in compliance with the primary care average and the 75-
percent threshold, as required (75 FR 72196 and 72197 and 72200 and
72201). We emphasized that it is within CMS' and the Medicare
contractors' authority to adjust a hospital's IME and direct GME
payments as early as it is feasible within a cost report's submission
and review cycle, and that we need not wait until final settlement to
do so. We further stated in the November 24, 2010 final rule with
comment period implementing section 5503 that ``We also understand that
we should consider that hospitals might not immediately fill all the
slots they receive, particularly because they are only required to
demonstrate the likelihood of filling the slots within the first three
cost reporting periods beginning on or after July 1, 2011'' (75 FR
72197). However, we gave an example that indicated that, of the section
5503 FTE slots that the hospital does begin to use, 75 percent of those
slots must be in primary care or general surgery.
Since we awarded the section 5503 slots pursuant to section
1886(h)(8) of the Act, and prior to issuance of the proposed rule, we
have received questions from hospitals asking if and how CMS would
enforce the primary care average and the 75-percent threshold
requirements under sections 1886(h)(8)(B)(ii)(I) and
1886(h)(8)(B)(ii)(II) of the Act if a hospital does not use any of its
section 5503 slots until year 4 or year 5 of the 5-year period, or if a
hospital does not use any of the section 5503 slots until after
expiration of the 5-year period. We have informed hospitals that the
75-percent threshold requirement applies once the hospital starts using
any of the section 5503 slots, and the 3-year primary care average
requirement applies immediately on July 1, 2011, regardless of whether
or not the hospital begins to use its additional section 5503 slots in
year 1 of the 5-year period. This is because the 3-year primary care
average test applies to the hospital's pre-section 5503 resident
complement as well, and not exclusively to the additional FTE residents
associated with slots awarded under section 5503.
In determining which hospitals applying for slots under section
5503 will receive slots, section 1886(h)(8)(C)(i) of the Act specifies
that the Secretary shall take into account the demonstrated likelihood
of the hospital filling the slots within the first three cost reporting
periods beginning on or after July 1, 2011. Hospitals included evidence
supporting the demonstrated likelihood stipulation in their
applications and we took that into consideration in awarding slots
under section 5503. We believe that it is inappropriate and in direct
conflict with a base consideration in the awarding of slots under
section 5503 for hospitals to refrain from using their section 5503
slots until after the initial 3 years after the slots have been awarded
in an attempt to circumvent the primary care average or the 75-percent
threshold requirements, or both.
As stated in the November 14, 2010 final rule, CMS reserves the
right to assess as many times as necessary in the 5-year period whether
a hospital is meeting the required criteria. The agency also may remove
the slots awarded to a hospital at any point during the 5-year period
(75 FR 72196 and 72197 and 72200 and 72201). Because a statutorily
directed criterion for consideration in awarding slots under section
5503 included the requirement that hospitals applying for slots
demonstrate the likelihood of filling the slots within the first three
cost reporting periods beginning on or after July 1, 2011, and we
relied on that information in awarding slots, we stated in the proposed
rule that we believe it is reasonable to expect that hospitals that
received slots under section 5503 should begin to use their slots
within the first three 12-month cost reporting periods beginning on or
after July 1, 2011, of the 5-year period in order to give full effect
to the requirements under section 1886(h)(8)(B)(ii) of the Act.
Therefore, in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27982), we
proposed that a hospital must fill at least half of its section 5503
slots, IME and direct GME respectively, in at least one of the
following timeframes, or lose its section 5503 slots: (A) In its first
12-month cost reporting period of the 5-year period; and/or (B) in its
second 12-month cost reporting period of the 5-year period; and/or (C)
in its third 12-month cost reporting period of the 5-year period. For
example, Hospital A and Hospital B both have June 30 fiscal year ends
(FYEs), and they received 10 slots under section 5503. In its FYE June
30, 2012, Hospital A filled 8 slots. In its FYE June 30, 2013, Hospital
A filled 0 slots. In its FYE June 30, 2014, Hospital A filled 5 slots.
However, Hospital B, in its FYEs June 30, 2012, 2013, and 2014, only
filled 3 slots respectively in each of the 3 years. Hospital A would
have complied with our proposed requirement, because it filled at least
half of its section 5503 slots in either its first, and/or second, and/
or its third 12-month cost reporting period during the 5-year period.
Hospital B would not have complied with our proposed requirement
because in neither its first, second, nor third 12-month cost reporting
period had it filled at least 5 (half of 10) slots.
We proposed to interpret that a hospital's failure to use slots
awarded under section 5503 in a timely manner to also be a failure to
meet the 75-percent threshold. We believe that we have the authority to
interpret section 1886(h)(8)(B)(ii) of the Act in such a manner and to
propose this requirement because section 1886(h)(8)(B)(ii) of the Act
allows the Secretary to ``* * * determine whether a hospital has met
the requirements under this clause during such 5-year period in such
manner and at such time as the Secretary determines appropriate,
including at the end of such 5-year period.'' We reiterated that the
75-percent threshold applies in the instance where a hospital uses less
than half, or any amount, of its slots prior to its third 12-month cost
reporting period during the 5-year period (75 FR 72197). In other
words, the 75-percent threshold applies throughout the 5-year period,
as long as the hospital is using some amount of its section 5503 slots
in the respective cost reporting period. If a hospital is using some of
its section 5503 slots in a cost reporting period, the 75-percent
threshold would be enforced; if a hospital is not using any of its
section 5503 slots in a cost reporting period, the 75-percent threshold
would not be enforced. However, as stated earlier, we proposed that a
hospital must use its section 5503 slots no later than the hospital's
third 12-month cost reporting period (and that at least half of its
section 5503 slots must be used in either the first, or second, or
third 12-month cost reporting period).
We noted in the proposed rule that we did not specify that a
hospital must use at least half of its section 5503 slots in its third
12-month cost reporting period of the 5-year period in the November 24,
2010 final rule with comment period because the possibility that a
hospital might not begin to use its section 5503 slots for several
years only came to our attention after July 1, 2011, in response to
questions raised by hospitals. Furthermore, given the demand for these
slots (we ran out of slots during the redistribution process and were
unable to award any slots to hospitals in
[[Page 53426]]
qualifying, but lower ranking, States), and that the slots were slated
to be distributed in States where there was an acute need for
additional residents (that is, as sections 1886(h)(8)(D) and
1886(h)(8)(E) of the Act specify, to States with resident-to-population
ratios in the lowest quartile, and to States that are among the top 10
in terms of the HPSA population to total population ratios), we did not
expect that hospitals that received section 5503 slots would not be
able to make almost immediate use of the slots. Consequently, in the
proposed rule, we stated that given the presumed huge need for these
slots in the States where Congress directed that they be awarded, we
believe it is appropriate to use our authority to reasonably ensure
that those slots awarded are used in compliance with section 5503
(hence, the proposals in the proposed rule), and, if not, are able to
be redistributed to other hospitals in need of slots as Congress
intended.
Section 1886(h)(8)(B)(iii) of the Act states that if the Secretary
determines that a hospital does not meet either the primary care
average or the 75-percent threshold, ``the Secretary shall (I) reduce
the otherwise applicable resident limit of the hospital by the amount
by which such limit was increased under this paragraph; and (II)
provide for the distribution of positions attributable to such
reduction in accordance with the requirements of this paragraph.''
Accordingly, we indicated in the proposed rule that we were exercising
the broad authority that the Secretary is given to determine whether
the requirements at section 1886(h)(8)(B)(ii) of the Act are met by
proposing that if a hospital fails to fill at least half of its section
5503 slots, IME and direct GME respectively, in its first 12-month cost
reporting period of the 5-year period, and/or in its second 12-month
cost reporting period, and/or in its third 12-month cost reporting
period of the 5-year period, this would mean failure to meet the 75-
percent threshold. In the case of such failure, we indicated that CMS
would instruct the Medicare contractor after audit to permanently
remove all of the hospital's section 5503 slots from the earliest cost
reporting period that is subject to reopening and in which it would be
determined that the hospital did not meet the requirements (in
accordance with existing Sec. 413.79(n)(2)(iii), which was proposed to
be redesignated as Sec. 413.79(n)(2)(iv) in the proposed rule), even
if the hospital had used at least half of its section 5503 slots in its
fourth or subsequent cost reporting year of the 5-year period. Thus, as
part of the Medicare contractors' reviews of the hospitals that
received section 5503 slots, we proposed that the Medicare contractors
would determine whether a hospital filled at least half of its section
5503 slots in its first 12-month cost reporting period of the 5-year
period, and/or in its second 12-month cost reporting period, and/or in
its third 12-month cost reporting period of the 5-year period. We
stated in the proposed rule that we believe it is appropriate to remove
the slots from a hospital that has not filled at least half of its
slots in any 12-month cost reporting year prior to and including the
third 12-month cost reporting period so that these slots may be
redistributed to other hospitals that may have greater success in
filling the slots and that are located in States that are described in
sections 1886(h)(8)(D) and 1886(h)(8)(E) of the Act.
We noted in the proposed rule that, as explained in the November
24, 2010 final rule with comment period (75 FR 72197), the start and
end of each year of the 5-year period depend on the fiscal year begin
date of each hospital's cost reporting periods. Hospitals with fiscal
year begin dates of July 1 will have five 12-month cost reporting
periods starting on July 1, 2011, and ending on June 30, 2016, while
hospitals with fiscal year begin dates of other than July 1 will have a
partial cost reporting period that includes July 1, 2011, four 12-month
cost reporting periods, and another partial cost reporting period that
includes June 30, 2016 (75 FR 72197). We proposed that, for example, if
Hospital A has a June 30 fiscal year end, its third 12-month cost
reporting period of the 5-year period would be July 1, 2013, to June
30, 2014, and Hospital A must fill at least half of its section 5503
slots, IME and direct GME respectively, in its first 12-month cost
reporting period of the 5-year period, and/or in its second 12-month
cost reporting period, and/or in its third 12-month cost reporting
period of the 5-year period. If Hospital B has a September 30 fiscal
year end, its cost reporting periods occurring during July 1, 2011
through June 30, 2016 are as follows:
Year 1--July 1, 2011--September 30, 2011
Year 2--October 1, 2011--September 30, 2012
Year 3--October 1, 2012--September 30, 2013
Year 4--October 1, 2013--September 30, 2014
Year 5--October 1, 2014--September 30, 2015
Year 6--October 1, 2015--June 30, 2016
Hospital B's third 12-month cost reporting period would be October
1, 2013, to September 30, 2014, and Hospital B must fill at least half
of its section 5503 slots, IME and direct GME, respectively, in its
first 12-month cost reporting period of the 5-year period, and/or in
its second 12-month cost reporting period, and/or in its third 12-month
cost reporting period of the 5-year period. As explained in the
November 24, 2010 final rule with comment period (75 FR 72197), if
hospitals have other than a June 30 fiscal year end, for their cost
reports that include July 1, 2011 and June 30, 2016 respectively, we
consider whether the hospital meets the primary care average and the
75-percent threshold requirements based on an annualized FTE count.
Also, if during the period of July 1, 2011 through June 30, 2016,
hospitals, for whatever reason, actually have less than 12-month cost
reports, we would consider on a case-by-case basis which cost reports
we would evaluate for purposes of meeting the proposed requirement of
filling at least half of the section 5503 slots in its first, second,
and/or third cost reporting period. As under existing policy, if the
hospital does begin to fill its section 5503 slots but fails to meet
the 75-percent threshold, the Medicare contractor would also remove the
section 5503 slots, effective with the earliest year that the 75-
percent threshold is not met.
Lastly, considering again that hospitals that received section 5503
slots had to demonstrate the likelihood of filling the slots within the
first three cost reporting periods beginning on or after July 1, 2011,
we proposed to require that hospitals that received section 5503 slots
must fill all of the slots they received in their final cost reporting
period beginning during the timeframe of July 1, 2011 through June 30,
2016 (IME and direct GME respectively), or lose all of their section
5503 slots after June 30, 2016. As stated above and in the proposed
rule, we consider it to be appropriate to remove the slots from a
hospital that has not filled at least half of its slots in any 12-month
cost reporting period prior to and including the third 12-month cost
reporting period, so that these slots may be redistributed to other
hospitals that otherwise qualified to receive slots, but did not
receive them because the available slots were granted to higher ranking
hospitals. We also stated that we were interested in commenters'
recommendations regarding alternative approaches to encouraging
compliance with the 3-year primary care average requirement and the 75-
percent threshold.
[[Page 53427]]
In summary, we proposed that a hospital must fill at least half of
its section 5503 slots, IME and direct GME respectively, in at least
one of the following timeframes or lose its section 5503 slots: (A) In
its first 12-month cost reporting period of the 5-year period; and/or
(B) in its second 12-month cost reporting period of the 5-year period;
and/or (C) in its third 12-month cost reporting period of the 5-year
period. We proposed to enforce the 75-percent threshold test once the
hospital begins to use its section 5503 slots, which we proposed must
be no later than the hospital's third 12-month cost reporting period
(and that at least half of its section 5503 slots must be used in
either the first, or second, or third 12-month cost reporting period).
In addition, we proposed that a hospital does not meet the 75-percent
threshold if it fails to fill at least half of its section 5503 slots,
IME and direct GME, respectively, in one or a combination of the first
three 12-month cost reporting period of the 5-year period, and upon
that basis, CMS would instruct the Medicare contractor, after audit, to
permanently remove all of the hospital's section 5503 slots from the
earliest cost reporting period that is subject to reopening and in
which it would be determined that the hospital did not meet the
requirements (in accordance with existing Sec. 413.79(n)(2)(iii),
which was proposed to be redesignated as Sec. 413.79(n)(2)(iv) in the
proposed rule), even if the hospital had used at least half of its
section 5503 slots in its fourth or subsequent cost reporting year of
the 5-year period. Thus, as part of the Medicare contractors' reviews
of the hospitals that received section 5503 slots, we proposed that the
Medicare contractors would determine whether a hospital filled at least
half of its section 5503 slots in its first 12-month cost reporting
period of the 5-year period, and/or in its second 12-month cost
reporting period, and/or in its third 12-month cost reporting period of
the 5-year period. Lastly, we proposed to require that a hospital that
received section 5503 slots must fill all of the slots it received in
their final cost reporting period beginning during the timeframe of
July 1, 2011 through June 30, 2016 (IME and direct GME respectively),
or lose all of its section 5503 slots after June 30, 2016.
We proposed that these requirements would be effective for a
hospital's third 12-month cost reporting period occurring during the 5-
year period of July 1, 2011 through June 30, 2016. For example, for
hospitals with a June 30 fiscal year end, this would be July 1, 2013
through June 30, 2014. For hospitals with a September 30 fiscal year
end, this would be October 1, 2013 through September 30, 2014. For
hospitals with a December 31 fiscal year end, this would be January 1,
2014 through December 31, 2014. We proposed to make appropriate changes
to the regulations text at Sec. 413.79(n)(2) to incorporate our
proposals. The IME regulations regarding section 5503 slots that are at
existing Sec. 412.105(f)(1)(iv)(C)(2) reference the direct GME
regulations text at Sec. 413.79(n) and would not require amendments.
Comment: Many commenters opposed CMS' proposal to require hospitals
to use at least half of their section 5503 slots in either the first,
second, or third 12-month cost reporting period of the 5-year period,
and to use all of their slots by the fifth year. One commenter stated
that the proposal ``over-reaches'' and the penalty for failure to meet
the timeline for filling the section 5503 slots is ``too harsh,''
unjustly penalizing hospitals. Commenters explained how, given the date
when CMS announced the section 5503 awards (August 2011, which they
believed was already too late to recruit resident for the July 1, 2011
academic year), and the complexity and length of the process for
receiving accreditation and hiring staff for a new program, a 3-year
timeframe for filling at least half of the slots is impossible for
hospitals to meet. Some commenters gave examples of a hospital that is
using its section 5503 to start a new program, but because of time
constraints in accrediting and growing the program, by the 5th year,
the hospital would still only have less than 75 percent of the slots
filled. They stated that, under CMS' proposal, this hospital would lose
all 10 of its section 5503 slots.
Some commenters expressed concern about the proposed timeline for
filling slots as it relates to longer residencies such as general
surgery, a 5-year program. These commenters requested that CMS revise
the proposal to require that 80 percent, rather than 100 percent, of
the slots are filled by the fifth year. Other commenters recommended
that CMS remove the requirement that half the slots be filled by the
third year, and instead either require that half the slots be filled by
the fifth year, or that hospitals prove that they began to start or
expand programs before the end of the fifth year, and that they
received accreditation for the full number of slots they were awarded.
Another commenter suggested that, if the hospitals can provide
appropriate documentation from the National Residency Match Program
(NRMP) or other appropriate match programs that, based on their
recruitment numbers, they have recruited for all the slots allocated,
then that hospital should be considered as meeting the 5-year
requirement. Alternatively, one commenter recommended that if CMS
insists on an ``interim check'' of the progress of slot-filling,
instead of using years 1, 2, and 3 of the 5-year evaluation period, CMS
should use years 2, 3, and 4. The commenter argued that leaving out the
first year ``seems fair and appropriate,'' considering that the public
would not have known about CMS' clarification until well into the first
year and well after the point in time during which residents for the
following academic year are selected.
