[Federal Register Volume 78, Number 91 (Friday, May 10, 2013)]
[Proposed Rules]
[Pages 27486-27823]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-10234]
[[Page 27485]]
Vol. 78
Friday,
No. 91
May 10, 2013
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, 418, 482, et al.
Medicare Program; Hospital Inpatient Prospective Payment Systems for
Acute Care Hospitals and the Long Term Care Hospital Prospective
Payment System and Proposed Fiscal Year 2014 Rates; Quality Reporting
Requirements for Specific Providers; Hospital Conditions of
Participation; Medicare Program; FY 2014 Hospice Wage Index and Payment
Rate Update; Hospice Quality Reporting Requirements; and Updates on
Payment Reform; Proposed Rules
Federal Register / Vol. 78, No. 91 / Friday, May 10, 2013 / Proposed
Rules
[[Page 27486]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 412, 482, 485, and 489
[CMS-1599-P]
RIN 0938-AR53
Medicare Program; Hospital Inpatient Prospective Payment Systems
for Acute Care Hospitals and the Long-Term Care Hospital Prospective
Payment System and Proposed Fiscal Year 2014 Rates; Quality Reporting
Requirements for Specific Providers; Hospital Conditions of
Participation
AGENCY: Centers for Medicare and Medicaid Services (CMS), HHS.
ACTION: Proposed rule.
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SUMMARY: We are proposing to revise the Medicare hospital inpatient
prospective payment systems (IPPS) for operating and capital-related
costs of acute care hospitals to implement changes arising from our
continuing experience with these systems. Some of the proposed 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 proposed changes would be applicable
to discharges occurring on or after October 1, 2013, unless otherwise
specified in this proposed rule. We also are proposing to update 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
proposed updated rate-of-increase limits would be effective for cost
reporting periods beginning on or after October 1, 2013.
We are proposing to update the payment policies and the annual
payment rates for the Medicare prospective payment system (PPS) for
inpatient hospital services provided by long-term care hospitals
(LTCHs) and implement certain statutory changes made by the Affordable
Care Act. Generally, these proposed changes would be applicable to
discharges occurring on or after October 1, 2013, unless otherwise
specified in this proposed rule.
In addition, we are proposing a number of changes relating to
direct graduate medical education (GME) and indirect medical education
(IME) payments. We are proposing to establish 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 are proposing to update policies relating to the Hospital Value-
Based Purchasing (VBP) Program and the Hospital Readmissions Reduction
Program. In addition, we are proposing to revise the conditions of
participation (CoPs) for hospitals relating to the administration of
vaccines by nursing staff as well as the CoPs for critical access
hospitals relating to the provision of acute care inpatient services.
DATES: Comment Period: To be assured consideration, comments must be
received at one of the addresses provided below, no later than 5 p.m.
EDT on June 25, 2013.
Application Deadline for GME FTE Resident Slots from Closed
Hospital. Applications from hospitals to receive GME FTE resident slots
from a hospital's closure as described in section V.J.3.c. of the
preamble of this proposed rule must be received, not postmarked, by 5
p.m. EST on July 25, 2013.
ADDRESSES: When commenting, please refer to file code CMS-1599-P.
Because of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four ways (please choose only one
of the ways listed):
1. Electronically. You may submit electronic comments on this
regulation at http://www.regulations.gov. Follow the instructions for
``Comment or Submission'' and enter the file code CMS-1599-P to submit
comments on this proposed rule.
2. By regular mail. You may mail written comments (one original and
two copies) to the following address ONLY:
Centers for Medicare & Medicaid Services, Department of Health and
Human Services, Attention: CMS-1599-P, P.O. Box 8011, Baltimore, MD
21244-1850.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments (one
original and two copies) to the following address ONLY:
Centers for Medicare & Medicaid Services, Department of Health and
Human Services, Attention: CMS-1599-P, Mail Stop C4-26-05, 7500
Security Boulevard, Baltimore, MD 21244-1850.
4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments (one original and two copies) before the
close of the comment period to either of the following addresses:
a. Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue
SW., Washington, DC 20201.
(Because access to the interior of the HHH Building is not readily
available to persons without Federal Government identification,
commenters are encouraged to leave their comments in the CMS drop slots
located in the main lobby of the building. A stamp-in clock is
available for persons wishing to retain a proof of filing by stamping
in and retaining an extra copy of the comments being filed.)
b. 7500 Security Boulevard, Baltimore, MD 21244-1850.
If you intend to deliver your comments to the Baltimore address,
please call telephone number (410) 786-7195 in advance to schedule your
arrival with one of our staff members.
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and received after the comment
period.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
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.
Mollie Knight, (410) 786-7948 and Bridget Dickensheets, (410) 786-
8670, Market Basket for IPPS Hospitals and LTCHs Issues.
Siddhartha Mazumdar, (410) 786-6673, Rural Community Hospital
Demonstration Program Issues.
James Poyer, (410) 786-2261, Hospital Inpatient Quality Reporting
and Hospital Value-Based Purchasing--Program Administration,
Validation, and Reconsideration Issues.
Shaheen Halim, (410) 786-0641, Hospital Inpatient Quality
Reporting--Measures Issues Except Hospital Consumer Assessment of
Healthcare Providers and Systems Issues; and
[[Page 27487]]
Readmission Measures for Hospitals Issues.
Elizabeth Goldstein, (410) 786-6665, Hospital Inpatient Quality
Reporting--Hospital Consumer Assessment of Healthcare Providers and
Systems Measures Issues.
Mary Pratt, (410) 786-6867, LTCH Quality Data Reporting Issues.
Kim Spalding Bush, (410) 786-3232, Hospital Value-Based Purchasing
Efficiency Measures Issues.
James Poyer, (410) 786-2261, PPS-Exempt Cancer Hospital Quality
Reporting Issues.
Allison Lee, (410) 786-8691 and Jeffrey Buck, (410) 786-0407,
Inpatient Psychiatric Facility Quality Reporting Issues.
Sarah Fahrendorf, (410) 786-3112, Conditions of Participation
(CoPs) for CAHs Issues.
Commander Scott Cooper, USPHS, (410) 786-9465, Hospital Conditions
of Participation (CoPs)--Pneumococcal Vaccine Issues.
Jennifer Dupee, (410) 786-6537, and Jennifer Phillips, (410) 786-
1023, Medical Review Criteria for Hospital Inpatient Services under
Medicare Part A.
Ann Marshall, (410) 786-3059, Requirement for Physician Order for
Payment of Hospital Inpatient Services under Medicare Part A.
SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following Web
site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to
view public comments.
Comments received timely also will be available for public
inspection, generally beginning approximately 3 weeks after publication
of the rule, at the headquarters of the Centers for Medicare and
Medicaid Services, 7500 Security Boulevard, Baltimore, MD 21244, on
Monday through Friday of each week from 8:30 a.m. to 4 p.m. EST. To
schedule an appointment to view public comments, phone 1 (800) 743-
3951.
Electronic Access
This Federal Register document is also available from the Federal
Register online database through Federal Digital System (FDsys), a
service of the U.S. Government Printing Office. This database can be
accessed via the Internet at: http://www.gpo.gov/fdsys.
Tables Available Only Through the Internet on the CMS Web Site
In the past, a majority of the tables referred to throughout this
preamble and in the Addendum to this proposed rule and the final rule
were published in the Federal Register as part of the annual proposed
and final rules. However, beginning in FY 2012, some of the IPPS tables
and LTCH PPS tables are no longer published in the Federal Register.
Instead, these tables will be available only through the Internet. The
IPPS tables for this proposed rule are available only through the
Internet on the CMS Web site at: http://www.cms.hhs.gov/Medicare/medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. Click on
the link on the left side of the screen titled, ``FY 2014 IPPS Proposed
Rule Home Page'' or ``Acute Inpatient--Files for Download''. The LTCH
PPS tables for this FY 2014 proposed rule are available only through
the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/index.html
under the list item for Regulation Number CMS-1599-P. For complete
details on the availability of the tables referenced in this proposed
rule, we refer readers to section VI. of the Addendum to this proposed
rule.
Readers who experience any problems accessing any of the tables
that are posted on the CMS Web sites identified above should contact
Michael Treitel at (410) 786-4552.
Acronyms
3M 3M Health Information System
AAMC Association of American Medical Colleges
ACGME Accreditation Council for Graduate Medical Education
ACoS American College of Surgeons
AHA American Hospital Association
AHIC American Health Information Community
AHIMA American Health Information Management Association
AHRQ Agency for Healthcare Research and Quality
ALOS Average length of stay
ALTHA Acute Long Term Hospital Association
AMA American Medical Association
AMGA American Medical Group Association
AOA American Osteopathic Association
APR DRG All Patient Refined Diagnosis Related Group System
APRN Advanced practice registered nurse
ARRA American Recovery and Reinvestment Act of 2009, Public Law 111-
5
ASCA Administrative Simplification Compliance Act of 2002, Public
Law 107-105
ASITN American Society of Interventional and Therapeutic
Neuroradiology
ATRA American Taxpayer Relief Act of 2012, Public Law 112-240
BBA Balanced Budget Act of 1997, Public Law 105-33
BBRA Medicare, Medicaid, and SCHIP [State Children's Health
Insurance Program] Balanced Budget Refinement Act of 1999, Public
Law 106-113
BIPA Medicare, Medicaid, and SCHIP [State Children's Health
Insurance Program] Benefits Improvement and Protection Act of 2000,
Public Law 106-554
BLS Bureau of Labor Statistics
CAH Critical access hospital
CARE [Medicare] Continuity Assessment Record & Evaluation
[Instrument]
CART CMS Abstraction & Reporting Tool
CAUTI Catheter-associated urinary tract infection
CBSAs Core-based statistical areas
CC Complication or comorbidity
CCN CMS Certification Number
CCR Cost-to-charge ratio
CDAC [Medicare] Clinical Data Abstraction Center
CDAD Clostridium difficile-associated disease
CDC Center for Disease Control and Prevention
CERT Comprehensive error rate testing
CDI Clostridium difficile
CFR Code of Federal Regulations
CLABSI Central line-associated bloodstream infection
CIPI Capital input price index
CMI Case-mix index
CMS Centers for Medicare & Medicaid Services
CMSA Consolidated Metropolitan Statistical Area
COBRA Consolidated Omnibus Reconciliation Act of 1985, Public Law
99-272
COLA Cost-of-living adjustment
CoP [Hospital] condition of participation
CPI Consumer price index
CRNA Certified registered nurse anesthetist
CY Calendar year
DACA Data Accuracy and Completeness Acknowledgement
DPP Disproportionate patient percentage
DRA Deficit Reduction Act of 2005, Public Law 109-171
DRG Diagnosis-related group
DSH Disproportionate share hospital
ECI Employment cost index
EDB [Medicare] Enrollment Database
EHR Electronic health record
EMR Electronic medical record
FAH Federation of American Hospitals
FDA Food and Drug Administration
FFY Federal fiscal year
FPL Federal poverty line
FQHC Federally qualified health center
FR Federal Register
FTE Full-time equivalent
FY Fiscal year
GAAP Generally Accepted Accounting Principles
GAF Geographic Adjustment Factor
GME Graduate medical education
[[Page 27488]]
HAC Hospital-acquired condition
HAI Healthcare-associated infection
HBIPS Hospital-based inpatient psychiatric services
HCAHPS Hospital Consumer Assessment of Healthcare Providers and
Systems
HCFA Health Care Financing Administration
HCO High-cost outlier
HCRIS Hospital Cost Report Information System
HHA Home health agency
HHS Department of Health and Human Services
HICAN Health Insurance Claims Account Number
HIPAA Health Insurance Portability and Accountability Act of 1996,
Public Law 104-191
HIPC Health Information Policy Council
HIS Health information system
HIT Health information technology
HMO Health maintenance organization
HPMP Hospital Payment Monitoring Program
HSA Health savings account
HSCRC [Maryland] Health Services Cost Review Commission
HSRV Hospital-specific relative value
HSRVcc Hospital-specific relative value cost center
HQA Hospital Quality Alliance
HQI Hospital Quality Initiative
ICD-9-CM International Classification of Diseases, Ninth Revision,
Clinical Modification
ICD-10-CM International Classification of Diseases, Tenth Revision,
Clinical Modification
ICD-10-PCS International Classification of Diseases, Tenth Revision,
Procedure Coding System
ICR Information collection requirement
IGI IHS Global Insight, Inc.
IHS Indian Health Service
IME Indirect medical education
I-O Input-Output
IOM Institute of Medicine
IPF Inpatient psychiatric facility
IPFQR Inpatient Psychiatric Facility Quality Reporting [Program]
IPPS [Acute care hospital] inpatient prospective payment system
IRF Inpatient rehabilitation facility
IQR Inpatient Quality Reporting
IVR Interactive voice response
LAMCs Large area metropolitan counties
LOS Length of stay
LTC-DRG Long-term care diagnosis-related group
LTCH Long-term care hospital
LTCHQR Long-Term Care Hospital Quality Reporting
MA Medicare Advantage
MAC Medicare Administrative Contractor
MAP Measure Application Partnership
MCC Major complication or comorbidity
MCE Medicare Code Editor
MCO Managed care organization
MCV Major cardiovascular condition
MDC Major diagnostic category
MDH Medicare-dependent, small rural hospital
MedPAC Medicare Payment Advisory Commission
MedPAR Medicare Provider Analysis and Review File
MEI Medicare Economic Index
MGCRB Medicare Geographic Classification Review Board
MIEA-TRHCA Medicare Improvements and Extension Act, Division B of
the Tax Relief and Health Care Act of 2006, Public Law 109-432
MIPPA Medicare Improvements for Patients and Providers Act of 2008,
Public Law 110-275
MMA Medicare Prescription Drug, Improvement, and Modernization Act
of 2003, Public Law 108-173
MMEA Medicare and Medicaid Extenders Act of 2010, Public Law 111-309
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Public
Law 110-173
MRHFP Medicare Rural Hospital Flexibility Program
MRSA Methicillin-resistant Staphylococcus aureus
MSA Metropolitan Statistical Area
MS-DRG Medicare severity diagnosis-related group
MS-LTC-DRG Medicare severity long-term care diagnosis-related group
NAICS North American Industrial Classification System
NALTH National Association of Long Term Hospitals
NCD National coverage determination
NCHS National Center for Health Statistics
NCQA National Committee for Quality Assurance
NCVHS National Committee on Vital and Health Statistics
NECMA New England County Metropolitan Areas
NHSN National Healthcare Safety Network
NOP Notice of Participation
NQF National Quality Forum
NTIS National Technical Information Service
NTTAA National Technology Transfer and Advancement Act of 1991 (Pub.
L. 104-113)
NVHRI National Voluntary Hospital Reporting Initiative
OACT [CMS'] Office of the Actuary
OBRA 86 Omnibus Budget Reconciliation Act of 1986, Public Law 99-509
OES Occupational employment statistics
OIG Office of the Inspector General
OMB Executive Office of Management and Budget
OPM U.S. Office of Personnel Management
OQR [Hospital] Outpatient Quality Reporting
O.R. Operating room
OSCAR Online Survey Certification and Reporting [System]
PCH PPS-exempt cancer hospital
PCHQR PPS-exempt cancer hospital quality reporting
PMSAs Primary metropolitan statistical areas
POA Present on admission
PPI Producer price index
PPS Prospective payment system
PRM Provider Reimbursement Manual
ProPAC Prospective Payment Assessment Commission
PRRB Provider Reimbursement Review Board
PRTFs Psychiatric residential treatment facilities
PSF Provider-Specific File
PS&R Provider Statistical and Reimbursement [System]
PQRS Physician Quality Reporting System
QIG Quality Improvement Group, CMS
QIO Quality Improvement Organization
RCE Reasonable compensation equivalent
RHC Rural health clinic
RHQDAPU Reporting hospital quality data for annual payment update
RNHCI Religious nonmedical health care institution
RPL Rehabilitation psychiatric long-term care (hospital)
RRC Rural referral center
RTI Research Triangle Institute, International
RUCAs Rural-urban commuting area codes
RY Rate year
SAF Standard Analytic File
SCH Sole community hospital
SCIP Surgical Care Improvement Project
SFY State fiscal year
SIC Standard Industrial Classification
SNF Skilled nursing facility
SOCs Standard occupational classifications
SOM State Operations Manual
SSI Surgical site infection
SSI Supplemental Security Income
SSO Short-stay outlier
TEFRA Tax Equity and Fiscal Responsibility Act of 1982, Public Law
97-248
TEP Technical expert panel
TMA TMA [Transitional Medical Assistance], Abstinence Education, and
QI [Qualifying Individuals] Programs Extension Act of 2007, Public
Law 110-90
TPS Total Performance Score
UHDDS Uniform hospital discharge data set
VBP [Hospital] Value Based Purchasing [Program]
VTE Venous thromboembolism
Table of Contents
I. Executive Summary and Background
A. Executive Summary
1. Purpose and Legal Authority
2. Summary of the Major Provisions
3. Summary of Costs and Benefits
B. Summary
1. Acute Care Hospital Inpatient Prospective Payment System
(IPPS)
2. Hospitals and Hospital Units Excluded from the IPPS
3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)
4. Critical Access Hospitals (CAHs)
5. Payments for Graduate Medical Education (GME)
C. Provisions of the Patient Protection and Affordable Care Act
(Pub. L. 111-148), the Health Care and Education Reconciliation Act
of 2010
(Pub. L. 111-152), and the American Taxpayer Relief Act of 2012
(Pub. L. 112-240)
D. Summary of Provisions of This Proposed Rule
II. Proposed 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
[[Page 27489]]
D. Proposed FY 2014 MS-DRG Documentation and Coding Adjustment
1. Background on the Prospective MS-DRG Documentation and Coding
Adjustments for FY 2008 and FY 2009 Authorized by Public Law 110-90
2. Adjustment to the Average Standardized Amounts Required by
Public Law 110-90
a. Prospective Adjustment Required by Section 7(b)(1)(A) of
Public Law 110-90
b. Recoupment or Repayment Adjustments in FYs 2010 through 2012
Required by Section 7(b)(1)(B) Public Law 110-90
3. Retrospective Evaluation of FY 2008 and FY 2009 Claims Data
4. Prospective Adjustments for FY 2008 and FY 2009 Authorized by
Section 7(b)(1)(A) of Public Law 110-90
5. Recoupment or Repayment Adjustment Authorized by Section
7(b)(1)(B) of Public Law 110-90
6. Recoupment or Repayment Adjustment Authorized by Section 631
of the American Taxpayer Relief Act of 2012 (ATRA).
7. Additional Prospective Adjustments for the MS-DRG
Documentation and Coding Effect through FY 2010 Authorized under
Section 1886(d)(3)(A)(vi) of the Act
E. Proposed Refinement of the MS-DRG Relative Weight Calculation
1. Background
2. Discussion and Proposal for FY 2014
F. Adjustment to MS-DRGs for Preventable Hospital-Acquired
Conditions (HACs), Including Infections
1. Background
2. HAC Selection
3. Present on Admission (POA) Indicator Reporting
4. HACs and POA Reporting in ICD-10-CM and ICD-10-PCS
5. Proposal Regarding Current HACs and Previously Considered
Candidate HACs
6. RTI Program Evaluation
7. Current and Previously Considered Candidate HACs--RTI Report
on Evidence-Based Guidelines
G. Proposed Changes to Specific MS-DRG Classifications
1. Pre-Major Diagnostic Categories (Pre-MDCs): Heart Transplants
and Liver Transplants
2. MDC 1 (Diseases and Disorders of the Nervous System): Tissue
Plasminogen Activator (tPA) (rtPA) Administration within 24 Hours
Prior to Admission
3. MDC 4 (Diseases and Disorders of the Ear, Nose, Mouth and
Throat)
a. Endoscopic Placement of a Bronchial Valve
b. Pulmonary Thromboendarterectomy (PTE) with Full Circulatory
Arrest
4. MDC 5 (Diseases and Disorders of the Circulatory System)
a. Discharge/Transfer to Designated Disaster Alternative Care
Site
b. Discharges/Transfers with a Planned Acute Care Hospital
Inpatient Readmission
5. MDC 8 (Diseases and Disorders of the Musculoskeletal System
and Connective Tissue)
a. Reverse Shoulder Procedures
b. Total Ankle Replacement Procedures
6. MDC 15 (Newborns and Other Neonates with Conditions
Originating in the Perinatal Period)
a. Persons Encountering Health Services for Specific Procedures,
Not Carried Out
b. Discharges/Transfers of Neonates with a Planned Acute Care
Hospital Inpatient Readmission
7. Proposed Medicare Code Editor (MCE) Changes
a. Age Conflict Edit
b. Discharge Status Code Updates
8. Surgical Hierarchies
9. Complications or Comorbidity (CC) Exclusions List
a. Background of the CC List and the CC Exclusion List
b. Proposed CC Exclusions List for FY 2014
10. Review of Procedure Codes in MS-DRGs 981 through 983, 984
through 986, and 987 through 989
a. Moving Procedure Codes from MS-DRGs 981 through 983 or MS-
DRGs 987 through 989 into MDCs
b. Reassignment of Procedures among MS-DRGs 981 through 983, 984
through 986, and 987 through 989
c. Adding Diagnosis or Procedure Codes to MDCs
11. Proposed Changes to the ICD-9-CM Coding System, Including
Discussion of the Replacement of the ICD-9-CM System with the ICD-
10-CM and ICD-10-PCS Systems in FY 2014
a. ICD-9-CM Coding System
b. Code Freeze
c. Processing of 25 Diagnosis Codes and 25 Procedure Codes on
Hospital Inpatient Claims
d. ICD-10 MS-DRGs
H. Recalibration of Proposed FY 2014 MS-DRG Relative Weights
1. Data Sources for Developing the Proposed Relative Weights
2. Methodology for Calculation of the Proposed Relative Weights
3. Development of National Average CCRs
4. Bundled Payments for Care Improvement (BPCI) Initiative
I. Proposed Add-On Payments for New Services and Technologies
1. Background
2. Public Input Before Publication of a Notice of Proposed
Rulemaking on Add-On Payments
3. FY 2014 Status of Technology Approved for FY 2013 Add-On
Payments
a. AutoLaser Interstitial Therapy (Auto LITTTM)
System
b. Glucarpidase (Trade Brand Voraxaze[supreg])
c. DIFICIDTM (Fidaxomicin) Tablets
d. Zenith[supreg] Fenestrated Abdominal Aortic Aneurysm (AAA)
Endovascular Graft
4. FY 2014 Applications for New Technology Add-On Payments
a. KcentraTM
b. Argus[supreg] II Retinal Prosthesis System
c. Responsive Neurostimulator (RNS) System
d. Zilver[supreg] PTX[supreg] Drug Eluting Stent
e. MitraClip[supreg] System
III. Proposed 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 Proposed FY 2014 Wage Index
1. Included Categories of Costs
2. Excluded Categories of Costs
3. Use of Wage Index Data by Providers Other Than Acute Care
Hospitals under the IPPS
D. Verification of Worksheet S-3 Wage Data
E. Method for Computing the Proposed FY 2014 Unadjusted Wage
Index
F. Proposed Occupational Mix Adjustment to the Proposed FY 2014
Wage Index
1. Development of Data for the Proposed FY 2014 Occupational Mix
Adjustment Based on the 2010 Occupational Mix Survey
2. New 2013 Occupational Mix Survey for the FY 2016 Wage Index
3. Calculation of the Proposed Occupational Mix Adjustment for
FY 2014
G. Analysis and Implementation of the Proposed Occupational Mix
Adjustment and the Proposed FY 2014 Occupational Mix Adjusted Wage
Index
1. Analysis of the Proposed Occupational Mix Adjustment and the
Proposed Occupational Mix Adjusted Wage Index
2. Proposed Application of the Rural, Imputed, and Frontier
Floors
a. Proposed Rural Floor
b. Proposed Imputed Floor
c. Proposed Frontier Floor
3. Proposed FY 2014 Wage Index Tables
H. Revisions to the Wage Index Based on Hospital Redesignations
and Reclassifications
1. General Policies and Effects of Reclassification/
Redesignation
2. FY 2014 MGCRB Reclassifications
a. FY 2014 Reclassification Requirements and Approvals
b. Applications for Reclassifications for FY 2015
3. Redesignations of Hospitals under Section 1886(d)(8)(B) of
the Act
4. Reclassifications under Section 1886(d)(8)(B) of the Act
seeking Reclassification by the MGCRB
5. Waiving Lugar Redesignation for the Out-Migration Adjustment
I. Proposed FY 2014 Wage Index Adjustment Based on Commuting
Patterns of Hospital Employees
J. Process for Requests for Wage Index Data Corrections
K. Proposed Labor-Related Share for the Proposed FY 2014 Wage
Index
IV. Proposed Rebasing and Revision of the Hospital Market Baskets
for Acute Care Hospitals
A. Background
B. Rebasing and Revising the IPPS Market Basket
1. Development of Cost Categories and Weights
2. Cost Category Computation
3. Selection of Price Proxies
4. Labor-Related Share
C. Market Basket for Certain Hospitals Presently Excluded from
the IPPS
D. Rebasing and Revising the Capital Input Price Index (CIPI)
V. Other Decisions and Proposed Changes to the IPPS for Operating
Costs and
[[Page 27490]]
Graduate Medical Education (GME) Costs
A. Proposed Inpatient Hospital Updates for FY 2014 (Sec. Sec.
412.64(d) and 412.211(c))
1. Proposed FY 2014 Inpatient Hospital Update
2. Proposed FY 2014 Puerto Rico Hospital Update
B. Rural Referral Centers (RRCs): Annual Update to Case-Mix
Index (CMI) and Discharge Criteria (Sec. 412.96)
1. Case-Mix Index (CMI)
2. Discharges
C. Proposed Payment Adjustment for Low-Volume Hospitals (Sec.
412.101)
1. Background
a. Original Implementation of the Low-Volume Hospital Payment
Adjustment
b. Affordable Care Act Provisions for FYs 2011 and 2012
2. Provisions of the ATRA for FY 2013
a. Background
b. Proposed Conforming Regulatory Changes
3. Proposed Low-Volume Hospital Definition and Payment
Adjustment for FY 2014 and Subsequent Years
D. Indirect Medical Education (IME) Adjustment (Sec. 412.105)
1. IME Adjustment Factor for FY 2014
2. Other Proposed Policy Changes Affecting GME
E. Proposed Payment Adjustment for Medicare Disproportionate
Share Hospitals (DSHs) Sec. 412.106)
1. Background
2. Counting of Patient Days Associated with Patients Enrolled in
Medicare Advantage Plans in the Medicare and Medicaid Fractions of
the Disproportionate Share Patient Percentage (DPP) Calculation
3. New Payment Adjustment Methodology for Medicare DSH under
Section 3133 of the Affordable Care Act
F. Medicare-Dependent, Small Rural Hospital (MDH) Program (Sec.
412.108)
1. Background
2. Provisions of the ATRA for FY 2013
a. Background
b. Proposed Conforming Regulatory Changes
c. Expiration of the MDH Program
G. Hospital Readmissions Reduction Program: Proposed Changes
(Sec. Sec. 412.150 through 412.154)
1. Statutory Basis for the Hospital Readmissions Reduction
Program
2. Overview
3. FY 2014 Proposals for the Hospital Readmissions Reduction
Program
a. Overview
b. Proposed Refinement of the Readmission Measures and Related
Methodology for FY 2014 and Subsequent Years Payment Determinations
c. Proposed Expansion of the Applicable Conditions for FY 2015
d. Proposals for Hospitals Paid under Section 1814(b)(3) of the
Act, Including the Process to be Exempt from the Hospital
Readmissions Reduction Program and Definition of ``Base Operating
DRG Payment Amount'' for Such Hospitals (Sec. 412.152 and Sec.