Other commenters suggested that any hospital that received an
increase for a new program should demonstrate that the program is
starting within the first three cost reporting periods, as outlined in
the final regulations published in the November 24, 2010 final rule
with comment period (75 FR 72168). The same commenters also stated that
any hospital that received an increase for a new program should submit
to CMS a 5-year plan on how it plans to fill its slots. The commenters
stated that this should be done in a similar manner as for hospitals
that participated in the New York Demonstration, the Utah
Demonstration, or a Voluntary Residency Reduction Program (VRRP) (as
outlined in the final regulations published in the November 24, 2010
final rule with comment period (75 FR 72168)). Commenters argued that,
because of the tremendous investment required to start a new program,
it is highly unlikely that a hospital would abandon that effort ``both
for financial and reputational reasons.''
Two commenters stated that the ACGME accreditation process for new
programs is more complex than for expansion of existing programs. The
commenters asked that CMS acknowledge the effort and time required to
start a new program, and CMS ``should continue to make a distinction
between expansions of existing programs and the establishment of new
programs in the requirements for the use of the redistributed GME
slots.'' The commenters noted that CMS made this distinction between
starting new programs and expanding existing programs under
Demonstrated Likelihood Criterion 1 in the November 24, 2010 final rule
with comment period (75 FR 72168), where CMS added the option of
submitting ``documentation demonstrating that it has made a commitment
to start a new program. One example of such a commitment
[[Page 53428]]
would be for the hospital to provide the minutes from the meeting at
which the hospital's GME committee gave approval for the hospital to
proceed with the process of applying to the accrediting agency for
approval to start a new program. We are not adding a similar option
under Demonstrated Likelihood Criterion 2 because we understand that
the process for requesting approval to expand an existing program is
not as time-consuming and labor-intensive as the process for requesting
approval for a brand new program.''
Commenters asked that if CMS does finalize a penalty for hospitals
that fail to use all of their slots, CMS only remove the slots that the
hospital did not fill by year 5, and if any removal of slots occurs, it
should only be prospective (that is, starting with the year after
failure to meet the 75-percent test). Commenters argued that it is
``draconian'' for CMS to remove all or any of a hospital's awarded
slots, if, for example, in the fifth year, the hospital has not filled
a fraction of the slots.
One commenter argued that there is no statutory requirement to use
``all'' the awarded section 5503 slots. The commenter stated that the
only statutory requirements are to make certain that the hospital
trains primary care residents at or above its primary care average and,
also, that 75 percent of the positions attributable to the additional
slots are in primary care or general surgery training. The commenter
asserted that this statutory requirement does not suggest a need for
use of all slots or any particular need to analyze the use of slots, if
any, for any slots not used for primary care or general surgery. The
commenter argued that Congress did not place any other requirements on
the use of the slots and clearly is allowing for 25 percent of the
slots used to be for nonprimary care training. The commenter gave an
example where if the primary care average is 12.2 and the hospital was
awarded 10 section 5503 slots, the commenter believes that, in year 5,
to determine compliance with the statutory 75-percent requirement and
primary care average, the only analysis should be whether the hospital,
in year 5, is training at least 12.2 residents in primary care and also
at least an additional 7.5 FTEs in primary care or general surgery. The
commenter believed that it should not matter what, if anything, the
hospital might be doing with the other 2.5 FTEs of the 10 awarded
section 5503 slots. The commenter added that it would be difficult to
determine use of all awarded slots without knowing precisely what
figure in year 5 will be compared to what figure from another year or
years.
Commenters also requested that CMS permit hospitals to choose to
start the 5-year evaluation period either to be July 1, 2011, or July
1, 2012. Commenters stated that although section 5503 is effective July
1, 2011, the section 5503 awards were not announced until after the
start of the July 1, 2011 academic year, and therefore, unless a
hospital had already recruited residents to positions during the 2010
match program, there is no way for any hospital to actually have used
any of the section 5503 awarded positions for the period of July 1,
2011 through June 30, 2012.
Response: We have considered all the public comments we received
and we are convinced that, with respect to starting a brand new
program, it is possible that even if a hospital began in earnest the
process of seeking accreditation for and starting a new program right
after the section 5503 slots were awarded in August 2011, half of the
slots may not be filled by the third 12-month cost reporting period of
the 5-year evaluation period. Nevertheless, we emphasize that our
proposal that hospitals must fill at least half of their slots in years
1, 2, or 3 was based on the statutory directive that, in distributing
the slots, CMS should take into account the demonstrated likelihood of
the hospital filling the additional slots within the first three cost
reporting periods beginning on or after July 1, 2011. Arguably, our
proposal was less restrictive than this directive, in that hospitals
would have to fill only half of their slots, and not all of the slots,
and do so in either the first, second, or third 12-month cost reporting
period of the 5-year evaluation period. However, in this final rule,
based on consideration of the public comments we received, we are
finalizing a policy that differs from what we proposed.
As we explain further below, we will be modifying the hospital cost
report to require hospitals to report the number of FTE residents that
they have added because of their section 5503 slots. The hospitals must
specify on the cost report, of the additional FTEs added because of
section 5503, the number that are in a new program(s), if any, and the
new program specialty(ies), and the number that are expansions to an
existing program(s), if any, and the expanded program's or programs'
specialty(ies). This information will assist the Medicare contractor in
determining how many slots are being used and the purpose for which
they are being used, at least for cost reports that have not yet been
filed in the 5-year evaluation period. We received many comments
convincing us of the complexity and devotion of time and resources
associated with starting a new program, but commenters did not do the
same regarding the process for expanding existing programs. In fact,
after noting that the ACGME process for starting a new program is more
complex than for expanding an existing program, two commenters also
pointed out that, consequently, CMS has already distinguished between
new programs and program expansions with regard to the type of
documentation required in the section 5503 application process (that
is, the documentation requirements for applications seeking slots to
start a new program were somewhat less stringent than the documentation
requirements for expanding existing programs (75 FR 72168)). Those
commenters asked that CMS continue to distinguish between new programs
and program expansions, presumably by being less stringent with regard
to the requirements imposed when slots must be filled for new programs.
These comments highlighting the differences in the level of difficulty
between starting a new program and expanding an existing program, and
the general lack of comments voicing concern over our proposals with
regard to expanding existing programs, confirm our belief that it is
much easier for a hospital to expand an existing program than to start
a new one. Therefore, in this final rule, we are continuing to
distinguish between new programs and expansions of existing programs,
and with regard to expansions of existing programs, we believe that a
hospital should be able to achieve its expansions fully by its fourth
12-month cost reporting period. With regard to establishing new
programs, we understand that a new program may not yet be fully grown
by its final (full or partial) cost report. As we explain further
below, we are finalizing a policy wherein the Medicare contractor would
remove from the final cost report the section 5503 slots that are
unused in a hospital's final (full or partial) cost report in the 5-
year evaluation period. We are concerned that hospitals may seek to
suddenly expand existing primary care or general surgery programs in
the final (full or partial) cost report as a means of holding on to
their section 5503 slots, only to reverse those expansions after June
30, 2016, and use the section 5503 slots for some other purpose
inconsistent with the policy goals of section 5503. We believe it is
reasonable and fair to choose the
[[Page 53429]]
fourth 12-month cost report as the year in which a hospital must have
achieved its full program expansion(s) because this is one year more
than the statutory requirement at section 1886(h)(8)(C)(i) of the Act
that the Secretary shall take into account the demonstrated likelihood
that a hospital would fill the slots within the first 3 cost reporting
periods beginning on or after July 1, 2011. We hope that this final
policy encourages hospitals to achieve the full expansion by their
fourth 12-month cost report, and to maintain that full expansion in the
final cost report. We believe that, in this manner, the hospital would
be demonstrating at least 2 years of commitment to the expanded
program(s), and as a result, the hospital may be less likely to reverse
the expansion after June 30, 2016.
Accordingly, we are finalizing a policy wherein if a hospital uses
any section 5503 slots for program expansions, the Medicare contractor
will review those slots used for program expansions and, in determining
the number of applicable unused slots to remove, compare the number of
FTEs associated with program expansion in the fourth 12-month cost
reporting period to that in the final cost report (full or partial). If
the final cost report indicates a number of FTEs associated with
program expansion that is more than the number of FTEs associated with
program expansion in the fourth 12-month cost reporting period, the
Medicare contractor would ignore the additional expansion in the final
cost report in calculating the applicable unused slots because, as
noted above, we believe the full expansion should have been achieved in
the fourth 12-month cost reporting period. Effective for portions of
cost reports on or after July 1, 2016, we would remove those additional
expanded FTEs (thereby reducing the section 5503 award) that are over
and above the FTEs associated with program expansion in the fourth 12-
month cost reporting period. If the number of FTEs associated with
program expansion in the final cost report is equal to or less than the
number of FTEs associated with program expansion in the fourth 12-month
cost reporting period, the hospital's section 5503 award would be
reduced by removing any FTE slots that are unused in the final (full or
partial) cost report, effective for portions of cost reports on or
after July 1, 2016.
For example, assume Hospital X was awarded 20 slots under section
5503. In its fourth 12-month cost reporting period, it has added 16
FTEs, 10 of which are associated with a new family medicine program,
and 6 are associated with an expanded surgery program. In its final
cost report, Hospital X has expanded its internal medicine program by 3
FTEs, and it continues to train the 6 surgery residents and the 10
family medicine residents added in its fourth cost reporting period.
One slot of the 20 section 5503 slots remains unused in the final cost
report. Because we believe all program expansions should have occurred
no later than the fourth 12-month cost reporting period, effective July
1, 2016, the Medicare contractor would remove the three (internal
medicine) FTE slots. In addition, effective July 1, 2016, the Medicare
contractor would remove the one unused FTE slot. Therefore, effective
July 1, 2016, Hospital X's section 5503 cap would be 16, not 20.
Alternatively, Hospital Y was awarded 20 slots under section 5503.
In its fourth 12-month cost reporting period, it has added 16 FTEs, 10
of which are associated with a new family medicine program, and 6 are
associated with an expanded surgery program. In its final cost report,
Hospital Y continues to train the 6 surgery residents and add 1 family
medicine resident, so Hospital Y is training 11 family medicine
residents. Hospital Y has maintained the same level of program
expansions in its final cost report as in its fourth 12-month cost
report (that is, 6 surgery residents). Three slots of the 20 section
5503 slots are unused in the final cost report. Therefore, the Medicare
contractor would only remove the 3 FTE unused slots effective for
portions of cost reporting periods on or after July 1, 2016. Hospital
Y's section 5503 cap would be 17, not 20, effective for portions of
cost reporting periods on or after July 1, 2016.
We are revising the proposed regulations text to conform to the
final policy regarding reduction of the section 5503 cap awards
effective for portions of cost reports on or after July 1, 2016, due to
unused slots. Specifically, we are revising the regulations text at
Sec. 413.79(n)(2)(ii) to state that if a hospital received a section
5503 cap award, and does not use all of the award in its final (12-
month or partial) cost report of the 5-year period beginning July 1,
2011, and ending June 30, 2016, the Medicare contractor will remove the
applicable unused slots, and the hospital's section 5503 award will be
reduced for portions of cost reporting periods on or after July 1,
2016. The number of applicable unused slots is equal to the difference
between the number of slots awarded and the number of slots used. In
determining the applicable slots used, the following amounts are added,
as relevant:
(1) If a hospital uses the section 5503 slots to expand an existing
program(s), the used slots are equal to the lesser of the number of
slots used for an expansion(s) in the fourth 12-month cost report or
the final cost report.
(2) If a hospital uses the section 5503 slots to start a new
program(s), the used slots are equal to the number of slots used for a
new program(s) in the final cost report.
(3) The portion, if any, of the section 5503 slots used for cap
relief, subject to the 75 percent test and the 3-year primary care
average requirement.
Because we are directing the contractors to only remove the
applicable unused slots awarded under section 5503, effective for
portions of cost reporting periods on or after July 1, 2016, it is
important to define what we mean by ``used'' versus ``unused'' slots.
As one commenter argued in great detail, there is no statutory
requirement to use ``all'' the awarded section 5503 slots. The only
statutory requirements are to make certain that the hospital trains
primary care residents at or above its primary care average and, also,
that 75 percent of the positions attributable to the additional slots
are in primary care or general surgery training. The commenter asserted
that it should not matter what, if anything, the hospital might be
doing with the other 25 percent of its section 5503 slots. The
commenter argued that Congress did not place any other requirements on
the use of the slots and clearly is allowing for 25 percent of the
slots used to be for non-primary care training.
We believe that the intent of section 5503 was to provide Medicare-
funded slots to hospitals in States that had documented shortages of
physicians, in primary care or otherwise, and, therefore, the slots are
intended to pay for additional FTE residents that the hospitals in
those States were previously not training. That is, the section 5503
slots were not intended to cover existing residency positions (that is,
cap relief), but to be used to create new residency positions either
through starting new programs or expanding existing programs. In fact,
hospitals were precluded from applying for section 5503 slots for cap
relief, and no place was provided on the section 5503 application form
to even apply for cap relief (75 FR 72171, 72173 and 72174).
Furthermore, in light of the 75-percent requirement, the intent of
section 5503 is that a sizeable majority of the additional resident
slots are to be filled with new primary care or general surgery
residents. Arguably, it is
[[Page 53430]]
acceptable if 25 percent of the remaining 5503 slots are used for
additional nonprimary care programs, considering that the States that
were awarded the slots have shortages of multiple kinds of physicians,
not just primary care and general surgery. Nevertheless, it appears
that, based on the language in the November 24, 2010 final rule with
comment period implementing section 5503 (75 FR 72198), hospitals may
use 25 percent of their section 5503 slots for cap relief.
While we believe that it is not desirable to use any amount of
section 5503 slots for cap relief, we are not instructing the
contractor to automatically disallow the portion of slots used for cap
relief if the 3-year primary care average and the 75-percent tests are
met. However, it is important for hospitals to understand that
application of any amount of section 5503 slots toward cap relief
constitutes a definite ``use'' of those section 5503 slots; therefore,
section 5503 slots utilized for cap relief count with respect to the
determination of whether 75 percent of a hospital's section 5503 slots
are being used for training additional primary care or general surgery
residents, and whether the total primary care FTE count equals at least
the 3-year primary care average number. We emphasize that we are not
instituting a new policy in this final rule with regard to using slots
for cap relief. As stated above, it appears that, based on language in
the November 24, 2010 final rule with comment period implementing
section 5503, using 25 percent of the slots for cap relief is
permissible (75 FR 72198). This existing policy would apply to cost
reports that hospitals have already filed after July 1, 2011 (the
effective date of section 5503), and certainly applies to cost reports
that have not yet been filed. For example, assume Hospital A has a cap
of 100 FTEs, and is training 110 residents. Hospital A has a fiscal
year end of December 31 and was awarded a total of 20 slots under
section 5503. On July 1, 2011, Hospital A did add one more primary care
resident, which equates to .5 FTE on the December 31, 2011 cost report.
Also, on its December 31, 2011 cost report (Form CMS-2552-10, line 8.01
of Worksheet E, Part A, and line 4.01 of Worksheet E-4), Hospital A
reported ``10'' section 5503 slots as its cap increase (that is, half
of the 20 section 5503 slots applicable to July 1, 2011 through
December 31, 2011), and it reported 110.5 unweighted FTEs as its
current year allowable allopathic and osteopathic FTE count (Form CMS-
2552-10, line 10 on Worksheet E, Part A and line 6 Worksheet E-4). In
effect, Hospital A ``used'' all of its section 5503 slots, which meant
that the 9.5 FTEs by which Hospital A previously exceeded its cap of
100 are now covered by 10 of the section 5503 slots, generating payment
on the December 31, 2011 cost report for an additional 9.5 preexisting
FTEs (for purposes of simplicity, we have disregarded the effects of
the rolling average calculation). However, Hospital A has only added
0.5 of an additional slot in primary care, while 9.5 of the other
section 5503 slots are used for cap relief. In this example, the 75-
percent test is not met. Thus, in accordance with the regulations at
Sec. 413.79(n)(2)(iv), all 20 of Hospital A's section 5503 slots would
be removed.
Consider the difference in reporting with Hospital B. Hospital B
also has a cap of 100 FTEs and is training 110 residents. Hospital B
has a fiscal year end of December 31 and was awarded a total of 20
slots under section 5503. On July 1, 2011, Hospital B did add one more
primary care resident, which equates to .5 FTE on the December 31, 2011
cost report. On its December 31, 2011 cost report (CMS Form 2552-10,
line 8.01 of Worksheet E, Part A, and line 4.01 of Worksheet E-4),
Hospital B reported ``0.66'' section 5503 slots as its cap increase. By
reporting 0.66 FTEs, the hospital would be reporting 0.5 of its section
5503 cap associated with the 0.5 additional primary care FTE, plus 25
percent more for cap relief (that is, 0.5 is 75 percent of 0.66, and
0.16 is 25 percent of 0.66). Hospital B's adjusted cap for FYE 12/31/11
is 100 + 0.66 = 100.66. Hospital B reported 110.5 unweighted FTEs as
its current year allowable allopathic and osteopathic FTE count (CMS
Form 2552-10, line 10 on Worksheet E, Part A and line 6 on Worksheet E-
4). Hospital B would be paid for 100.66 FTEs on its December 31, 2011
cost report (disregarding the rolling average). Hospital B has
permissibly ``used'' 75 percent of its section 5503 slots for an
additional primary care resident and 25 percent for other purposes,
such as cap relief.
These examples demonstrate how cap relief constitutes ``use'' of
section 5503 slots, and also show that in the 5-year evaluation period,
a hospital should not automatically report (that is, use) all of its
section 5503 cap increase (on Form CMS-2552-10, line 8.01 of Worksheet
E, Part A, and on line 4.01 of Worksheet E-4), but should only report
(that is, use) a portion that at least is equal to the additional
primary care/general surgery FTEs added, with no more than an
additional 25 percent allowed to be reported for other purposes. (We
plan to update the cost report instructions to reflect this directive.)
We reiterate that a hospital is responsible for meeting the 75-percent
test based on whatever amount of section 5503 cap increase it reports
on its cost report (Form CMS-2552-10, line 8.01 of Worksheet E, Part A,
and line 4.01 of Worksheet E-4) during each year of the 5-year
evaluation period. If use of slots for cap relief results in the
hospital using less than 75 percent of the slots in a year for primary
care and/or general surgery residents, the hospital risks losing all of
section 5503 slots from the earliest cost reporting period that is
reopenable in which it would be determined that the hospital did not
meet the requirements in accordance with Sec. 413.79(n)(2)(iv). For
example, in year 5 (that is the final cost report), a hospital that was
awarded 10 slots is training 6 new primary care/general surgery
residents in a new program. That means in order to meet the 75-percent
test in year 5, the most that can be used for cap relief or non-primary
care is 2 FTEs (2 is 25 percent of 8), and an amount of 8 may be
reported on Form CMS-2552-10, line 8.01 of Worksheet E, Part A, and on
line 4.01 of Worksheet E-4, and the remaining 2 FTEs would be removed
by the contractor effective for portions of cost reporting periods on
or after July 1, 2016. If this hospital had reported all 10 of its
section 5503 slots on line 8.01 of Worksheet E, Part A, and on line
4.01 of Worksheet E-4 in year 5, while actually only adding 6 primary
care/general surgery residents in the new program, this hospital would
fail the 75 percent test. Under the regulations at Sec.
413.79(n)(2)(iv), this hospital would lose all 10 of its section 5503
cap slots, from the earliest cost reporting period that is reopenable
in which it would be determined that the hospital did not meet the
requirements.
In order for the Medicare contractors to determine whether a
hospital is complying with the 75-percent test and the 3-year primary
care average requirement, hospitals would have to provide their
contractors with information as part of the cost report (possibly on
Worksheet S-2, Part I of the CMS Form 2552-10), the following for IME
and direct GME separately:
(1) The baseline FTE count, which is used for determining whether
FTEs are added in cost reports in the 5-year evaluation period. The
baseline FTE count is the total unweighted allopathic and osteopathic
FTE count from the hospital's 12-month cost report that immediately
precedes the cost report that includes July 1, 2011. (That is, the
baseline cost report for June 30 providers would be July 1, 2010
through June 30, 2011; for December 31
[[Page 53431]]
providers, this would be January 1, 2010 through December 31, 2010; for
September 30 providers, this would be October 1, 2009 through September
30, 2010). (On the CMS Form 2552-96, the baseline FTE count is on line
3.08 of Worksheet E, Part A, and on line 3.05 of Worksheet E-3, Part
IV. On the CMS Form 2552-10, the baseline FTE count is on line 10 of
Worksheet E, Part, and on line 6 of Worksheet E-4).
(2) The number of additional FTEs above the baseline FTE count that
were added in the current cost reporting period, because of the section
5503 award. (These FTEs are part of the current year FTE count, and
would be included on CMS Form 2552-10, line 10 of Worksheet E, Part A,
and line 6 of Worksheet E-4).
(3) Of the additional FTEs in item 2, specify each new program
specialty, if any, and the number of FTE residents for each new
program.
(4) Of the additional FTEs in item 2, specify each expanded program
specialty, if any, and the number of FTE residents for each program
expansion.
(5) The amount of the section 5503 award that is being used for cap
relief, if any.
(6) The current year's total unweighted primary care FTE count
(excluding obstetrics and gynecology). (The 3-year primary care average
from the 3 most recent cost reports ending prior to March 23, 2010,
must already be reported on Worksheet S-2, Part I, line 61).
In order to determine compliance with the 75-percent test and the
3-year primary care average, the Medicare contractor would first
determine the number of ``used'' slots. That is, the Medicare
contractor would compare the amount on the hospital's section 5503
award letter to the section 5503 cap line on the Medicare cost report
(line 8.01 of Worksheet E, Part A, and line 4.01 of Worksheet E-4).
Then, the Medicare contractor would determine if the hospital reported
the full amount of its section 5503 cap increase on the section 5503
cap line of the cost report, or a partial cap increase. The amount of
the section 5503 cap increase that is reported on the section 5503 cap
line (line 8.01 of Worksheet E, Part A, and line 4.01 of Worksheet E-4)
is the amount of the ``used'' slots, and it influences the additional
number of FTE residents that would be paid for in the current cost
report. Therefore, while the sum of items 2 and 5 above should equal
the cap increase amount reported on the section 5503 cap line, 75
percent of that cap increase amount reported on the section 5503 cap
line must be used for additional primary care or general surgery FTEs
added to the baseline number of FTEs.
If no residents were added on the current year line 10 or line 6
(item 2 above), but the hospital reported some or all of its section
5503 cap increase on line 8.01 of Worksheet E, Part A or line 4.01 of
Worksheet E-4, the section 5503 cap increase is being used for cap
relief. The 75-percent test would not be met, and all of the section
5503 cap slots would be removed in accordance with Sec.
413.79(n)(2)(iv). If no section 5503 cap increase is reported on the
section 5503 cap line (line 8.01 of Worksheet E, Part A or line 4.01 of
Worksheet E-4), the contractor would still determine if the primary
care average requirement is met in the current year. Failure to comply
with either the 75 percent or 3-year primary care average test means
permanent removal of all section 5503 slots from the earliest
applicable cost reporting period under the regulations at Sec.
413.79(n)(2)(iv).
With regard to the Medicare contractor's review of a hospital's
final (full or partial) cost report, if the Medicare contractor
determines that the hospital complied with the 75-percent test and the
3-year primary care average requirement, the Medicare contractor would
assess the number of applicable unused slots, in accordance with the
revised regulations text at Sec. 413.79(n)(2)(ii). Any amount of
``unused'' section 5503 award, that is, the portion above 25 percent of
the total award that is not being used for nonprimary care ``growth''
or for cap relief, would be removed permanently by the contractor for
portions of cost reporting periods on or after July 1, 2016. For
example, in year 5 (that is, the final cost report), a hospital that
was awarded 10 slots is training 6 new primary care/general surgery
residents in a new program. That means the most that can be used for
cap relief or nonprimary care is 2 FTEs (2 is 25 percent of 8), and an
amount of 8 may be reported on line 8.01 of Worksheet E, Part A, and on
line 4.01 of Worksheet E-4, and the remaining 2 FTEs would be removed
for portions of cost reporting periods on or after July 1, 2016 by the
contractor. (That is, effective for portions of cost reporting periods
on or after July 1, 2016, the hospital's section 5503 award would be
permanently reduced by 2 FTEs). If this hospital had reported all 10 of
its section 5503 slots on line 8.01 of Worksheet E, Part A, and on line
4.01 of Worksheet E-4 in year 5, while actually only adding 6 primary
care/general surgery residents in the new program, this hospital would
fail the 75 percent test. Under the regulations at Sec.
413.79(n)(2)(iv), this hospital would lose all 10 of its section 5503
cap slots, effective with the earliest cost reporting period that is
reopenable in which it would be determined that the hospital did not
meet the requirements.
With regard to the commenters who stated that any hospital that
received an increase for a new program should submit to CMS a 5-year
plan on how it plans to fill its slots, we believe that is superfluous.
Hospitals that received section 5503 slots were already required to
demonstrate in their initial application a commitment to fill the slots
within the first three cost reporting periods of receiving the slots.
Therefore, it would not be helpful to require hospitals to submit
additional plans for CMS to review. We also do not see the need to
allow hospitals to choose the start of their 5-year evaluation period
to be either July 1, 2011 or July 1, 2012. If the 5-year evaluation
period begins July 1, 2012, that would extend the 5-year period beyond
June 30, 2016, and we stated in the November 24, 2010 final rule with
comment period that the 5-year probationary period ends on June 30,
2016 (75 FR 72200). Because we believe we have modified and
significantly relaxed our requirements for hospitals with regard to the
timeframe for filling section 5503 slots, we do not believe it is
necessary to further prolong the 5-year evaluation period beyond June
30, 2016.
Comment: One commenter did not understand CMS' use of ``and/or'' to
describe the requirement that a hospital must fill at least half of its
slots in its first 12-month cost reporting period of the 5-year period,
and/or in its second 12-month cost reporting period of the 5-year
period, and/or in its third 12-month cost reporting period of the 5-
year period. The commenter believed it would be clearer to state that a
hospital must fill ``at least half of its section 5503 slots in at
least one of the following timeframes * * * its second 12-month cost
reporting period of the 5-year period, or its third 12-month cost
reporting period of the 5-year period; or its fourth 12-month cost
reporting period of the 5-year period.'' Another commenter asked that
CMS clarify its language regarding use of all the slots in the fifth
year, noting that the proposed preamble states that hospitals would be
required to ``fill all of the slots they received in their final cost
reporting period beginning during the timeframe of July 1, 2011 through
June 30, 2016'' (emphasis added by the commenter), while the proposed
regulations at 42 CFR 413.79(n)(2)(ii) state that the hospital ``must
fill all of the slots it received by its final cost reporting
[[Page 53432]]
period beginning during the timeframe of July 1, 2011 through June 30,
2016'' (emphasis added by the commenter). The commenter asked that CMS
not measure a hospital's compliance with a rate of usage of section
5503 slots based on a single year, noting that a hospital might fill
all of its slots in the fourth year, but for reasons beyond its
control, may lose one of the residents in the fifth year, putting the
hospital at risk to lose all of its slots. Yet another commenter noted
that CMS has not indicated how it would measure compliance with the
requirement that ``all'' awarded slots be filled in the fifth year of
the evaluation period. The commenter suggested that CMS establish a
baseline and indicate whether it is a single year FTE count or an
average FTE count of more than one year.
Response: We regret the confusion we caused by using ``and/or'' to
describe the requirement that a hospital must fill at least half of its
slots in its first 12-month cost reporting period of the 5-year period,
and/or in its second 12-month cost reporting period of the 5-year
period, and/or in its third 12-month cost reporting period of the 5-
year period. In any case, because we are not finalizing that proposal,
this language is irrelevant and will not be included in the final
regulations text. Regarding the language in the proposed preamble that
states that hospitals would be required to ``fill all of the slots they
received in their final cost reporting period'' (emphasis added by the
commenter), while the proposed regulations at 42 CFR 413.79(n)(2)(ii)
state that the hospital ``must fill all of the slots it received by its
final cost reporting period'' (emphasis added by the commenter), we
believe that ``in'' and ``by'' may be used interchangeably. The point
is that Medicare counts and pays for FTEs, not resident positions, as
reported on the Medicare cost report. We have stated what we mean by
the 5-year evaluation period, and described that depending on a
hospital's fiscal year end, some hospitals will have five 12-month cost
reporting periods (if they have a June 30 FYE), while other hospitals
would have first a partial cost report, then four 12-month cost
reports, and then finally a partial cost report, so as not to go beyond
June 30, 2016, which is 5 years from the effective date of July 1, 2011
(75 FR 72197 and 77 FR 27983). We also have stated that, for hospitals
with other than a June 30 FYE, in order to measure compliance with the
75-percent test and the 3-year primary care average requirement, an
annualized FTE count in the first and final partial cost reports would
be employed (75 FR 72197). Thus, the annualized FTE count and the
annualized FTE resident cap increase in that final full or partial cost
reporting period will be used to determine compliance with the tests
and to determine the amount of slots that are ``unused.'' Finally, as
we stated in response to the previous comment, in this final rule,
unlike in the proposed rule, we are not requiring that ``all'' awarded
slots be filled in the fifth year. Rather, we have revised the
regulation text at Sec. 413.79(n)(2)(ii) to describe when slots would
be removed, in the event that not ``all'' of them are filled (that is,
used) by the fifth year. Furthermore, in the previous response, we also
have defined a base year, or baseline number of FTEs, for the purpose
of determining ``growth'' of additional FTE slots added in accordance
with section 5503. However, we are not necessarily measuring a
hospital's compliance with a rate of usage of section 5503 slots based
on a single year or an average of years. As stated in the November 24,
2010 final rule (75 FR 72200 and 72201), CMS could consider an average
of a hospital's performance over more than 1 year, rather than only
always reviewing each year during the 5 years independently. Regardless
of when the Medicare contractor audits a hospital to determine if it is
meeting the criteria within the 5-year period, a hospital should not
view this policy as an encouragement to have an ``off'' year where the
requirements need not be met.
Comment: One commenter asked how CMS would determine if a hospital
filled half of its section 5503 slots. For example, if a hospital was
awarded 10 slots, would CMS or a MAC seek to confirm that the hospital
is training 3.75 FTEs above its primary care average, because 3.75 is
75 percent of 5, which is half of the 10 awarded slots? The commenter
believed such an approach makes sense, ``as it provides for a clear,
straightforward comparison of primary care/general surgery training in
a particular year to the known, established 3-year primary care
average.'' The commenter stated that because up to 25 percent of the
awarded slots can, at any time, be used for any type of non-primary
care residency training, it would be very difficult to demonstrate use
of all 5 slots (that is, half the awarded 10), when 1.25 FTEs could be
used for any purpose and there would be no clear reference point to
determine that nonprimary care training is also increased by a specific
amount (given that there is no nonprimary care historical reference--or
not one that has been clearly identified for this purpose).
Response: The commenter's question was asked in the context of the
proposed policy, which proposed to require hospitals to fill at least
half of their section 5503 slots in at least one of the first three 12-
month cost reporting periods of the 5-year evaluation period. In this
final rule, we are finalizing a policy wherein, regardless of whether a
hospital is starting new programs, expanding programs, or doing a
combination of both, the Medicare contractor will remove the portion of
the section 5503 award that is unused in the final cost report.
(However, as explained earlier, in the case of slots used to expand an
existing program, if the number of slots associated with a program
expansion in the final cost report is greater than the number of slots
associated with a program expansion in the fourth 12-month cost report,
the Medicare contractor would remove those additional expanded FTEs
that are over the FTEs associated with program expansion in the fourth
12-month cost reporting period.) We agree that, of the applicable
section 5503 cap increase reported on a hospital's cost report in the
5-year evaluation period, 25 percent of the cap increase amount may be
used for any purpose. We also have defined a base year, or baseline
number of FTEs, for the purpose of determining ``growth'' of additional
FTE slots added in accordance with section 5503. The baseline for
determining whether FTEs are added in each cost report in the 5-year
evaluation period is the total unweighted allopathic and osteopathic
FTE count from the hospital's 12-month cost report that immediately
precedes the cost report that includes July 1, 2011 (that is, the
baseline cost report for June 30 providers would be July 1, 2010
through June 30, 2011; for December 31 providers, this would be January
1, 2010 through December 31, 2010; for September 30 providers, this
would be October 1, 2009 through September 30, 2010). (On the CMS Form
2552-96, the baseline number is the number on line 3.08 of Worksheet E,
Part A, and on line 3.05 of Worksheet E-3, Part IV. On the CMS Form
2552-10, the baseline number is the number on line 10 of Worksheet E,
Part, and on line 6 of Worksheet E-4). We believe this base year
provides a clear reference point for determining whether both primary
care/general surgery or nonprimary care training has increased during
the 5-year evaluation period.
Comment: A few commenters supported the proposal to require
hospitals to use at least half of their section 5503 slots in either
the first, second, or third 12-month cost reporting
[[Page 53433]]
period of the 5-year period, and to use all of their slots by the fifth
year, stating that the proposed standards appear reasonable and
consistent with statutory intent. One commenter stated that the
proposals ``drive earlier implementation of new positions and
strengthen requirements that institutions fulfill the obligation of the
statute regarding primary care and general surgery positions.'' With
regard to the proposed requirement that Medicare contractors determine
whether a hospital filled at least half of its section 5503 slots in
any of the first three cost reporting periods, the commenter asked that
CMS add to this a requirement consistent with Evaluation Criterion 3 of
the section 5503 application form, which was targeted to primary care
programs with a ``demonstrated focus'' on residents who pursue careers
in primary care. Hospitals that received points under Evaluation
Criterion Three had to ``demonstrate'' that residents graduating from
their programs actually do practice in primary care, and do not enroll
in nonprimary care subspecialty programs or work as something other
than a primary care practitioner. CMS stated that a threshold of
greater than 50 percent of graduates would be acceptable as a basis to
demonstrate that a program produces physicians who pursue careers in
primary care. The commenter stated that, given that Medicare
contractors will be able to identify which positions are filled with
primary care positions after the third year, CMS should utilize the 50-
percent threshold and require Medicare contractors to identify the
number of graduates who remain in primary care practice in the fifth
year after medical school (2 years after primary care residency
completion), and remove slots from institutions that do not graduate
over 50 percent who remain in primary care. The commenter believed that
this can be accomplished by counting those residents who are not in
residency or fellowship training in their fifth year, in relation to
those who are continuing training.
One commenter that supported the proposal is a hospital that
consistently trains residents in excess of its caps and that is not
located in a State with a resident-to-population ratio in the lowest
quartile or in an area designated as a health professional shortage
area (HPSA), and therefore was not eligible to receive slots from
redistribution under section 5503. The commenter stated that if
hospitals are not using the caps they received, the slots should become
available to hospitals that will use them. The commenter asserted that
there is no guarantee that physicians trained in rural, low resident to
population ratio areas or HPSAs will stay in those areas. Therefore,
the commenter encouraged CMS to develop a methodology with appropriate
criteria to redistribute slots not used under section 5503 to those
hospitals that have consistently trained residents over their cap.
Response: We appreciate the commenters' support for our proposals.