412.154(d))
e. Proposed Floor Adjustment Factor for FY 2014 (Sec.
412.154(c)(2))
f. Proposed Applicable Period for FY 2014
g. Proposed Refinements of the Methodology to Calculate the
Aggregate Payments for Excess Readmissions
h. Clarification of Reporting Hospital-Specific Information,
Including Opportunity to Review and Submit Corrections
H. Hospital Value-Based Purchasing Program (Sec. Sec. 412.160
through 412.165)
1. Statutory Background
2. Overview of the FY 2013 Hospital VBP Program
3. FY 2014 Payment Details
4. FY 2014 Hospital VBP Program Measures
5. FY 2015 Hospital VBP Program Measures
6. FY 2016 Hospital VBP Program Measures
a. Measures Previously Adopted and Proposal to Remove AMI-8a,
PN-3b, and HF-1
b. Proposed New Measures for the FY 2016 Hospital VBP Program
c. Future Measures for the Efficiency Domain
7. Proposed Performance Periods and Baseline Periods
a. Background
b. Proposed Clinical Process of Care Domain Performance Period
and Baseline Periods for the FY 2016 Hospital VBP Program
c. Proposed Experience of Care Domain Performance Period and
Baseline Period for the FY 2016 Hospital VBP Program
d. Proposed Efficiency Domain Measure Performance Period and
Baseline Period for the FY 2016 Hospital VBP Program
e. Proposed Outcome Domain Performance Periods and Baseline
Periods for the FY 2017 through FY 2019 Hospital VBP Programs
8. Proposed Performance Standards for the Hospital VBP Program
a. Background
b. Performance Standards for the FY 2016 Hospital VBP Program
Measures
c. Certain Performance Standards for the FY 2017, FY 2018, and
FY 2019 Hospital VBP Programs
9. Proposed FY 2016 Hospital VBP Program Scoring Methodology
a. Proposed General Hospital VBP Program Scoring Methodology
b. Proposed Domain Weighting for the FY 2016 Hospital VBP
Program for Hospitals That Receive a Score on All Domains
c. Proposed Domain Weighting for the FY 2016 Hospital VBP
Program for Hospitals Receiving Scores on Fewer than Four Domains
d. Proposed Domain Reclassification and Domain Weighting for the
FY 2017 Hospital VBP Program
e. Proposed Disaster/Extraordinary Circumstance Waivers under
the Hospital VBP Program
10. Applicability of the Hospital VBP Program to Hospitals
a. Background
b. Proposed Minimum Numbers of Cases and Measures for the FY
2016 Hospital VBP Program Outcome Domain
c. Hospitals Paid under Section 1814(b)(3) of the Act
I. Hospital-Acquired Condition (HAC) Reduction Program
1. Background
2. Statutory Basis for the HAC Reduction Program
3. Proposals to Implement the HAC Reduction Program
a. Proposed Definitions
b. Proposed Payment Adjustment under the HAC Reduction Program,
Including Exemptions
c. Proposed Measure Selection and Conditions, Including a
Proposed Risk-Adjustment and Scoring Methodology
d. Criteria for Applicable Hospitals and Performance Scoring
e. Reporting Hospital-Specific Information, Including the Review
and Correction of Information
f. Limitation on Administrative and Judicial Review
J. Payment for Graduate Medical Education (GME) and Indirect
Medical Education (IME) Costs (Sec. Sec. 412.105, 413.75 through
413.83)
1. Background
2. Proposed Inclusion of Labor and Delivery Days in the
Calculation of Medicare Utilization for Direct GME Payment Purposes
and for Other Medicare Inpatient Days Policy
3. Notice of Closure of Teaching Hospital and Opportunity to
Apply for Available Slots
4. Payments for Residents Training in Approved Residency
Programs at CAHs
a. Background
b. Residents in Approved Medical Residency Training Programs
That Train at CAHs
5. Expiration of Inflation Update Freeze for High Per Resident
Amounts (PRAs)
K. Rural Community Hospital Demonstration Program
1. Background
2. Proposed FY 2014 Budget Neutrality Offset Amount
L. Hospital Emergency Services under EMTALA: Technical Change
(Sec. Sec. 4189.24(f))
M. Hospital Services Furnished under Arrangements
N. Policy Proposal on Admission and Medical Review Criteria for
Hospital Inpatient Services under Medicare Part A
1. Background
2. Requirements for Physician Orders
3. Proposed Inpatient Admission Guidelines
a. Background
b. Correct Coding Reviews
c. Complete and Accurate Documentation
d. Medical Necessity Reviews
4. Proposed Payment Adjustment
VI. Proposed Changes to the IPPS for Capital-Related Costs
A. Overview
B. Additional Provisions
1. Exception Payments
2. New Hospitals
3. Hospitals Located in Puerto Rico
C. Other Proposed Changes for FY 2014--Proposed Adjustment to
Offset the Cost of the Policy Proposal on Admission and
[[Page 27491]]
Medical Review Criteria for Hospital Inpatient Services under
Medicare Part A
D. Proposed Annual Update for FY 2014
VII. Proposed Changes for Hospitals Excluded from the IPPS
A. Proposed Rate-of-Increase in Payments to Excluded Hospitals
for FY 2014
B. Critical Access Hospitals (CAHs): Proposed Changes to
Conditions of Participation (CoPs) Relating to Furnishing of Acute
Care Inpatient Services
1. Background
2. Proposed Policy Changes
VIII. Proposed Changes to the Long-Term Care Hospital Prospective
Payment System (LTCH PPS) for FY 2014
A. Background of the LTCH PPS
1. Legislative and Regulatory Authority
2. Criteria for Classification as a LTCH
a. Classification as a LTCH
b. Hospitals Excluded from the LTCH PPS
3. Limitation on Charges to Beneficiaries
4. Administrative Simplification Compliance Act (ASCA) and
Health Insurance Portability and Accountability Act (HIPAA)
Compliance
B. Proposed Medicare Severity Long-Term Care Diagnosis-Related
Group (MS-LTC-DRG) Classifications and Relative Weights for FY 2014
1. Background
2. Patient Classifications into MS-LTC-DRGs
a. Background
b. Proposed Changes to the MS-LTC-DRGs for FY 2014
3. Development of the Proposed FY 2014 MS-LTC-DRG Relative
Weights
a. General Overview of the Development of the MS-LTC-DRG
Relative Weights
b. Development of the Proposed MS-LTC-DRG Relative Weights for
FY 2014
c. Data
d. Hospital-Specific Relative Value (HSRV) Methodology
e. Proposed Treatment of Severity Levels in Developing the MS-
LTC-DRG Relative Weights
f. Proposed Low-Volume MS-LTC-DRGs
g. Steps for Determining the Proposed FY 2014 MS-LTC-DRG
Relative Weights
C. Proposed LTCH PPS Payment Rates for FY 2014
1. Overview of Development of the Proposed LTCH Payment Rates
2. Proposed FY 2014 LTCH PPS Annual Market Basket Increase
a. Overview
b. Revision of Certain Market Basket Updates as Required by the
Affordable Care Act
c. Adjustment to the Annual Update to the LTCH PPS Standard
Federal Rate under the Long-Term Care Hospital Quality Reporting
(LTCHQR) Program
1. Background
2. Proposed Reduction to the Annual Update to the LTCH PPS
Standard Federal Rate under the LTCHQR Program
d. Proposed Market Basket Under the LTCH PPS for FY 2014
e. Proposed Annual Market Basket Update for LTCHs for FY 2014
3. Proposed Adjustment for the Second Year of the Phase-In of
the One-Time Prospective Adjustment to the Standard Federal Rate
under Sec. 412.523(d)(3)
D. Expiration of Certain Payment Rules for LTCH Services--The
25-Percent Threshold Payment Adjustment
E. Research on the Development of a Patient Criteria-Based
Payment Adjustment under the LTCH PPS
1. Overview
2. MedPAC's 2004 Report to Congress
3. LTCHs in the Medicare Program
4. CMS' Research: The RTI Report
5. CMS' Report to Congress: Determining Medical Necessity and
Appropriateness of Care for Medicare Long-Term Care Hospitals
6. Current Practices in LTCHs
7. Identification of Chronically Critically Ill/Medically
Complex (CCI/MC) Patients
8. LTCH PPS Payments for CCI/MC Patients
IX. Proposed 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. Proposed 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 Rulemaking
c. Proposed Removal of Hospital IQR Program Measures for the FY
2016 Payment Determination and Subsequent Years
d. Suspension of Data Collection for the FY 2014 Payment
Determination and Subsequent Years
3. Process for Retaining Previously Adopted Hospital IQR Program
Measures for Subsequent Payment Determinations
4. Additional Considerations in Expanding and Updating Quality
Measures under the Hospital IQR Program
5. Proposed Changes to Hospital IQR Program Measures Previously
Adopted for the FY 2015 and FY 2016 Payment Determinations and
Subsequent Years
a. Previously Adopted Hospital IQR Program Measures for the FY
2015 Payment Determination and Subsequent Years
b. Proposed Refinements to Existing Measures in the Hospital IQR
Program
6. Proposed Additional Hospital IQR Program Measures for the FY
2016 Payment Determination and Subsequent Years
a. Proposed Hospital 30-Day, All-Cause, Risk-Standardized
Readmission Rate (RSRR) Following Chronic Obstructive Pulmonary
Disease (COPD) Hospitalization Measure (NQF 1891)
b. Proposed Hospital 30-Day, All-Cause, Risk-Standardized
Mortality Rate (RSMR) Following Chronic Obstructive Pulmonary
Disease (COPD) Hospitalization Measure (NQF 1893)
c. Proposed Hospital 30-day, All-Cause Risk-Standardized Rate of
Readmission Following Acute Ischemic Stroke (Stroke Readmission)
Measure
d. Proposed Hospital 30-Day, All-Cause Risk-Standardized Rate of
Mortality Following an Admission for Acute Ischemic Stroke (Stroke
Mortality) Measure
e. Proposed Hospital Risk-Standardized Payment Associated with a
30-day Episode of Care for Acute Myocardial Infarction (AMI) Measure
7. Electronic Clinical Quality Measures
8. Possible New Quality Measures and Measure Topics for Future
Years
9. Form, Manner, and Timing of Quality Data Submission
a. Background
b. Procedural Requirements for the FY 2016 Payment Determination
and Subsequent Years
c. Proposed Data Submission Requirements for Chart-Abstracted
Measures
d. Proposed Data Submission Requirements for Quality Measures
That May be Voluntarily Electronically Reported for the FY 2016
Payment Determination
e. Sampling and Case Thresholds for the FY 2016 Payment
Determination and Subsequent Years
f. Proposed HCAHPS Requirements for the FY 2017 Payment
Determination and Subsequent Years
g. Proposed Data Submission Requirements for Structural Measures
for the FY 2015 and FY 2016 Payment Determinations
h. Proposed Data Submission and Reporting Requirements for
Healthcare-Associated Infection (HAI) Measures Reported via NHSN
10. Proposed Modifications to the Validation Process for Chart-
Abstracted Measures under the Hospital IQR Program
a. Proposed Timing and Number of Quarters Included in Validation
b. Proposed Selection of Measures and Sampling of Charts to be
Included in Validation
c. Proposed Procedures for Scoring Records for Validation
d. Proposed Procedures to Select Hospitals for Validation
e. Proposed Procedures for Submitting Records for Validation
11. Proposed Data Accuracy and Completeness Acknowledgement
Requirements for the FY 2015 Payment Determination and Subsequent
Years
12. Public Display Requirements for the FY 2016 Payment
Determination and Subsequent Years
13. Proposed Reconsideration and Appeal Procedures for the FY
2015 Payment Determination and Subsequent Years
14. Hospital IQR Program Extraordinary Circumstances Extensions
or Waivers
B. PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program
1. Statutory Authority
2. Covered Entities
3. Previously Finalized Quality Measures for PCHs Beginning with
the FY 2014 Program
[[Page 27492]]
4. Considerations in the Selection of the Quality Measures
5 Proposed New Quality Measures
a. Proposed New Measure Beginning with FY 2015--NHSN Healthcare-
Associated Infection (HAI) Measure: Surgical Site Infection (SSI)
(NQF 0753)
b. Proposed New Measures Beginning with the FY 2016 PQHQR
Program
6. Possible New Quality Measure Topics for Future Years
7. Maintenance of Technical Specifications for Quality Measures
8. Public Display Requirements Beginning with FY 2015 Program
Year
9. Form, Manner, and Timing of Data Submission Beginning with FY
2015 Program Year
a. Background
b. Proposed Waivers from Program Requirements
c. Proposed Reporting Periods and Submission Timelines for the
Proposed SSI Measure
d. Proposed Exceptions to Reporting and Data Submission for HAI
Measures (CAUTI, CLABSI, and Proposed SSI)
e. Proposed Reporting and Data Submission Requirements for the
Proposed Clincial Process/Oncology Care Measures
f. Proposed Reporting and Data Submission Requirements for the
Proposed SCIP Measures
g. Proposed HCAHPS Requirements
C. Long-Term Care Hospital Quality Reporting (LTCHQR) Program
1. Statutory History
2. General Consideratons Used for Selection of Quality Measures
for the LTCHQR Program
3. Process for Retention of LTCHQR Program Measures Adopted in
Previous Payment Determinations
4. Process for Adopting Changes to LTCHQR Program Measures
5. Previously Adopted Quality Measures for the FY 2014 and FY
2015 Payment Determinations and Subsequent Payment Determinations
6. Previously Adopted Quality Measures for the FY 2016 Payment
Determination and Subsequent Payment Determinations
7. Proposed Revisions to Previously Adopted Quality Measures
a. Proposed Revisions for Influenza Vaccination Coverage among
Health Care Personnel (NQF 0431)
b. Proposed Revisions for Percent of Residents or Patients Who
Were Assessed and Appropriately Given the Seasonal Influenza Vaccine
(Short-Stay) (NQF 0680)
c. Proposed Revisions for Percent of Residents or Patients with
Pressure Ulcers That Are New or Worsened (Short-Stay) (NQF
0678)
8. Proposed New LTCHQR Program Quality Measures Affecting the FY
2017 and FY 2018 Payment Determinations and Subsequent Payment
Determinations
a. Considerations in Updating and Expanding Quality Measures
under the LTCHQR Program for the FY 2017 Payment Determination and
Subsequent Payment Determinations
b. Proposed New LTCHQR Program Quality Measures for the FY 2017
Payment Determination and Subsequent Payment Determinations
c. Proposed New LTCHQR Program Quality Measure for the FY 2018
Payment Determination and Subsequent Payment Determinations
d. LTCHQR Program Quality Measures and Concepts under
Consideration for Future Years Payment Determinations
9. Form, Manner, and Timing of Quality Data Submission for the
FY 2016 Payment Determination and Subsequent Payment Determinations
a. Background
b. Finalized Timeline for Data Submission under the LTCHQR
Program for the FY 2016 Payment Determination
c. Proposed Timeline for Data Submission for the NQF
0431 Influenza Vaccination Coverage Among Healthcare
Personnel Measure for the FY 2016 Payment Determination and
Subsequent Payment Determinations
d. Proposed Timeline for Data Submission for the NQF
0680 Percent of Residents or Patients Who Were Assessed and
Appropriately Given the Seasonal Influenza Vaccine (Short Stay)
Measure for the FY 2016 Payment Determination and Subsequent Payment
Determinations
e. Proposed Timeline for Data Submission under the LTCHQR
Program for the FY 2017 Payment Determination and Subsequent Program
Determinations
f. Proposed Timeline for Data Submission under the LTCHQR
Program for the FY 2018 Payment Determination and Subsequent Payment
Determinations
10. Public Display of Data Quality Measures for the LTCHQR
Program
11. Proposed LTCHQR Program Submission Waiver Requirements for
the FY 2015 Payment Determination and Subsequent Payment
Determinations
12. Proposed LTCHQR Program Reconsideration and Appeals for the
FY 2015 Payment Determination and Subsequent Payment Determinations
D. Inpatient Psychiatric Facilities Quality Reporting (IPFQR)
Program
1. Statutory Authority
2. Application of the Payment Update Reduction for Failure to
Report for the FY 2014 Payment Determination and Subsequent Years
3. Covered Entities
4. Considerations in Selecting Quality Measures
5. Proposed Quality Measures for the FY 2015 Payment
Determination and Subsequent Years
a. Background
b. Proposed New Quality Measures Beginning with the FY 2016
Payment Determination and Subsequent Years
c. Maintenance of Technical Specifications for Quality Measures
6. Proposed Request for Voluntary Information--Facility
Assessment of Patient Experience of Care
7. Request for Recommendations for New Quality Measures for
Future Years
8. Proposed Public Display Requirements for the FY 2014 Payment
Determination and Subsequent Years
9. Form, Manner, and Timing of Quality Data Submission for the
FY 2014 Payment Determination and Subsequent Years
a. Background
b. Procedural Requirements
c. Proposed Submission Requirements for the FY 2016 Payment
Determination and Subsequent Years
d. Reporting Requirements for the FY 2016 Payment Determination
and Subsequent Years
e. Proposed Population, Sampling, and Minimum Case Threshold for
the FY 2016 Payment Determination and Subsequent Years
f. Data Accuracy and Completeness Acknowledgement (DACA)
Requirements
10. Reconsideration and Appeals Procedures for the FY 2014
Payment Determination and Subsequent Years
11. Waivers from Quality Reporting Requirements for the FY 2014
Payment Determination and Subsequent Years
12. Electronic Health Records (EHRs)
E. Electronic Health Records (EHRs) Incentive Program and
Meaningful Use (MU)
1. Background
2. Proposed Expanded Electronic Submission Period for CQMs
3. Quality Reporting Data Architecture Category III (QRDA-III)
Option in 2014
4. Case Number Threshold Exemption--Proposed Requirements
Regarding Data Submission
X. Proposed Change to the Medicare Hospital Conditions of
Participation (CoPs) Relating to the Administration of Pneumococcal
Vaccines
XI. MedPAC Recommendations
XII. 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 Proposed Occupational Mix Adjustment to the
Proposed FY 2014 Wage Index (Hospital Wage Index Occupational Mix
Survey)
4. Hospital Applications for Geographic Reclassifications by the
MGCRB
5. ICRs for Application for GME Resident Slots
6. ICRs for the Hospital Inpatient Quality Reporting (IQR)
Program
7. ICRs for PPS-Exempt Cancer Hospital Quality Reporting (PCHQR)
Program
8. ICRs for Hospital Value-Based Purchasing (VBP) Program
9. ICRs for the Long-Term Care Hospital Quality Reporting
(LTCHQR) Program
10. ICRs for the Inpatient Psychiatric Facilities Quality
Reporting (IPFQR) Program
C. Response to Public Comments
Regulation Text
Addendum--Proposed Schedule of Standardized Amounts, Update Factors,
and Rate-of-Increase Percentages Effective With Cost Reporting Periods
Beginning on or After October 1, 2013 and Payment
[[Page 27493]]
Rates for LTCHs Effective With Discharges Occurring on or After October
1, 2013
I. Summary and Background
II. Proposed Changes to the Prospective Payment Rates for Hospital
Inpatient Operating Costs for Acute Care Hospitals for FY 2014
A. Calculation of the Proposed Adjusted Standardized Amount
B. Proposed Adjustments for Area Wage Levels and Cost-of-Living
C. Calculation of the Proposed Prospective Payment Rates
III. Proposed Changes to Payment Rates for Acute Care Hospital
Inpatient Capital-Related Costs for FY 2014
A. Determination of Federal Hospital Inpatient Capital-Related
Prospective Payment Rate Update
B. Calculation of the Proposed Inpatient Capital-Related
Prospective Payments for FY 2014
C. Capital Input Price Index
IV. Proposed Changes to Payment Rates for Excluded Hospitals: Rate-
of-Increase Percentages for FY 2014
V. Proposed Updates to the Payment Rates for the LTCH PPS for FY
2014
A. Proposed LTCH PPS Standard Federal Rate for FY 2014
B. Proposed Adjustment for Area Wage Levels Under the LTCH PPS
for FY 2014
1. Background
2. Proposed Geographic Classifications/Labor Market Area
Definitions
3. Proposed LTCH PPS Labor-Related Share
4. Proposed LTCH PPS Wage Index for FY 2014
5. Proposed Budget Neutrality Adjustment for Changes to the Area
Wage Level Adjustment
C. Proposed LTCH PPS Cost-of-Living Adjustment (COLA) for LTCHs
Located in Alaska and Hawaii
D. Proposed Adjustment for LTCH PPS High-Cost Outlier (HCO)
Cases
E. Computing the Proposed Adjusted LTCH PPS Federal Prospective
Payments for FY 2014
VI. Tables Referenced in this Proposed 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 Proposed 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 Proposed Policy Changes
1. Effects of Proposed Policy on MS-DRGs for Preventable HACs,
Including Infections
2. Effects of Proposed Policy Relating to New Medical Service
and Technology Add-On Payments
3. Effects of Proposed Payment Adjustment for Low-Volume
Hospitals for FY 2014
4. Effects of Extension of the MDH Program
5. Effects of Changes Under the FY 2014 Hospital Value-Based
Purchasing (VBP) Program
6. Effects of the Implementation of the HAC Reduction Program
7. Effects of Proposed Policy Changes Relating to Payments for
Direct GME and IME Costs
8. Effects of Implementation of Rural Community Hospital
Demonstration Program
9. Effects of the Extended Effective Date for Policy on Hospital
Services Furnished Under Arrangements
I. Effects of Proposal Relating to the Furnishing of Acute Care
Inpatient Services by CAHs
J. Effects of Proposed Changes to the COPs for Hospitals
Relating to the Administration of Pneumococcal Vaccines
K. Effects of Proposed Changes in the Capital IPPS
1. General Considerations
2. Results
L. Effects of Proposed Payment Rate Changes and Policy Changes
Under the LTCH PPS
1. Introduction and General Considerations
2. Impact on Rural Hospitals
3. Anticipated Effects of Proposed LTCH PPS Payment Rate Changes
and Policy Changes
4. Effect on the Medicare Program
5. Effect on Medicare Beneficiaries
M. Effects of Proposed Requirements for Hospital Inpatient
Quality Reporting (IQR) Program
N. Effects of Proposed Changes in the PPS-Exempt Cancer Hospital
Quality Reporting (PCHQR) Program
O. Effects of Proposed Changes in the LTCH Quality Reporting
(LTCHQR) Program
P. Effects of Proposed Changes in the Requirements for the
Inpatient Psychiatric Facilities Quality Reporting (IPFQR) Program
II. Alternatives Considered
III. Overall Conclusion
1. Acute Care Hospitals
2. LTCHs
IV. Accounting Statements and Tables
A. Acute Care Hospitals
B. LTCHs
V. Regulatory Flexibility Act (RFA) Analysis
VI. Impact on Small Rural Hospitals
VII. Unfunded Mandate Reform Act (UMRA) Analysis
VIII. Executive Order 12866
Appendix B: Recommendation of Update Factors for Operating Cost
Rates of Payment for Inpatient Hospital Services
I. Background
II. Inpatient Hospital Update for FY 2014
A. Proposed FY 2014 Inpatient Hospital Update
B. Proposed Update for SCHs for FY 2014
C. Proposed FY 2014 Puerto Rico Hospital Update
D. Proposed Update for Hospitals Excluded From the IPPS
E. Proposed Update for LTCHs for FY 2014
III. Secretary's Recommendation
IV. MedPAC Recommendation for Assessing Payment Adequacy and
Updating Payments in Traditional Medicare
I. Executive Summary and Background
A. Executive Summary
1. Purpose and Legal Authority
This proposed rule would make payment and policy changes under the
Medicare inpatient prospective payment systems (IPPS) for operating and
capital-related costs of acute care hospitals as well as for certain
hospitals and hospital units excluded from the IPPS. In addition, it
would make payment and policy changes for inpatient hospital services
provided by long-term care hospitals (LTCHs) under the long-term care
hospital prospective payment system (LTCH PPS). It also would make
policy changes to programs associated with Medicare IPPS hospitals,
IPPS-excluded hospitals, and LTCHs.
Under various statutory authorities, we are proposing to make
changes to the Medicare IPPS, to the LTCH PPS, and to other related
payment methodologies and programs for FY 2014 and subsequent fiscal
years. These statutory authorities include, but are not limited to, the
following:
Section 1886(d) of the Social Security Act (the Act),
which sets forth a system of payment for the operating costs of acute
care hospital inpatient stays under Medicare Part A (Hospital
Insurance) based on prospectively set rates. Section 1886(g) of the Act
requires that, instead of paying for capital-related costs of inpatient
hospital services on a reasonable cost basis, the Secretary use a
prospective payment system (PPS).