However, we have considered the comments in their totality and are
persuaded by those comments that opposed our proposed policies, and,
therefore, we are modifying our proposed policy in this final rule
accordingly. Moreover, we do not believe it would be appropriate to
adopt the commenter's suggestion of removing slots from hospitals that
do not graduate over 50 percent of residents who train in primary care.
We also note that distribution of slots under section 5503 was
statutorily directed to only certain States.
Comment: One commenter noted that, as part of the Medicare
contractors' reviews of the hospitals that received section 5503 slots,
CMS proposed that the Medicare contractors would determine whether a
hospital filled at least half of its section 5503 slots in its first
12-month period, its second 12-month period, and/or its third 12-month
period. The commenter stated that, for any new requirements finalized
in the final rule, CMS should provide specific desk review and/or audit
steps for the contractors to follow. With regard to the hospitals, the
commenter noted that there is no reporting requirement or mechanism for
a hospital to report the manner in which it fills its section 5503 FTE
cap slots, making it difficult for a Medicare contractor to determine
whether such a hospital is meeting its requirements. On the Medicare
cost report, a hospital reports its FTE residents in total, with no
distinction as to whether the FTE residents were added as a result of
the addition of the section 5503 FTE cap slots. The commenter
recommended that CMS require hospitals that received Section 5503 slots
to report how they filled the slots as a separate data submission.
Because these hospitals received the benefit of additional FTE cap
slots, the commenter believed it is not unreasonable to require them to
report how they meet the requirements accompanying this benefit. If the
hospital is required to report section 5503 information to the Medicare
contractor, the commenter stated that it is possible that the review
could be part of the desk review process. However, if the hospital is
not required to submit information specific to its section 5503
requirements, the commenter believed that the contractor might have to
review this information on audit.
Response: We will provide additional instructions for the Medicare
contractors to follow in the desk review and audit process. As stated
in response to the comments above, we also are modifying the cost
report for hospitals to provide specific information regarding how they
are using the section 5503 slots. As with other provisions, hospitals
are required to supply information and documentation to the Medicare
contractor upon request.
Comment: One commenter noticed that CMS reiterated in the proposed
rule (77 FR 27982) the policy finalized in the November 24, 2010 final
rule with comment period (75 FR 72196 and 72197, and 72200 and 72201),
that CMS has the right to audit at any time during the 5-year period
and remove reallocated slots. The commenter expressed concern that this
policy ``undercuts'' the procedures for assuring that slots are filled.
The commenter argued that if CMS audits and removes slots in Year 1, 2,
or 4, and the hospital had not yet filled half or all of the slots, but
would meet the requirement in Year 3 or Year 5, CMS ``has subverted its
own rule.'' The commenter pointed out that CMS already has the
authority to investigate civil or criminal fraud or abuse; therefore,
the commenter recommended that CMS clarify the circumstances under
which it could conduct such audits and ``not subject providers to
undefined second-guessing.''
Response: Although this comment was made in the context of the
proposal which we have revised significantly in this final rule, this
comment prompts us to provide more clarification for those who may be
unclear about the rules that are applicable during the 5-year
evaluation period between July 1, 2011 and June 30, 2016. The commenter
argued that, if CMS audits and removes slots in Year 1, 2, or 4, and
the hospital had not yet filled half or all of the slots, but would
meet the requirement in Year 3 or Year 5, CMS ``has subverted its own
rule.'' It appears that the commenter is saying that by auditing and
perhaps removing slots for failing to meet the 75 percent test or the
3-year primary care average requirement in years prior to Year 3 or
Year 5, CMS is not even giving a hospital a chance to meet CMS'
proposed rules. However, section 1886(h)(8)(B)(ii) of the Act states
that a hospital that receives section 5503 slots ``shall ensure, during
the 5-year period beginning on the date of such increase''
[[Page 53434]]
(emphasis added) that it meets those two requirements. Therefore,
whether or not a hospital meets CMS' proposed (or even modified final)
rules regarding by when and how many of the awarded slots must be
filled is irrelevant if, at any point during the 5-year evaluation
period, the hospital fails to meet the 75 percent test or the 3-year
primary care average requirement. As we stated in response to a
previous comment, regardless of when the Medicare contractor audits a
hospital to determine if it is meeting the criteria every year within
the 5-year period, a hospital should not view this policy as an
encouragement to have an ``off'' year where the requirements need not
be met. Thus, a contractor could remove all of the slots awarded to the
hospital in any year of the 5-year evaluation period because either the
75 percent test or the 3-year primary care average was not met, even if
the hospital does fill half of its section 5503 slots by its third 12-
month cost report, or fills all of its slots by its final cost
reporting period (based on the proposed policy). Therefore, we disagree
with the commenter that we are ``subverting'' our own rules by
reserving the right to have the Medicare contractors assess as many
times as necessary during the 5-year period that the hospital is
meeting the statutory criteria.
Comment: One commenter asked that CMS clarify whether the analysis
of whether a hospital meets the primary care average and the 75 percent
test will be conducted separately for IME and direct GME respectively.
Response: The primary care average and the 75-percent test are
conducted separately with respect to IME and direct GME, and many
hospitals received different award amounts for IME and direct GME.
In summary, we are finalizing a policy under section 5503 and we
are revising the regulations text at Sec. 413.79(n)(2)(ii) to state
that if a hospital received a section 5503 cap award, and does not use
all of the award in its final (12-month or partial) cost report of the
5-year period beginning July 1, 2011 and ending June 30, 2016, the
Medicare contractor will remove the applicable unused slots, and the
hospital's section 5503 award will be reduced for portions of cost
reporting periods on or after July 1, 2016. The number of applicable
unused slots is equal to the difference between the number of slots
awarded and the number of slots used. In determining the applicable
slots used, the following amounts are added, as relevant:
(1) If a hospital uses the section 5503 slots to expand an existing
program(s), the used slots are equal to the lesser of the number of
slots used for an expansion(s) in the fourth 12-month cost report or
the final cost report.
(2) If a hospital uses the section 5503 slots to start a new
program(s), the used slots are equal to the number of slots used for a
new program(s) in the final cost report.
(3) The portion, if any, of the section 5503 slots used for cap
relief, subject to the 75 percent test and the 3-year primary care
average requirement.
We also clarify that cap relief constitutes ``use'' of section 5503
slots, and we instruct that, in the 5-year evaluation period, a
hospital should not automatically report (that is, use) all of its
section 5503 cap increase (on Form CMS-1-2552-10, line 8.01 of
Worksheet E, Part A, and on line 4.01 of Worksheet E-4), but should
only report (that is, use) a portion that at least is equal to the
additional primary care/general surgery FTEs added, with no more than
an additional 25 percent allowed to be reported for other purposes. We
reiterate that a hospital is responsible for meeting the 75-percent
test based on whatever amount of section 5503 cap increase it reports
on its cost report (on Form CMS-2552-10, line 8.01 of Worksheet E, Part
A, and line 4.01 of Worksheet E-4) during each year of the 5-year
evaluation period. We also reiterate that the 3-year primary care
average requirement applies immediately on July 1, 2011, regardless of
when a hospital begins to use its additional section 5503 slots in the
5-year period. This is because the 3-year primary care average test
applies to the hospital's pre-section 5503 resident complement as well,
and not exclusively to the additional FTE residents associated with
slots awarded under section 5503.
4. Preservation of Resident Cap Positions From Closed Hospitals
(Section 5506 of the Affordable Care Act)
a. Background
Under existing regulations at Sec. 413.79(h) for direct GME and
Sec. 412.105(f)(1)(ix) for IME, a hospital that is training FTE
residents at or in excess of its FTE resident caps and takes in
residents displaced by the closure of another teaching hospital may
receive a temporary increase to its FTE residents caps so that it may
receive direct GME and IME payment associated with those displaced FTE
residents. However, those temporary FTE resident caps are associated
with those specific displaced FTE residents, and the temporary caps
expire as those displaced residents complete their training program.
Thus, in the past, if a teaching hospital closed, its direct GME and
IME FTE resident cap slots would be ``lost,'' because those cap slots
are associated with a specific hospital's Medicare provider agreement,
which would be retired upon the hospital's closure. Section 5506 of the
Affordable Care Act addressed that situation by amending section
1886(h)(4)(H) of the Act to add a new clause (vi) that instructs the
Secretary to establish a process by regulation under which, in the
event a teaching hospital closes, the Secretary will permanently
increase the FTE resident caps for hospitals that meet certain criteria
up to the number of the closed hospital's FTE resident caps. The
Secretary is directed to ensure that the total number of FTE resident
cap slots distributed shall be equal to the amount of slots in the
closed hospital's direct GME and IME FTE resident caps, respectively.
Under existing regulations at Sec. 489.52 and Sec. 413.79(h),
``closure of a hospital'' means the hospital terminates its Medicare
provider agreement. As finalized in the November 24, 2010 final rule
with comment period (75 FR 72213), we also specified that the FTE
resident cap slots of the hospital that closed no longer exist as part
of any other hospital's permanent FTE resident cap.
Section 1886(h)(4)(H)(vi)(II) of the Act, as added by section
5506(a) of the Affordable Care Act, specifies that the Secretary shall
distribute the FTE cap increases in the following priority order,
``with preference given within each category to hospitals that are
members of the same affiliated group'' (as defined by the Secretary) as
the closed hospital:
First, to hospitals located in the same core-based
statistical area (CBSA) as, or in a CBSA contiguous to, the hospital
that closed.
Second, to hospitals located in the same State as the
closed hospital.
Third, to hospitals located in the same region of the
country as the hospital that closed.
Fourth, only if the slots are not able to be fully
distributed under the third priority group, to qualifying hospitals in
accordance with the criteria established under section 5503
(``Distribution of Additional Residency Positions'') of the Affordable
Care Act.
For a detailed discussion on these ranking categories, we refer
readers to the November 24, 2010 final rule with comment period (75 FR
72214 and 72215). In the November 24, 2010 final rule with comment
period (75 FR 72212 through 72240), we also finalized the following
Ranking Criteria:
[ssquf] Ranking Criterion One. The applying hospital is requesting
the
[[Page 53435]]
increase in its FTE resident cap(s) because it is assuming (or assumed)
an entire program (or programs) from the hospital that closed, and the
applying hospital is continuing to operate the program(s) exactly as it
had been operated by the hospital that closed (that is, same residents,
possibly the same program director, and possibly the same (or many of
the same) teaching staff).
[ssquf] Ranking Criterion Two. The applying hospital was listed as
a participant of a Medicare GME affiliated group on the most recent
Medicare GME affiliation agreement of which the closed hospital was a
member before the hospital closed, and under the terms of that Medicare
GME affiliation agreement, the applying hospital received slots from
the hospital that closed, and the applying hospital will use the
additional slots to continue to train at least the number of FTE
residents it had trained under the terms of the Medicare GME
affiliation agreement. If the most recent Medicare GME affiliation
agreement of which the closed hospital was a member before the hospital
closed was with a hospital that itself has closed or is closing,
preference would be given to an applying hospital that was listed as a
participant in the next most recent Medicare GME affiliation agreement
(but not one which was entered into more than 5 years prior to the
hospital's closure) of which the first closed hospital was a member
before the hospital closed, and that applying hospital received slots
from the closed hospital under the terms of that affiliation agreement.
[ssquf] Ranking Criterion Three. The applying hospital took in
residents displaced by the closure of the hospital, but is not assuming
an entire program or programs, and will use the additional slots to
continue training residents in the same programs as the displaced
residents, even after those displaced residents complete their training
(that is, the applying hospital is permanently expanding its own
existing programs).
[ssquf] Ranking Criterion Four. The applying hospital does not fit
into Ranking Criterion One, Two, or Three, and will use additional
slots to establish a new or expand an existing geriatrics residency
program.
[ssquf] Ranking Criterion Five. Applying hospital does not meet
Ranking Criterion One, Two, or Three, is located in a HPSA, and will
use all the additional slots to establish or expand a primary care or
general surgery residency program.
[ssquf] Ranking Criterion Six. Applying hospital does not meet
Ranking Criterion One, Two, or Three, is not located in a HPSA, and
will use all the additional slots to establish or expand a primary care
or general surgery residency program.
[ssquf] Ranking Criterion Seven. Applying hospital seeks the slots
for purposes that do not fit into any of the above ranking criteria.
In determining which hospitals should receive the slots associated
with the closed hospital, in addition to considering the ranking
categories and criteria listed above, section 1886(h)(4)(H)(vi) of the
Act, as added by section 5506(a) of the Affordable Care Act, states
that the Secretary may only award slots to an applying hospital ``if
the Secretary determines that the hospital has demonstrated a
likelihood of filling the positions made available under this clause
within 3 years.'' ``Within 3 years'' means within the 3 academic years
immediately following the application deadline to receive slots after a
particular hospital closes (75 FR 72224). For example, where the
application deadline is April 1, 2011, the immediately following
academic year is July 1, 2011; therefore, hospitals must demonstrate
the likelihood of filling their slots by June 30, 2014.
Finally, section 5506(d) of the Affordable Care Act specifies that
``the Secretary shall give consideration to the effect of the
amendments made by this section on any temporary adjustment to a
hospital's FTE cap under Sec. 413.79(h) * * * (as in effect on the
date of enactment of this Act) in order to ensure that there is no
duplication of FTE slots * * *.'' In distributing slots permanently
under section 5506, we need to be cognizant of the number of FTE
residents for whom a temporary FTE cap adjustment was provided under
existing regulations at Sec. 413.79(h), and when those residents will
complete their training, at which point the temporary slot associated
with those displaced residents would be available for permanent
redistribution.
b. Change in Amount of Time Provided for Submitting Applications Under
Section 5506 of the Affordable Care Act
In the August 3, 2010 proposed rule (75 FR 46422), we proposed to
establish an application process for hospitals to apply to CMS to
receive an increase in FTE caps based on slots from closed hospitals.
Section 5506 of the Affordable Care Act did not specify an application
deadline for hospitals to request an increase to their caps when a
hospital closes. With respect to the first application process, which
applied to all teaching hospital closures between March 23, 2008, and
August 3, 2010, we established an application deadline of April 1,
2011. For future teaching hospital closures, we finalized a policy
whereby we would inform the public through an appropriate medium that
increases to hospitals' FTE resident caps are available for
distribution due to the closure of a teaching hospital, and the
application deadline would be 4 months following the issuance of that
notice to the public (75 FR 72215).
Prior to issuance of the FY 2013 IPPS/LTCH PPS proposed rule, some
representatives of the provider community had commented that providing
hospitals with 4 months following the announcement of a teaching
hospital closure to apply for slots under section 5506 is longer than
necessary. They asserted that such a long application period
unnecessarily delays CMS' review of applications and the resulting
distribution of resident cap slots from closed hospitals to the
applicants. The provider representatives suggested that perhaps a 2-
month application window is sufficient and is more practical.
As we discussed in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR
27985), we have considered the suggestion of the provider
representatives, and after our initial experience in implementing
section 5506 of the Affordable Care Act, we agree that 4 months may be
more time than is needed for hospitals to properly prepare and submit
section 5506 applications to CMS. Accordingly, we proposed to set the
application deadline for future section 5506 applications to be 60 days
following CMS' public notice of a hospital's closure and the
availability of resident cap slots increases. We stated that we believe
that reducing the application submission timeframe from 4 months to 60
days will shorten the entire process for awarding FTE resident cap
slots from closed hospitals considerably.
Comment: Many commenters supported CMS' proposal for a 60-day
application period as a reasonable timeframe and commended CMS' efforts
to expedite the process of awarding section 5506 FTE resident cap
slots. One commenter did not support the shortened application period
because the commenter believed it may lead to less thoughtful decision-
making and it could have a disproportionately adverse effect on smaller
hospitals with fewer resources at their disposal when applying for
additional FTE resident cap slots.
Another commenter supported the 60-day application period but
suggested that CMS use the IPPS final rule as a medium to issue the
public notice of a hospital's closure. The commenter believed that CMS'
issuance of the
[[Page 53436]]
public notice as part of the IPPS final rule instead of issuing a
separate public notice would ease an applicant hospital's
administrative burden in that the hospital would have advance knowledge
of the forthcoming public notice and could plan accordingly.
Response: We appreciate the commenters' support for our proposal,
and at the same time, we also understand the commenter's concerns
regarding a shortened application period. As noted above, we initially
implemented a 4 month application period because we believed that 4
months provided adequate time for hospitals to gather the appropriate
documentation and prepare a section 5506 application (75 FR 72215). In
light of the public comments received on our proposed policy to reduce
the length of the application period to 60 days, and our understanding
of the efforts required to prepare a section 5506 application, we
believe an appropriate compromise is to provide for a 90-day
application period for future section 5506 applications. Therefore, we
are finalizing a section 5506 application deadline of 90 days following
CMS' public notice of a hospital's closure and the availability of
resident cap slots increases.
With respect to the comment suggesting that we include public
notice of hospital closures in the IPPS final rule, we believe this
could unnecessarily delay the section 5506 award process. We prefer to
have the flexibility to issue public notices of hospital closures at
other times during the year and not limit the notices to the IPPS final
rule, and we believe it is in hospitals' best interests to maintain
such flexibility.
In summary, after consideration of the public comments we received,
we are finalizing a section 5506 application period of 90 days
following CMS' public notice of a hospital's closure and the
availability of resident cap slots increases.
c. Change to the Ranking Criteria under Section 5506
In the November 24, 2010 final rule with comment period (75 FR
72223), we finalized the Ranking Criteria within each of the three
first statutory priority categories (that is, same or contiguous CBSAs,
same State, and same region) to be used to rank applications. For each
application, we assigned slots based on Ranking Criteria, with Ranking
Criterion One being the highest ranking and Ranking Criterion Seven
being the lowest. For a complete list of the Ranking Criteria, we refer
readers to section IV.I.4.a. of this preamble, which discusses the
background for preservation of resident cap positions from closed
hospitals under section 5506 of the Affordable Care Act. For a detailed
discussion of the ranking categories, we refer readers to the November
24, 2010 final rule with comment period (75 FR 72212 through 72240).
After reviewing applications from the first section 5506
application process (those applications that were due to CMS on April
1, 2011), we observed that the overwhelming majority of applications
fell under Ranking Criterion Seven, that is, the applying hospital
seeks the slots for purposes that do not fit into any of Ranking
Criterion One through Ranking Criterion Six. These applications
included applications from hospitals that applied for FTE cap slots for
both primary care and/or general surgery and for nonprimary care
specialties as well as applications for general cap relief. (A request
for slots only for primary care and/or general surgery programs would
qualify under either Ranking Criterion Five or Ranking Criterion Six.)
The sheer number of applications we received under Ranking Criterion
Seven indicated a need to further prioritize among the applicants that
would previously have qualified under Ranking Criterion Seven.
Therefore, in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27985), we
proposed to replace current Ranking Criterion Seven with the two
separate proposed Ranking Criteria listed below. We noted that we were
not proposing to make any changes to Ranking Criteria One through Six.
We proposed the following two criteria to replace existing Ranking
Criterion Seven:
Proposed Ranking Criterion Seven: The program does not
meet Ranking Criterion One through Six, and the slots for which the
hospital is applying are for a primary care or a general surgery
program, but the hospital is also applying for slots under Ranking
Criterion Eight.
Proposed Ranking Criterion Eight: Applying hospital seeks
the slots for purposes that do not fit into any of the above ranking
criteria.
The proposal to modify Ranking Criterion Seven is consistent with
current Medicare policy goals to increase residency training in primary
care and general surgery, because we proposed to give a higher ranking
to those applications from hospitals applying for primary care and
general surgery FTE cap slots, as well as nonprimary care programs.
Under the current Ranking Criteria, when a hospital applies for
additional FTE cap slots for primary care and/or general surgery as
well as nonprimary care programs, we do not distinguish between the
primary care/general surgery and nonprimary care applications.
Therefore, because the hospital would be applying for nonprimary
program(s), all the hospital's applications would fall under proposed
Ranking Criterion Seven. Under our proposal, although the hospital's
application that requests FTE cap slots for primary care/general
surgery would qualify for proposed Ranking Criterion Seven, the
application for nonprimary care/general surgery would be classified as
proposed Ranking Criterion Eight.
Following is an example of how Ranking Criteria Seven and Eight
would be assigned:
Hospital A applies for slots from closed Hospital B. Hospital A is
seeking to expand its internal medicine and dermatology programs. Under
the current ranking system, both of Hospital A's applications would
receive consideration under Ranking Criterion Seven. That is, the
internal medicine application is ranked equally with the dermatology
application even though internal medicine is a primary care specialty.
Under the proposed change to the Ranking Criteria, Hospital A's
internal medicine program would receive consideration under proposed
Ranking Criterion Seven while the dermatology program would receive
consideration under proposed Ranking Criterion Eight.
Comment: One commenter objected to CMS' policy of giving higher
ranking to hospitals that apply for FTE cap slots for primary care or
general surgery programs only than to hospitals that apply for FTE cap
slots for primary care or general surgery as well as for other
nonprimary care or nongeneral surgery programs. The commenter suggested
that CMS rank all applications for primary care or general surgery
programs equally, regardless of the existence or nonexistence of other
nonprimary care or nongeneral surgery applications. Another commenter
urged CMS not to advance the creation of primary care or general
surgery programs at the expense of other essential yet nonprimary care
or nongeneral surgery specialties such as psychiatry.
Response: We disagree with the first commenter. We do not believe
that a hospital that applies for slots under section 5506 for the
purpose of starting or expanding only programs in primary care and
general surgery should be ranked equally with a hospital that applies
for the purpose of starting or
[[Page 53437]]
expanding primary care and/or general surgery programs, and other
nonprimary care programs as well. We continue to believe that our
Ranking Criteria, which give a higher ranking to hospitals that apply
only for primary care or general surgery programs, are consistent with
the expressed goals of sections 5503 and 5506 of the Affordable Care
Act, and are in keeping with the important policy objective of
promoting the growth in the number of primary care and general surgery
residents, and reducing the shortage of primary care physicians and
general surgeons. Thus far, Congress has not identified other
specialties for special treatment. However, we note that under Ranking
Criteria One, Two, and Three, hospitals can use slots awarded under
section 5506 for nonprimary care programs because these Ranking
Criteria do not consider or specify a program type, and instead give
priority to hospitals that continue to maintain the level and type of
training that were occurring prior to the hospital closure.
After consideration of the public comments we received, we are
finalizing our proposed changes to the Ranking Criteria with some
modification. As proposed, we are replacing current Ranking Criterion
Seven with the two separate Ranking Criteria listed below. We also are
modifying our proposed language for Ranking Criterion Seven in order to
highlight and clarify how Ranking Criterion Seven differs from Ranking
Criterion Five and Ranking Criterion Six. A program may only qualify
for Ranking Criterion Five or Six if the applying hospital will use all
of its additional slots to establish or expand primary care or general
surgery programs. Therefore, a hospital that submits several
applications that include requests for additional FTE slots for
purposes other than solely to establish or expand primary care or
general surgery programs may not apply under Ranking Criterion Five or
Six for additional FTE slots for its primary care or general surgery
programs. Rather, a hospital that is applying both for the purpose of
establishing or expanding primary care or general surgery programs, and
for the purpose of establishing or expanding nonprimary care or
nongeneral surgery programs and/or for cap relief must submit an
application requesting additional FTE slots under Ranking Criterion
Seven for its primary care or general surgery programs. The hospital's
requests for additional FTE slots to establish or expand a nonprimary
care or nongeneral surgery program and/or for additional FTE slots for
cap relief would properly be made under Ranking Criterion Eight. In
summary, we are finalizing Ranking Criterion Seven as follows:
Ranking Criterion Seven: The applying hospital will use
additional slots to establish or expand a primary care or general
surgery program, but the program does not meet Ranking Criterion Five
or Six because the hospital is also separately applying under Ranking
Criterion Eight for slots to establish or expand a nonprimary care or
non-general surgery program and/or for cap relief.
In light of the modifications we are making in this final rule to
the proposed Ranking Criterion Seven, we also believe it is appropriate
to modify the language of proposed Ranking Criterion Eight to specify
the types of applications that would properly be made under this
Ranking Criterion. In the proposed rule, we proposed to replace the
existing Ranking Criterion Seven with a new Ranking Criteria Seven, and
create a new Ranking Criterion Eight for situations where an ``applying
hospital seeks the slots for purposes that do not fit into any of the
above ranking criteria.'' We are modifying this proposed language and
finalizing Ranking Criterion Eight as follows:
Ranking Criterion Eight: The applying hospital will use
the additional slots to establish or expand a nonprimary care or
nongeneral surgery program or for cap relief.
We note that we did not propose, nor are we making, any changes to
Ranking Criteria One through Six.
d. Effective Dates of Slots Awarded Under Section 5506
As stated previously, section 5506(d) of the Affordable Care Act
instructs the Secretary, in pertinent part, `` * * * to ensure that
there is no duplication of FTE slots * * * .'' Accordingly, in
distributing slots permanently under section 5506, we need to be
cognizant of the number of FTE residents for whom a temporary FTE cap
adjustment was provided under existing regulations at Sec. 413.79(h),
when those residents will complete their training, and at which point
the temporary slots associated with those displaced residents would be
available for permanent redistribution. With that in mind, in the first
distribution of section 5506 cap slots from hospitals that closed
between March 23, 2008, and August 3, 2010, we used the following
several effective dates based on the ranking criterion under which a
hospital applied:
Date of hospital closure. This effective date could have
applied to Ranking Criterion Two. It also could have applied to Ranking
Criteria One and Three if there were no temporary cap adjustments given
for any displaced FTE residents.
Cost reporting period following date of hospital closure.
This effective date could have been used for awarding slots to
hospitals that were training displaced FTE residents and qualified for
Ranking Criterion One or Ranking Criterion Three because they were
taking over an entire program or part of a program from a closed
hospital and had received a temporary cap adjustment to train those
displaced residents under 42 CFR 413.79(h).
July 1 effective date. This effective date, which could
have been retroactive, could have been used for awarding slots to
hospitals that qualified under Ranking Criteria Four through Seven
where there were temporary cap adjustments made for displaced FTE
residents that completed training in a program on a specific June 30.
Date of award announcement (January 30, 2012). This
effective date could have applied to hospitals that qualified under
Ranking Criteria Four through Seven either where there were no
temporary cap increases under 42 CFR 413.79(h), or where there were
temporary cap increases but those slots associated with the temporary
cap increases were already accounted for. That is, displaced FTE
residents graduated prior to a specific July 1, and, therefore, the cap
slots associated with these FTE residents had already been permanently
assigned that specific July 1, but the closed hospital still had
remaining cap slots available for permanent assignment.
We stated in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27986)
that, based on comments we have received from hospitals that were
involved in the initial phase of section 5506 implementation (hospitals
that applied for cap slots from hospitals that closed between March 23,
2008 and August 3, 2010), we believe we need to clarify certain
existing policies and propose a change to the effective dates
associated with several ranking criteria.
First, we clarified in the proposed rule the effective date of
slots awarded under section 5506 with respect to Ranking Criterion Two.
Ranking Criterion Two applies to hospitals that participated in a
Medicare GME affiliation agreement with the closed hospital (but not
one that was entered into more than 5 years prior to the hospital's
closure), received slots from the closed hospital as part of the
affiliation agreement, and will use any additional awarded slots to
continue to train at least the same number of FTE
[[Page 53438]]
resident slots it trained as part of the affiliation agreement. For
hospitals that qualify for additional slots under Ranking Criterion
Two, we award the 5506 slots effective on a permanent basis with the
date of the hospital's closure. However, for hospitals that qualify
under Ranking Criteria One and Three and are already receiving
temporary cap adjustments for displaced FTE residents under 42 CFR
413.79(h), we award the 5506 slots effective on a permanent basis with
the cost reporting period following the date of the hospital's closure.
Because these hospitals are already receiving temporary cap adjustments
for their portion of their cost reporting period following the closure,
for administrative ease, slots became permanent due to the section 5506
award effective with the cost reporting period following the date of
the hospital's closure. However, this policy, applicable to hospitals
that qualify under Ranking Criterion One or Three, is not appropriate
for hospitals that qualify under Ranking Criterion Two and that
participated in a Medicare GME affiliation agreement with the closed
hospital and received cap slots from the closed hospital as part of
that affiliation agreement. This policy is not appropriate because, in
this case, there were no displaced FTE residents from the Medicare GME
affiliation agreement and, therefore, the hospital did not receive a
temporary cap adjustment. For example, if Hospital A received slots
from Hospital B as part of an affiliation agreement so that FTE
residents could train at Hospital A and Hospital B closes, Hospital A
lost the cap adjustment it received from Hospital B as part of the
affiliation agreement as of the date of the hospital's closure, and a
temporary cap adjustment under 42 CFR 413.79(h) is not available to
Hospital A. In this case, no FTE residents are displaced.
In the proposed rule and in this final rule, we are clarifying
that, for hospitals qualifying under Ranking Criterion Two that are
awarded cap slots from the closed hospital, the award is effective with
the date of the hospital's closure. This effective date allows a
hospital applying under Ranking Criterion Two to receive funding for
training the additional FTE residents it was training as part of the
Medicare GME affiliation agreement with the closed hospital immediately
after the closure, without having to wait until the following cost
reporting period to receive that cap adjustment. We note that, under
existing regulations at 42 CFR 413.79(d), additional FTEs that a
hospital receives under the terms of a Medicare GME affiliation
agreement are subject to the 3-year rolling average. Therefore,
hospitals that receive permanent assignment of FTE resident cap slots
under Ranking Criterion Two do not receive an exemption from the
rolling average. With regard to the IME intern and resident-to-bed
(IRB) ratio, the existing regulations at 42 CFR 412.105(a)(1)(i)
indicate that the numerator of the prior year IRB ratio may be adjusted
to reflect FTEs added under a Medicare GME affiliation agreement. The
affiliation agreement would terminate when the hospital closes. Thus,
on the cost report of the hospital that receives slots under Ranking
Criterion Two, the prior year numerator of the IRB ratio would only be
adjusted to reflect the portion of the affiliated FTEs that the
hospital received prior to the other hospital's closure and the
termination of the affiliation agreement.
As we did in the proposed rule, we also are clarifying that when
there are no temporary cap adjustments for displaced FTE residents from
hospitals that closed, and an applying hospital qualifies under Ranking
Criterion One or Ranking Criterion Three, the FTE resident cap slots
are awarded effective with the date of the hospital's closure. This was
indicated in the November 24, 2010 final rule with comment period (75
FR 72225), but we understand, based on comments received after the
initial phase of section 5506 slot awards, that this policy was not
clearly understood. These slots are also immediately included in
applying the rolling average and IRB ratio cap.
We proposed to change the effective date of an award of additional
FTE caps for hospitals that qualify under Ranking Criterion Four
through proposed Ranking Criterion Eight where temporary caps were
given for displaced FTE residents (we refer readers to section
IV.I.4.b. of this preamble for a discussion of proposed Ranking
Criteria Seven and Eight). As a general matter, hospitals that apply
under Ranking Criterion Four through proposed Ranking Criterion Eight
are applying either to establish or expand a program or to seek cap
relief. In the proposed rule, we stated that we do not believe that,
when a hospital receives additional cap slots to establish or expand a
residency training program, we need to award the cap slots
retroactively to a previous July 1 effective date. Rather, the awarded
cap slots are to be used on a prospective basis to allow hospitals to
expand current programs or establish new ones. We understand that if a
hospital is applying for cap relief under proposed Ranking Criterion
Eight (previously Ranking Criterion Seven), the hospital would want its
cap slots awarded retroactively to the date of the hospital's closure
or the July 1 after a specific displaced resident has graduated if that
date is prior to the date of the award announcement. However, we stated
in the proposed rule that we do not believe such a policy is consistent
with the spirit of the BBA caps. Furthermore, the purpose of section
5506 is for hospitals to receive slots from the closed hospital to
facilitate the continuity of the closed hospital's programs and to
promote stability in the number of physicians in a community.
The proposed Ranking Criterion Eight of section 5506 does not serve
to encourage the continuity of the closed hospital's programs; it
merely provides Medicare funding for a certain amount of slots in
excess of the BBA caps. Accordingly, we indicated in the proposed rule
that we believe that hospitals applying for cap relief under proposed
Ranking Criterion Eight should only receive their permanent cap slots
effective on a prospective basis. Therefore, while under the initial
section 5506 application process, it was possible for an applying
hospital that qualified under Ranking Criteria Four through Seven to
receive slots retroactive to the July 1 after a specific displaced FTE
resident's graduation date, we proposed that, for hospitals that
qualify under Ranking Criteria Four through Eight for cap slots from a
closed hospital even where there were temporary caps given for
displaced FTE residents, the applying hospitals would receive the
permanent FTE cap slots effective no earlier than the date of the award
announcement. That is, if an applying hospital that qualified under
Ranking Criterion Four through proposed Ranking Criterion Eight
receives cap slots associated with a displaced FTE resident and that
resident graduated prior to the date of the award announcement, the
earliest the applying hospital could receive the permanent cap
adjustment would be the date of the award announcement. If a hospital
qualified under Ranking Criterion Four through proposed Ranking
Criterion Eight, and the only available cap slots are temporarily being
used to train displaced FTE residents that are expected to graduate
after the date of the award, the applying hospital will receive the
permanent slots effective the July 1 after those displaced FTE
residents complete their training. For example, if a hospital closed
January 1, 2012, and the section 5506 slot awards were announced May 1,
2013, but
[[Page 53439]]
residents displaced from the closed hospital did not complete their
training until June 30, 2013, the applying hospital will receive
section 5506 slots for those displaced residents effective July 1,
2013, following the completion of training of those displaced
residents. We did not propose to change the effective date of section
5506 awards for applying hospitals that qualify under Ranking Criterion
Four through proposed Ranking Criterion Eight where there were no
temporary caps given for displaced residents; as described in the
November 24, 2010 final rule with comment period (75 FR 72227), those
applying hospitals will continue to receive their section 5506 cap
slots effective with the date of the award announcement.
In the proposed rule, we discussed another option to consider for
the effective date of Ranking Criteria Four through proposed Ranking
Criterion Seven, which are Ranking Criteria associated with either
starting a program or expanding a program, would be to award the slots
in accordance with when the hospital actually needs the slots, as
asserted in the hospital's section 5506 application. (The proposed
effective date for proposed Ranking Criterion Eight would still be no
earlier than the date of the award announcement.) For example, assume a
hospital applies under Ranking Criterion Five to expand an internal
medicine program by nine positions. As described in its section 5506
application, the hospital plans that expansion to occur beginning on
July 1, 2012, and at that time, the hospital would add three residents,
on July 1, 2013, the hospital would add another three residents, and on
July 1, 2014, the hospital would add the last three internal medicine
residents. Therefore, the effective date of three slots could be July
1, 2012, the effective date of three additional slots would be July 1,
2013, and the effective date of the last three slots would be July 1,
2014. We stated that we were interested in receiving public comments on
this policy alternative. We still proposed that the effective date for
proposed Ranking Criterion Eight would be no earlier than date of the
award.
Comment: A number of commenters addressed our clarifications and
proposals of the effective dates for all of the Ranking Criteria.