Section 1886(d)(1)(B) of the Act, which specifies that
certain hospitals and hospital units are excluded from the IPPS. These
hospitals and units are: rehabilitation hospitals and units; LTCHs;
psychiatric hospitals and units; children's hospitals; and cancer
hospitals. Religious nonmedical health care institutions (RNHCIs) are
also excluded from the IPPS.
Sections 123(a) and (c) of Public Law 106-113 and section
307(b)(1) of Public Law 106-554 (as codified under section 1886(m)(1)
of the Act), which provide for the development and implementation of a
prospective payment system for payment for inpatient hospital services
of long-term care hospitals (LTCHs) described in section
1886(d)(1)(B)(iv) of the Act.
Sections 1814(l), 1820, and 1834(g) of the Act, which
specifies that
[[Page 27494]]
payments are made to critical access hospitals (CAHs) (that is, rural
hospitals or facilities that meet certain statutory requirements) for
inpatient and outpatient services and that these payments are generally
based on 101 percent of reasonable cost.
Section 1866(k) of the Act, as added by section 3005 of
the Affordable Care Act, which establishes a quality reporting program
for hospitals described in section 1886(d)(1)(B)(v) of the Act,
referred to as ``PPS-Exempt Cancer Hospitals.''
Section 1886(d)(3)(A)(vi) of the Act, which authorizes us
to maintain budget neutrality by adjusting the national standardized
amount, to eliminate the estimated effect of changes in coding or
classification that do not reflect real changes in case-mix.
Section 1886(d)(4)(D) of the Act, which addresses certain
hospital-acquired conditions (HACs), including infections. Section
1886(d)(4)(D) of the Act specifies that, by October 1, 2007, the
Secretary was required to select, in consultation with the Centers for
Disease Control and Prevention (CDC), at least two conditions that: (a)
are high cost, high volume, or both; (b) are assigned to a higher
paying MS-DRG when present as a secondary diagnosis (that is,
conditions under the MS-DRG system that are CCs or MCCs); and (c) could
reasonably have been prevented through the application of evidence-
based guidelines. Section 1886(d)(4)(D) of the Act also specifies that
the list of conditions may be revised, again in consultation with CDC,
from time to time as long as the list contains at least two conditions.
Section 1886(d)(4)(D)(iii) of the Act requires that hospitals,
effective with discharges occurring on or after October 1, 2007, submit
information on Medicare claims specifying whether diagnoses were
present on admission (POA). Section 1886(d)(4)(D)(i) of the Act
specifies that effective for discharges occurring on or after October
1, 2008, Medicare no longer assigns an inpatient hospital discharge to
a higher paying MS-DRG if a selected condition is not POA.
Section 1886(a)(4) of the Act, which specifies that costs
of approved educational activities are excluded from the operating
costs of inpatient hospital services. Hospitals with approved graduate
medical education (GME) programs are paid for the direct costs of GME
in accordance with section 1886(h) of the Act.
Section 1886(b)(3)(B)(viii) of the Act, which requires the
Secretary to reduce the applicable percentage increase in payments to a
subsection (d) hospital for a fiscal year if the hospital does not
submit data on measures in a form and manner, and at a time, specified
by the Secretary.
Section 1886(o) of the Act, which requires the Secretary
to establish a Hospital Value-Based Purchasing (VBP) Program under
which value-based incentive payments are made in a fiscal year to
hospitals meeting performance standards established for a performance
period for such fiscal year.
Section 1886(p) of the Act, as added by section 3008 of
the Affordable Care Act, which establishes an adjustment to hospital
payments for hospital-acquired conditions (HACs), or a Hospital-
Acquired Condition (HAC) Reduction Program, under which payments to
applicable hospitals are adjusted to provide an incentive to reduce
hospital-acquired conditions, effective for discharges beginning on
October 1, 2014.
Section 1886(q) of the Act, as added by section 3025 of
the Affordable Care Act and amended by section 10309 of the Affordable
Care Act, which establishes the ``Hospital Readmissions Reduction
Program'' effective for discharges from an ``applicable hospital''
beginning on or after October 1, 2012, under which payments to those
hospitals under section 1886(d) of the Act will be reduced to account
for certain excess readmissions.
Section 1886(r) of the Act), as added by section 3313 of
the Affordable Care Act, which provides for a reduction to
disproportionate share payments under section 1886(d)(5)(f) of the Act
and for a new uncompensated care payment to eligible hospitals.
Specifically, section 1886(r) of the Act now requires that, for
``fiscal year 2014 and each subsequent fiscal year,'' ``subsection (d)
hospitals'' that would otherwise receive a ``disproportionate share
payment . . . made under subsection (d)(5)(F)'' will receive two
separate payments: (1) 25 percent of the amount they previously would
have received under subsection (d)(5)(F) for DSH (``the empirically
justified amount''), and (2) an additional payment for the DSH
hospital's proportion of uncompensated care, determined as the product
of three factors. These three factors are: (1) 75 percent of the
payments that would otherwise be made under subsection (d)(5)(F); (2) 1
minus the percent change in the percent of individuals under the age of
65 who are uninsured (minus 0.1 percentage points for FY 2014, and
minus 0.2 percentage points for FY 2015 through FY 2017); and (3) a
hospital's uncompensated care amount relative to the uncompensated care
amount of all DSH hospitals expressed as a percentage.
Section 1886(s)(4) of the Act, as added and amended by
section 3401(f) and 10322(a) of the Affordable Care Act, respectively,
which requires the Secretary to implement a quality reporting program
for inpatient psychiatric hospitals and psychiatric units. Under this
program, known as the Inpatient Psychiatric Facility Quality Reporting
(IPFQR) Program, beginning with FY 2014, the Secretary must reduce any
annual update to a standard Federal rate for discharges occurring
during a fiscal year by 2.0 percentage points for any inpatient
psychiatric hospital or psychiatric unit that does not comply with
quality data submission requirements with respect to an applicable
fiscal year.
2. Summary of the Major Provisions
a. MS-DRG Documentation and Coding Adjustment
Section 631 of the American Taxpayer Relief Act (ATRA, Pub. L. 112-
240) amended section 7(b)(1)(B) of Public Law 110-90 to require the
Secretary to make a recoupment adjustment to the standardized amount of
Medicare payments to acute care hospitals to account for changes in MS-
DRG documentation and coding that do not reflect real changes in case-
mix, totaling $11 billion over a 4-year period of FYs 2014, 2015, 2016,
and 2017. This adjustment represents the amount of the increase in
aggregate payments as a result of not completing the prospective
adjustment authorized under section 7(b)(1)(A) of Public Law 110-90
until FY 2013. Prior to the ATRA, this amount could not have been
recovered under Public Law 110-90.
While our actuaries estimate that a -9.3 percent adjustment to the
standardized amount would be necessary if CMS were to fully recover the
$11 billion recoupment required by section 631 of the ATRA in FY 2014,
it is often our practice to delay or phase in rate adjustments over
more than one year, in order to moderate the effects on rates in any
one year. Therefore, consistent with the policies that we have adopted
in many similar cases, we are proposing a -0.8 percent recoupment
adjustment to the standardized amount in FY 2014. Although we are not
proposing an additional prospective adjustment in FY 2014 for the
cumulative MS-DRG documentation and coding effects through FY 2010, we
are soliciting public comments as to whether any portion of the
proposed -0.8 percent recoupment adjustment to the operating
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IPPS standardized amount should be reduced and instead applied as a
prospective adjustment to the operating IPPS standardized amount (and
hospital-specific rates) for the cumulative MS-DRG documentation and
coding effect through FY 2010.
b. Proposed Refinement of the MS-DRG Relative Weight Calculation
Beginning in FY 2007, we implemented relative weights for DRGs
based on cost report data instead of charge information. To address the
issue of charge compression (the hospital practice of applying higher
charges to lower cost items and applying lesser charges to higher cost
items) when using cost report data to set the MS-DRG relative weights,
in FYs 2009 and 2010, we created additional cost centers on the
Medicare cost report to distinguish implantable devices from other
medical supplies, MRIs and CT scans, respectively, from other radiology
services, and cardiac catheterization from other cardiology services.
As compared to previous years, we currently have a significant volume
of hospitals completing all, or some, of these new cost centers on the
Medicare cost report. In section II.E. of the preamble of this proposed
rule, we provide various data analyses based on comparison of the FY
2014 relative weights computed using 15 cost-to-charge ratios (CCRs),
as we have done in the past, and the FY 2014 relative weights computed
using 19 CCRs, with distinct CCRs for implantable devices, MRIs, CT
scans, and cardiac catheterization.
We believe that the analytic findings described in section II.E. of
the preamble of this proposed rule support our original decision to
break out and create new cost centers for implantable devices, MRIs, CT
scans, and cardiac catheterization. Therefore, beginning in FY 2014, we
are proposing to calculate the MS-DRG relative weights using 19 CCRs,
creating distinct CCRs from cost report data for implantable devices,
MRIs, CT scans, and cardiac catheterization.
c. Proposed Rebasing and Revision of the Hospital Market Baskets for
Acute Care Hospitals
In section IV. of the preamble of this proposed rule, we are
proposing to rebase and revise the acute care hospital operating and
capital market baskets used to update IPPS payment rates. For both
market baskets, we are proposing to update the base year cost weights
from a FY 2006 base year to a FY 2010 base year. We also are proposing
to recalculate the labor-related share using the proposed FY 2010-based
hospital market basket, for discharges occurring on or after October 1,
2013. We would use the FY 2010-based market basket in developing the FY
2014 update factor for the operating and capital prospective payment
rates and the FY 2014 update factor for the excluded hospital rate-of-
increase limits. We also are setting forth the data sources used to
determine the proposed revised market basket relative weights.
d. Reduction of Hospital Payments for Excess Readmissions
We are proposing a number of changes in policies to implement
section 1886(q) of the Act, as added by section 3025 of the Affordable
Care Act, which establishes the Hospital Readmissions Reduction
Program. The Hospital Readmissions Reduction Program requires a
reduction to a hospital's base operating DRG payment to account for
excess readmissions of selected applicable conditions. These conditions
are acute myocardial infarction, heart failure, and pneumonia. For FY
2014, we are proposing additional exclusions to the three existing
readmission measures (that is, the excess readmission ratio) that
account for planned readmissions. We also are proposing additional
readmission measures to be used in the payment determination for FY
2015. In addition, we are proposing that the readmissions payment
adjustment factors for FY 2014 can be no more than a 2-percent
reduction (there is a 1-percent cap in FY 2013), consistent with the
statute. We are proposing a change in the methodology we use to
calculate the readmissions payment adjustment factors to make it more
consistent with the calculation of the excess readmission ratio.
e. Hospital Value-Based Purchasing (VBP) Program
Section 1886(o) of the Act requires the Secretary to establish a
Hospital Value-Based Purchasing (VBP) Program under which value-based
incentive payments are made in a fiscal year to hospitals meeting
performance standards established for a performance period for such
fiscal year. Both the performance standards and the performance period
for a fiscal year are to be established by the Secretary.
In this proposed rule, we are outlining payment details for the FY
2014 Hospital VBP Program. In addition, we are proposing numerous
policies for the FY 2016 Hospital VBP Program, including measures,
performance standards, and performance and baseline periods. We also
are proposing a disaster/extraordinary circumstances waiver process,
domain reclassification and weighting based on CMS' National Quality
Strategy for the FY 2017 Hospital VBP Program, and certain measures,
performance and baseline periods, and performance standards for the FY
2017 through FY 2019 Programs.
f. Hospital-Acquired Condition (HAC) Reduction Program
In this proposed rule, we are proposing measures, scoring, and risk
adjustment methodology to implement the FY 2015 payment adjustment
under the HAC Reduction Program. Section 1886(p) of the Act, as added
under section 3008(a) of the Affordable Care Act, establishes an
adjustment to hospital payments for HACs, or a HAC Reduction program,
under which payments to applicable hospitals are adjusted to provide an
incentive to reduce HACs, effective for discharges beginning on October
1, 2014 and for subsequent program years. The amount of payment shall
be equal to 99 percent of the amount of payment that would otherwise
apply to such discharges under section 1886(d) or 1814(b)(3) of the
Act, as applicable.
g. Counting of Inpatient Days for Medicare Payment or Eligibility
Purposes
In response to a comment we received on the FY 2013 IPPS/LTCH PPS
final rule and consistent with the inpatient day counting rules for DSH
as clarified in the FY 2010 IPPS/RY 2010 LTCH PPS final rule, we are
proposing that patient days associated with maternity patients who were
admitted as inpatients and were receiving ancillary labor and delivery
services at the time the inpatient routine census is taken, regardless
of whether the patient actually occupied a routine bed prior to
occupying an ancillary labor and delivery bed and regardless of whether
the patient occupies a ``maternity suite'' in which labor, delivery
recovery, and postpartum care all take place in the same room, would be
included in the Medicare utilization calculation. We understand that
including labor and delivery inpatient days in the Medicare utilization
calculation invariably would reduce direct GME payments because direct
GME payments are based, in part, on a hospital's Medicare utilization
ratio and the denominator of that ratio, which includes the hospital's
total inpatient days, would increase at a higher rate than the
numerator of the ratio, which includes the hospital's Medicare
inpatient days. However, because the Medicare utilization ratio is a
comparison of a hospital's total
[[Page 27496]]
Medicare inpatient days to its total inpatient days, we believe that
revising the ratio to include labor and delivery days is appropriate
because they are inpatient days and therefore should be counted as
such. We are proposing to include labor and delivery days as inpatient
days in the Medicare utilization calculation effective for cost
reporting periods beginning on or after October 1, 2013.
h. Proposed Changes to the DSH Payment Adjustment and the Provision of
Additional Payment for Uncompensated Care
Section 3133 of the Affordable Care Act modified the Medicare
disproportionate share hospital (DSH) payment methodology beginning in
FY 2014. Currently, Medicare DSHs qualify for a DSH payment adjustment
under a statutory formula that considers their Medicare utilization due
to beneficiaries who also receive Supplemental Security Income benefits
and their Medicaid utilization. Under section 1886(r) of the Act, which
was added by section 3133 of the Affordable Care Act, starting in FY
2014, DSHs will receive 25 percent of the amount they previously would
have received under the current statutory formula for Medicare DSH
payments. The remaining amount, equal to 75 percent of what otherwise
would have been paid as Medicare DSH payments, will be paid as
additional payments after the amount is reduced for changes in the
percentage of individuals that are uninsured. Each Medicare DSH will
receive its additional amount based on its share of the total amount of
uncompensated care for all Medicare DSH hospitals for a given time
period. In this proposed rule, we are proposing to implement these
statutory changes.
i. Proposal Relating to Admission and Medical Review Criteria for
Hospital Inpatient Services Under Medicare Part A
To reduce uncertainty regarding the requirements for payments to
hospitals and CAHs under Medicare Part A related to when a Medicare
beneficiary should be admitted as a hospital inpatient, in this
proposed rule, we are proposing to clarify the rules governing
physician orders of hospital inpatient admissions for payment under
Medicare Part A. We are proposing to clarify and specify in the
regulations that an individual becomes an inpatient of a hospital,
including a critical access hospital, pursuant to an order for
inpatient admission by a physician or other qualified practitioner and,
therefore, the order is required for payment of hospital inpatient
services under Medicare Part A. We are proposing that hospital
inpatient admissions spanning 2 midnights in the hospital would
generally qualify as appropriate for payment under Medicare Part A.
This would revise our guidance to hospitals and physicians relating to
when hospital inpatient admissions are determined reasonable and
necessary for payment under Part A. We also are proposing to use our
exceptions and adjustments authority under section 1886(d)(5)(I)(i) of
the Act to offset the additional IPPS expenditures under this proposal
by reducing the standardized amount, the hospital-specific amount, and
the Puerto Rico-specific standardized amount by 0.2 percent.
j. Proposed LTCH PPS Standard Federal Rate
In section VIII.A. of the preamble of this proposed rule, we
present the proposed LTCH PPS standard Federal rate for FY 2014, which
includes a proposed adjustment factor of 0.98734 for the second year of
the 3-year phase-in of the permanent one-time adjustment to the
standard Federal rate. In addition, under the LTCH Quality Reporting
(LTCHQR) Program, the proposed annual update to the standard Federal
rate will be reduced by 2 percentage points for LTCHs that fail to
submit data for FY 2014 on specific measures under section 3004 of the
Affordable Care Act.
k. Expiration of Certain Payment Rules for LTCH Services and Research
on the Development of a Patient Criteria-Based Payment Adjustment Under
the LTCH PPS
In section VIII.D. of the preamble of this proposed rule, we note
the expiration of the moratorium on the full implementation of the ``25
percent threshold'' payment adjustment to LTCHs under the LTCH PPS for
cost reporting periods beginning on or after October 1, 2013.
In section VIII.E. of the preamble of this proposed rule, we
describe the results of research being done by a CMS contractor,
Kennell and Associates (Kennell) and its subcontractor, Research
Triangle Institute, International (RTI), on the development of a
payment adjustment under the LTCH PPS based on the establishment of
LTCH patient criteria.
l. 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 proposed rule, we are proposing to make several changes to:
(1) The measure set, including the removal of some measures, the
refinement of some measures, and the adoption of several new measures;
(2) the administrative processes; and (3) the validation methodologies.
We also are proposing to allow hospitals the option of reporting the
measures in four measure sets electronically for the FY 2016 payment
determination. These proposed changes would improve the timeliness and
efficiency of the Hospital IQR Program and begin the process of
incorporating electronic reporting into the Hospital IQR Program.
3. Summary of Costs and Benefits
Proposed Adjustment for MS-DRG Documentation and Coding
Changes. We are proposing a -0.8 percent recoupment adjustment to the
standardized amount for FY 2014 to implement, in part, the requirement
of section 631 of the ATRA that the Secretary make an adjustment
totaling $11 billion over a 4-year period of FYs 2014, 2015, 2016, and
2017. This recoupment adjustment represents the amount of the increase
in aggregate payments as a result of not completing the prospective
adjustment authorized under section 7(b)(1)(A) of Public Law 110-90
until FY 2013. Prior to the ATRA, this amount could not have been
recovered under Public Law110-90.
While our actuaries estimate that a -9.3 percent recoupment
adjustment to the standardized amount would be necessary if CMS were to
fully recover the $11 billion recoupment required by section 631 of the
ATRA in FY 2014, it is often our practice to delay or phase in rate
adjustments over more than one year, in order to moderate the effects
on rates in any one year. Therefore, consistent with the policies that
we have adopted in many similar cases, we are proposing a -0.8 percent
recoupment adjustment to the standardized amount in FY 2014. We
estimate that this level of adjustment would recover $0.96 billion in
FY 2014, with approximately $10.4 billion remaining to be addressed. We
are not proposing any future adjustments at this time but note that if
recoupment adjustments of approximately -0.8 percent are implemented in
FYs 2014, 2015, 2016, and 2017, we estimate that the entire $11 billion
will be recovered
[[Page 27497]]
by the end of the statutory 4-year timeline.
Proposed Refinement of the MS-DRG Relative Weight
Calculation. We refer readers to section VI.C. of Appendix A of this
proposed rule for the overall IPPS operating impact, which includes the
impact for the proposed refinement of the MS-DRG relative weight
calculation. This proposed impact models payments to various hospital
types using relative weights developed from 19 CCRs as compared to 15
CCRs. As with other proposed changes to the MS-DRGs, these proposed
changes are to be implemented in a budget neutral manner.
Proposed Rebasing and Revision of the Hospital Market
Baskets for Acute Care Hospitals. The proposed FY 2010-based IPPS
market basket update (as measured by percentage increase) for FY 2014
is currently forecasted to be the same as the market basket update
based on the FY 2006-based IPPS market basket at 2.5 percent (currently
used under the IPPS). Therefore, we are projecting that there would be
no fiscal impact on the IPPS operating payment rates in FY 2014 as a
result of the proposed rebasing and revision of the IPPS market basket.
The proposed FY 2010-based IPPS capital input price index update
(as measured by percentage increase) for FY 2014 is currently
forecasted to be 1.2 percent, 0.2 percentage points lower than the
update based on the FY 2006-based capital input price index. Therefore,
we are projecting that there would be a fiscal impact of -$16 million
to the IPPS capital payments in FY 2014 as a result of this proposal
(0.2 percentage points * annual capital IPPS payments of approximately
$8 billion).
In addition, we are proposing to update the labor-related share
under the IPPS for FY 2014 based on the proposed FY 2010-based IPPS
market basket, which would result in a labor-related share of 69.6
percent (compared to the FY 2013 labor-related share of 68.8) or 62
percent, depending on which results in higher payments to the hospital.
For FY 2014, the proposed labor-related share for the Puerto Rico-
specific standardized amount would be either 63.2 percent or 62
percent, depending on which results in higher payments to the hospital.
We are projecting that there would be no impact on aggregate IPPS
payments as a result of this proposal due to the statutory requirement
that any changes to the IPPS area wage adjustment (including the labor-
related share) are adopted in a budget neutral manner.
Reduction to Hospital Payments for Excess Readmissions.
The provisions of section 1886(q) of the Act which establishes the
Hospital Readmissions Reduction Program are not budget neutral. For FY
2014, a hospital's readmissions payment adjustment factor is the higher
of a ratio of a hospital's aggregate payments for excess readmissions
to its aggregate payments for all discharges, or 0.98 (that is, or a 2-
percent reduction). In this proposed rule, we estimate that the
reduction to a hospital's base operating DRG payment amount to account
for excess readmissions of selected applicable conditions under the
Hospital Readmissions Reduction Program will result in a 0.2 percent
decrease, or approximately -$175 million, in payments to hospitals for
FY 2014.
Value-Based Incentive Payments Under the Hospital Value-
Based Purchasing (VBP) Program. We estimate that there will be no net
financial impact to the Hospital VBP Program for FY 2014 in the
aggregate because, by law, the amount available for value-based
incentive payments under the program in a given fiscal year must be
equal to the total amount of base operating DRG payment amount
reductions for that year, as estimated by the Secretary. The estimated
amount of base operating DRG payment amount reductions for FY 2014, and
therefore the estimated amount available for value-based incentive
payments for FY 2014 discharges, is approximately $1.1 billion. We
believe that the program's benefits will be seen in improved patient
outcomes, safety, and in the patient's experience of care. We intend to
provide an updated analysis of the program's estimated dollar impact
for the FY 2014 program year in the FY 2014 IPPS/LTCH PPS final rule.
However, we cannot estimate these benefits in actual dollar and patient
terms.
Implementation of the HAC Reduction Program for FY 2014.
We note that there is no payment impact for FY 2014 for implementing
the HAC Reduction Program. For FY 2015, we are presenting the overall
impact of the HAC Reduction Program provision along with other IPPS
payment provision impacts in section I.G. of Appendix A of this
proposed rule.
Counting of Inpatient Days in the Medicare Utilization
Calculation. We believe our proposal to include labor and delivery days
as inpatient days in the Medicare utilization calculation would result
in a savings of approximately $15 million for FY 2014.
Changes to the Medicare DSH Payment Adjustment and
Provision of Additional Payment for Uncompensated Care. Under section
1886(r) of the Act (as added by section 3313 of the Affordable Care
Act), disproportionate share payments to hospitals under section
1886(d)(5)(F) of the Act are reduced and an additional payment to
eligible hospitals will be made beginning in FY 2014. Hospitals that
receive Medicare DSH payments will receive 25 percent of the amount
they previously would have received under the current statutory formula
for Medicare DSH payments. The remainder, equal to 75 percent of what
otherwise would have been paid as Medicare DSH payments, will be the
basis for additional payments after the amount is reduced for changes
in the percentage of individuals that are uninsured and additional
statutory adjustments. Each hospital that receives Medicare DSH
payments will receive an additonal payment based on its share of the
total uncompensated care amount reported by Medicare DSHs. The
reduction to Medicare DSH payments is not budget neutral.
We are proposing that 75 percent of what otherwise would have been
paid for Medicare DSH payments is adjusted to 88.8 percent of that
amount for changes in the percentage of individuals that are uninsured
and additional statutory adjustments. In other words, Medicare DSH
payments prior to the application of section 3133 are adjusted to 66.6
percent (the product of 75 percent and 88.8 percent) and that resulting
payment amount is used to create an additional payment for a hospital's
relative uncompensated care. As a result, we project that the reduction
of Medicare DSH payments and the inclusion of the additional payments
will reduce payments overall by 0.9 percent as compared to Medicare DSH
payments prior to the implementation of section 3133. The proposed
additional payment costs have redistributive effects based on a
hospital's uncompensated care amount relative to the uncompensated care
amount for all hospitals that are estimated to receive Medicare DSH
payments, and the payment amount is not tied to a hospital's
discharges.
Proposal Relating to Admission and Medical Review Criteria
for Hospital Inpatient Services Under Medicare Part A. In this proposed
rule, we are making a proposal relating to admission and medical review
criteria for hospital inpatient admissions under Medicare Part A. One
aspect of this proposal is that hospital inpatient admissions spanning
2 midnights in the hospital would generally qualify as appropriate for
payment under
[[Page 27498]]
Medicare Part A. Our actuaries estimate that the proposal would
increase IPPS expenditures by approximately $220 million due to an
expected net increase in inpatient encounters. We are proposing to use
our exceptions and adjustments authority under section 1886(d)(5)(I)(i)
of the Act to make a reduction of 0.2 percent to the standardized
amount, the Puerto Rico standardized amount, and the hospital-specific
payment rate to offset this estimated $220 million in additional IPPS
expenditures. We also are proposing to apply that 0.2 percent reduction
to the capital Federal rates using our authority under section 1886(g)
of the Act.
Hospital Inpatient Quality Reporting (IQR) Program. We are
proposing that hospitals participating in the Hospital IQR Program will
have the option to report a subset of measures electronically in CY
2014 for the FY 2016 payment determination. Under this proposal,
hospitals may choose to report the measures in four measure sets
electronically or as chart-abstracted measures in CY 2014. For the FY
2016 payment determination, we also are proposing to remove seven
chart-abstracted measures and one structural measure. We also are
proposing to adopt five new claims-based measures for the FY 2016
payment determination and subsequent years. We are proposing, for the
FY 2016 payment determination and subsequent years, to validate two
additional chart-abstracted HAI measures: MRSA bacteremia, and C.
difficile. We also are proposing to reduce the number of records used
for HAI validation from 48 records per year to 36 records per year
beginning with the FY 2015 payment determination. Finally, we are
proposing to allow hospitals to submit patient charts for purposes of
validation either in paper form or by means of electronic transmission.