Commenters agreed that cap slots received under Ranking Criterion Two
should be effective with the date of the hospital closure. One
commenter stated that because the receiving hospital had already been
using the cap slots from the closed hospital as part of a Medicare GME
affiliation agreement, there is no reason the slots should be awarded
any later than the date of the hospital closure. The commenter added
that it supported making slots received under Ranking Criterion Two
effective with the date of the hospital closure because there are no
temporary cap adjustments and exemptions from the rolling average
applied to these cap slots.
Other commenters believed cap slots from closed hospitals should be
awarded on an ``as-needed'' basis. They stated that, therefore, it is
appropriate that the cap slots received under Ranking Criterion Two be
awarded when the hospital closes because the receiving hospital would
need the additional cap slots as of the date of the hospital's closure.
Response: We agree with the commenters that cap slots received
under Ranking Criterion Two should be effective with the date of the
hospital closure because the receiving hospital had already been using
the cap slots from the closed hospital as part of a Medicare GME
affiliation agreement, and there are no temporary cap adjustments and
exemptions from the rolling average applied to these cap slots.
Therefore, we are finalizing our clarification that, if a hospital is
awarded cap slots under Ranking Criterion Two, those cap slots are
effective with the date of the hospital closure.
Comment: Some commenters specifically addressed our clarifications
and proposals for the effective dates of Ranking Criteria Four through
proposed Eight. One commenter did ``not believe that it is appropriate
for CMS to institute a `one size fits all' policy to determine the
effective dates for all awards,'' and that the awards should be
``driven by the reasons for which the slots are being awarded.'' The
commenter believed that making all awards for program establishment or
expansion under Ranking Criteria Four through Eight prospectively could
be appropriate if it was done in a manner consistent with a reasonable
policy regarding the application of the temporary cap adjustments that
hospitals have received for taking in displaced residents and it is
done in a manner that does not ``over manage'' the distribution of the
slots by doling them out on a slot by slot basis. Another commenter
encouraged CMS to award section 5506 slots under all ranking criteria
prospectively.
Other commenters recommended that the effective date for section
5506 direct GME and IME positions be the date when the slots are needed
by the awardee hospital. The commenters believed that assigning
effective dates based on this principle would avoid confusion and some
of the problems hospitals encountered under CMS' current system for
assigning effective dates. Commenters suggested that, for hospitals
that begin new programs (that is, apply for slots under Ranking
Criterion Four, Five, or Six), section 5506 slots should become
effective on the date the hospital's new program begins. The commenters
recommended that, for administrative simplicity, the effective date
should be the same for all awarded positions (that is, all slots become
effective the date the new program begins). For a hospital that starts
and is awarded slots for a new program that happens to begin in the
time period between the date it submits an application to CMS and the
date CMS announces the slot award, the commenters recommended that the
effective date be retroactive to the date the hospital actually started
the new program. (The commenters noted that this issue is relevant
particularly given the large time lags between section 5506 slot
application deadlines and award announcements.)
Response: We agree with the commenters that the effective dates of
the various Ranking Criteria should be driven by the reasons for which
they are awarded, and by when they are needed. However, while we do not
want to over-complicate or ``over-manage'' the awarding of the slots,
as one commenter cautioned against, we do believe that a certain amount
of discretion and control should be maintained in the timing of the
effective dates. Some commenters stated that section 5506 slots should
become effective on the date the hospital's new program begins, and
that for administrative simplicity, the effective date should be the
same for all awarded positions (that is, all slots become effective the
date the new program begins). However, these commenters did not address
the fact that Ranking Criteria Four through the new Eight are also for
expansions of existing programs. (The new Ranking Criterion Eight could
be used for hospitals applying for slots to start or expand nonprimary
care programs, and/or for cap relief.) The timing of program
expansions, which may not always require separate approval from the
accrediting body if the hospital is training below its accredited
number of positions, may be more challenging to pinpoint. Nevertheless,
we believe that slots awarded under Ranking Criteria Four through Seven
(and Eight if the slots are for starting or expanding a nonprimary care
program) should be
[[Page 53440]]
effective only with the date that they are actually needed, or, if
applicable, only delayed sufficiently until displaced residents have
graduated, freeing up those slots for use under Ranking Criteria Four
through Eight.
Accordingly, consistent with some commenters' suggestion and our
assessment that slots awarded under Ranking Criteria Four through Seven
(and Ranking Criterion Eight if the slots are for starting or expanding
a nonprimary care program) should be effective only when they are
actually needed, we are finalizing a policy as follows:
For hospitals awarded slots under these Ranking Criteria, in the
hospital's award letter, CMS will specify the program for which slots
are being awarded, whether those slots are for a new program, or for an
expansion of a program, the number of FTE slots awarded for that
program, and the Ranking Criterion under which those slots are awarded.
The award letter will not specify an effective date, although it may
indicate that the slots can be used no earlier than a certain date in
the instance where displaced residents need to graduate in order to
free up slots. Rather, the slots would be ``pending'' with the Medicare
contractor, and the hospital would have to contact its Medicare
contractor and submit documentation proving that it needs a certain
number of its slots awarded under Ranking Criteria Four through Seven
(or Ranking Criterion Eight, as applicable, for nonprimary care
programs) as of a certain date, because the hospital has filled that
number of positions in the National Resident Match Program (Match) (or
other applicable recruitment process) as of that date, over the number
of positions that it had trained in that program in the prior academic
year.
For example, for a subsequent section 5506 application process, a
hospital's award letter would state that it is awarded four slots to
expand a pediatrics program under Ranking Criterion Six. The hospital
would not be able to report a cap increase of any of the four FTEs on
the section 5506 line of its Medicare cost report unless it receives
permission from its Medicare contractor to do so. Assume that in March
2014, the awardee hospital documents to the Medicare contractor that in
the March 2014 Match, it actually filled (not just placed) two more
positions than it had trained in that program for the academic year
beginning July 1, 2013. In this manner, because two additional slots
are actually filled as compared to the preceding July 1, the hospital
shows the Medicare contractor that effective July 1, 2014, it indeed
will need two of the section 5506 FTEs that it was awarded under
Ranking Criterion Six. The Medicare contractor could then release two
of the four slots awarded for the purpose of expanding a pediatrics
program effective July 1, 2014, and the hospital could report two FTEs
(or some prorated amount if the hospital's FYE is other than June 30)
on the section 5506 line of its Medicare cost report that includes July
1, 2014. The hospital shall not report the full cap increase of four on
the section 5506 line of the cost report until it similarly proves that
it has actually filled the remaining two positions. The documentation
process would be the same if a hospital is awarded slots for starting a
new program under Ranking Criteria Four through Seven (or Ranking
Criterion Eight, as applicable, for nonprimary care programs). That is,
the hospital would have to prove that it actually has filled slots in
the Match (or applicable process) associated with the new program for
the upcoming academic year before the Medicare contractor would release
the appropriate number of slots for that academic year.
Comment: Regarding cap slots received under section 5506 for cap
relief (previously Ranking Criterion Seven, now Ranking Criterion Eight
in this final rule), commenters stated that those cap slots should be
awarded effective with the date of the hospital closure. Commenters
stated that following the principle that cap slots should be assigned
to receiving hospitals on an ``as-needed'' basis, if a hospital applied
for cap relief, it would need those cap slots at the time of the
hospital closure. One commenter disagreed with the proposal to assign
cap slots for cap relief at the earliest with the date of the award
announcement. The commenter stated that any teaching hospital that
applied for cap relief should be awarded cap slots at the earliest
point they are available. The commenter stated that ``there is no
justifiable policy reason to withhold a cap increase if the closed
hospital's slots are available to be awarded and the hospital receiving
the award, with all due respect to CMS, never claimed in its
application that it was going to do anything different on a prospective
basis (for example, expand a program) to justify its need for the
slots.'' The commenter stated it did not understand CMS' statement that
retroactive application of cap slots received for cap relief is not
consistent with the caps. The commenter stated that the intent of
section 5506 is to redistribute a closed teaching hospital's cap to
other teaching hospitals, many of them in the same community, and that
these teaching hospitals' caps are what prevent them from receiving
additional Medicare funding to support their operations as academic
centers. The commenter stated that for CMS to delay awarding cap slots
that they were instructed to award without a policy justification,
would be ``extremely unfortunate.'' The commenter requested that CMS
withdraw its proposal related to the awarding of slots for cap relief
and that the effective date for these cap slots be the date they become
available.
Response: We disagree with the commenter who stated there is no
justifiable policy reason that cap slots awarded for cap relief cannot
be applied retroactively. When a teaching hospital closes, this
occurrence may cause a disruption and loss of a GME infrastructure and
a source of physicians to a community that can be a daunting task to
rebuild and replace. The purpose of section 5506 is to attempt to
preempt such disruption and loss by encouraging other hospitals in the
area to continue the training programs of the closed hospital, not
merely to use the section 5506 slots for an applicant hospital's own
financial benefit to cover its unfunded slots. Consistent with the
purpose of section 5506, we developed Ranking Criteria to give
preference to those hospitals that take over a closed hospital's entire
program or part of a program, and to hospitals that participated in a
Medicare GME affiliation agreement with the closed hospital. These
hospitals have had a direct relationship with the closed hospital and
are helping to maintain the residency training program(s) of that
closed hospital, thereby also minimizing the disruption and loss to the
community at large. Therefore, because we do not believe that there is
a justifiable policy reason to award slots for cap relief
retroactively, we are finalizing a policy that cap slots received under
Ranking Criterion Eight, specifically for cap relief, are effective the
later of the date of the award announcement, or a July 1 after
displaced FTE residents complete their training if the cap slots
awarded were associated with temporary adjustments made for displaced
FTE residents.
Comment: One commenter stated that if, for purposes of the Medicare
cost report, hospitals that receive cap slots under Ranking Criterion
Two are treated differently from hospitals that receive cap slots under
other Ranking Criteria, Medicare contractors must be notified of any
such distinction. The commenter stated that the distinction would
affect
[[Page 53441]]
application of the 3-year rolling average and the IRB ratio cap. The
commenter also stated that Medicare cost report instructions should be
revised to reflect the difference between Ranking Criterion Two and
other Ranking Criteria.
Response: In this final rule, as we explained in response to
comments above, because we are no longer employing a policy where
temporary cap increases would be replaced by permanent cap increases on
the cost report, and the 3-year rolling average and the IRB ratio cap
exemption would no longer be suspended as a consequence of receipt of
permanent slots, we believe the cost reporting effect of receipt of
section 5506 slots is the same, regardless of the Ranking Criteria
under which the slots are awarded. That is, on the applicable cost
report that an FTE cap increase is effective, whether retroactive or
prospective, the hospital will be able to count more residents under
the increased FTE resident cap in that cost report. Consequently, more
FTE residents would be drawn into the rolling average for IME and
direct GME, and more FTE residents would be subject to the IRB ratio
cap for IME purposes. Therefore, we do not believe there is any
distinction regarding the effect of reporting section 5506 slots about
which we need to notify Medicare contractors or hospitals. However, we
note that, as is the case with the first two rounds of section 5506
slot awards, a hospital may receive a number of slots with various
effective dates. Therefore, it is important that a hospital not report
its full section 5506 cap increase on the section 5506 cap increase
line (Form CMS-2552-10, Worksheet E, Part A, line 8.02 for IME, and
Worksheet E-4, line 4.02 for direct GME) on its cost report all at
once, but, rather, only report the portions of the section 5506 awards
as they become effective.
In summary, we are finalizing our clarification that section 5506
slots awarded under Ranking Criterion Two are effective the date of the
hospital closure. In response to public comments, we are finalizing a
policy that the effective date for Ranking Criteria Four through Seven
is the later of when a hospital can demonstrate to the Medicare
contractor that the slots associated with a new program or expanded
program are actually filled and, therefore, are needed as of a
particular date (usually July 1, possibly retroactive), or the July 1
after displaced residents complete their training. Regarding Ranking
Criterion 8, if slots are for starting or expanding a nonprimary care
program, the effective date is the same as that for Ranking Criteria
Four through Seven. If the slots are for cap relief, the effective date
is the date of the CMS award announcement, or the July 1 after
displaced residents complete their training, whichever date is later.
Thus far, we have discussed our proposed clarifications regarding
when various effective dates have been used (that is, the date of
closure, or the cost reporting period following the date of the
closure, or a July 1 date), and our proposal to change the effective
date of Ranking Criteria Four through proposed (now finalized) Ranking
Criterion Eight when temporary cap adjustments for displaced residents
were given (to be no earlier than the date of the award announcement).
However, due to concerns expressed by recipients of slots under the
first round of section 5506, particularly regarding the interaction
with the rolling average as the retroactive section 5506 slots become
effective, in the proposed rule, we solicited public comments on
alternative approaches to implementing section 5506. While bearing in
mind that section 5506(d) of the Affordable Care Act instructs the
Secretary ``* * * to ensure that there is no duplication of FTE slots *
* *,'' we stated that we would be interested in public comments
regarding whether to either make the effective dates prospective for
all section 5506 slots awarded under all ranking criteria, or, in
certain instances such as when slots are awarded under Ranking Criteria
One or Three, make the effective dates of the section 5506 slots
seamless with the expiration of applicable temporary cap adjustments
under Sec. 413.79(h). We also solicited public comments on whether the
regulatory temporary cap adjustment for residents displaced from closed
hospitals under Sec. 413.79(h) is still necessary and appropriate, now
that there is a provision in the statute that addresses permanent
reassignment of slots from closed teaching hospitals. Alternatively, we
stated that we would be interested in comments regarding whether the
regulatory temporary cap adjustment for displaced residents under Sec.
413.79(h) should be preserved, but the exemption from the rolling
average for those displaced FTE residents should be eliminated. We
indicated that these options should be considered by commenters not
only in the context of section 5506 slots that have already been
assigned, but also in the context of future teaching hospital closures,
and how previously awarded section 5506 slots that have not as yet been
filled might interact with eligibility for temporary cap adjustments
for additional displaced residents in the future.
Comment: Commenters supported the concept of making the effective
dates of the section 5506 awards under Ranking Criteria One and Three
seamless with the expiration of applicable temporary cap adjustments
(that is, at the time when a displaced resident graduates). The
commenters stated that this would allow the temporary cap adjustment
and the exemption from the rolling average and IRB ratio cap to apply
for the duration of time that the displaced residents are in training.
Response: We appreciate the commenters' support. To accommodate
seamless awards under Ranking Criteria One and Three, we are modifying
the CMS Application Form (formerly, the Evaluation Form) to instruct a
hospital applying under Ranking Criteria One and Three to list the
names and graduation dates of specific displaced residents whom the
hospital believes it has seamlessly replaced or will be seamlessly
replacing with new PGY1 residents upon graduation of the displaced
residents. Similarly, in the award letters, we will specify whether
slots are being awarded under Ranking Criterion One or Three, the
amount of FTEs awarded, and the names and graduation dates of specific
displaced residents of whom we believe the hospital has proven that it
has or will be seamlessly replacing. The effective date of these slots
will be the day after the applicable graduation date(s).
Comment: One commenter requested clarification on the ``seamless''
requirement for Ranking Criterion One and Ranking Criterion Three. The
commenter stated that under Ranking Criterion One and Ranking Criterion
Three, a hospital applying for additional cap slots must demonstrate
that it will continue to train FTE residents in the same program as the
closed hospital without any lapse in training. The commenter stated,
for example, that if a hospital applied to take over part of a closed
hospital's program under Ranking Criterion Three, which means it is
also training some of the FTE residents that were displaced from that
closed hospital's program, the applying hospital must be able to
demonstrate that once those displaced FTE residents graduate on June
30, it will immediately fill those positions with new FTE residents the
next day on July 1. The commenter stated that if a teaching hospital
closes even just a couple of months after the start of the academic
year (July 1), it is very difficult for a hospital applying under
Ranking Criterion One or Ranking Criterion Three to fill a slot vacated
by a
[[Page 53442]]
displaced FTE resident(s) who is graduating June 30 of that academic
year by July 1 of the following academic year. The commenter stated
that recruitment for most residency training programs is organized in
accordance with the National Resident Matching Program schedule. This
schedule generally requires that the Match quotas for specialty
programs must be submitted by January 31 and that the Match quotas for
subspecialty programs be submitted even earlier than the January
deadline for specialty programs. Therefore, if a hospital took in a
displaced FTE resident who was scheduled to graduate the upcoming June
30, it would likely be impossible for the hospital to fill that slot
vacated by the displaced FTE resident immediately with the following
July 1. The commenter stated it understands CMS' goal of requiring
hospitals that apply under Ranking Criterion One or Ranking Criterion
Three to seamlessly fill slots vacated by displaced FTE residents.
However, the commenter requested that CMS clarify its policy to state
that for those hospitals that apply under Ranking Criterion One and
Ranking Criterion Three, in situations where FTE residents will
graduate the next June 30, the applying hospital is required to
demonstrate that it will fill the slots vacated by the displaced FTE
residents by July 1 of the second academic year following the hospital
closure.
Response: We acknowledge that the timeline used by the National
Resident Match Program or other resident match services can make it
difficult, if not impossible, to seamlessly fill the slots of a
displaced resident graduating on June 30 in the instance where a
teaching hospital closes (or its programs close) after the date (for
example, January 31) that positions must be placed in the Match for the
upcoming academic year beginning July 1. However, we are not convinced
that the same challenge exists even in instances where a hospital
closes, or the programs close, at any point after ``just a couple of
months'' following the start of an academic year, as the commenter
asserted. With regard to allopathic and osteopathic programs, because
the deadline for submitting the Match quota is approximately the end of
January, we believe December 31 of the same academic year is a
reasonable date to use for the purpose of determining the feasibility
of seamlessly replacing displaced residents who are scheduled to
graduate on the upcoming June 30. Therefore, we are stating in this
final rule that, in the instance where a teaching hospital closed after
December 31 of an academic year, in order for a hospital to qualify
under Ranking Criterion One or Ranking Criterion Three for cap slots
associated with displaced FTE residents that will graduate June 30 of
the academic year in which the applying hospital took in the displaced
FTE residents, the applying hospital must be able to demonstrate that
it will fill slots vacated by displaced FTE residents by July 1 of the
second academic year following the hospital closure. For example, if a
hospital closes January 1, 2013, an applying hospital must be able to
demonstrate that it will fill any positions vacated by displaced FTE
residents who will graduate June 30, 2013, by July 1, 2014. However, in
the instance where a teaching hospital closed before December 31 of an
academic year, in order for a hospital to qualify under Ranking
Criterion One or Ranking Criterion Three for cap slots associated with
displaced FTE residents that will graduate June 30 of the academic year
in which the applying hospital took in the displaced FTE residents, the
applying hospital must be able to demonstrate that it will
``seamlessly'' fill slots vacated by displaced FTE residents by July 1;
that is, the day immediately after the June 30 that the displaced FTE
residents graduate.
Comment: Commenters stated that even though section 5506 exists to
permanently redistribute slots from a closed teaching hospital, the
temporary cap adjustments for displaced residents in the regulations at
Sec. 413.79(h) must continue to exist. The commenters argued that the
temporary cap adjustment for displaced residents policy in regulations
at Sec. 413.79(h) and section 5506 are two provisions that serve
different purposes and should be viewed independently; section 5506
should not be viewed as a replacement for the temporary cap adjustment.
The commenters stated that the temporary cap adjustment addresses an
immediate crisis situation, protecting displaced residents and
providing immediate payment to hospitals taking in the displaced
residents, while section 5506 is intended to address a long-term
situation, and the entire process can easily take up to 2 years to
complete. Commenters pointed out that a hospital that takes in
displaced residents and applies for section 5506 slots has no guarantee
that it will be awarded permanent slots under the section 5506 program,
and ``given this lack of certainty, the mere possibility of being
awarded section 5506 slots is simply not enough of an incentive for the
hospital to take on displaced residents.'' One commenter stated that
CMS should exercise ``extreme caution before assuming that section 5506
can be or should be viewed as a replacement for the temporary cap
adjustment policy in any meaningful way.''
Commenters also asserted that if the temporary cap adjustment was
removed from the regulations, the pool of potential hospitals willing
to absorb the displaced residents would likely shrink. The commenters
stated that, for a variety of practical and personal reasons, displaced
residents are not always able to (and some may not desire to) continue
their residency training in the same geographic location as the closed
hospital, and hospitals that are not located in the same state as the
closed hospital would not be in a position to receive slots permanently
under section 5506. One commenter noted that significant financial
barriers still exist for many hospitals despite Medicare's payment
policies, because the temporary cap adjustment policy only accounts for
the Medicare share of teaching hospital costs, and not others, such as
Medicaid, which generally does not have a policy like Medicare's to
address displaced residents.
Commenters also opposed the concept raised in the proposed rule of
maintaining the temporary cap adjustment but of eliminating the
exemption from the 3-year rolling average. Commenters argued that
teaching hospitals should not have to face a short-term loss of funding
due to the immediate application of the 3-year rolling average (and IRB
ratio cap) when taking in displaced residents. One commenter added
that, although CMS did not directly ask for comments on the exemption
from the IRB ratio cap, this exemption is also an important piece of
the temporary cap adjustment policy and should be preserved.
Response: After considering the public comments received, we agree
that the temporary cap adjustment policy in the regulations at Sec.
413.79(h) and the permanent cap adjustments provided by section 5506
serve both different and necessary roles. We particularly agree that
elimination of the temporary cap adjustment may influence the
willingness of hospitals in states or geographic areas outside the
state or geographic vicinity of the closed hospital to take in
displaced residents. Therefore, we are not making any changes to the
regulations at Sec. 413.79(h), and are preserving the attending
exemptions from the 3-year rolling average and the IRB ratio cap for
the duration of a displaced resident's
[[Page 53443]]
training in the program from which he/she was displaced.
In summary, we are finalizing the policy that the effective dates
of the section 5506 slots awarded under Ranking Criteria One and Three
are seamless with the expiration of applicable temporary cap
adjustments (that is, at the time when a displaced resident graduates).
To accommodate seamless awards under Ranking Criteria One and Three, we
are modifying the CMS Application Form (formerly, the Evaluation Form)
to instruct a hospital applying under Ranking Criteria One and Three to
list the names and graduation dates of specific displaced residents
whom the hospital believes it has seamlessly replaced or will be
seamlessly replacing with new PGY1 residents upon graduation of the
displaced residents. We also are stating in this final rule that in the
instance where a teaching hospital closed after December 31 of an
academic year, in order for a hospital to qualify under Ranking
Criterion One or Ranking Criterion Three for cap slots associated with
displaced FTE residents that will graduate June 30 of the academic year
in which the applying hospital took in the displaced FTE residents, the
applying hospital must be able to demonstrate that it will fill slots
vacated by displaced FTE residents by July 1 of the second academic
year following the hospital closure. Lastly, in this final rule, we are
not making any changes to the regulations at Sec. 413.79(h), and we
are preserving the attending exemptions from the 3-year rolling average
and the IRB ratio cap for the duration of a displaced resident's
training in the program from which he/she was displaced.
Following is a chart of the Ranking Criteria and the effective
dates we are finalizing:
------------------------------------------------------------------------
Ranking criterion Effective date
------------------------------------------------------------------------
One: The applying hospital is requesting The day after the
the increase in its FTE resident cap(s) graduation date(s) of
because it is assuming (or assumed) an actual displaced
entire program (or programs) from the resident(s).
hospital that closed, and the applying
hospital is continuing to operate the
program(s) exactly as it had been operated
by the hospital that closed (that is, same
residents, possibly the same program
director, and possibly the same (or many
of the same) teaching staff).
Two: The applying hospital was listed as a Date of the hospital
participant of a Medicare GME affiliated closure.
group on the most recent Medicare GME
affiliation agreement of which the closed
hospital was a member before the hospital
closed, and under the terms of that
Medicare GME affiliation agreement, the
applying hospital received slots from the
hospital that closed, and the applying
hospital will use the additional slots to
continue to train at least the number of
FTE residents it had trained under the
terms of the Medicare GME affiliation
agreement. If the most recent Medicare GME
affiliation agreement of which the closed
hospital was a member before the hospital
closed was with a hospital that itself has
closed or is closing, preference would be
given to an applying hospital that was
listed as a participant in the next most
recent Medicare GME affiliation agreement
(but not one which was entered into more
than 5 years prior to the hospital's
closure) of which the first closed
hospital was a member before the hospital
closed, and that applying hospital
received slots from the closed hospital
under the terms of that affiliation
agreement.
Three: The applying hospital took in The day after the
residents displaced by the closure of the graduation date(s) of
hospital, but is not assuming an entire actual displaced
program or programs, and will use the resident(s).
additional slots to continue training
residents in the same programs as the
displaced residents, even after those
displaced residents complete their
training (that is, the applying hospital
is permanently expanding its own existing
programs).
Four: The program does not meet Ranking The later of when hospital
Criteria 1, 2, or 3, and the applying can demonstrate to the
hospital will use additional slots to Medicare contractor that
establish a new or expand an existing the slots associated with
geriatrics residency program. a new program or program
expansion are actually
filled, and therefore, are
needed as of a particular
date (usually July 1,
possibly retroactive), or
the July 1 after displaced
residents complete their
training.
Five: The program does not meet Ranking
Criteria 1 through 4, the applying
hospital is located in a HPSA, and will
use all the additional slots to establish
or expand a primary care or general
surgery residency program.
Six: The program does not meet Ranking
Criteria 1 through 5, and the applying
hospital is not located in a HPSA, and
will use all the additional slots to
establish or expand a primary care or
general surgery residency program.
Seven: The applying hospital will use
additional slots to establish or expand a
primary care or general surgery program,
but the program does not meet Ranking
Criterion 5 or 6 because the hospital is
also separately applying under Ranking
Criterion 8 for slots to establish or
expand a nonprimary care or non-general
surgery program and/or for cap relief.
Eight: The program does not meet Ranking If slots are for starting
Criteria 1 through 7, and the applying or expanding a nonprimary
hospital will use additional slots to care program, the
establish or expand a nonprimary care or a effective date is same as
non-general surgery program or for cap that for Ranking Criteria
relief. Four through Seven. If
slots are for cap relief,
the effective date is the
effective date of CMS'
award announcement, or the
July 1 after displaced
residents complete their
training, whichever is
later.
------------------------------------------------------------------------
[[Page 53444]]
e. Clarification of Relationship Between Ranking Criteria One, Two, and
Three
In the November 24, 2010 final rule with comment period, as part of
the response to a comment we received requesting that the order of
Ranking Criterion One (regarding an applicant hospital that assumes an
entire program from a closed hospital) and Ranking Criterion Two
(regarding an applicant hospital that received slots under the terms of
a Medicare GME affiliation agreement from a closed hospital) be
switched, we stated: ``Furthermore, the commenter need not be concerned
that hospitals that would fit into Ranking Criterion Two would be at a
disadvantage and deprived of their fair share of slots to hospitals
that would fit under Ranking Criterion One. In fact, Ranking Criteria
One and Two are not competing with each other, and hospitals fitting
into each category would get their `fair' share of slots. For example,
assume a hospital with an FTE resident cap of 100 closes. Hospital A
assumes the entire programs in which 80 FTE residents were training
when the hospital closed. Hospital B had been receiving 20 FTE slots
from the closed hospital under the terms of a Medicare GME affiliation
agreement. Hospital A applies for 80 slots under Ranking Criterion One
and, all other things being equal, is awarded 80 slots. Hospital A
could apply for more than 80 slots, but it could only receive
consideration under Ranking Criterion One for a maximum of 80 slots.
Therefore, 20 slots would remain for Hospital B to apply for and
receive under Ranking Criterion Two. Accordingly, we do not believe it
is necessary to reorder Ranking Criteria One and Two'' (75 FR 72218).
Prior to the issuance of the proposed rule, we had been made aware
that it may not always be true that Ranking Criteria One, Two, and even
Three are not competing with each other. For example, in the case where
the closed hospital was training residents in excess of its FTE
resident caps, it is possible for hospitals to apply under Ranking
Criteria One, Two, and/or Three for more slots than are available.
However, under the policy expressed in the response quoted above from
the November 24, 2010 final rule with comment period, because a
hospital that takes over an entire program from the closed hospital is
ranked under Ranking Criterion One, and a hospital that received slots
from a Medicare GME affiliation agreement from the closed hospital is
ranked under Ranking Criterion Two, all the slots could be assigned to
the hospital under Ranking Criterion One, leaving no slots for
hospitals ranked under Ranking Criterion Two or Three. (We note that in
the first round of section 5506 awards associated with hospitals that
closed between March 23, 2008, and August 3, 2010, this turned out not
to be a concern because even in the case where a closed hospital was
training residents in excess of its FTE caps at the time of closure,
there were no applicants for the slots that simultaneously qualified
under Ranking Criteria One, Two, and/or Three). For example, a hospital
that closed has an FTE resident cap of 10, but when it closed, it was
training 15 FTEs in an internal medicine program. Hospital A assumes at
least 90 percent of the internal medicine program; that is, the
``entire'' program (a hospital that takes on 90 percent of the
residents training in a particular program at the closed hospital
within 5 years prior to the hospital's closure or at the time of the
hospital's closure would be deemed to have assumed an ``entire''
program (75 FR 72218)). Ninety percent of the internal medicine program
is 13.5 FTEs. Because Hospital A took over the ``entire'' internal
medicine program, it applies for slots under Ranking Criterion One.
Hospital B applies under Ranking Criterion Three because it assumes the
other 10 percent of the program, or 1.5 FTEs. However, because the
closed hospital's FTE resident cap was limited to 10, it would seem
that all 10 slots would be assigned to Hospital A under Ranking
Criterion One, leaving no slots for Hospital B under Ranking Criterion
Three. Conversely, if Ranking Criteria One and Three were ranked as
equals, the 10 slots could be prorated so that both Hospital A and
Hospital B each receive a ``fair'' share.
Another example might be one in which a closed hospital that was
training residents in excess of its FTE resident cap of 10 ``lent'' 2
of those 10 cap slots to Hospital C under the terms of a Medicare GME
affiliation agreement. Although under the terms of the Medicare GME
affiliation agreement, the hospital's FTE resident cap was reduced from
10 to 8, the hospital actually trained 9 FTEs, and continued to do so
until it closed. Hospital D then assumes the 9 FTEs, or the entirety of
the program that remained at the closed hospital when it closed. Again,
one policy approach would be to rank the ranking criteria in descending
order, and assign all 10 slots to Hospital D since Hospital D qualifies
under Ranking Criterion One. Alternatively, another policy approach
would be to treat Ranking Criteria One and Two as equals, and then a
prorata share of the 10 slots could be given each to Hospital C and
Hospital D.
After consideration of these scenarios, we stated in the proposed
rule that we believe that in the case where the closed hospital was
training residents in excess of its FTE resident caps, prorating among
hospitals that qualify under Ranking Criteria One, Two, and Three is
not warranted. This is because we believe that a hospital that assumes
an entire program from the closed hospital should be ranked highest, as
it has taken the boldest step to ensuring the continuity of the closed
hospital's program. As we explained first in the August 3, 2010
proposed rule (75 FR 46423) and again in the November 24, 2010 final
rule with comment period (75 FR 72218), ``We note that we are proposing
this ranking criterion regarding affiliated hospitals as second, after
the first ranking criterion regarding applying hospitals that assume an
entire program or programs from the closed hospital because, even
though section 5506 of the Affordable Care Act directs the Secretary to
give preference to members of the same affiliated group, we believe
that a hospital that assumes the responsibility for an entire program
or programs demonstrates a commitment to maintain the programs to an
even greater degree than does a hospital that was affiliated with the
hospital that closed and may only be maintaining a portion of the
residency program or programs.'' Similarly, we believe that because
section 5506 of the Affordable Care Act does give preference to members
of the same affiliated group as the closed hospital, hospitals
qualifying for Ranking Criterion Two should receive slots first before
hospitals qualifying for slots under Ranking Criterion Three. While we
would encourage a hospital to assume a part of a closed hospital's
program if it does not have the capacity to assume the entire program,
such a hospital would be ranked under Ranking Criterion Three, still
receiving preference before all hospitals that did not necessarily have
any relationship with the closed hospital and that qualify under
Ranking Criteria Four and below. As we stated in the November 24, 2010
final rule with comment period (75 FR 72226), ``we would still assign
the slots to hospitals qualifying under Ranking Criteria One, Two, and
Three in descending order.'' Therefore, in the instance where a closed
hospital is training residents in excess of its FTE resident caps when
it closes, we are clarifying that we would not prorate a closed
hospital's FTE resident caps among applicant hospitals that qualify
[[Page 53445]]
under Ranking Criteria One, Two, and Three.
We did not receive any public comments on this clarification
regarding the relationship between Ranking Criteria One, Two, and
Three. Therefore, we are finalizing the clarification.
f. Modifications to the Section 5506 CMS Evaluation Form
In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27989), we
proposed to make numerous changes to the Section 5506 CMS Evaluation
Form. Most of the changes were not substantive, but were intended to
clarify the requirements on the form, and therefore, we did not list
them each individually. In the proposed rule, we indicated that there
were several proposed changes that were more substantive, and we
enumerated those. First, we proposed to change the name of the CMS
Evaluation Form to the CMS Application Form. We believe this is a more
appropriate name, as it is the form used by hospitals to apply for
slots under section 5506. Second, we identified several instances on
the proposed CMS Application Form where we proposed to prompt the
applicant to specify whether the application is for a particular
program, or for general cap relief, or for slots associated with a
Medicare GME affiliation agreement with the closed hospital (which we
did not do on the preceding form). Third, we proposed to clarify the
titles of the Demonstrated Likelihood Criteria (DLC). Specifically, the
proposed title for Demonstrated Likelihood Criterion 1 is
``Establishing a New Residency Program'', the proposed title for
Demonstrated Likelihood Criterion 2 is ``Taking Over All or Part of an
Existing Residency Program from the Closed Hospital, or Expanding an
Existing Residency Program,'' the proposed title for Demonstrated
Likelihood Criterion 3 is ``Receiving Slots for General Cap Relief,''
and the proposed title for Demonstrated Likelihood Criterion 4 is
``Receiving Slots by Virtue of Medicare GME Affiliated Group Agreement
with Closed Hospital.'' Fourth, we proposed to add a category under
Demonstrated Likelihood Criterion 2 stating that if the hospital
currently has unfilled positions in a residency program that have
previously been approved by the ACGME, AOA, or the ABMS, and the
hospital is now seeking to fill those positions, the hospital must
attach documentation clearly showing its current number of approved
positions, and its current number of filled positions (as proof of the
unfilled positions). Fifth, we proposed to change the wording in
Ranking Criteria Four, Five, and Six, respectively, from ``The applying
hospital does not meet Ranking Criteria 1, 2, or 3'' to ``The program
does not meet Ranking Criterion 1, 2, or 3'' because the latter is more
accurate. That is, it is possible for a hospital to qualify under
Ranking Criterion 1, 2, or 3 for a particular program, and also to
apply for slots separately under Ranking Criterion 4, 5, or 6 for a
different program. Sixth, we proposed to add a new Ranking Criterion 7:
The program does not meet Ranking Criteria 1 through 6, and the slots
for which the hospital is applying are for a primary care or a general
surgery program, but the hospital is also applying for slots under
Ranking Criterion Eight. We also proposed to renumber what had been the
previous Ranking Criterion Seven to be the proposed Ranking Criterion
Eight. Lastly, in the proposed rule, we included the proposed revised
CMS Section 5506 Application Form:
Comment: One commenter supported the proposed changes to the CMS
Evaluation Form and believed that its use will improve the application
and review process for section 5506 awards.