We believe the proposed changes to the measure set, processes, and
validation methodologies, the proposal for electronic submission of
records for validation, as well as the proposal to allow hospitals to
report certain measures electronically for the FY 2016 payment
determination will result in improved program efficiency and begin the
process of incorporating electronic reporting into the program. We
estimate that the combination of these proposed changes and the
reduction in measures mentioned above will reduce burden hours by
700,000 hours annually.
Proposed Update to the LTCH PPS Standard Federal Rate and
Other Payment Factors. Based on the best available data for the 423
LTCHs in our database, we estimate that the proposed changes we are
presenting in the preamble and Addendum of this proposed rule,
including the proposed update to the standard Federal rate for FY 2014,
the proposed changes to the area wage adjustment for FY 2014, and the
proposed changes to short-stay outliers and high-cost outliers, would
result in an increase in estimated payments from FY 2013 of
approximately $62 million (or 1.1 percent). Although we generally
project an increase in proposed payments for all LTCHs in FY 2014 as
compared to FY 2013, we expect rural LTCHs to experience slightly lower
increases than the national average due to decreases in their wage
index for FY 2014 compared to FY 2013. In addition, under current law,
our moratoria on the full implementation of the ``25-percent
threshold'' payment adjustment policy will expire for certain LTCHs for
cost reporting periods beginning on or after October 1, 2013. These
regulatory moratoria extended, for an additional year, the 5-year
statutory moratorium on the application of the ``25-percent threshold''
payment adjustment policy as provided by section 114(c) of the MMSEA,
as amended by section 4302(a) of the ARRA and sections 3106(a) and
10312(a) of the Affordable Care Act, which expired for cost reporting
periods beginning on or after October 1, 2012 (``October LTCHs''), and
for other LTCHs and LTCH satellite facilities for cost reporting
periods beginning on or after July 1, 2012 (``July LTCHs'') (77 FR
53483 through 53484, as amended by the FY 2013 IPPS/LTCH PPS correcting
amendment (77 FR 63751 through 63753)), as explained in section VIII.D.
of the preamble of this proposed rule. We estimate that the expiration
of the regulatory moratoria will result in a reduction in payments of
$190 million to LTCHs. Overall, we estimate that the effect of the
changes we are proposing for FY 2014 in conjunction with the expiration
of the regulatory moratoria would result in a decrease in aggregate
LTCH PPS payments in FY 2014 relative to FY 2013 of approximately -$128
million (that is, the estimated increase of $62 million plus the
estimated reduction of $190 million, as described above).
B. Summary
1. Acute Care Hospital Inpatient Prospective Payment System (IPPS)
Section 1886(d) of the Social Security Act (the Act) sets forth a
system of payment for the operating costs of acute care hospital
inpatient stays under Medicare Part A (Hospital Insurance) based on
prospectively set rates. Section 1886(g) of the Act requires the
Secretary to use a prospective payment system (PPS) to pay for the
capital-related costs of inpatient hospital services for these
``subsection (d) hospitals.'' Under these PPSs, Medicare payment for
hospital inpatient operating and capital-related costs is made at
predetermined, specific rates for each hospital discharge. Discharges
are classified according to a list of diagnosis-related groups (DRGs).
The base payment rate is comprised of a standardized amount that is
divided into a labor-related share and a nonlabor-related share. The
labor-related share is adjusted by the wage index applicable to the
area where the hospital is located. If the hospital is located in
Alaska or Hawaii, the nonlabor-related share is adjusted by a cost-of-
living adjustment factor. This base payment rate is multiplied by the
DRG relative weight.
If the hospital treats a high percentage of certain low-income
patients, it receives a percentage add-on payment applied to the DRG-
adjusted base payment rate. This add-on payment, known as the
disproportionate share hospital (DSH) adjustment, provides for a
percentage increase in Medicare payments to hospitals that qualify
under either of two statutory formulas designed to identify hospitals
that serve a disproportionate share of low-income patients. For
qualifying hospitals, the amount of this adjustment varies based on the
outcome of the statutory calculations.
If the hospital is an approved teaching hospital, it receives a
percentage add-on payment for each case paid under the IPPS, known as
the indirect medical education (IME) adjustment. This percentage
varies, depending on the ratio of residents to beds.
Additional payments may be made for cases that involve new
technologies or medical services that have been approved for special
add-on payments. To qualify, a new technology or medical service must
demonstrate that it is a substantial clinical improvement over
technologies or services otherwise available, and that, absent an add-
on payment, it would be inadequately paid under the regular DRG
payment.
The costs incurred by the hospital for a case are evaluated to
determine whether the hospital is eligible for an additional payment as
an outlier case. This additional payment is designed to protect the
hospital from large financial losses due to unusually expensive cases.
Any eligible outlier payment is added to the DRG-adjusted base payment
rate, plus any DSH, IME, and new technology or medical service add-on
adjustments.
[[Page 27499]]
Although payments to most hospitals under the IPPS are made on the
basis of the standardized amounts, some categories of hospitals are
paid in whole or in part based on their hospital-specific rate, which
is determined from their costs in a base year. For example, sole
community hospitals (SCHs) receive the higher of a hospital-specific
rate based on their costs in a base year (the highest of FY 1982, FY
1987, FY 1996, or FY 2006) or the IPPS Federal rate based on the
standardized amount. Through and including FY 2006, a Medicare-
dependent, small rural hospital (MDH) received the higher of the
Federal rate or the Federal rate plus 50 percent of the amount by which
the Federal rate is exceeded by the higher of its FY 1982 or FY 1987
hospital-specific rate. As discussed below, for discharges occurring on
or after October 1, 2007, but before October 1, 2013, an MDH will
receive the higher of the Federal rate or the Federal rate plus 75
percent of the amount by which the Federal rate is exceeded by the
highest of its FY 1982, FY 1987, or FY 2002 hospital-specific rate. (We
note that the statutory provision for payments to MDHs expires at the
end of FY 2013, that is, on September 30, 2013.) SCHs are the sole
source of care in their areas, and MDHs are a major source of care for
Medicare beneficiaries in their areas. Specifically, section
1886(d)(5)(D)(iii) of the Act defines an SCH as a hospital that is
located more than 35 road miles from another hospital or that, by
reason of factors such as isolated location, weather conditions, travel
conditions, or absence of other like hospitals (as determined by the
Secretary), is the sole source of hospital inpatient services
reasonably available to Medicare beneficiaries. In addition, certain
rural hospitals previously designated by the Secretary as essential
access community hospitals are considered SCHs. Section
1886(d)(5)(G)(iv) of the Act defines an MDH as a hospital that is
located in a rural area, has not more than 100 beds, is not an SCH, and
has a high percentage of Medicare discharges (not less than 60 percent
of its inpatient days or discharges in its cost reporting year
beginning in FY 1987 or in two of its three most recently settled
Medicare cost reporting years). Both of these categories of hospitals
are afforded this special payment protection in order to maintain
access to services for beneficiaries.
Section 1886(g) of the Act requires the Secretary to pay for the
capital-related costs of inpatient hospital services ``in accordance
with a prospective payment system established by the Secretary.'' The
basic methodology for determining capital prospective payments is set
forth in our regulations at 42 CFR 412.308 and 412.312. Under the
capital IPPS, payments are adjusted by the same DRG for the case as
they are under the operating IPPS. Capital IPPS payments are also
adjusted for IME and DSH, similar to the adjustments made under the
operating IPPS. In addition, hospitals may receive outlier payments for
those cases that have unusually high costs.
The existing regulations governing payments to hospitals under the
IPPS are located in 42 CFR Part 412, Subparts A through M.
2. Hospitals and Hospital Units Excluded From the IPPS
Under section 1886(d)(1)(B) of the Act, as amended, certain
hospitals and hospital units are excluded from the IPPS. These
hospitals and units are: Rehabilitation hospitals and units; long-term
care hospitals (LTCHs); psychiatric hospitals and units; children's
hospitals; and cancer hospitals. Religious nonmedical health care
institutions (RNHCIs) are also excluded from the IPPS. Various sections
of the Balanced Budget Act of 1997 (BBA, Pub. L. 105-33), the Medicare,
Medicaid and SCHIP [State Children's Health Insurance Program] Balanced
Budget Refinement Act of 1999 (BBRA, Pub. L. 106-113), and the
Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act
of 2000 (BIPA, Pub. L. 106-554) provide for the implementation of PPSs
for rehabilitation hospitals and units (referred to as inpatient
rehabilitation facilities (IRFs)), LTCHs, and psychiatric hospitals and
units (referred to as inpatient psychiatric facilities (IPFs)). (We
note that the annual updates to the LTCH PPS are now included as part
of the IPPS annual update document. Updates to the IRF PPS and IPF PPS
are issued as separate documents.) Children's hospitals, cancer
hospitals, and RNHCIs continue to be paid solely under a reasonable
cost-based system subject to a rate-of-increase ceiling on inpatient
operating costs.
The existing regulations governing payments to excluded hospitals
and hospital units are located in 42 CFR Parts 412 and 413.
3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)
The Medicare prospective payment system (PPS) for LTCHs applies to
hospitals described in section 1886(d)(1)(B)(iv) of the Act effective
for cost reporting periods beginning on or after October 1, 2002. The
LTCH PPS was established under the authority of sections 123 of the
BBRA and section 307(b) of the BIPA (as codified under section
1886(m)(1) of the Act). During the 5-year (optional) transition period,
a LTCH's payment under the PPS was based on an increasing proportion of
the LTCH Federal rate with a corresponding decreasing proportion based
on reasonable cost principles. Effective for cost reporting periods
beginning on or after October 1, 2006, all LTCHs are paid 100 percent
of the Federal rate. The existing regulations governing payment under
the LTCH PPS are located in 42 CFR Part 412, Subpart O. Beginning
October 1, 2009, we issue the annual updates to the LTCH PPS in the
same documents that update the IPPS (73 FR 26797 through 26798).
4. Critical Access Hospitals (CAHs)
Under sections 1814(l), 1820, and 1834(g) of the Act, payments made
to critical access hospitals (CAHs) (that is, rural hospitals or
facilities that meet certain statutory requirements) for inpatient and
outpatient services are generally based on 101 percent of reasonable
cost. Reasonable cost is determined under the provisions of section
1861(v)(1)(A) of the Act and existing regulations under 42 CFR Parts
413 and 415.
5. Payments for Graduate Medical Education (GME)
Under section 1886(a)(4) of the Act, costs of approved educational
activities are excluded from the operating costs of inpatient hospital
services. Hospitals with approved graduate medical education (GME)
programs are paid for the direct costs of GME in accordance with
section 1886(h) of the Act. The amount of payment for direct GME costs
for a cost reporting period is based on the hospital's number of
residents in that period and the hospital's costs per resident in a
base year. The existing regulations governing payments to the various
types of hospitals are located in 42 CFR Part 413.
C. Provisions of the Patient Protection and Affordable Care Act (Pub.
L. 111-148), the Health Care and Education Reconciliation Act of 2010
(Pub. L. 111-152), and the American Taxpayer Relief Act of 2012 (ATRA)
(Pub. L. 112-240)
The Patient Protection and Affordable Care Act (Pub. L. 111-148),
enacted on March 23, 2010, and the Health Care and Education
Reconciliation Act of 2010 (Pub. L. 111-152), enacted on March 30,
2010, made a number of changes that affect the IPPS and the LTCH PPS.
(Pub. L. 111-148 and Pub. L. 111-152 are collectively referred to as
the ``Affordable Care Act.'') A number of
[[Page 27500]]
the provisions of the Affordable Care Act affect the updates to the
IPPS and the LTCH PPS and providers and suppliers. The provisions of
the Affordable Care Act that were applicable to the IPPS and the LTCH
PPS for FYs 2010, 2011, and 2012 were implemented in the June 2, 2010
Federal Register notice (75 FR 31118), the FY 2011 IPPS/LTCH PPS final
rule (75 FR 50042) and the FY 2012 IPPS/LTCH PPS final rule (76 FR
51476).
The American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-240),
enacted on January 2, 2013, also made a number of changes that affect
the IPPS. We announced changes related to certain IPPS provisions for
FY 2013 pursuant to sections 605 and 606 of Public Law 112-240 in a
notice issued in the Federal Register on March 7, 2013 (78 FR 14689).
1. The Patient Protection and Affordable Care Act (Pub. L. 111-148) and
the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-
152)
In this proposed rule, we are proposing to implement, or continue
in FY 2014 to implement, the following provisions (or portions of the
following provisions) of the Affordable Care Act that are applicable to
the IPPS, the LTCH PPS, and PPS-exempt cancer hospitals:
Section 3001(a) of Public Law 111-148, which requires the
establishment of a hospital inpatient value-based purchasing program
under which value-based incentive payments are made in a fiscal year to
hospitals that meet performance standards for the performance period
for that fiscal year.
Section 3004 of Public Law 111-148, which provides for the
submission of quality data by LTCHs in order for them to receive the
full annual update to the payment rates beginning with the FY 2014 rate
year.
Section 3005 of Public Law 111-148, which provides for the
establishment of a quality reporting program for PPS-exempt cancer
hospitals beginning with FY 2014, and for subsequent program years.
Section 3008 of Public Law 111-148, which establishes the
Hospital-Acquired Condition (HAC) Reduction Program and requires the
Secretary to make an adjustment to hospital payments for applicable
hospitals, effective for discharges beginning on October 1, 2014, and
for subsequent program years.
Section 3025 of Public Law 111-148, which establishes a
hospital readmissions reduction program and requires the Secretary to
reduce payments to applicable hospitals with excess readmissions
effective for discharges beginning on or after October 1, 2012.
Section 3133 of Public Law 111-148, which modifies the
methodologies for determining Medicare DSH payments and creates a new
additional payment for uncompensated care.
Section 3401 of Public Law 111-148, which provides for the
incorporation of productivity adjustments into the market basket
updates for IPPS hospitals and LTCHs.
Section 10324 of Public Law 111-148, which provides for a
wage adjustment for hospitals located in frontier States.
Sections 3401 and 10319 of Public Law 111-148 and section
1105 of Public Law 111-152, which revise certain market basket update
percentages for IPPS and LTCH PPS payment rates for FY 2014.
Section 5506 of Public Law 111-148, which added a
provision to the Act that instructs the Secretary to establish a
process by regulation under which, in the event a teaching hospital
closes, the Secretary will permanently increase the FTE resident caps
for hospitals that meet certain criteria up to the number of the closed
hospital's FTE resident caps. The Secretary is directed to ensure that
the aggregate number of FTE resident cap slots distributed is equal to
the amount of slots in the closed hospital's direct GME and IME FTE
resident caps, respectively.
2. American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-240)
In this proposed rule, we are proposing to implement or to make
conforming changes to regulation text in accordance with the following
provisions (or portions of the following provisions) of the American
Taxpayer Relief Act of 2012 that are applicable to the IPPS:
Section 605, which amended sections 1886(d)(12)(B),
(C)(i), and (D) of the Act to extend changes to the payment methodology
for the Medicare inpatient hospital payment adjustment for low-volume
hospitals through September 30, 2013 (FY 2013). Beginning with FY 2014,
the preexisting low-volume hospital qualifying criteria and payment
adjustment, as implemented in FY 2005, will resume.
Section 606(a), which amended sections 1886(d)(5)(G)(i)
and (ii)(II) of the Act to extend the MDH program through September 30,
2013 (FY 2013), and section 606(b), which made conforming amendments to
sections 1886(b)(3)(D)(i) and (iv) of the Act and amended section
13501(e)(2) of the Omnibus Budget Reconciliation Act of 1993 to permit
hospitals to decline reclassification through FY 2013.
Section 631, which amended section 7(b)(1)(B) of Public
Law 110-90 and requires a recoupment adjustment to the standardized
amounts under section 1886(d) of the Act based upon the Secretary's
estimates for discharges occurring in FY 2014 through FY 2017 to fully
offset $11 billion (which represents the amount of the increase in
aggregate payments from FYs 2008 through 2013 for which an adjustment
was not previously applied).
D. Summary of the Provisions of This Proposed Rule
In this proposed rule, we are setting forth proposed changes to the
Medicare IPPS for operating costs and for capital-related costs of
acute care hospitals in FY 2014. We also are setting 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 this proposed rule, we are
setting forth proposed changes to the payment rates, factors, and other
payment rate policies under the LTCH PPS for FY 2014.
Below is a summary of the major changes that we are proposing to
make:
1. Proposed Changes to MS-DRG Classifications and Recalibrations of
Relative Weights
In section II. of the preamble of this proposed rule, we include--
Proposed changes to MS-DRG classifications based on our
yearly review.
Proposed application of the documentation and coding
adjustment for FY 2014 resulting from implementation of the MS-DRG
system.
A discussion of the Research Triangle Institute,
International (RTI) reports and recommendations relating to charge
compression, including the proposal to calculate the MS-DRG relative
weights using 19 CCRs.
Proposed recalibrations of the MS-DRG relative weights.
Proposed changes to hospital-acquired conditions (HACs)
and a listing and discussion of HACs, including infections, that would
be subject to the statutorily required adjustment in MS-DRG payments
for FY 2014.
A discussion of the FY 2014 status of new technologies
approved for add-on payments for FY 2013 and a presentation of our
evaluation and analysis of the FY 2014 applicants for add-on payments
for high-cost new medical services and technologies
[[Page 27501]]
(including public input, as directed by Pub. L. 108-173, obtained in a
town hall meeting).
2. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals
In section III. of the preamble to this 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 2014 wage index update using wage data
from cost reporting periods beginning in FY 2010.
Analysis and implementation of the proposed FY 2014
occupational mix adjustment to the wage index for acute care hospitals,
including the proposed application of the rural floor, the imputed
rural floor calculated under the original and alternative
methodologies, and the frontier State floor.
Proposed revisions to the wage index for acute care
hospitals based on hospital redesignations and reclassifications.
The proposed adjustment to the wage index for acute care
hospitals for FY 2014 based on commuting patterns of hospital employees
who reside in a county and work in a different area with a higher wage
index.
The timetable for reviewing and verifying the wage data
used to compute the proposed FY 2014 hospital wage index.
Determination of the labor-related share for the proposed
FY 2014 wage index.
3. Proposed Rebasing and Revision of the Hospital Market Baskets for
Acute Care Hospitals
In section IV. of the preamble of this proposed rule, we are
proposing to rebase and revise the acute care hospital operating and
capital market baskets to be used in developing the FY 2014 update
factor for the operating and capital prospective payment rates and the
FY 2014 update factor for the excluded hospital rate-of-increase
limits. We also are setting forth the data sources used to determine
the proposed revised market basket relative weights.
4. Other Decisions and Proposed Changes to the IPPS for Operating Costs
and GME Costs
In section V. of the preamble of this proposed rule, we discuss
proposed changes or clarifications of a number of the provisions of the
regulations in 42 CFR Parts 412 and 413, including the following:
Proposed changes to the inpatient hospital update for FY
2014, including incorporation of a productivity adjustment.
The proposed updated national and regional case-mix values
and discharges for purposes of determining RRC status.
Proposed payment adjustment for low-volume hospitals for
FY 2014.
The statutorily required IME adjustment factor for FY
2014.
Proposed changes to the methodologies for determining
Medicare DSH payments and proposals to implement the new additional
payments for uncompensated care.
Discussion of the extension of the MDH program through FY
2013.
Proposed changes to the rules for payment adjustments
under the Hospital Readmissions Reduction Program based on hospital
readmission measures and the process for hospital review and correction
of those rates.
Proposed changes to the requirements and provision of
value-based incentive payments under the Hospital Value-Based
Purchasing Program.
Proposed requirements for payment adjustments to hospitals
under the HAC Reduction Program.
Proposal for counting labor and delivery inpatient days in
the calculation of Medicare utilization for direct GME purposes and for
other inpatient days policy for payments and eligibility.
Announcement of an additional closed hospital and
redistribution of resident cap slots relating to direct GME and IME
payments.
Proposed clarifications of policies on payments for
residents training in approved residency programs at CAHs.
Announcement of the expiration of the inflation update
freeze for high per resident amounts (PRAs).
Discussion of the Rural Community Hospital Demonstration
Program and a proposal for making a budget neutrality adjustment for
the demonstration program.
Extending the effective date of policies relating to
hospital services furnished under arrangements.
Proposed policy that medical review of inpatient
admissions will include a presumption that hospital inpatient
admissions are reasonable and necessary for beneficiaries who require
more than 1 Medicare utilization day (defined by encounters crossing 2
midnights) in the hospital receiving medically necessary services.
5. Proposed FY 2014 Policy Governing the IPPS for Capital-Related Costs
In section VI. of the preamble to this proposed rule, we discuss
the proposed payment policy requirements for capital-related costs and
capital payments to hospitals for FY 2014 and other related proposed
policy changes.
6. Proposed Changes to the Payment Rates for Certain Excluded
Hospitals: Rate-of-Increase Percentages
In section VII. of the preamble of this proposed rule, we discuss--
Proposed changes to payments to certain excluded hospitals
for FY 2014.
Proposed changes to the conditions of participation (CoPs)
relating to administration of pneumococcal vaccine and CAH payment for
acute care inpatient services.
7. Proposed Changes to the LTCH PPS
In section VIII. of the preamble of this proposed rule, we set
forth proposed changes to the payment rates, factors, and other payment
rate policies under the LTCH PPS for FY 2014. We also note that the
moratorium on the full implementation of the ``25-percent threshold''
payment adjustment will expire for certain cost reporting periods
beginning on or after October 1, 2013. In addition, in this section, we
describe the results of research being done by Kennell and Associates
(Kennell) and its subcontractor, Research Triangle Institute,
International (RTI), under a contract with CMS on the development of a
payment adjustment under the LTCH PPS based on the establishment of
LTCH patient criteria.
8. Proposed Changes Relating to Quality Data Reporting for Specific
Providers and Suppliers
In section IX. of the preamble of this proposed rule, we address--
Proposed requirements for the Hospital Inpatient Quality
Reporting (IQR) Program as a condition for receiving the full
applicable percentage increase.
Proposed changes to the requirements for the quality
reporting program for PPS-exempt cancer hospitals (PCHQR Program).
Proposed changes to the requirements under the LTCH
Quality Reporting (LTCHQR) Program.
Proposed changes to the requirements under the Inpatient
Psychiatric Facility Quality Reporting (IPFQR) Program.
9. Determining Proposed Prospective Payment Operating and Capital Rates
and Rate-of-Increase Limits for Acute Care Hospitals
In the Addendum to this proposed rule, we set forth proposed
changes to the amounts and factors for determining the proposed FY 2014
prospective payment rates for operating costs and
[[Page 27502]]
capital-related costs for acute care hospitals. We are proposing to
establish the threshold amounts for outlier cases. In addition, we
address the proposed update factors for determining the rate-of-
increase limits for cost reporting periods beginning in FY 2014 for
certain hospitals excluded from the IPPS.
10. Determining Proposed Prospective Payment Rates for LTCHs
In the Addendum to this proposed rule, we set forth proposed
changes to the amounts and factors for determining the proposed FY 2014
prospective standard Federal rate. We are proposing to establish the
adjustments for wage levels, the labor-related share, the cost-of-
living adjustment, and high-cost outliers, including the fixed-loss
amount, and the LTCH cost-to-charge ratios (CCRs) under the LTCH PPS.
11. Impact Analysis
In Appendix A of this proposed rule, we set forth an analysis of
the impact that the proposed changes would have on affected acute care
hospitals, LTCHs, PCHs, and IPFs.
12. Recommendation of Update Factors for Operating Cost Rates of
Payment for Hospital Inpatient Services
In Appendix B of this proposed rule, as required by sections
1886(e)(4) and (e)(5) of the Act, we provide our recommendations of the
appropriate percentage changes for FY 2014 for the following:
A single average standardized amount for all areas for
hospital inpatient services paid under the IPPS for operating costs of
acute care hospitals (and hospital-specific rates applicable to SCHs).
Target rate-of-increase limits to the allowable operating
costs of hospital inpatient services furnished by certain hospitals
excluded from the IPPS.
The standard Federal rate for hospital inpatient services
furnished by LTCHs.
13. Discussion of Medicare Payment Advisory Commission Recommendations
Under section 1805(b) of the Act, MedPAC is required to submit a
report to Congress, no later than March 15 of each year, in which
MedPAC reviews and makes recommendations on Medicare payment policies.
MedPAC's March 2013 recommendations concerning hospital inpatient
payment policies address the update factor for hospital inpatient
operating costs and capital-related costs under the IPPS, for hospitals
and distinct part hospital units excluded from the IPPS. We address
these recommendations in Appendix B of this proposed rule. For further
information relating specifically to the MedPAC March 2013 report or to
obtain a copy of the report, contact MedPAC at (202) 220-3700 or visit
MedPAC's Web site at: http://www.medpac.gov.
II. Proposed Changes to Medicare Severity Diagnosis-Related Group (MS-
DRG) Classifications and Relative Weights
A. Background
Section 1886(d) of the Act specifies that the Secretary shall
establish a classification system (referred to as diagnosis-related
groups (DRGs)) for inpatient discharges and adjust payments under the
IPPS based on appropriate weighting factors assigned to each DRG.
Therefore, under the IPPS, Medicare pays for inpatient hospital
services on a rate per discharge basis that varies according to the DRG
to which a beneficiary's stay is assigned. The formula used to
calculate payment for a specific case multiplies an individual
hospital's payment rate per case by the weight of the DRG to which the
case is assigned. Each DRG weight represents the average resources
required to care for cases in that particular DRG, relative to the
average resources used to treat cases in all DRGs.
Congress recognized that it would be necessary to recalculate the
DRG relative weights periodically to account for changes in resource
consumption. Accordingly, section 1886(d)(4)(C) of the Act requires
that the Secretary adjust the DRG classifications and relative weights
at least annually. These adjustments are made to reflect changes in
treatment patterns, technology, and any other factors that may change
the relative use of hospital resources.
B. MS-DRG Reclassifications
For general information about the MS-DRG system, including yearly
reviews and changes to the MS-DRGs, we refer readers to the previous
discussions in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR
43764 through 43766), the FY 2011 IPPS/LTCH PPS final rule (75 FR 50053
through 50055), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51485
through 51487), and the FY 2013 IPPS/LTCH PPS final rule (77 FR 53273).
C. Adoption of the MS-DRGs in FY 2008
For information on the adoption of the MS-DRGs in FY 2008, we refer
readers to the FY 2008 IPPS final rule with comment period (72 FR 47140
through 47189).
D. Proposed FY 2014 MS-DRG Documentation and Coding Adjustment
1. Background on the Prospective MS-DRG Documentation and Coding
Adjustments for FY 2008 and FY 2009 Authorized by Public Law 110-90
In the FY 2008 IPPS final rule with comment period (72 FR 47140
through 47189), we adopted the MS-DRG patient classification system for
the IPPS, effective October 1, 2007, to better recognize severity of
illness in Medicare payment rates for acute care hospitals. The
adoption of the MS-DRG system resulted in the expansion of the number
of DRGs from 538 in FY 2007 to 745 in FY 2008. (Currently, there are
751 MS-DRGs.) By increasing the number of MS-DRGs and more fully taking
into account patient severity of illness in Medicare payment rates for
acute care hospitals, MS-DRGs encourage hospitals to improve their
documentation and coding of patient diagnoses.
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).
[[Page 27503]]
For FY 2009, section 7(a) of Public Law 110-90 required a
documentation and coding adjustment of -0.9 percent, and we finalized
that adjustment through rulemaking (73 FR 48447). The documentation and
coding adjustments established in the FY 2008 IPPS final rule with
comment period, which reflected the amendments made by Public Law 110-
90, are cumulative. As a result, the -0.9 percent documentation and
coding adjustment for FY 2009 was in addition to the -0.6 percent
adjustment for FY 2008, yielding a combined effect of -1.5 percent.
2. Adjustment to the Average Standardized Amounts Required by Public
Law 110-90
a. Prospective Adjustment Required by Section 7(b)(1)(A) of Public Law
110-90
Section 7(b)(1)(A) of Public Law 110-90 requires that, if the
Secretary determines that implementation of the MS-DRG system resulted
in changes in documentation and coding that did not reflect real
changes in case-mix for discharges occurring during FY 2008 or FY 2009
that are different than the prospective documentation and coding
adjustments applied under section 7(a) of Public Law 110-90, the
Secretary shall make an appropriate adjustment under section
1886(d)(3)(A)(vi) of the Act. Section 1886(d)(3)(A)(vi) of the Act
authorizes adjustments to the average standardized amounts for
subsequent fiscal years in order to eliminate the effect of such coding
or classification changes. These adjustments are intended to ensure
that future annual aggregate IPPS payments are the same as the payments
that otherwise would have been made had the prospective adjustments for
documentation and coding applied in FY 2008 and FY 2009 reflected the
change that occurred in those years.
b. Recoupment or Repayment Adjustments in FYs 2010 Through 2012
Required by Section 7(b)(1)(B) Public Law 110-90
If, based on a retroactive evaluation of claims data, the Secretary
determines that implementation of the MS-DRG system resulted in changes
in documentation and coding that did not reflect real changes in case-
mix for discharges occurring during FY 2008 or FY 2009 that are
different from the prospective documentation and coding adjustments
applied under section 7(a) of Public Law 110-90, section 7(b)(1)(B) of
Public Law 110-90 requires the Secretary to make an additional
adjustment to the standardized amounts under section 1886(d) of the
Act. This adjustment must offset the estimated increase or decrease in
aggregate payments for FYs 2008 and 2009 (including interest) resulting
from the difference between the estimated actual documentation and
coding effect and the documentation and coding adjustment applied under
section 7(a) of Public Law 110-90. This adjustment is in addition to
making an appropriate adjustment to the standardized amounts under
section 1886(d)(3)(A)(vi) of the Act as required by section 7(b)(1)(A)
of Public Law 110-90. That is, these adjustments are intended to recoup
(or repay, in the case of underpayments) spending in excess of (or less
than) spending that would have occurred had the prospective adjustments
for changes in documentation and coding applied in FY 2008 and FY 2009
precisely matched the changes that occurred in those years. Public Law
110-90 requires that the Secretary only make these recoupment or
repayment adjustments for discharges occurring during FYs 2010, 2011,
and 2012.
3. Retrospective Evaluation of FY 2008 and FY 2009 Claims Data
In order to implement the requirements of section 7 of Public Law
110-90, we performed a retrospective evaluation of the FY 2008 data for
claims paid through December 2008 using the methodology first described
in the FY 2009 IPPS/LTCH PPS final rule (73 FR 43768 and 43775) and
later discussed in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR
43768 through 43772). We performed the same analysis for FY 2009 claims
data using the same methodology as we did for FY 2008 claims (75 FR
50057 through 50068). The results of the analysis for the FY 2011
proposed and final rules, and subsequent evaluations in FY 2012,
supported that the 5.4 percent estimate accurately reflected the FY
2009 increases in documentation and coding under the MS-DRG system. We
were persuaded by both MedPAC's analysis (as discussed in the FY 2011
IPPS/LTCH PPS final rule (75 FR 50064 through 50065)) and our own
review of the methodologies recommended by various commenters that the
methodology we employed to determine the required documentation and
coding adjustments was sound.
As in prior years, the FY 2008, FY 2009, and FY 2010 MedPAR files
are available to the public to allow independent analysis of the FY
2008 and FY 2009 documentation and coding effects. Interested
individuals may still order these files through the Web site at: http://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/LimitedDataSets/ by clicking on MedPAR Limited Data Set (LDS)-Hospital
(National). This Web page describes the file and provides directions
and further detailed instructions for how to order.
Persons placing an order must send the following: a Letter of
Request, the LDS Data Use Agreement and Research Protocol (refer to the
Web site for further instructions), the LDS Form, and a check for
$3,655 to:
Mailing address if using the U.S. Postal Service: Centers for Medicare
& Medicaid Services, RDDC Account, Accounting Division, P.O. Box 7520,
Baltimore, MD 21207-0520.
Mailing address if using express mail: Centers for Medicare & Medicaid
Services, OFM/Division of Accounting--RDDC, 7500 Security Boulevard,
C3-07-11, Baltimore, MD 21244-1850.
4. Prospective Adjustments for FY 2008 and FY 2009 Authorized by
Section 7(b)(1)(A) of Public Law 110-90
In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43767
through 43777), we opted to delay the implementation of any
documentation and coding adjustment until a full analysis of case-mix
changes based on FY 2009 claims data could be completed. We refer
readers to the FY 2010 IPPS/RY LTCH PPS final rule for a detailed
description of our proposal, responses to comments, and finalized
policy. After analysis of the FY 2009 claims data for the FY 2011 IPPS/
LTCH PPS final rule (75 FR 50057 through 50073), we found a total
prospective documentation and coding effect of 1.054 percent. After
accounting for the -0.6 percent and the -0.9 percent documentation and
coding adjustments in FYs 2008 and 2009, we found a remaining
documentation and coding effect of 3.9 percent. As we have discussed,
an additional cumulative adjustment of -3.9 percent would be necessary
to meet the requirements of section 7(b)(1)(A) of Public Law 110-90 to
make an adjustment to the average standardized amounts in order to
eliminate the full effect of the documentation and coding changes that
do not reflect real changes in case-mix on future payments. Unlike
section 7(b)(1)(B) of Public Law 110-90, section 7(b)(1)(A) does not
specify when we must apply the prospective adjustment, but merely
requires us to make an ``appropriate'' adjustment. Therefore, as we
stated in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50061), we
believe the law provided some discretion as to the manner in which we
applied the
[[Page 27504]]
prospective adjustment of -3.9 percent. As we discussed extensively in
the FY 2011 IPPS/LTCH PPS final rule, it has been our practice to
moderate payment adjustments when necessary to mitigate the effects of
significant downward adjustments on hospitals, to avoid what could be
widespread, disruptive effects of such adjustments on hospitals.
Therefore, we stated that we believed it was appropriate to not
implement the -3.9 percent prospective adjustment in FY 2011 because we
finalized a -2.9 percent recoupment adjustment for that year.
Accordingly, we did not propose a prospective adjustment under section
7(b)(1)(A) of Public Law 110-90 for FY 2011 (75 FR 23868 through
23870). We note that, as a result, payments in FY 2011 (and in each
future year until we implemented the requisite adjustment) would be
higher than they would have been if we had implemented an adjustment
under section 7(b)(1)(A) of Public Law 110-90.
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51489 and 51497), we
indicated that because further delay of this prospective adjustment
will result in a continued accrual of unrecoverable overpayments, it
was imperative that we implement a prospective adjustment for FY 2012,
while recognizing CMS' continued desire to mitigate the effects of any
significant downward adjustments to hospitals. Therefore, we
implemented a -2.0 percent prospective adjustment to the standardized
amount to partially eliminate the full effect of the documentation and
coding changes that do not reflect real changes in case-mix on future
payments.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53274 through
53276), we completed the prospective portion of the adjustment required
under section 7(b)(1)(A) of Public Law 110-90 by finalizing a -1.9
percent adjustment to the standardized amount for FY 2013. We stated
that this adjustment would remove the remaining effect of the
documentation and coding changes that do not reflect real changes in
case-mix that occurred in FY 2008 and FY 2009. We believe it was
imperative to implement the full remaining adjustment, as any further
delay would result in an overstated standardized amount in FY 2013 and
any future years until a full adjustment is made.
We note again that delaying full implementation of the prospective
portion of the adjustment required under section 7(b)(1)(A) of Public
Law 110-90 until FY 2013 resulted in payments in FY 2010 through FY
2012 being overstated. These overpayments could not be recovered by CMS
as section 7(b)(1)(B) of Public Law 110-90 limited recoupments to
overpayments made in FY 2008 and FY 2009.
5. Recoupment or Repayment Adjustment Authorized by Section 7(b)(1)(B)
of Public Law 110-90
As discussed in section II.D.3. of 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). For FY 2012, in
accordance with the timeframes set forth by section 7(b)(1)(B) of
Public Law 110-90, and consistent with the discussion in the FY 2011
IPPS/LTCH PPS final rule, we completed the recoupment adjustment by
implementing the remaining -2.9 percent adjustment, in addition to
removing the effect of the -2.9 percent adjustment to the standardized
amount finalized for FY 2011 (76 FR 51489 and 51498). Because these
adjustments, in effect, balanced out, there was no year-to-year change
in the standardized amount due to this recoupment adjustment for FY
2012. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53276), we made a
final +2.9 percent adjustment to the standardized amount, completing
the recoupment portion of section 7(b)(1)(B) of Public Law 110-90. We
note that with this positive adjustment, according to our estimates,
all overpayments made in FY 2008 and FY 2009 have been fully recaptured
with appropriate interest, and the standardized amount has been
returned to the appropriate baseline.
6. Recoupment or Repayment Adjustment Authorized by Section 631 of the
American Taxpayer Relief Act of 2012 (ATRA)
Section 631 of the ATRA amended section 7(b)(1)(B) of Public Law
110-90 to require the Secretary to make a recoupment adjustment or
adjustments totaling $11 billion by FY 2017. This adjustment represents
the amount of the increase in aggregate payments as a result of not
completing the prospective adjustment authorized under section
7(b)(1)(A) of Public Law 110-90 until FY 2013. As discussed earlier,
this delay in implementation resulted in overstated payment rates in
FYs 2010, 2011, and 2012. The resulting overpayments could not have
been recovered under Public Law 110-90.
Similar to the adjustments authorized under section 7(b)(1)(B) of
Public Law 110-90, the adjustment required under section 631 of the
ATRA is a one-time recoupment of a prior overpayment, not a permanent
reduction to payment rates. Therefore, any adjustment made to reduce
rates in one year would eventually be offset by a positive adjustment,
once the necessary amount of overpayment is recovered.
Our actuaries estimate that a -9.3 percent adjustment to the
standardized amount would be necessary if CMS were to fully recover the
$11 billion recoupment required by section 631 of the ATRA in FY 2014.
In its March 2013 ``Report to Congress: Medicare Payment Policy,''
MedPAC estimates that a -2.4 percent adjustment made in FY 2014, and
not removed until FY 2018, also would recover the required recoupment
amount. It is often our practice to delay or phase in rate adjustments
over more than one year, in order to moderate the effect on rates in
any one year. Therefore, consistent with the policies that we have
adopted in many similar cases, we are proposing a -0.8 percent
recoupment adjustment to the
[[Page 27505]]
standardized amount in FY 2014. We estimate that this level of
adjustment will recover up to $0.96 billion in FY 2014, with at least
$10.04 billion remaining to be recovered by FY 2017. If adjustments of
approximately -0.8 percent are implemented in FYs 2014, 2015, 2016, and
2017, using standard inflation factors, we estimate that the entire $11
billion will be accounted for by the end of the statutory 4-year
timeline. As estimates of any future adjustments are subject to slight
variations in total savings, we are not proposing specific adjustments
for FYs 2015, 2016, or 2017 at this time. We believe that this level of
adjustment for FY 2014 is a reasonable and fair approach that satisfies
the requirements of the statute while mitigating extreme annual
fluctuations in payment rates. We again note that this -0.8 percent
recoupment adjustment, and future adjustments under this authority,
will be eventually offset by an equivalent positive adjustment once the
full $11 billion recoupment requirement has been realized.
7. Additional Prospective Adjustments for the MS-DRG Documentation and
Coding Effect Through FY 2010 Authorized Under Section
1886(d)(3)(A)(vi) of the Act
Section 1886(d)(3)(A)(vi) of the Act authorizes adjustments to the
average standardized amounts if the Secretary determines such
adjustments to be necessary for any subsequent fiscal years in order to
eliminate the effect of coding or classification changes that do not
reflect real changes in case-mix. After review of comments and
recommendations received in a FY 2012 public comment letter from MedPAC
(available on the Internet at: http://www.medpac.gov/documents/06172011_FY12IPPS_MedPAC_COMMENT.pdf), we analyzed claims data in FY
2010 to determine whether any additional adjustment would be
appropriate to ensure that the introduction of MS-DRGs was implemented
in a budget neutral manner. We analyzed FY 2010 data on claims paid
through December 2011 using the same claims-based methodology as
described in previous rulemaking (73 FR 43768 and 43775). We determined
a total additional prospective documentation and coding effect of 0.8
percent through FY 2010 and found that this effect was present for both
IPPS hospitals paid with the standardized amount and IPPS hospitals
paid using their hospital-specific payment rates.
In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27890), we
proposed an additional -0.8 percent prospective adjustment to the
standardized amount to account for this effect. We indicated that this
additional prospective adjustment of -0.8 percent, when combined with
the other prospective MS-DRG documentation and coding adjustments
already made or proposed would eliminate the future effect of MS-DRG
documentation and coding that did not reflect real changes in case-mix
for discharges occurring through FY 2010. As discussed in the FY 2013
IPPS/LTCH PPS final rule (77 FR 53278 through 53280), numerous
commenters objected to the CMS proposal to make an adjustment to
account for payment increases due to MS-DRG documentation and coding
that did not reflect real changes in case-mix for discharges occurring
through FY 2010. Many commenters continued to assert that our estimates
of documentation and coding were overstated, and could be explained by
other factors. These commenters also focused on part of the analysis
provided by MedPAC in its FY 2012 public comment letter indicating that
a slightly smaller additional prospective adjusment of -0.55 percent
rather than -0.8 percent might be required to offset the cumulative MS-
DRG documentation and coding effect through FY 2010. Specifically,
while MedPAC supported the overall methodology, it suggested that it
was possible that changes in documentation and coding to optimize
payments under the MS-DRG GROUPERs and weights may have resulted in
slightly less than optimal payments under the FY 2007 GROUPER and
weights (the denominator of the documentation and coding change
estimate). Many commenters requested that, given the MedPAC analysis,
if CMS were to apply an additional prospective adjustment to the MS-DRG
documentation and coding effect through FY 2010, it should subtract
0.25 percentage points from its estimate, for an adjustment of -0.55
percent.
After considering the public comments, we recognized that the issue
of the estimate to use for the cumulative MS-DRG documentation and
coding effect through FY 2010 may merit further consideration.
Therefore, as discussed in the FY 2013 IPPS/LTCH PPS final rule (77 FR
53278 through 53280), we decided not to finalize the proposed -0.8
percent adjustment to the standardized amount and the hospital-specific
rate until more analysis could be completed.
CMS is continuing to consider whether MedPAC's recommendation that
an adjustment to offset the cumulative documentation and coding effects
through FY 2010 under section 1886(d)(3)(A)(vi) of the Act is
appropriate and supported by a review of the claims data. After further
consideration of the MedPAC analysis and the request by many public
commenters, if we were to apply an additional prospective adjustment
for the cumulative MS-DRG documentation and coding effect through FY
2010, we believe the most appropriate additional adjustment is -0.55
percent.
It is often our practice to delay or phase-in adjustments to
mitigate negative financial impacts. Because we are proposing a -0.8
percent recoupment adjustment, as discussed in section II.D.6. of the
preamble of this proposed rule, we are not proposing a prospective
adjustment in FY 2014 for the cumulative MS-DRG documentation and
coding effect through FY 2010. However, we are soliciting public
comments as to whether any portion of the proposed -0.8 percent
recoupment adjustment should be reduced and instead applied to a
prospective adjustment for the cumulative MS-DRG documentation and
coding effect through FY 2010. For example, we could apply a -0.25
percent recoupment adjustment, and a -0.55 prospective adjustment, for
a total FY 2014 adjustment of -0.8 percent. Reducing the recoupment
adjustment in FY 2014 would require relatively larger adjustments for
FYs 2015, 2016, and/or 2017, but making a prospective adjustment of -
0.55 percent would eliminate future payment increases due to MS-DRG
documentation and coding that did not reflect real changes in case-mix
for discharges occurring through FY 2010. As we discuss above, because
the documentation and coding effect through FY 2010 was found for both
IPPS hospitals paid with the standardized amount and IPPS hospitals
paid under their hospital-specific payment rate, if we were to apply a
prospective adjustment to remove this effect, we also would apply such
an adjustment to the hospital-specific payment rate, using the
Secretary's broad authority under section 1886(d)(5)(I)(i) of the Act
(77 FR 53276 through 53277). Therefore, if we attribute a portion of
the -0.8 percent adjustment for FY 2014 to the prospective adjustment,
we also would make appropriate adjustments to the hospital-specific
payment rates. Puerto Rico-specific rates would not be affected, as we
previously found no significant additional MS-DRG documentation and
coding effect for FY 2010 that would warrant any additional
[[Page 27506]]
adjustment to the Puerto Rico-specific rate (77 FR 53279).
E. Proposed Refinement of the MS-DRG Relative Weight Calculation
1. Background
Beginning in FY 2007, we implemented relative weights for DRGs
based on cost report data instead of charge information. We refer
readers to the FY 2007 IPPS final rule (71 FR 47882) for a detailed
discussion of our final policy for calculating the cost-based DRG
relative weights and to the FY 2008 IPPS final rule with comment period
(72 FR 47199) for information on how we blended relative weights based
on the CMS DRGs and MS-DRGs.
As we implemented cost-based relative weights, some public
commenters raised concerns about potential bias in the weights due to
``charge compression,'' which is the practice of applying a higher
percentage charge markup over costs to lower cost items and services,
and a lower percentage charge markup over costs to higher cost items
and services. As a result, the cost-based weights would undervalue
high-cost items and overvalue low-cost items if a single CCR is applied
to items of widely varying costs in the same cost center. To address
this concern, in August 2006, we awarded a contract to the Research
Triangle Institute, International (RTI) to study the effects of charge
compression in calculating the relative weights and to consider methods
to reduce the variation in the cost-to-charge ratios (CCRs) across
services within cost centers. For a detailed summary of RTI's findings,
recommendations, and public comments that we received on the report, we
refer readers to the FY 2009 IPPS/LTCH PPS final rule (73 FR 48452
through 48453). In addition, we refer readers to RTI's July 2008 final
report titled ``Refining Cost to Charge Ratios for Calculating APC and
MS-DRG Relative Payment Weights'' (http://www.rti.org/reports/cms/HHSM-500-2005-0029I/PDF/Refining_Cost_to_Charge_Ratios_200807_Final.pdf).
In the FY 2009 IPPS/LTCH PPS final rule (73 FR 48458 through
48467), in response to the RTI's recommendations concerning cost report
refinements, we discussed our decision to pursue changes to the cost
report to split the cost center for Medical Supplies Charged to
Patients into one line for ``Medical Supplies Charged to Patients'' and
another line for ``Implantable Devices Charged to Patients.'' We
acknowledged, as RTI had found, that charge compression occurs in
several cost centers that exist on the Medicare cost report. However,
as we stated in the FY 2009 IPPS/LTCH PPS final rule, we focused on the
CCR for Medical Supplies and Equipment because RTI found that the
largest impact on the MS-DRG relative weights could result from
correcting charge compression for devices and implants. In determining
the items that should be reported in these respective cost centers, we
adopted the commenters' recommendations that hospitals should use
revenue codes established by the AHA's National Uniform Billing
Committee to determine the items that should be reported in the
``Medical Supplies Charged to Patients'' and the ``Implantable Devices
Charged to Patients'' cost centers. Accordingly, a new subscripted line
for ``Implantable Devices Charged to Patients'' was created in July
2009. This new subscripted cost center has been available for use for
cost reporting periods beginning on or after May 1, 2009.
As we discussed in the FY 2009 IPPS final rule (73 FR 48458) and in
the CY 2009 OPPS/ASC final rule with comment period (73 FR 68519
through 68527), in addition to the findings regarding implantable
devices, RTI also found that the costs and charges of computed
tomography (CT) scans, magnetic resonance imaging (MRI), and cardiac
catheterization differ significantly from the costs and charges of
other services included in the standard associated cost center. RTI
also concluded that both the IPPS and the OPPS relative weights would
better estimate the costs of those services if CMS were to add standard
cost centers for CT scans, MRIs, and cardiac catheterization in order
for hospitals to report separately the costs and charges for those
services and in order for CMS to calculate unique CCRs to estimate the
costs from charges on claims data. In the FY 2011 IPPS/LTCH PPS final
rule (75 FR 50075 through 50080), we finalized our proposal to create
standard cost centers for CT scans, MRIs, and cardiac catheterization,
and to require that hospitals report the costs and charges for these
services under new cost centers on the revised Medicare cost report
Form CMS-2552-10. (We refer readers to the FY 2011 IPPS/LTCH PPS final
rule (75 FR 50075 through 50080) for a detailed discussion of the
reasons for the creation of standard cost centers for CT scans, MRIs,
and cardiac catheterization.) The new standard cost centers for CT
scans, MRIs, and cardiac catheterization are effective for cost report
periods beginning on or after May 1, 2010, on the revised cost report
Form CMS-2552-10.
In the FY 2009 IPPS final rule (73 FR 48468), we stated that, due
to what is typically a 3-year lag between the reporting of cost report
data and the availability for use in ratesetting, we anticipated that
we might be able to use data from the new ``Implantable Devices Charged
to Patients'' cost center to develop a CCR for ``Implantable Devices
Charged to Patients'' in the FY 2012 or FY 2013 IPPS rulemaking cycle.
However, as noted in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74
FR 43782), due to delays in the issuance of the revised cost report
Form CMS 2552-10, we determined that a new CCR for ``Implantable
Devices Charged to Patients'' might not be available before FY 2013.
Similarly, when we finalized the decision in the FY 2011 IPPS/LTCH PPS
final rule to add new cost centers for CT scans, MRIs, and cardiac
catheterization, we explained that data from any new cost centers that
may be created will not be available until at least 3 years after they
are first used (75 FR 50077). In preparation for the FY 2012 IPPS
rulemaking, we checked the availability of data in the ``Implantable
Devices Charged to Patients'' cost center on the FY 2009 cost reports,
but we did not believe that there was a sufficient amount of data from
which to generate a meaningful analysis in this particular situation.
Therefore, we did not propose to use data from the ``Implantable
Devices Charged to Patients'' cost center to create a distinct CCR for
``Implantable Devices Charged to Patients'' for use in calculating the
MS-DRG relative weights for FY 2012. We indicated that we would
reassess the availability of data for the ``Implantable Devices Charged
to Patients'' cost center for the FY 2013 IPPS/LTCH PPS rulemaking
cycle and, if appropriate, we would propose to create a distinct CCR at
that time.
During the development of the FY 2013 IPPS/LTCH PPS proposed and
final rules, hospitals were still in the process of transitioning from
the previous cost report Form CMS-2552-96 to the new cost report Form
CMS-2552-10. Therefore, we were able to access only those cost reports
in the FY 2010 HCRIS with fiscal year begin dates on or after October
1, 2009, and before May 1, 2010; that is, those cost reports on Form
CMS-2552-96. Data from the Form CMS-2552-10 cost reports were not
available because cost reports filed on the Form CMS-2552-10 were not
accessible in the HCRIS. Further complicating matters was that, due to
additional unforeseen technical difficulties, the corresponding
[[Page 27507]]
information regarding charges for implantable devices on hospital
claims was not yet available to us in the MedPAR file. Without the
breakout in the MedPAR file of charges associated with implantable
devices to correspond to the costs of implantable devices on the cost
report, we believed that we had no choice but to continue computing the
relative weights with the current CCR that combines the costs and
charges for supplies and implantable devices. We stated in the FY 2013
IPPS/LTCH PPS final rule (77 FR 53281 through 53283) that when we do
have the necessary data for supplies and implantable devices on the
claims in the MedPAR file to create distinct CCRs for the respective
cost centers for supplies and implantable devices, we hoped that we
would also have data for an analysis of creating distinct CCRs for CT
scans, MRIs, and cardiac catheterization, which could then be finalized
through rulemaking.
2. Discussion and Proposal for FY 2014
To calculate the proposed FY 2014 MS-DRG relative weights, we are
proposing to continue our current methodology of using the two most
recent data sources: the December 2012 update of the FY 2012 MedPAR
file as the claims data source and the December 2012 update of FY 2011
HCRIS as the cost data source. We currently have a substantial number
of hospitals completing all, or some, of these new cost centers on the
FY 2011 Medicare cost reports, compared to prior years. Specifically,
using the December 2012 update of FY 2011 HCRIS, we were able to
calculate a valid implantable device CCR for 2,285 IPPS hospitals, a
valid MRI CCR for 1,402 IPPS hospitals, a valid CT scan CCR for 1,470
IPPS hospitals, and a valid cardiac catheterization CCR for 1,022 IPPS
hospitals. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53281), we
stated that prior to proposing to create these CCRs, we would first
thoroughly analyze and determine the impacts of the data, and that
distinct CCRs for these new cost centers would be used in the
calculation of the relative weights only if they were first finalized
through rulemaking.
We believe that there is a sufficient amount of data in the FY 2011
cost reports from which to generate a meaningful analysis of using
distinct CCRs for implantable devices, MRIs, CT scans, and cardiac
catheterization. In addition, the corresponding charge data on hospital
claims for implantable devices, MRIs, CT scans, and cardiac
catheterization are available in the FY 2012 MedPAR file. Therefore, we
are providing various data analyses below based on comparison of the FY
2014 relative weights computed using 15 CCRs, as we have done in the
past, and the FY 2014 relative weights computed using 19 CCRs, with
distinct CCRs for implantable devices, MRIs, CT scans, and cardiac
catheterization. Specifically, rather than having a single CCR for
``Supplies and Equipment'' which includes low-cost supplies and high-
cost implantable devices, a distinct CCR would be carved out of the
``Supplies and Equipment'' CCR, leaving one CCR for ``Supplies'' and
one CCR for ``Implantable Devices.'' Regarding the Radiology CCR, which
currently is comprised of general radiology ancillary services and MRIs
and CT scans, the costs for MRIs and CT scans would be separated from
general radiology, creating two distinct CCRs, one for MRIs and one for
CT scans, respectively. Finally, by separating the costs of cardiac
catheterization out of the CCR for general cardiology, a distinct CCR
would be created for cardiac catheterization. Thus, by breaking out
these 4 additional CCRs, the number of CCRs used to calculate the
relative weights would increase from 15 to 19.
For comparison purposes, the following table shows the final FY
2013 CCRs, the potential FY 2014 CCRs computed with the existing 15
cost centers, and the potential FY 2014 CCRs computed with 19 cost
centers, with 4 new CCRs for implantable devices, MRIs, CT scans, and
cardiac catheterization.
------------------------------------------------------------------------
Final FY Potential Potential
Group 2013 15 FY 2014 15 FY 2014 19
CCRs CCRs CCRs
------------------------------------------------------------------------
Routine days..................... 0.514 0.502 0.502
Intensive days................... 0.442 0.423 0.423
Drugs............................ 0.199 0.193 0.193
Supplies & Equipment............. 0.335 0.327 0.293
Implantable Devices.............. n/a n/a 0.361
Therapy Services................. 0.370 0.355 0.355
Laboratory....................... 0.143 0.133 0.133
Operating Room................... 0.238 0.225 0.225
Cardiology....................... 0.145 0.134 0.132
Cardiac Catheterization.......... n/a n/a 0.135
Radiology........................ 0.136 0.128 0.170
MRI.............................. n/a n/a 0.091
CT Scans......................... n/a n/a 0.045
Emergency Room................... 0.226 0.207 0.207
Blood............................ 0.389 0.371 0.371
Other Services................... 0.397 0.399 0.399
Labor & Delivery................. 0.450 0.445 0.445
Inhalation Therapy............... 0.189 0.187 0.187
Anesthesia....................... 0.109 0.120 0.120
------------------------------------------------------------------------
In order to model the effects on the relative weights in medical
MS-DRGs versus surgical MS-DRGs, we compared a set of relative weights
calculated with 15 CCRs and 19 CCRs. Overall, if 19 CCRs are used to
calculate the relative weights for FY 2014, relative weights for
medical MS-DRGs would be expected to decrease by approximately 1.1
percent, and those for surgical MS-DRGs would be expected to increase
by approximately 1.2 percent. In addition, as shown in the table below,
at the MDC level, payments would increase by approximately 0.64 percent
(0.39 + 0.25) within orthopedic and cardiac MDCs, with most of the
reductions in payment resulting to the medical MS-DRGs in
[[Page 27508]]
the nervous system, digestive system, and respiratory system MDCs.
----------------------------------------------------------------------------------------------------------------
Estimated
percentage
MDC Description change
within MDC
(percent)
----------------------------------------------------------------------------------------------------------------
08......................................... Musculoskeletal System and Connective Tissue.......... 0.39
05......................................... Circulatory System.................................... 0.25
01......................................... Nervous System........................................ -0.16
06......................................... Digestive System...................................... -0.10
04......................................... Respiratory System.................................... -0.08
----------------------------------------------------------------------------------------------------------------
The largest estimated increase in MS-DRG relative weights would
likely occur for MS-DRGs associated with cardiac catheterization and
implantable cardiac devices. The largest estimated reductions in MS-DRG
relative weights would likely occur for MS-DRGs associated with
traumatic head injury and concussion, which are high users of CT
scanning and MRI services. We are including in the table below the top
10 (nonlabor and delivery) MS-DRGs that we predict would experience the
largest increases and decreases in relative weights if 19 CCRs would be
used as compared to 15 CCRs.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Potential
Potential relative
MS-DRG Type Title relative weights Percentage
weight with with 19 change
15 CCRs CCRs
--------------------------------------------------------------------------------------------------------------------------------------------------------
MS-DRGs that would experience the largest decrease in relative weight
--------------------------------------------------------------------------------------------------------------------------------------------------------
090.................................. MED..................... Concussion without CC/MCC....................... 0.7614 0.7013 -7.9
084.................................. MED..................... Traumatic Stupor & Coma, Coma >1 Hour without CC/ 0.9137 0.8516 -6.8
MCC.
087.................................. MED..................... Traumatic Stupor & Coma, Coma <1 Hour without CC/ 0.7899 0.7369 -6.7
MCC.
965.................................. MED..................... Other Multiple Significant Trauma without CC/MCC 1.0450 0.980 -6.1
185.................................. MED..................... Major Chest Trauma without CC/MCC............... 0.7281 0.6845 -6.0
089.................................. MED..................... Concussion with CC.............................. 0.9959 0.9366 -6.0
123.................................. MED..................... Neurological Eye Disorder....................... 0.7355 0.6920 -5.9
343.................................. SURG.................... Appendectomy without Complicated Principal 0.9880 0.9517 -5.7
Diagnosis without CC/MCC.
053.................................. MED..................... Spinal Disorders & Injuries without CC/MCC...... 0.9355 0.8825 -5.7
066.................................. MED..................... Intracranial Hemorrhage or Cerebral Infarction 0.8034 0.7579 -5.7
without CC/MCC.
--------------------------------------------------------------------------------------------------------------------------------------------------------
MS-DRGs that would experience the largest increase in relative weight
--------------------------------------------------------------------------------------------------------------------------------------------------------
454.................................. SURG.................... Combined Anterior/Posterior Spinal Fusion with 7.6399 8.0563 5.5
CC.
455.................................. SURG.................... Combined Anterior/Posterior Spinal Fusion 5.9862 6.3133 5.5
Without CC/MCC.
484.................................. SURG.................... Major Joint & Limb Reattachment Procedure of 2.1211 2.2380 5.5
Upper Extremity without CC/MCC.
225.................................. SURG.................... Cardiac Defibrillator Implant with Cardiac 5.6298 5.9530 5.7
Catheterization without AMI/HF/Shock without
MCC.
223.................................. SURG.................... Cardiac Defibrillator Implant with Cardiac 6.0956 6.4482 5.8
Catheterization with AMI/HF/Shock without MCC.
458.................................. SURG.................... Spinal Fusion Except Cervical with Spinal Curve/ 4.8794 5.1630 5.8
Malignant/Infection OR 9+ Fusion without CC/MCC.
245.................................. SURG.................... AICD Generator Procedures....................... 4.4627 4.7320 6.0
849.................................. MED..................... Radiotherapy.................................... 1.3423 1.4258 6.2
946.................................. MED..................... Rehabilitation without CC/MCC................... 1.1295 1.2024 6.5
227.................................. SURG.................... Cardiac Defibrillator Implant without Cardiac 5.2193 5.5714 6.7
Catheterization without MCC.
--------------------------------------------------------------------------------------------------------------------------------------------------------
After computing the analyses described above by comparing both sets
of MS-DRG relative weights computed with FY 2011 cost report data, we
revisited RTI's July 2008 final report. We note that the impacts on
relative weight and at the MDC level are generally consistent with
those estimated by RTI in its modeling. RTI found that disaggregating
the CCRs for medical supplies and devices would have the most impact on
reducing charge compression, and that the largest impact was for MS-DRG
227. Similarly, as shown in the chart above, we estimate that the
potential relative weight for MS-DRG 227 would experience the largest
increase, 6.7 percent. Cardiac implants and spinal fusion procedures
accounted for most of the 10 MS-DRGs with the largest incremental
increases. In addition, RTI's July 2008 final report (pages 103 through
107) indicates that among the largest expected reductions are the MS-
DRG relative weights for MS-DRGs associated with traumatic head injury
and concussion, which are high users of CT scanning and MRI services.
RTI's analyses were highly predictive for many of the MS-DRGs most
sensitive to the effects of charge compression.
As we have stated in prior rulemaking (77 FR 53281 through 53283),
once we determined that cost report data were available for analysis,
we would propose, if appropriate, to use the distinct CCRs described
above in the calculation of the MS-DRG relative weights. We believe
that the analytic findings described above using the FY 2011 cost
report data and FY 2012
[[Page 27509]]
claims data support our original decision to break out and create new
cost centers for implantable devices, MRIs, CT scans, and cardiac
catheterization, and we see no reason to further delay proposing to
implement the CCRs of each of these cost centers. Therefore, beginning
in FY 2014, we are proposing to calculate the MS-DRG relative weights
using 19 CCRs, creating distinct CCRs from cost report data for
implantable devices, MRIs, CT scans, and cardiac catheterization. We
welcome public comments on this proposal and the impacts that it may
have. We refer readers to section VI.C. of Appendix A of this proposed
rule for the overall IPPS operating impact of this proposal, which
models payments to various hospital types using relative weights
developed from 19 CCRs as compared to 15 CCRs. In addition, each year,
as part of the IPPS proposed rule and final rule, we issue Table 5,
which lists all of the MS-DRGs and their relative weights. As part of
this FY 2014 IPPS/LTCH PPS proposed rule, in addition to providing
Table 5, which lists the proposed MS-DRGs and their relative weights
using 19 CCRs (available on the CMS Web site at: http://www.cms.hhs.gov/AcuteInpatientPPS/01_overview.asp; click on the link
on the left side of the screen titled ``FY 2014 IPPS Proposed Rule Home
Page'' or ``Acute Inpatient--Files for Download''), we are providing a
separate table that lists all MS-DRGs and their relative weights if
computed using 15 CCRs (available at the same CMS Web site cited
above). These two formats will allow readers to compare our proposal to
calculate the MS-DRG relative weights using 19 CCRs with the relative
weights of MS-DRGs if computed using 15 CCRs.
F. Adjustment to MS-DRGs for Preventable Hospital-Acquired Conditions
(HACs), Including Infections
1. Background
Section 1886(d)(4)(D) of the Act addresses certain hospital-
acquired conditions (HACs), including infections. This provision is
part of an array of Medicare tools that we are using to promote
increased quality and efficiency of care. Under the IPPS, hospitals are
encouraged to treat patients efficiently because they receive the same
DRG payment for stays that vary in length and in the services provided,
which gives hospitals an incentive to avoid unnecessary costs in the
delivery of care. In some cases, conditions acquired in the hospital do
not generate higher payments than the hospital would otherwise receive
for cases without these conditions. To this extent, the IPPS encourages
hospitals to avoid complications.
However, the treatment of certain conditions can generate higher
Medicare payments in two ways. First, if a hospital incurs
exceptionally high costs treating a patient, the hospital stay may
generate an outlier payment. Because the outlier payment methodology
requires that hospitals experience large losses on outlier cases before
outlier payments are made, hospitals have an incentive to prevent
outliers. Second, under the MS-DRG system that took effect in FY 2008
and that has been refined through rulemaking in subsequent years,
certain conditions can generate higher payments even if the outlier
payment requirements are not met. Under the MS-DRG system, there are
currently 261 sets of MS-DRGs that are split into 2 or 3 subgroups
based on the presence or absence of a CC or an MCC. The presence of a
CC or an MCC generally results in a higher payment.
Section 1886(d)(4)(D) specifies that, by October 1, 2007, the
Secretary was required to select, in consultation with the Centers for
Disease Control and Prevention (CDC), at least two conditions that: (a)
Are high cost, high volume, or both; (b) are assigned to a higher
paying MS-DRG when present as a secondary diagnosis (that is,
conditions under the MS-DRG system that are CCs or MCCs); and (c) could
reasonably have been prevented through the application of evidence-
based guidelines. Section 1886(d)(4)(D) of the Act also specifies that
the list of conditions may be revised, again in consultation with CDC,
from time to time as long as the list contains at least two conditions.
Effective for discharges occurring on or after October 1, 2008,
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
affected in a manner shown in the diagram below.
[[Page 27510]]
[GRAPHIC] [TIFF OMITTED] TP10MY13.000
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);
the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25810 through 25816) and
final rule (76 FR 51504 through 51522); and the FY 2013 IPPS/LTCH PPS
proposed rule (77 FR 27892 through 27898) and final rule (77 FR 53283
through 53303). A complete list of the 11 current categories of HACs is
included on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/Hospital-Acquired_Conditions.html.
3. Present on Admission (POA) Indicator Reporting
Collection of POA indicator data is necessary to identify which
conditions were acquired during hospitalization for the HAC payment
provision as well as for broader public health uses of Medicare data.
In previous rulemaking, we provided both CMS and CDC Web site resources
that are available to hospitals for assistance in this reporting
effort. For detailed information regarding these sites and materials,
including the application and use of POA indicators, we refer the
reader to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51506 through
51507).
Currently, as we discussed in the prior rulemaking cited above, the
POA indicator reporting requirement only applies to IPPS hospitals
because they are subject to this HAC provision. Non-IPPS hospitals,
including CAHs, LTCHs, IRFs, IPFs, cancer hospitals, children's
hospitals, hospitals in Maryland operating under waivers, RNHCIs, and
the Department of Veterans Affairs/Department of Defense hospitals, are
exempt from POA reporting. We note that hospitals in Maryland operating
under their waiver are not paid under the IPPS but rather are paid
under the provisions of section 1814(b)(3) of the Act. This waiver
applies to the amount paid to providers of services, and does not
extend to billing requirements and other reporting requirements. In
fact, hospitals in Maryland are required to submit Medicare claims for
Medicare payment and also to submit the same information on their
Medicare claims as hospitals in other parts of the country paid under
the IPPS. Therefore, we believe it is inappropriate to continue to
exempt hospitals in Maryland from the POA indicator reporting
requirement. Under current policy, hospitals in Maryland will continue
to be exempt from the application of this HAC provision so long as they
are not paid under the IPPS. However, we believe it is appropriate to
require them to use POA indicator reporting on their claims so that we
can include their data and have as complete a dataset as possible when
we analyze trends and make further payment policy determinations, such
as those authorized under section 1886(p) of the Act. (We refer readers
to section V.I. of the preamble to this proposed rule for a discussion
of our proposals to implement section 1886(p) of the Act.) Therefore,
we are proposing that hospitals in Maryland operating under their
waiver under section 1814(b)(3) of the Act will no longer be exempted
from the POA indicator reporting requirement beginning with claims
submitted on or after October 1, 2013, including all claims for
discharges on or after October 1, 2013. We are inviting public comment
regarding this proposal.
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
[[Page 27511]]
48486 through 48487); the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule
(74 FR 24106) and final rule (74 FR 43784 through 43785); the FY 2011
IPPS/LTCH PPS proposed rule (75 FR 23881 through 23882) and final rule
(75 FR 50081 through 50082); the FY 2012 IPPS/LTCH PPS proposed rule
(76 FR 25812 through 25813) and final rule (76 FR 51506 through 51507);
and the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27893 through 27894)
and final rule (77 FR 53284 through 53285).
----------------------------------------------------------------------------------------------------------------
Indicator Descriptor
----------------------------------------------------------------------------------------------------------------
Y........................................... Indicates that the condition was present on admission.
W........................................... Affirms that the hospital has determined that, based on data and
clinical judgment, it is not possible to document when the onset
of the condition occurred.
N........................................... Indicates that the condition was not present on admission.
U........................................... Indicates that the documentation is insufficient to determine if
the condition was present at the time of admission.
1........................................... Signifies exemption from POA reporting. CMS established this code
as a workaround to blank reporting on the electronic 4010A1. A
list of exempt ICD-9-CM diagnosis codes is available in the ICD-9-
CM Official Guidelines for Coding and Reporting.
----------------------------------------------------------------------------------------------------------------
Beginning on or after January 1, 2011, hospitals were required to
begin reporting POA indicators using the 5010 electronic transmittal
standards format. The 5010 format removes the need to report a POA
indicator of ``1'' for codes that are exempt from POA reporting. We
have issued CMS instructions on this reporting change as a One-Time
Notification, Pub. No. 100-20, Transmittal No. 756, Change Request
7024, effective on August 13, 2010, which can be located at the
following link on the CMS Web site: http://www.cms.gov/manuals/downloads/Pub100_20.pdf.
In addition, as discussed elsewhere in section III.G.10. of the
preamble of this proposed rule, the 5010 format allows the reporting
and effective January 1, 2011, the processing of up to 25 diagnoses and
25 procedure codes. As such, it is necessary to report a valid POA
indicator for each diagnosis code, including the principal and all
secondary diagnoses up to 25.
4. HACs and POA Reporting in ICD-10-CM and ICD-10-PCS
As we stated in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51506
and 51507), in preparation for the transition to the ICD-10-CM and ICD-
10-PCS code sets, further information regarding the use of the POA
indicator with the ICD-10-CM/ICD-10-PCS classifications as they pertain
to the HAC policy will be discussed in future rulemaking.
At the March 5, 2012 and the September 19, 2012 meetings of the
ICD-9-CM Coordination and Maintenance Committee, an announcement was
made with regard to the availability of the ICD-9-CM HAC list
translation to ICD-10-CM and ICD-10-PCS code sets. Participants were
informed that the list of the current ICD-9-CM selected HACs has been
translated into codes using the ICD-10-CM and ICD-10-PCS classification
system. It was recommended that the public review this list of ICD-10-
CM/ICD-10-PCS code translations of the current selected HACs available
on the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. The translations can be found under
the link titled ``ICD-10-CM/PCS MS-DRG v30 Definitions Manual Table of
Contents--Full Titles--HTML Version in Appendix I--Hospital Acquired
Conditions (HACs).'' The above CMS Web site regarding the ICD-10-MS-DRG
Conversion Project is also available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/icd10_hacs.html. We encourage the public to submit comments on these
translations through the HACs Web page using the CMS ICD-10-CM/PCS HAC
Translation Feedback Mailbox that has been set up for this purpose
under the Related Links section titled ``CMS HAC Feedback.'' The final
HAC list translation from ICD-9-CM to ICD-10-CM/ICD-10-PCS will be
subject to formal rulemaking.
In the meantime, we continue to encourage readers to review the
educational materials and draft code sets currently available for ICD-
10-CM/ICD-10-PCS on the CMS Web site at: http://www.cms.gov/ICD10/. In
addition, the draft ICD-10-CM/ICD-10-PCS coding guidelines can be
viewed on the CDC Web site at: http://www.cdc.gov/nchs/icd/icd10cm.htm.
5. Proposals Regarding Current HACs and Previously Considered Candidate
HACs
We are not proposing to add or remove categories of HACs at this
time. However, we continue to encourage public dialogue about
refinements to the HAC list by written stakeholder comments about both
previously selected and potential candidate HACs. We refer readers to
section II.F.6. of the FY 2008 IPPS final rule with comment period (72
FR 47202 through 47218) and to section II.F.7. of the FY 2009 IPPS
final rule (73 FR 48774 through 48491) for detailed discussion
supporting our determination regarding each of these conditions. We
also refer readers to section III.F.5. of the FY 2013 IPPS/LTCH PPS
proposed rule (77 FR 27892 through 27898) and the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53285 through 53292) for the HAC policy for FY 2013.
In addition, readers may find updated information on evidence-based
guidelines on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/Hospital-Acquired_Conditions.html.
6. RTI Program Evaluation
On September 30, 2009, a contract was awarded to 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 rates. This was an
intra-agency project with funding and technical support from CMS, OPHS,
AHRQ, and CDC. The evaluation also examined the implementation of the
program and evaluated additional conditions for future selection. The
contract with RTI ended on November 30, 2012. Summary reports of RTI's
analysis of the FYs 2009, 2010, and 2011 MedPAR data files for the HAC-
POA program evaluation were included in the FY 2011 IPPS/LTCH PPS final
rule (75 FR 50085 through 50101), the FY 2012 IPPS/LTCH PPS final rule
(76 FR 51512 through 51522), and the FY 2013 IPPS/LTCH PPS final rule
(77 FR 53292 through 53302). Summary and detailed data also were made
publicly available on the CMS Web site at: http://www.cms.gov/HospitalAcqCond/01_Overview.asp and
[[Page 27512]]
the RTI Web site at: http://www.rti.org/reports/cms/.
In addition to the evaluation of HAC and POA MedPAR claims data,
RTI also conducted analyses on readmissions due to HACs, the
incremental costs of HACs to the healthcare system, a study of
spillover effects and unintended consequences, as well as an updated
analysis of the evidence-based guidelines for selected and previously
considered HACs. Reports on these analyses have been made publicly
available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/index.html.
7. Current and Previously Considered Candidate HACs--RTI Report on
Evidence-Based Guidelines
The RTI program evaluation includes a report that provides
references for all evidence-based guidelines available for each of the
selected and previously considered candidate HACs that provide
recommendations for the prevention of the corresponding conditions.
Guidelines were primarily identified using the AHRQ National Guidelines
Clearing House (NGCH) and the CDC, along with relevant professional
societies. Guidelines published in the United States were used, if
available. In the absence of U.S. guidelines for a specific condition,
international guidelines were included.
Evidence-based guidelines that included specific recommendations
for the prevention of the condition were identified for each of the
selected conditions. In addition, evidence-based guidelines also were
found for the previously considered candidate conditions. RTI prepared
a final report to summarize its findings regarding evidence-based
guidelines. This report can be found on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/Hospital-Acquired_Conditions.html. Subsequent to this final report,
RTI has been awarded an FY 2014 Evidence-Based Guidelines Monitoring
contract. Under the contract, RTI will provide a summary report of all
evidence-based guidelines available for each of the selected and
previously considered candidate HACs that provide recommendations for
the prevention of the corresponding conditions. Updates to the
guidelines will be made available to the public.
G. Proposed Changes to Specific MS-DRG Classifications
In this FY 2014 IPPS/LTCH PPS proposed rule, we are inviting public
comment on each of the MS-DRG classification proposed changes described
below, as well as our proposals to maintain certain existing MS-DRG
classifications, which also are discussed below. In some cases, we are
proposing changes to the MS-DRG classifications based on our analysis
of claims data. In other cases, we are proposing 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 early December
of the year prior to the next annual proposed rule update. For example,
to be considered for any updates or changes in FY 2014, comments and
suggestions should have been submitted by early December 2012. The
comments that were submitted in a timely manner are discussed below in
this section.
1. Pre-Major Diagnostic Categories (Pre-MDCs): Heart Transplants and
Liver Transplants
We received a request from an organization that represents
transplant surgeons to eliminate the severity levels for the heart and
liver transplants MS-DRGs. The MS-DRGs for heart transplants are: MS-
DRG 001 (Heart Transplant or Implant of Heart Assist System with MCC)
and MS-DRG 002 (Heart Transplant or Implant of Heart Assist System
without MCC). The MS-DRGs for liver transplants are: MS-DRG 005 (Liver
Transplant with MCC or Intestinal Transplant) and MS-DRG 006 (Liver
Transplant without MCC). We received this comment during the comment
period for the FY 2013 IPPS/LTCH PPS proposed rule. We referred to this
comment briefly in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53325),
but we did not address the issue because we considered this comment
outside of the scope of the proposed rule. However, we are addressing
this issue in this FY 2014 proposed rule.
The commenter stated that there are no ``uncomplicated'' heart
transplants or liver transplants, and indicated that all of these
transplant procedures are highly complex, involving numerous
complicating conditions, only some of which may be recognized by the
MS-DRGs. The commenter expressed concern that the continued bifurcation
of the MS-DRGs for heart and liver transplants will result in
unsustainable payment for these cases that are assigned to the
``without MCC'' MS-DRGs 002 and 006. According to the commenter, in
light of the relatively small number of Medicare patients involved and
the significant cost variation involved, it would be preferable to
eliminate the bifurcation of these procedures, thereby increasing the
stability of the DRG weights for these procedures.
We examined claims data from the FY 2012 MedPAR file for heart and
liver transplant cases assigned to MS-DRGs 001, 002, 005, and 006. The
following table illustrates our findings:
------------------------------------------------------------------------
Average
MS-DRGs Number of length of Average
cases stay costs
------------------------------------------------------------------------
MS-DRG 001....................... 1,247 33.27 $158,556
MS-DRG 002....................... 284 18 97,932
MS-DRGs 001 and 002--All cases... 1,531 30.4 147,310
MS-DRG 005....................... 828 19 66,746
MS-DRG 006....................... 282 8.75 30,873
MS-DRGs 005 and 006--All cases... 1,110 16.3 57,632
------------------------------------------------------------------------
The data showed that the majority of the heart transplant cases, a
total of 1,247, are assigned to MS-DRG 001, with average costs of
approximately $158,556 and an average length of stay of approximately
33.27 days. There were 284 cases assigned to MS-DRG 002, with average
costs of approximately $97,932 and an average length of stay of
approximately 18 days.
This table shows that there are significant differences in average
lengths of stay and average costs for the severity level for the heart
transplant MS-DRGs that justify the existing split in MS-DRGs 001 and
002. If we were to combine the heart transplant cases in MS-DRGs 001
and 002 as suggested by the commenter, the payment for the majority of
cases with an MCC would be lower.
[[Page 27513]]
The majority of the liver transplant cases, 828 cases, were
assigned to MS-DRG 005, with average costs of approximately $66,746 and
an average length of stay of approximately 19 days. There were 282
cases assigned to MS-DRG 006, with average costs of approximately
$30,873 and an average length of stay of approximately 8.75 days. The
data showed that there are significant differences in average costs and
average lengths of stay in the severity levels for the liver transplant
MS-DRGs. Again, if we were to combine all the liver transplant cases
into one MS-DRG as requested by the commenter, the majority of the
cases would receive lower payment.
Based on these findings, we believe that it would not be prudent to
eliminate the severity levels for the heart and liver transplant MS-
DRGs. Our clinical advisors concur with this analysis that two severity
levels are justified for the heart and liver transplant MS-DRGs.
Therefore, for FY 2014, we are not proposing to make any changes to the
severity levels for heart and liver transplant MS-DRGs 001, 002, 005,
and 006.
We are inviting public comments on this issue.
2. MDC 1 (Diseases and Disorders of the Nervous System): Tissue
Plasminogen Activator (tPA) (rtPA) Administration Within 24 Hours Prior
to Admission
During the comment period for the FY 2013 IPPS/LTCH PPS proposed
rule, we received a public comment that we considered to be outside the
scope of that proposed rule. We stated in the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53325) that we would consider this issue in future
rulemaking as part of our annual review process. The commenter
requested that CMS conduct an analysis of diagnosis code V45.88 (Status
post administration of tPA (rtPA) in a different facility within the
last 24 hours prior to admission to current facility). Diagnosis code
V45.88 was created for use beginning October 1, 2008, to identify
patients who are given tissue plasminogen activator (tPA) at one
institution and then transferred and admitted to a comprehensive stroke
center for further care. This situation has been referred to as the
``drip-and-ship'' issue and was discussed at length in the FY 2009 IPPS
proposed rule (73 FR 23563 through 23564) and final rule (73 FR 48493
through 48495), as well as the FY 2011 IPPS/LTCH PPS proposed rule (75
FR 23899 through 23900) and final rule (75 FR 50102 through 50106). We
refer readers to these previous discussions for detailed background
information regarding this topic.
Similar to previous requests, according to the commenter, the
concern at the receiving facilities is that the costs associated with
[caring for] more complex stroke patients that receive tPA are much
higher than the cost of the drug, presumably because stroke patients
initially needing tPA have more complicated strokes and outcomes.
However, because these patients do not receive the tPA at the second or
transfer hospital, the receiving hospital will not be able to assign
the case to one of the higher-weighted tPA stroke MS-DRGs when it
admits these patients whose care requires the use of intensive
resources. The MS-DRGs that currently include the diagnosis code for
the use of tPA are: MS-DRG 061 (Acute Ischemic Stroke with Use of
Thrombolytic Agent with MCC); MS-DRG 062 (Acute Ischemic Stroke with
Use of Thrombolytic Agent with CC); and MS-DRG 063 (Acute Ischemic
Stroke with Use of Thrombolytic Agent without CC/MCC). These MS-DRGs
have higher relative weights than the other MS-DRGs relating to stroke
or cerebral infarction. The commenter requested an analysis of
diagnosis code V45.88 to determine whether new claims data warrant any
change in the MS-DRG structure.
For this proposed rule, we analyzed MedPAR claims data from FY
2012. We included claims for patient cases assigned to the following
MS-DRGs:
061 (Acute Ischemic Stroke with Use of Thrombolytic Agent
with MCC)
062 (Acute Ischemic Stroke with Use of Thrombolytic Agent
with CC)
063 (Acute Ischemic Stroke with Use of Thrombolytic Agent
without CC/MCC)
064 (Intracranial Hemorrhage or Cerebral Infarction with
MCC)
065 (Intracranial Hemorrhage or Cerebral Infarction with
CC)
066 (Intracranial Hemorrhage or Cerebral Infarction
without CC/MCC).
Our data analysis included MS-DRGs 064, 065, and 066 because claims
involving diagnosis code V45.88 also would be properly reported in the
data for these MS-DRGs. The following table reflects the results of our
analysis of the MedPAR data in which diagnosis code V45.88 was reported
as a secondary diagnosis for FY 2012.
----------------------------------------------------------------------------------------------------------------
Average
MS-DRG Number of length of Average
cases stay costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 061--All cases.................................................... 3,369 7.48 $18,556
MS-DRG 061--Cases with secondary diagnosis code V45.88................... 140 7.51 19,008
MS-DRG 062--All cases.................................................... 5,277 4.92 12,935
MS-DRG 062--Cases with secondary diagnosis code V45.88................... 179 5.03 13,317
MS-DRG 063--All cases.................................................... 1,709 3.45 10,363
MS-DRG 063--Cases with secondary diagnosis code V45.88................... 48 3.15 9,372
MS-DRG 064--All cases.................................................... 64,095 6.30 11,654
MS-DRG 064--Cases with secondary diagnosis code V45.88................... 955 7.06 14,432
MS-DRG 065--All cases.................................................... 101,011 4.29 7,414
MS-DRG 065--Cases with secondary diagnosis code V45.88................... 1,259 4.91 9,471
MS-DRG 066--All cases.................................................... 56,620 2.92 5,414
MS-DRG 066--Cases with secondary diagnosis code V45.88................... 493 3.28 6,682
----------------------------------------------------------------------------------------------------------------
Based on our review of the data for all of the cases in MS-DRGs
064, 065, and 066, compared to the subset of cases containing diagnosis
code V45.88 as the secondary diagnosis, we again concluded that the
movement of cases with diagnosis code V45.88 as a secondary diagnosis
from MS-DRGs 064, 065, and 066 to MS-DRGs 061, 062, and 063 is not
warranted. We determined that the differences in the average lengths of
stay and the average costs are too small to warrant an assignment to
the higher-weighted MS-DRGs.
However, the data does reflect that the average costs for cases
reporting diagnosis code V45.88 as a secondary diagnosis in MS-DRG 066
are more similar to the average costs of higher
[[Page 27514]]
severity level cases in MS-DRG 065. Therefore, for FY 2014, we are
proposing to move cases with diagnosis code V45.88 from MS-DRG 066 to
MS-DRG 065, and to revise the title of MS-DRG 065 to reflect the
patients status post tPA administration within 24 hours. The proposed
revised MS-DRG title would be: MS-DRG 065 (Intracranial Hemorrhage or
Cerebral Infarction with CC or tPA in 24 Hours).
We are inviting public comments on our proposal.
3. MDC 4 (Diseases and Disorders of the Ear, Nose, Mouth and Throat)
a. Endoscopic Placement of a Bronchial Value
In response to the FY 2013 IPPS/LTCH PPS proposed rule, we received
a request to modify the MS-DRG assignment for bronchial valve(s)
insertion, which we considered to be outside of the scope of that
proposed rule (77 FR 53325 through 53326). The requestor asked that
cases in MS-DRGs 190, 191, and 192 (Chronic Obstructive Pulmonary
Disease with MCC, with CC, and without MCC/CC, respectively) that
involve insertion of a bronchial valve be assigned instead to MS-DRGs
163, 164, and 165 (Major Chest Procedures with MCC, with CC, and
without MCC/CC, respectively). The procedures are captured by procedure
codes 33.71 (Endoscopic insertion or replacement of bronchial valve(s),
single lobe) and 33.73 (Endoscopic insertion or replacement of
bronchial valve(s), multiple lobes), which are considered nonoperating
procedures and do not affect the MS-DRG assignment. When reported
without any other operating room (OR) procedure code, the admission
would be assigned to a medical MS-DRG.
The Spiration[supreg] IBV Valve System device, a bronchial valve,
was approved for new technology add-on payments in the FY 2010 IPPS/RY
2010 LTCH PPS final rule (74 FR 43819 through 43823) with a maximum
payment rate of $3,437.50. In the FY 2012 IPPS/LTCH PPS final rule, the
new technology add-on payments were discontinued for FY 2012 (76 FR
51575 through 51576). The bronchial valve device is used to place, via
bronchoscopy, small, one-way valves into selected small airways in the
lung in order to limit airflow into selected portions of lung tissue
that have prolonged air leaks following surgery while still allowing
mucus, fluids, and air to exit, and thereby reducing the amount of air
that enters the pleural space. The device is intended to control
prolonged air leaks following three specific surgical procedures:
lobectomy, segmentectomy, or lung volume reduction surgery (LVRS).
According to Spiration[supreg], an air leak that is present on
postoperative day 7 is considered ``prolonged'' unless present only
during forced exhalation or cough. In order to help prevent valve
migration, there are five anchors with tips that secure the valve to
the airway. The implanted valves are intended to be removed no later
than 6 weeks after implantation.
New technology add-on payments were limited to cases involving
prolonged air leaks following lobectomy, segmentectomy, and LVRS in MS-
DRGs 163, 164, and 165 in the FY 2010 IPPS/RY 2010 LTCH PPS final rule
(74 FR 43823). This limitation was based on the indications for use
approved by the FDA in the FDA Humanitarian Device Exemption (HDE)
approval process set forth in section 520(m) of the Federal Food, Drug
& Cosmetic Act. A humanitarian use device (HUD) is a device that is
intended to benefit patients by treating or diagnosing a disease or
condition that affects or is manifested in fewer than 4,000 individuals
in the United States per year. Devices that receive HUD designation may
be eligible for marketing approval, subject to certain restrictions,
under an HDE application. To obtain marketing approval for an HUD, an
HDE application must be submitted to the FDA. An HDE application is a
premarket approval (PMA) application submitted to the FDA under 21 CFR
814.104 that seeks exemption from the PMA requirement under 21 CFR
814.20 demonstrating a reasonable assurance of effectiveness. A device
that has received HUD designation may receive HDE approval if, among
other things, the FDA determines that the device will not expose
patients to an unreasonable or significant risk of illness or injury
and the probable benefit to health from use of the device outweighs the
risk of injury or illness from its use, taking into account the
probable risks and benefits of currently available devices or
alternative forms of treatment. In addition, the applicant must
demonstrate that no comparable devices are available to treat or
diagnose the disease or condition (other than another device approved
under an HDE application or a device under an approved Investigational
Device Exemption), and that the device would not otherwise be available
unless an HDE is granted. An approved HDE authorizes marketing of the
HUD. However, an HUD generally may be used in facilities only after
prior approval by an Institutional Review Board (IRB).
FDA's approval of the HDE application limited the use of the
Spiration[supreg] IBV Valve System device to cases involving prolonged
air leaks following lobectomy, segmentectomy, or LVRS.
The requested MS-DRG change would initiate the same payment for
chronic obstructive pulmonary disease (COPD) cases with a bronchial
valve inserted without a major chest procedure as for cases where both
a major chest procedure and a bronchial valve insertion were performed.
The following table shows the COPD cases that involved the insertion of
a bronchial valve as well as data on cases assigned to MS-DRGs 163,
164, and 165.
----------------------------------------------------------------------------------------------------------------
Average
MS-DRGs Number of length of Average
cases stay costs
----------------------------------------------------------------------------------------------------------------
COPD Cases
----------------------------------------------------------------------------------------------------------------
MS-DRG 190--All cases................................................... 133,566 5.07 $7,815
MS-DRG 190--Cases with procedure code 33.71............................. 0 0 0
MS-DRG 190--Cases with procedure code 33.73............................. 2 14.0 47,034
MS-DRG 191--All cases................................................... 129,231 4.18 6,245
MS-DRG 191--Cases with procedure code 33.71............................. 0 0 0
MS-DRG 191--Cases with procedure code 33.73............................. 0 0 0
MS-DRG 192--All cases................................................... 93,507 3.32 4,776
MS-DRG 192--Cases with procedure code 33.71............................. 0 0 0
MS-DRG 192--Cases with procedure code 33.73............................. 0 0 0
[[Page 27515]]
Major Chest Procedures
----------------------------------------------------------------------------------------------------------------
MS-DRG 163--All cases................................................... 11,287 13.33 32,728
MS-DRG 164--All cases................................................... 16,113 6.69 17,494
MS-DRG 165--All cases................................................... 9,280 3.94 12,209
----------------------------------------------------------------------------------------------------------------
There were only two COPD cases that had bronchial valves inserted
in MS-DRGs 190, 191, and 192. While the charges were high, these cases
were assigned to the highest severity level MS-DRG (MS-DRG 190 with
MCC). Given the small number of cases, it is not possible to determine
if the high average costs were due to the bronchial valve insertion or
to other factors such as other secondary diagnoses. The average length
of stay for these two cases was approximately 14 days compared to
approximately 5.07 days for all other cases within MS-DRG 190. Because
the additional 10 days cannot be clinically attributed to the bronchial
valve insertion, our clinical advisors have determined that other
factors must have impacted these two cases.
Cases in MS-DRGs 163, 164, and 165 include those cases with a major
chest procedure and those cases with both a major chest procedure as
well as a bronchial valve insertion as discussed above. Our clinical
advisors do not support moving COPD cases that have only a bronchial
valve insertion and no other major chest procedure from MS-DRGs 190,
191, and 192 to MS-DRGs 163, 164, and 165. They do not believe the
bronchial valve procedures are clinically similar to other major chest
procedures that require significantly more resources to perform. Our
clinical advisors point out that the limited circumstances where this
procedure would be used led the sponsor to seek HDE approval from the
FDA rather than a standard PMA. The indications for use approved by the
FDA are still limited to post-surgery. Our clinical advisors
recommended that we not modify the MS-DRG logic so that COPD cases with
bronchial valve insertions would be assigned to MS-DRGs 163, 164, and
165.
Given the limited number of cases for this procedure and the advice
from our clinical advisors, we are not proposing any MS-DRG changes for
bronchial valve(s) insertion for FY 2014. We also are not proposing to
change the MS-DRG assignment for procedures involving bronchial
valve(s) insertion (procedure codes 33.71 and 33.73) within MS-DRGs
190, 191, and 192.
We are inviting public comment on this issue.
b. Pulmonary Thromboendarterectomy (PTE) with Full Circulatory Arrest
We received a request from a university medical center to create a
new MS-DRG or to reassign cases reporting a unique approach to
pulmonary thromboendarterectomy (PTE) surgery performed with full
cardiac arrest and hypothermia. The requestor asked that we move cases
from MS-DRGs 163, 164, and 165 (Major Chest Procedures with MCC, with
CC, and without CC/MCC, respectively) to MS-DRGs 228, 229, and 230
(Other Cardiothoracic Procedures with MCC, with CC, and without CC/MCC,
respectively). Currently, MS-DRGs 163, 164, and 165 are grouped within
MDC 4 (Diseases and Disorders of the Respiratory System) while MS-DRGs
228, 229, and 230 are grouped within MDC 5 (Diseases and Disorders of
the Circulatory System).
The requestor identified two conditions for which a pulmonary
endarterectomy procedure is typically performed. These conditions are
identified by ICD-9-CM diagnosis codes 415.19 (Other pulmonary embolism
and infarction) and 416.2 (Chronic pulmonary embolism). However, the
requestor noted that diagnosis code 415.19 is usually associated with
traditional PTE for acute pulmonary embolism while diagnosis code 416.2
is associated with the medical center's unique approach to PTE
performed with full cardiac arrest and hypothermia.
Currently, there is not a specific ICD-9-CM procedure code to
accurately describe PTE surgery performed with full cardiac arrest and
hypothermia. Rather, a subset of existing ICD-9-CM procedure codes may
be used to identify the various components involved in this unique
approach to PTE surgery; for example, ICD-9-CM procedure codes 38.15
(Endarterectomy, other thoracic vessels); 39.61 (Extracorporeal
circulation auxiliary to open heart surgery); 39.62 (Hypothermia
(systemic) incidental to open heart surgery); and 39.63 (Cardioplegia).
However, it is not clear if the requestor reports any of these codes or
a combination of these codes to identify its unique approach to the
procedure.
According to the requestor, its approach to PTE surgery is
significantly different from traditional pulmonary endarterectomy
procedures in terms of complexity, resource use, and the population for
which the procedure is performed. The requestor noted that the surgery
is ``conducted under profound hypothermia and circulatory arrest which
involves placing the patient on cardiopulmonary bypass and cooling the
body to 20 degrees centigrade or lower.'' In addition, the requestor
explained that ``during this period of cooling and cardiac arrest, the
heart is arrested and all of the patient's blood is removed from the
body.'' Following this, circulation is stopped completely allowing for
``optimal and extensive dissection of the pulmonary arteries and
identification of an endarterectomy plane which can be delicately
incised into the deepest pulmonary vasculature.'' The requestor further
noted that ``due to the complexity of the surgical technique, a very
high degree of skill is required and the procedure is currently only
performed by a handful of surgeons world-wide.'' Lastly, the requestor
stated the average operating time for a traditional PTE is
approximately 3 to 4 hours compared to the university medical center's
approach to PTE, which averages approximately 10 to 12 hours.
We analyzed claims data from the FY 2012 MedPAR file for cases
reporting a principal diagnosis code of 415.19 or a principal diagnosis
code of 416.2 along with procedure codes 38.15, 39.61, 39.62, and
39.63. As displayed in the table below, there were a total of 11,287
cases in MS-DRG 163 with an average length of stay of approximately
13.33 days and average costs of approximately $32,728. Using the
combination of diagnosis and procedure codes as described above, the
total number of cases found in MS-DRG 163 was 12, with average costs
ranging from approximately $46, 959 to $53,048 and an average length of
stay ranging from approximately 13.50 days to 16.20 days. We
acknowledge that the average length of stay and average costs for these
cases are somewhat higher in comparison to
[[Page 27516]]
the average lengths of stay and average costs of all the other cases in
MS-DRG 163. However, the volume of cases was very low. The data reflect
similar results for MS-DRG 164. Only 4 cases were identified in the
analysis, with average costs ranging from approximately $21,669 to
$37,447 and average lengths of stay ranging from approximately 7 days
to 10 days.
In total, there were only 16 cases reflected in the data using the
combination of diagnosis codes and proxy procedure codes. We believe
there may be other factors contributing to the increased lengths of
stay and costs. (We note that, there were no cases found for a
principal diagnosis code of 415.19 with procedure code 38.15 only.
There also were no cases found in MS-DRG 165 using the combination of
diagnosis and procedure codes.)
----------------------------------------------------------------------------------------------------------------
Average
MS-DRG Number of length of Average
cases stay costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 163--All cases.................................................... 11,287 13.33 $32,728
MS-DRG 163--Cases with principal diagnosis code 415.19 with procedure 4 13.50 46,959
code 38.15 and 39.61 or 39.62 or 39.63..................................
MS-DRG 163--Cases with principal diagnosis code 416.2 with procedure code 3 14.33 53,048
38.15 only..............................................................
MS-DRG 163--Cases with principal diagnosis code 416.2 with procedure code 5 16.20 50,393
38.15 and 39.61 or 39.62 or 39.63.......................................
MS-DRG 164--All cases.................................................... 16,113 6.69 17,494
MS-DRG 164--Cases with principal diagnosis code 415.19 with procedure 2 10.00 37,447
code 38.15 with 39.61 or 39.62 or 39.63.................................
MS-DRG 164--Cases with principal diagnosis code 416.2 with procedure code 0 0 0
38.15 only..............................................................
MS-DRG 164--Cases with principal diagnosis code 416.2 with procedure code 2 7.00 21,669
38.15 and 39.61 or 39.62 or 39.63.......................................
----------------------------------------------------------------------------------------------------------------
As stated in previous rulemaking discussion, the MS-DRG
classification system on which the IPPS is based comprises a system of
averages. As such, it is understood that, in any particular MS-DRG, it
is not unusual for a small number of cases to demonstrate higher than
average costs, nor is it unusual for a small number of cases to
demonstrate lower than average costs. Upon review of the MedPAR data,
our clinical advisors agree that the current MS-DRG assignment for this
unique procedure is appropriate.
We also analyzed claims data from the FY 2012 MedPAR file for MS-
DRGs 228, 229, and 230 as illustrated below.
----------------------------------------------------------------------------------------------------------------
Average
MS-DRG Number of length of Average
cases stay costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 228--Other cardiothoracic procedures with MCC..................... 1,643 13.26 $46,758
MS-DRG 229--Other cardiothoracic procedures with CC...................... 1,841 7.77 30,432
MS-DRG 230--Other cardiothoracic procedures without CC/MCC............... 506 5.08 25,068
----------------------------------------------------------------------------------------------------------------
ICD-9-CM procedure code 38.15 is designated as an operating room
(OR) procedure code and currently groups to MS-DRGs 163, 164, and 165
in MDC 4 when either diagnosis code 415.19 or 416.2 are reported as the
principal diagnosis. As diagnosis codes can only be assigned to one MDC
within the GROUPER logic, it is not possible for a patient to have
diagnosis code 415.19 or diagnosis code 416.2 reported along with
procedure code 38.15 and grouped to MDC 5, which is where MS-DRGs 228,
229, and 230 are assigned.
Therefore, another aspect of this MS-DRG request involved the
evaluation of moving ICD-9-CM diagnosis code 416.2 from MDC 4 to MDC 5.
Our clinical advisors do not support moving diagnosis code 416.2 from
MDC 4 to MDC 5 in order to accommodate this rare procedure performed by
only a small number of physicians worldwide. They pointed out that a
basic change such as moving diagnosis code 416.2 from MDC 4 to MDC 5
would impact a large number of patients who do not undergo this
procedure. It also would disrupt trend data from over 30 years of DRG
and MS-DRG reporting. Given the very small number of potential cases,
and the advice of our clinical advisors, we do not believe a MS-DRG
modification is warranted at this time.
Therefore, we are not proposing to create a new MS-DRG or to
reassign cases reporting this university medical center's approach to
pulmonary thromboendarterectomy. We are inviting public comments on
this issue.
4. MDC 5 (Diseases and Disorders of the Circulatory System)
a. Discharge/Transfer to Designated Disaster Alternative Care Site
We are proposing to add new patient discharge status code 69
(Discharged/transferred to a designated disaster alternative care site)
to the MS-DRG GROUPER logic for MS-DRGs 280 (Acute Myocardial
Infarction Discharged Alive with MCC), 281 (Acute Myocardial Infarction
Discharged Alive with CC), and 282 (Acute Myocardial Infarction
Discharged Alive without CC/MCC) to identify patients who are
discharged or transferred to an alternative site that will provide
basic patient care during a disaster response. As discussed in section
II.G.7. of the preamble of this proposed rule, this new discharge
status code is also being added to the Medicare Code Editor (MCE)
software. We are inviting public comments on this proposal.
b. Discharges/Transfers With a Planned Acute Care Hospital
Inpatient Readmission
We also are proposing to add 15 new discharge status codes to the
MS-DRG GROUPER logic for MS-DRGs 280, 281, and 282 that will identify
patients who are discharged with a planned acute care hospital
inpatient readmission. As discussed in section II.G.7. of the preamble
of this proposed rule, these new discharge status codes are being
proposed for addition to the MCE as well.
Shown in the table below are the current discharge status codes
that are
[[Page 27517]]
assigned to the GROUPER logic for MS-DRGs 280, 281, and 282, along with
the proposed new discharge status codes and their titles.
----------------------------------------------------------------------------------------------------------------
New
Current code code Title
----------------------------------------------------------------------------------------------------------------
01....................................... 81 Discharged to home or self care with a planned acute care
hospital inpatient readmission.
02....................................... 82 Discharged/transferred to a short term general hospital for
inpatient care with a planned acute care hospital inpatient
readmission.
03....................................... 83 Discharged/transferred to a skilled nursing facility (SNF)
with Medicare certification with a planned acute care
hospital inpatient readmission.
04....................................... 84 Discharged/transferred to a facility that provides custodial
or supportive care with a planned acute care hospital
inpatient readmission.
05....................................... 85 Discharged/transferred to a designated cancer center or
children's hospital with a planned acute care hospital
inpatient readmission.
06....................................... 86 Discharged/transferred to home under care of organized home
health service organization with a planned acute care
hospital inpatient readmission.
21....................................... 87 Discharged/transferred to court/law enforcement with a
planned acute care hospital inpatient readmission.
43....................................... 88 Discharged/transferred to a federal health care facility with
a planned acute care hospital inpatient readmission.
61....................................... 89 Discharged/transferred to a hospital-based Medicare approved
swing bed with a planned acute care hospital inpatient
readmission.
62....................................... 90 Discharged/transferred to an inpatient rehabilitation
facility (IRF) including rehabilitation distinct part units
of a hospital with a planned acute care hospital inpatient
readmission.
63....................................... 91 Discharged/transferred to a Medicare certified long term care
hospital (LTCH) with a planned acute care hospital inpatient
readmission.
64....................................... 92 Discharged/transferred to a nursing facility certified under
Medicaid but not certified under Medicare with a planned
acute care hospital inpatient readmission.
65....................................... 93 Discharged/transferred to a psychiatric distinct part unit of
a hospital with a planned acute care hospital inpatient
readmission.
66....................................... 94 Discharged/transferred to a critical access hospital (CAH)
with a planned acute care hospital inpatient readmission.
70....................................... 95 Discharged/transferred to another type of health care
institution not defined elsewhere in this code list with a
planned acute care hospital inpatient readmission.
----------------------------------------------------------------------------------------------------------------
We are inviting public comments on our proposal to add the above
listed new discharge status codes to the GROUPER logic for MS-DRGs 280,
281, and 282.
5. MDC 8 (Diseases and Disorders of the Musculoskeletal System and
Connective Tissue)
a. Reverse Shoulder Procedures
We received a request to change the MS-DRG assignment for reverse
shoulder replacement procedures which is captured with procedure code
81.88 (Reverse total shoulder replacement). The requestor did not
suggest a specific new MS-DRG assignment, but requested that reverse
shoulder replacement procedures be reassigned from MS-DRGs 483 and 484
(Major Joint/Limb Reattachment Procedure of, Upper Extremities with CC/
MCC and without CC/MCC, respectively) or that we create a new MS-DRG
for reverse shoulder replacement procedures.
Biomechanically, the reverse shoulder devices move the center of
rotation of the arm laterally and change the direction of the pull of
the deltoid muscle, allowing the deltoid muscle to elevate the arm
without functioning rotator cuff tendons. The requestor stated that the
use of traditional total shoulder devices in patients with a
nonfunctioning rotator cuff frequently leads to long-term complications
and unsatisfactory functional results. Patients with damaged rotator
cuffs or rotator cuff syndrome have poor outcomes with traditional
shoulder replacement devices. The reverse shoulder replacement
procedure was created to address the clinical needs for patients who
would have poor outcomes with a traditional shoulder replacement. The
requestor stated that reverse shoulder replacement devices were
designed to provide a superior functionality and outcomes for patients
with damaged rotator cuffs.
The requestor stated that the reverse shoulder replacement
procedure is technically more complex and requires a higher level of
expertise than traditional shoulder procedures and involves several
issues that make the surgery more complex. Patients who have had prior
rotator cuff surgery have anchors and scar tissue that must be
surgically addressed. Often, there also are severe deformities that
must be addressed in order to establish stability.
The requestor acknowledged that the reverse shoulder replacement
procedure is an upper extremity procedure like other procedures
assigned to MS-DRGs 483 and 484. These MS-DRGs include the longstanding
total shoulder replacement procedures as well as partial shoulder
replacements. While the procedure is similar to other procedures in MS-
DRGs 483 and 484, the requestor stated there are significant
differences between the technical complexity and indications for usage
from the other procedures. The requestor stated there are significant
differences in resource usage and clinical coherence between
longstanding approaches to shoulder replacement and other procedures
assigned to MS-DRGs 483 and 484 and the reverse shoulder replacement
procedure. The requestor stated not only was the resource consumption
significantly higher, the individual supply costs for reserve shoulder
replacement procedures were higher than the costs of other procedures
assigned to MS-DRGs 483 and 484.
MS-DRGs 483 and 484 contain the following procedures:
81.73 (Total wrist replacement)
81.80 (Other total shoulder replacement)
81.81 (Partial shoulder replacement)
81.84 (Total elbow replacement)
81.88 (Reverse total shoulder replacement)
84.23 (Forearm, wrist, or hand reattachment)
84.24 (Upper arm reattachment).
As can be seen from this list, MS-DRGs 483 and 484 contain total
and partial shoulder replacements, as well as replacement and
attachment procedures on the wrist and upper arm. Both the newer
shoulder replacement techniques as well as the longstanding
[[Page 27518]]
shoulder replacement techniques are included in these MS-DRGs.
----------------------------------------------------------------------------------------------------------------
Average
MS-DRG Number of length of Average
cases stay costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 483--All cases.................................................... 13,113 3.33 $17,039
MS-DRG 483--Cases with procedure code 81.88.............................. 5,690 3.30 19,023
MS-DRG 484--All cases.................................................... 21,073 2.01 14,448
MS-DRG 484--Cases with procedure code 81.88.............................. 7,505 2.08 16,890
----------------------------------------------------------------------------------------------------------------
As the above table illustrates, the average costs for reverse total
shoulder replacement are approximately $2,000 higher than the average
costs for all other procedures within MS-DRGs 483 and 484 and have
similar average lengths of stays. While the average costs were higher,
each MS-DRG has some cases that are higher and some cases that are
lower than the average costs for the entire MS-DRG. We believe the
average costs for the reverse shoulder replacement procedures are not
inappropriately high compared to other procedures grouped within MS-
DRGs 483 and 484. Therefore, the claims data do not support reassigning
these cases or creating a new MS-DRG.
Our clinical advisors reviewed this issue and determined that the
cases are appropriately assigned to MS-DRGs 483 and 484. As stated
earlier, MS-DRGs 483 and 484 contain other types of shoulder
replacements. Our clinical advisors believe it is appropriate to have
all total shoulder replacement procedures within the same set of MS-
DRGs. They do not believe it is appropriate to reassign those that use
a different technique to accomplish the same goal, a total shoulder
replacement. Therefore, our clinical advisors determined that this is
an appropriate assignment for reverse shoulder replacement procedures
from a clinical perspective. They also do not believe it is appropriate
to move these cases to any other surgical, orthopedic MS-DRGs because
of differences in the clinical makeup of the other surgical orthopedic
MS-DRGs. Our clinical advisors recommended not creating a new MS-DRG
for reverse shoulder replacement procedures because they believe the
procedures are appropriately assigned to MS-DRGs 483 and 484.
Therefore, based on claims data and clinical analysis, we are not
proposing to reassign these cases to any other MS-DRGs or to create a
new MS-DRG.
Based on the claims data and our clinical analysis, we are not
proposing to reassign cases reporting procedure code 81.88 from their
current assignment to MS-DRGs 483 and 484 or to create a new MS-DRG. We
are inviting public comments on this issue.
b. Total Ankle Replacement Procedures
In response to the FY 2013 IPPS/LTCH PPS proposed rule, we received
a request to develop a new MS-DRG for total ankle replacements, which
we considered to be outside the scope of that proposed rule (77 FR
53325). We are addressing this request as part of this FY 2014 IPPS/
LTCH PPS proposed rule. The cases are captured by procedure code 81.56
(Total ankle replacement) and are assigned to MS-DRGs 469 and 470
(Major Joint Replacement or Reattachment of Lower Extremity with MCC
and without MCC, respectively).
The commenter stated that total ankle procedures are much more
clinically complex than total hip or total knee replacement procedures,
which have their own distinct MS-DRGs. The commenter also stated that
total ankle replacement is surgery that involves the replacement of the
damaged parts of the three bones that make up the ankle joint, as
compared to two bones in most other total joint procedures such as hip
or knee replacement. The commenter stated that average costs of total
ankle replacements are higher than those for total knee and hip
replacements. Therefore, a new MS-DRG should be created for total ankle
replacements. As an alternative, the commenter suggested that these
cases be reassigned to MS-DRG 469 even if the cases do not have an MCC
as a secondary diagnosis.
MS-DRGs 469 and 470 include a variety of procedures of the lower
extremities including the procedures listed below. This group of lower
extremity joint replacement and reattachment procedures was developed
because they were considered to be clinically cohesive and to have
similar resource consumptions.
00.85 (Resurfacing hip, total, acetabulum and femoral
head)
00.86 (Resurfacing hip, partial, femoral head)
00.87 (Resurfacing hip, partial, acetabulum)
81.51 (Total hip replacement)
81.52 (Partial hip replacement)
81.54 (Total knee replacement)
81.56 (Total ankle replacement)
84.26 (Foot reattachment)
84.27 (Lower leg or ankle reattachment)
84.28 (Thigh reattachment)
As the table below shows, there were 1,275 cases reporting total
ankle replacements with 21 cases in MS-DRG 469 and 1,254 cases in MS-
DRG 470. The 1,254 cases in MS-DRG 470 have higher costs than other
cases in MS-DRG 470 (approximately $17,242 compared to approximately
$13,984). The 21 cases in MS-DRG 469 had average costs of approximately
$23,360 compared to approximately $21,186 in average costs for all
cases within MS-DRG 469. While these procedures are higher in average
costs than other procedures within the MS-DRGs, we point out that cases
are grouped together based on similar clinical and resource criteria.
Some cases will have average costs higher than the overall average
costs for the MS-DRG, while other cases will have lower average costs.
Total ankle replacements represent 0.3 percent of the total number of
cases within MS-DRGs 469 and 470.
----------------------------------------------------------------------------------------------------------------
Average
MS-DRGs Number of length of Average
cases stay costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 469--All cases.................................................... 25,618 7.33 $21,186
MS-DRG 469--Cases with procedure code 81.56.............................. 21 6.81 23,360
MS-DRG 470--All cases.................................................... 390,518 3.37 13,984
MS-DRG 470--Cases with procedure code 81.56.............................. 1,254 2.19 17,242
[[Page 27519]]
Total--All cases......................................................... ........... ........... 416,136
Total--Cases with procedure code 81.56................................... ........... ........... 1,275
----------------------------------------------------------------------------------------------------------------
Our clinical advisors reviewed this issue and determined that the
total ankle replacements are appropriately classified within MS-DRGs
469 and 470. They do not support the commenter's contention that these
cases are significantly more complex than knee and hip replacements.
They believe that total ankle replacements are clinically consistent
with other types of lower extremity joint replacements within MS-DRGs
469 and 470. Our clinical advisors do not support creating a new MS-DRG
for total ankle replacements. After considering the results of
examination of the claims data, the recommendations from our clinical
advisors, and the small number of total ankle replacements, we are not
proposing to create a new MS-DRG at this time.
We also examined the request to move all total ankle replacements
to the highest severity level, MS-DRG 469, even when no secondary
diagnosis on the MCC list was reported. Moving all total ankle
replacements to MS-DRG 469 would lead to overpayments of approximately
$3,944 per case because the average costs of total ankle replacements
in MS-DRG 470 was approximately $17,242, while the average costs of all
cases in MS-DRG 469 was approximately $21,186. After considering the
claims data as well as the input from our clinical advisors, we are not
proposing that all total ankle procedures be assigned to MS-DRG 469
even when the case does not have an MCC reported as a secondary
diagnosis. We believe the current MS-DRGs are appropriate for total
ankle replacements.
We are not proposing to create a new total ankle replacement MS-DRG
or to reassign all total ankle replacements to MS-DRG 469. We are
proposing to maintain the current MS-DRG assignments for total ankle
replacements. We are inviting public comment on our proposal.
6. MDC 15 (Newborns and Neonates With Conditions Originating in the
Neonatal Period)
a. Persons Encountering Health Services for Specific Procedures, Not
Carried Out
We received a request to evaluate the MS-DRG assignment of ICD-9-CM
diagnosis codes V64.00 through V64.04, and V64.06 through V64.43 in MS-
DRG 794 (Neonate with Other Significant Problems) under MDC 15. The
requestor noted that the assignment of diagnosis code V64.05
(Vaccination not carried out because of caregiver refusal) was
addressed in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50111 through
50112). We removed diagnosis code V64.05 from MS-DRG 794 and added it
to the ``only secondary diagnosis'' list for MS-DRG 795 (Normal
Newborn). The requestor asked that we consider the reassignment of
these diagnosis codes from MS-DRG 794 to MS-DRG 795. The codes under
existing MS-DRG 794 include:
V64.00 (Vaccination not carried out, unspecified reason)
V64.01 (Vaccination not carried out because of acute
illness)
V64.02 (Vaccination not carried out because of chronic
illness or condition)
V64.03 (Vaccination not carried out because of immune
compromised state)
V64.04 (Vaccination not carried out because of allergy to
vaccine or component)
V64.06 (Vaccination not carried out because of patient
refusal)
V64.07 (Vaccination not carried out for religious reasons)
V64.08 (Vaccination not carried out because patient had
disease being vaccinated against)
V64.09 (Vaccination not carried out for other reason)
V64.1 (Surgical or other procedure not carried out because
of contraindication)
V64.2 (Surgical or other procedure not carried out because
of patient's decision)
V64.3 (Procedure not carried out for other reasons)
V64.41 (Laparoscopic surgical procedure converted to open
procedure)
V64.42 (Thoracoscopic surgical procedure converted to open
procedure)
V64.43 (Arthroscopic surgical procedure converted to open
procedure).
In a newborn case with one of these diagnosis codes reported as a
secondary diagnosis, the case would be assigned to MS-DRG 794. The
commenter believed that these diagnosis codes, when reported as a
secondary diagnosis for a newborn case, should be assigned to MS-DRG
795 instead of MS-DRG 794.
Our clinical advisors reviewed this request and concur with the
commenter that diagnosis codes V64.00 through V64.04, and V64.06
through V64.3 should not continue to be assigned to MS-DRG 794, as
there is no clinically usable information reported in those codes
identifying significant problems. However, our clinical advisors
recommend that diagnosis codes V64.41, V64.42, and V64.43, which
identify that a surgical procedure converted to an open procedure,
continue to be assigned to MS-DRG 794. These diagnosis codes may
indicate a more significant encounter that required a surgical
intervention.
Therefore, for FY 2014, we are proposing to reassign diagnosis
codes V64.00 through V64.04, and V64.06 through V64.3 from MS-DRG 794
to MS-DRG 795. Diagnosis codes V64.00 through V64.04, and V64.06
through V64.3 would be added to the ``only secondary diagnosis'' list
for MS-DRG 795. Diagnosis codes V64.41, V64.42, and V64.43 would
continue to be assigned to MS-DRG 794. We are inviting public comments
on this proposal.
b. Discharges/Transfers of Neonates With a Planned Acute Care Hospital
Inpatient Readmission
We are proposing to add the patient discharge status codes shown in
the table below to the MS-DRG GROUPER logic for MS-DRG 789 (Neonates,
Died or Transferred to Another Acute Care Facility) to identify
neonates that are transferred to a designated facility with a planned
acute care hospital inpatient readmission.
----------------------------------------------------------------------------------------------------------------
New code Title
----------------------------------------------------------------------------------------------------------------
82.................................................. Discharged/transferred to a short term general hospital
for inpatient care with a planned acute care hospital
inpatient readmission.
[[Page 27520]]
85.................................................. Discharged/transferred to a designated cancer center or
children's hospital with a planned acute care hospital
inpatient readmission.
94.................................................. Discharged/transferred to a critical access hospital (CAH)
with a planned acute care hospital inpatient readmission.
----------------------------------------------------------------------------------------------------------------
Currently, the GROUPER logic for MS-DRG 789 contains discharge
status codes 02 (Discharged/transferred to a short term general
hospital for inpatient care), 05 (Discharged/transferred to a
designated cancer center or children's hospital), and 66 (Discharged/
transferred to a critical access hospital (CAH)).
As discussed in section II.G.7. of the preamble of this proposed
rule, these new discharge status codes are also being proposed for
addition to the Medicare Code Editor (MCE). We are inviting public
comments on our proposal.
7. Proposed Medicare Code Editor (MCE) Changes
The Medicare Code Editor (MCE) is a software program that detects
and reports errors in the coding of Medicare claims data. Patient
diagnoses, procedure(s), and demographic information are entered into
the Medicare claims processing systems and are subjected to a series of
automated screens. The MCE screens are designed to identify cases that
require further review before classification into an MS-DRG.
a. Age Conflict Edit
We received a request to review three ICD-9-CM diagnosis codes
currently listed under the age conflict edit within the MCE. The age
conflict edit detects inconsistencies between a patient's age and any
diagnosis on the patient's record. Specifically, the requestor
recommended that CMS consider the removal of diagnosis codes 751.1
(Atresia and stenosis of small intestine), 751.2 (Atresia and stenosis
of large intestine, rectum, and anal canal), and 751.61 (Biliary
atresia) from the pediatric age conflict edit. Generally, diagnoses
included in the list for the pediatric age conflict edit are applicable
for ages 0 through 17.
The requestor noted that diagnosis code 751.1 was removed from the
Integrated Outpatient Code Editor (IOCE) effective January 1, 2006. Our
clinical advisors agree that patients described with any one of the
above listed codes, although congenital anomalies, may require a
revision procedure in adulthood. Therefore, we believe that the removal
of these codes appears appropriate and also would be consistent with
the IOCE.
We are inviting public comments on our proposal to remove diagnosis
codes 751.1, 751.2, and 751.61 from the pediatric age conflict edit
effective October 1, 2013.
b. Discharge Status Code Updates
To reflect changes in the UB-04 code set maintained by the National
Uniform Billing Committee (NUBC), we are proposing to add the following
new discharge status codes to the CMS GROUPER and the MCE logic
effective October 1, 2013.
One of the new discharge status codes corresponds to an alternative
care site. This alternative care site discharge status code is intended
to identify patients being discharged or transferred to an alternative
site that will provide basic patient care during a disaster response.
The new discharge status code is 69 (Discharged/transferred to a
designated disaster alternative care site).
In addition, 15 new discharge status codes correspond with
identifying planned acute care hospital inpatient readmissions. Shown
below are the existing ``base'' discharge status codes and the new
codes that will better identify patients who are discharged with a
planned readmission.
----------------------------------------------------------------------------------------------------------------
Base code New code Title
----------------------------------------------------------------------------------------------------------------
01................................... 81..................... Discharged to home or self care with a planned
acute care hospital inpatient readmission.
02................................... 82..................... Discharged/transferred to a short term general
hospital for inpatient care.
03................................... 83..................... Discharged/transferred to a skilled nursing
facility (SNF) with Medicare certification with
a planned acute care hospital inpatient
readmission.
04................................... 84..................... Discharged/transferred to a facility that
provides custodial or supportive care with a
planned acute care hospital inpatient
readmission.
05................................... 85..................... Discharged/transferred to a designated cancer
center or children's hospital with a planned
acute care hospital inpatient readmission.
06................................... 86..................... Discharged/transferred to home under care of
organized home health service organization with
planned acute care hospital inpatient
readmission.
21................................... 87..................... Discharged/transferred to court/law enforcement
with a planned acute care hospital inpatient
readmission.
43................................... 88..................... Discharged/transferred to federal health care
facility with a planned acute care hospital
inpatient readmission.
61................................... 89..................... Discharged/transferred to a hospital-based
Medicare approved swing bed with a planned
acute care hospital inpatient readmission.
62................................... 90..................... Discharged/transferred to an inpatient
rehabilitation facility (IRF) including
rehabilitation distinct part units of a
hospital with a planned acute care hospital
inpatient readmission.
63................................... 91..................... Discharged/transferred to a Medicare certified
long term care hospital (LTCH) with a planned
acute care hospital inpatient readmission.
64................................... 92..................... Discharged/transferred to a nursing facility
certified under Medicaid but not certified
under Medicare with a planned acute care
hospital inpatient readmission.
65................................... 93..................... Discharged/transferred to a psychiatric distinct
part unit of a hospital with a planned acute
care hospital inpatient readmission.
66................................... 94..................... Discharged/transferred to a critical access
hospital (CAH) with a planned acute care
hospital inpatient readmission.
70................................... 95..................... Discharged/transferred to another type of health
care institution not defined elsewhere in this
code list with a planned acute care hospital
inpatient readmission.
----------------------------------------------------------------------------------------------------------------
[[Page 27521]]
We are inviting public comments on our proposal to add the above
listed new discharge status codes to the GROUPER and the MCE logic
effective October 1, 2013 (FY 2014).
8. Surgical Hierarchies
Some inpatient stays entail multiple surgical procedures, each one
of which, occurring by itself, could result in assignment of the case
to a different MS-DRG within the MDC to which the principal diagnosis
is assigned. Therefore, it is necessary to have a decision rule within
the GROUPER by which these cases are assigned to a single MS-DRG. The
surgical hierarchy, an ordering of surgical classes from most resource-
intensive to least resource-intensive, performs that function.
Application of this hierarchy ensures that cases involving multiple
surgical procedures are assigned to the MS-DRG associated with the most
resource-intensive surgical class.
Because the relative resource intensity of surgical classes can
shift as a function of MS-DRG reclassification and recalibrations, for
FY 2014, we reviewed the surgical hierarchy of each MDC, as we have for
previous reclassifications and recalibrations, to determine if the
ordering of classes coincides with the intensity of resource
utilization.
A surgical class can be composed of one or more MS-DRGs. For
example, in MDC 11, the surgical class ``kidney transplant'' consists
of a single MS-DRG (MS-DRG 652) and the class ``major bladder
procedures'' consists of three MS-DRGs (MS-DRGs 653, 654, and 655).
Consequently, in many cases, the surgical hierarchy has an impact on
more than one MS-DRG. The methodology for determining the most
resource-intensive surgical class involves weighting the average
resources for each MS-DRG by frequency to determine the weighted
average resources for each surgical class. For example, assume surgical
class A includes MS-DRGs 001 and 002 and surgical class B includes MS-
DRGs 003, 004, and 005. Assume also that the average costs of MS-DRG
001 are higher than that of MS-DRG 003, but the average costs of MS-
DRGs 004 and 005 are higher than the average costs of MS-DRG 002. To
determine whether surgical class A should be higher or lower than
surgical class B in the surgical hierarchy, we would weigh the average
costs of each MS-DRG in the class by frequency (that is, by the number
of cases in the MS-DRG) to determine average resource consumption for
the surgical class. The surgical classes would then be ordered from the
class with the highest average resource utilization to that with the
lowest, with the exception of ``other O.R. procedures'' as discussed
below.
This methodology may occasionally result in assignment of a case
involving multiple procedures to the lower-weighted MS-DRG (in the
highest, most resource-intensive surgical class) of the available
alternatives. However, given that the logic underlying the surgical
hierarchy provides that the GROUPER search for the procedure in the
most resource-intensive surgical class, in cases involving multiple
procedures, this result is sometimes unavoidable.
We note that, notwithstanding the foregoing discussion, there are a
few instances when a surgical class with a lower average cost is
ordered above a surgical class with a higher average cost. For example,
the ``other O.R. procedures'' surgical class is uniformly ordered last
in the surgical hierarchy of each MDC in which it occurs, regardless of
the fact that the average costs for the MS-DRG or MS-DRGs in that
surgical class may be higher than those for other surgical classes in
the MDC. The ``other O.R. procedures'' class is a group of procedures
that are only infrequently related to the diagnoses in the MDC, but are
still occasionally performed on patients with cases assigned to the MDC
with these diagnoses. Therefore, assignment to these surgical classes
should only occur if no other surgical class more closely related to
the diagnoses in the MDC is appropriate.
A second example occurs when the difference between the average
costs for two surgical classes is very small. We have found that small
differences generally do not warrant reordering of the hierarchy
because, as a result of reassigning cases on the basis of the hierarchy
change, the average costs are likely to shift such that the higher-
ordered surgical class has lower average costs than the class ordered
below it.
In this proposed rule, we are proposing limited changes to the MS-
DRG classifications for FY 2014, as discussed in sections II.G.2. and
5. of this preamble. In our review of these proposed changes, we did
not identify any needed changes to the surgical hierarchy. Therefore,
in this proposed rule, we are not proposing any changes to the surgical
hierarchy for Pre-MDCs and MDCs for FY 2014.
9. Complications or Comorbidity (CC) Exclusions List
a. Background of the CC List and the CC Exclusions List
Under the IPPS MS-DRG classification system, we have developed a
standard list of diagnoses that are considered CCs. Historically, we
developed this list using physician panels that classified each
diagnosis code based on whether the diagnosis, when present as a
secondary condition, would be considered a substantial complication or
comorbidity. A substantial complication or comorbidity was defined as a
condition that, because of its presence with a specific principal
diagnosis, would cause an increase in the length of stay by at least 1
day in at least 75 percent of the patients. However, depending on the
principal diagnosis of the patient, some diagnoses on the basic list of
complications and comorbidities may be excluded if they are closely
related to the principal diagnosis. In FY 2008, we evaluated each
diagnosis code to determine its impact on resource use and to determine
the most appropriate CC subclassification (non-CC, CC, or MCC)
assignment. We refer readers to sections II.D.2. and 3. of the preamble
of the FY 2008 IPPS final rule with comment period for a discussion of
the refinement of CCs in relation to the MS-DRGs we adopted for FY 2008
(72 FR 47152 through 47171).
b. Proposed CC Exclusions List for FY 2014
In the September 1, 1987 final notice (52 FR 33143) concerning
changes to the DRG classification system, we modified the GROUPER logic
so that certain diagnoses included on the standard list of CCs would
not be considered valid CCs in combination with a particular principal
diagnosis. We created the CC Exclusions List for the following reasons:
(1) To preclude coding of CCs for closely related conditions; (2) to
preclude duplicative or inconsistent coding from being treated as CCs;
and (3) to ensure that cases are appropriately classified between the
complicated and uncomplicated DRGs in a pair. As we indicated above, we
developed a list of diagnoses, using physician panels, to include those
diagnoses that, when present as a secondary condition, would be
considered a substantial complication or comorbidity. In previous
years, we have made changes to the list of CCs, either by adding new
CCs or deleting CCs already on the list.
In the May 19, 1987 proposed notice (52 FR 18877) and the September
1, 1987 final notice (52 FR 33154), we explained that the excluded
secondary diagnoses were established using the following five
principles:
Chronic and acute manifestations of the same condition
should not be considered CCs for one another;
Specific and nonspecific (that is, not otherwise specified
(NOS))
[[Page 27522]]
diagnosis codes for the same condition should not be considered CCs for
one another;
Codes for the same condition that cannot coexist, such as
partial/total, unilateral/bilateral, obstructed/unobstructed, and
benign/malignant, should not be considered CCs for one another;
Codes for the same condition in anatomically proximal
sites should not be considered CCs for one another; and
Closely related conditions should not be considered CCs
for one another.
The creation of the CC Exclusions List was a major project
involving hundreds of codes. We have continued to review the remaining
CCs to identify additional exclusions and to remove diagnoses from the
master list that have been shown not to meet the definition of a CC.\1\
---------------------------------------------------------------------------
\1\ We refer readers to the FY 1989 final rule (53 FR 38485,
September 30, 1988) for the revision made for the discharges
occurring in FY 1989; the FY 1990 final rule (54 FR 36552, September
1, 1989) for the FY 1990 revision; the FY 1991 final rule (55 FR
36126, September 4, 1990) for the FY 1991 revision; the FY 1992
final rule (56 FR 43209, August 30, 1991) for the FY 1992 revision;
the FY 1993 final rule (57 FR 39753, September 1, 1992) for the FY
1993 revision; the FY 1994 final rule (58 FR 46278, September 1,
1993) for the FY 1994 revisions; the FY 1995 final rule (59 FR
45334, September 1, 1994) for the FY 1995 revisions; the FY 1996
final rule (60 FR 45782, September 1, 1995) for the FY 1996
revisions; the FY 1997 final rule (61 FR 46171, August 30, 1996) for
the FY 1997 revisions; the FY 1998 final rule (62 FR 45966, August
29, 1997) for the FY 1998 revisions; the FY 1999 final rule (63 FR
40954, July 31, 1998) for the FY 1999 revisions; the FY 2001 final
rule (65 FR 47064, August 1, 2000) for the FY 2001 revisions; the FY
2002 final rule (66 FR 39851, August 1, 2001) for the FY 2002
revisions; the FY 2003 final rule (67 FR 49998, August 1, 2002) for
the FY 2003 revisions; the FY 2004 final rule (68 FR 45364, August
1, 2003) for the