Response: We appreciate the commenter's support, and we are
finalizing our proposed changes with some modifications. In response to
public comments on Ranking Criteria One and Three, we are making
additional changes to the CMS Evaluation Form (finalized as the CMS
Application Form) under Ranking Criteria One and Three where hospitals
applying under those Ranking Criteria must list the names and
graduation dates of specific displaced residents whom, upon their
graduation, the hospital seamlessly replaces (or intends to seamlessly
replace) with new residents.
Following is the finalized revised CMS Section 5506 Application
Form:
CMS Application Form
As Part of the Application for the Increase in a Hospital's FTE Cap(s)
under Section 5506 of the Affordable Care Act: Preservation of FTE Cap
Slots from Teaching Hospitals that Close
Directions: Please fill out the information below for each
residency program for which the applicant hospital intends to use the
increase in its FTE cap(s). If the hospital is applying for general FTE
cap relief (an increase in the hospital's FTE cap(s) in recognition of
already training residents in excess of the hospital's cap(s)), that
application must be submitted separately from an individual program
request. If the hospital is applying for slots associated with a
Medicare GME affiliation agreement with a hospital that closed, that
application must also be submitted separately from an individual
program request.
NAME OF HOSPITAL:
-----------------------------------------------------------------------
MEDICARE PROVIDER NUMBER (CCN):
-----------------------------------------------------------------------
NAME OF MEDICARE CONTRACTOR:
-----------------------------------------------------------------------
CORE-BASED STATISTICAL AREA (CBSA in which the hospital is physically
located--write the 5 digit code here):
-----------------------------------------------------------------------
COUNTY NAME (in which the hospital is physically located):
-----------------------------------------------------------------------
Complete the following, as applicable:
1. Name Of Specialty Training Program:
-----------------------------------------------------------------------
2. General FTE Cap Relief:
-----------------------------------------------------------------------
3. Medicare GME Affiliated Group:
-----------------------------------------------------------------------
(Check one):
[square] Allopathic Program
[square] Osteopathic Program
NUMBER OF FTE SLOTS REQUESTED FOR SPECIFIC PROGRAM (OR HOSPITAL OVERALL
IF SEEKING GENERAL CAP RELIEF OR SLOTS ASSOCIATED WITH A MEDICARE GME
AFFILIATED GROUP) AT YOUR HOSPITAL:
Direct GME:---------- IME:----------
Section A: Demonstrated Likelihood Criteria (DLC) of Filling the FTE
Slots
The applicant hospital must provide documentation to demonstrate
the likelihood of filling requested slots under section 5506 within the
3 academic years immediately following the application deadline to
receive slots after a particular hospital closes. Please indicate the
specific use for which you are requesting an increase in your
hospital's FTE cap(s). If you are requesting an increase in the
hospital's FTE cap(s) for a combination of DLC1, DLC2, or DLC3, you
must complete a separate CMS Application Form for each DLC and specify
the distinct criterion from the list below within each Form.
[[Page 53446]]
Demonstrated Likelihood Criterion 1: Establishing a New Residency
Program
The hospital does not have sufficient room under its direct GME FTE
cap or IME FTE cap, or both, and will establish a new residency program
in the specialty. (The hospital must check at least one of the
following.)
[square] Application for approval of the new residency program has
been submitted to the ACGME, AOA or the ABMS (The hospital must attach
a copy.)
[square] The hospital has submitted an institutional review
document or program information form concerning the new program in an
application for approval of the new program. (The hospital must attach
a copy.)
[square] The hospital has received written correspondence from the
ACGME, AOA or ABMS acknowledging receipt of the application for the new
program, or other types of communication from the accrediting bodies
concerning the new program approval process (such as notification of
site visit). (The hospital must attach a copy.)
[square] The hospital has other documentation demonstrating that it
has made a commitment to start a new program (The hospital must attach
a copy.).
Demonstrated Likelihood Criterion 2: Taking Over All or Part of an
Existing Residency Program from the Closed Hospital, or Expanding an
Existing Residency Program
The hospital does not have sufficient room under its direct GME FTE
cap or IME FTE cap, or both, and a) has permanently taken over the
closed hospital's entire residency program, or b) is permanently
expanding its own previously established and approved residency program
resulting from taking over part of a residency program from the closed
hospital, or c) is permanently expanding its own existing residency
program. (The hospital must check at least one of the following.)
Hospitals applying for slots under option a) which correlates to
Ranking Criterion 1 or b) which correlates to Ranking Criterion 3 must
list the names and graduation dates of specific displaced residents
who, upon their graduation, have been or will be seamlessly replaced by
new residents. This list may be added as an attachment to this
application.
[squ] Application for approval to take over the closed hospital's
residency program has been submitted to the ACGME, AOA, or the ABMS, or
approval has been received from the ACGME, AOA, or the ABMS. (The
hospital must attach a copy.)
[squ] Application for approval of an expansion of the number of
approved positions in its residency program resulting from taking over
part of a residency program from the closed hospital has been submitted
to the ACGME, AOA or the ABMS, or approval has been received from the
ACGME, AOA, or the ABMS. (The hospital must attach a copy.)
[squ] Application for approval of an expansion of the number of
approved positions in its residency program has been submitted to the
ACGME, AOA or the ABMS, or approval has been received from the ACGME,
AOA, or the ABMS. (The hospital must attach a copy.)
[squ] The hospital currently has unfilled positions in its
residency program that have previously been approved by the ACGME, AOA,
or the ABMS, and is now seeking to fill those positions. (The hospital
must attach documentation clearly showing its current number of
approved positions, and its current number of filled positions).
[squ] The hospital has submitted an institutional review document
or program information form concerning the program in an application
for approval of an expansion to the program (The hospital must attach a
copy).
Demonstrated Likelihood Criterion 3: Receiving Slots for General Cap
Relief
[squ] The hospital does not have sufficient room under its direct
GME FTE cap or IME cap, or both, and is seeking an increase in its FTE
cap(s) for general cap relief for residents that it is already
training.
Demonstrated Likelihood Criterion 4: Receiving Slots by Virtue of
Medicare GME Affiliated Group Agreement with Closed Hospital
[squ] The hospital was listed as a participant of a Medicare GME
affiliated group on the most recent Medicare GME affiliation agreement
of which the closed hospital was a member before the hospital closed,
and under the terms of that Medicare GME affiliation agreement, the
applying hospital received slots from the hospital that closed, and the
applying hospital will use the additional slots to continue to train at
least the number of FTE residents it had trained under the terms of the
Medicare GME affiliation agreement. If the most recent Medicare GME
affiliation agreement of which the closed hospital was a member before
the hospital closed was with a hospital that itself has closed or is
closing, the applying hospital was listed as a participant in the next
most recent Medicare GME affiliation agreement (but not one which was
entered into more than 5 years prior to the hospital's closure) of
which the first closed hospital was a member before the hospital
closed, and that applying hospital received slots from the closed
hospital under the terms of that affiliation agreement. (Copies of EACH
of the following must be attached.)
[dec222] Copies of the recent Medicare GME affiliation agreement of
which the applying hospital and the closed hospital were a member of
before the hospital closed.
[dec222] Copies of the most recent accreditation letters for all of
the hospital's training programs in which the hospital had a shared
rotational arrangement (as defined at Sec. 413.75(b)) with the closed
hospital.
Section B. Level Priority Category
(Place an ``X'' in the appropriate box that is applicable to the
level priority category that describes the applicant hospital.)
[squ] First, to hospitals located in the same core-based
statistical area (CBSA) as, or in a CBSA contiguous to, the hospital
that closed.
[squ] Second, to hospitals located in the same State as the closed
hospital.
[squ] Third, to hospitals located in the same region as the
hospital that closed.
[squ] Fourth, if the slots have not yet been fully distributed, to
qualifying hospitals in accordance with the criteria established under
section 5503, ``Distribution of Additional Residency Positions''
Section C. Ranking Criteria
(Place an ``X'' in the box for each criterion that is appropriate
for the applicant hospital and for the program for which the increase
in the FTE cap is requested.)
[squ] Ranking Criterion One. The applying hospital is requesting
the increase in its FTE resident cap(s) because it is assuming (or
assumed) an entire program (or programs) from the hospital that closed,
and the applying hospital is continuing to operate the program (s)
exactly as it had been operated by the hospital that closed (that is,
same residents, possibly the same program director, and possibly the
same (or many of the same) teaching staff).
[squ] Ranking Criterion Two. The applying hospital was listed as a
participant of a Medicare GME affiliated group on the most recent
Medicare GME affiliation agreement of which the closed hospital was a
member before the hospital closed, and under the terms of that Medicare
GME affiliation agreement, the applying hospital
[[Page 53447]]
received slots from the hospital that closed, and the applying hospital
will use the additional slots to continue to train at least the number
of FTE residents it had trained under the terms of the Medicare GME
affiliation agreement. If the most recent Medicare GME affiliation
agreement of which the closed hospital was a member before the hospital
closed was with a hospital that itself has closed or is closing,
preference would be given to an applying hospital that was listed as a
participant in the next most recent Medicare GME affiliation agreement
(but not one which was entered into more than 5 years prior to the
hospital's closure) of which the first closed hospital was a member
before the hospital closed, and that applying hospital received slots
from the closed hospital under the terms of that affiliation agreement.
[squ] Ranking Criterion Three. The applying hospital took in
residents displaced by the closure of the hospital, but is not assuming
an entire program or programs, and will use the additional slots to
continue training residents in the same programs as the displaced
residents, even after those displaced residents complete their training
(that is, the applying hospital is permanently expanding its own
existing programs).
[squ] Ranking Criterion Four. The program does not meet Ranking
Criteria 1, 2, or 3, and the applying hospital will use additional
slots to establish a new or expand an existing geriatrics residency
program.
[squ] Ranking Criterion Five: The program does not meet Ranking
Criteria 1 through 4, the applying hospital is located in a HPSA, and
will use all the additional slots to establish or expand a primary care
or general surgery residency program.
[squ] Ranking Criterion Six: The program does not meet Ranking
Criteria 1 through 5, and the applying hospital is not located in a
HPSA, and will use all the additional slots to establish or expand a
primary care or general surgery residency program.
[squ] Ranking Criterion Seven: The applying hospital will use
additional slots to establish or expand a primary care or general
surgery program, but the program does not meet Ranking Criterion 5 or 6
because the hospital is also separately applying under Ranking
Criterion 8 for slots to establish or expand a nonprimary care or non-
general surgery program and/or for cap relief.
[squ] Ranking Criterion Eight: The program does not meet Ranking
Criteria 1 through 7, and the applying hospital will use additional
slots to establish or expand a nonprimary care or a non-general surgery
program or for cap relief.
Application Process and CMS Central Office and Regional Office Mailing
Addresses for Receiving Increases in FTE Resident Caps
In order for hospitals to be considered for increases in their FTE
resident caps, each qualifying hospital must submit a timely
application. The following information must be submitted on
applications to receive an increase in FTE resident caps:
[ssquf] The name and Medicare provider number, and Medicare
contractor (to which the hospital submits its cost report) of the
hospital.
[ssquf] The total number of requested FTE resident slots for direct
GME or IME, or both.
[ssquf] A completed copy of the CMS Application Form for each
residency program for which the hospital intends to use the requested
increase in FTE residents.
[ssquf] Source documentation to support the assertions made by the
hospital on the CMS Application Form.
[ssquf] FTE resident counts for direct GME and IME and FTE resident
caps for direct GME and IME reported by the hospital in the most recent
as-filed cost report. (If the CMS Form 2552-96 is applicable, include
copies of Worksheets E, Part A, E-3, Part IV, and if a hospital
received an increase to its FTE cap(s) under section 422 of the MMA, a
copy of E-3, Part VI. If the CMS Form 2552-10 is applicable, include
copies of Worksheets E, Part A, and E-4).
[ssquf] An attestation, signed and dated by an officer or
administrator of the hospital who signs the hospital's Medicare cost
report, of the following information:
``I hereby certify that I understand that misrepresentation or
falsification of any information contained in this application may be
punishable by criminal, civil, and administrative action, fine and/or
imprisonment under federal law. Furthermore, I understand that if
services identified in this application were provided or procured
through payment directly or indirectly of a kickback or were otherwise
illegal, criminal, civil, and administrative action, fines and/or
imprisonment may result. I also certify that, to the best of my
knowledge and belief, it is a true, correct, and complete application
prepared from the books and records of the hospital in accordance with
applicable instructions, except as noted. I further certify that I am
familiar with the laws and regulations regarding Medicare payment to
hospitals for the training of interns and residents.''
5. Notice of Closure of Teaching Hospitals and Opportunity To Apply for
Available Slots
a. Background
Section 5506 of the Affordable Care Act authorizes the Secretary to
redistribute residency cap slots after a hospital that trained
residents in an approved medical residency program(s) closes.
Specifically, section 5506 amended the Act by adding a subsection (vi)
to section 1886(h)(4)(H) and modifying the language at section
1886(d)(5)(B)(v) to instruct the Secretary to establish a process to
increase the FTE resident caps for other hospitals based upon the FTE
resident caps in teaching hospitals that closed ``on or after a date
that is 2 years before the date of enactment'' (that is March 23,
2008). In the CY 2011 OPPS/ASC final rule with comment period issued on
November 24, 2010 (75 FR 72212), we established regulations and an
application process for qualifying hospitals to apply to CMS to receive
direct GME and IME FTE resident cap slots from a hospital that closed.
The procedures we established apply both to teaching hospitals that
closed after March 23, 2008, and on or before August 3, 2010, and to
teaching hospitals that closed after August 3, 2010. For teaching
hospitals that closed on or after March 23, 2008, and on or before
August 3, 2010, we established an application deadline of April 1,
2011, for a hospital to request cap slots from a closed hospital(s). We
also stated in the CY 2011 OPPS/ASC final rule with comment period (75
FR 72215) that hospitals that close at any point after August 3, 2010,
will fall into additional categories of applications, for which we
would provide a separate notice with a future application deadline.
b. Notice of Closure of Teaching Hospitals
We have learned of the closure of several teaching hospitals that
occurred after August 3, 2010. This notice serves to notify the public
of the closure of teaching hospitals, and to initiate another round of
the section 5506 application and selection process. (We note that the
first round applied to closed teaching hospitals listed at 76 FR 13294
(March 11, 2011), with an application deadline of April l, 2011; and
the second round applied to one closed teaching hospital as discussed
at 76 FR 55917 (September 9, 2011), with an application deadline of
December 1, 2011.) The following closed teaching
[[Page 53448]]
hospitals are part of a new application process under section 5506:
----------------------------------------------------------------------------------------------------------------
IME cap Direct GME cap
(including (including
Provider No. Provider name City and state CBSA Code Terminating MMA Sec. 422 MMA Sec. 422
date \1\ and ACA \1\ and ACA
Sec. 5503 \2\ Sec. 5503 \2\
adjustments) adjustments)
----------------------------------------------------------------------------------------------------------------
120010........ Hawaii Medical Honolulu, HI... 26180 January 5, 2012 15.73 16.12
Center East.
140301........ Oak Forest Oak Forest, IL. 16974 August 31, 2011 0 4.40 - section
Hospital. 422 decrease
2.37 = 2.03
\3\
360101........ Huron Hospital.. East Cleveland, 17460 October 3, 2011 50.06 50.85 +.17
OH. section 422
increase - .10
section 422
reduction =
50.92 \4\
----------------------------------------------------------------------------------------------------------------
\1\ Section 422 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), Public Law
108-173, redistributed unused residency slots effective July 1, 2005.
\2\ Section 5503 of the Affordable Care Act (ACA), Public Law 111-148, redistributed unused residency slots
effective July 1, 2011.
\3\ Oak Forest Hospital's 1996 direct GME FTE cap is 4.40. Under section 422 of the MMA, the hospital received a
decrease of 2.37 to its direct GME FTE cap: 4.40 - 2.37 = 2.03.
\4\ Huron Hospital's 1996 direct GME FTE cap is 50.85. Under section 422 of the MMA, the hospital received an
increase of 0.17 to its direct GME FTE cap and a decrease of 0.10 to its direct GME FTE cap: 50.85 + 0.17 -
0.10 = 50.92.
c. Application Process for Available Resident Slots
Under section IV.I.4. of the preamble of this final rule, in
response to comments, we are finalizing a policy that provides an
application period of 90 days following notification to the public of a
hospital closure. Therefore, hospitals wishing to apply for and receive
slots from the above hospitals' FTE resident caps must submit
applications directly to the CMS Central Office no later than October
29, 2012. Unlike in the first 2 rounds of section 5506, under this
round, hospitals need not submit applications to their respective CMS
Regional Office. The mailing address for the CMS Central Office is
included on the application form. Applications must be received, not
postmarked, by the October 29, 2012 deadline date.
In the CY 2011 OPPS/ASC final rule with comment period, we did not
establish a deadline by when CMS would issue the final determinations
to hospitals that receive slots under section 5506 of the Affordable
Care Act. However, we will review all applications received by the
October 29, 2012 deadline and notify applicants of our determinations
as soon as possible.
We refer readers to the CMS Web site at: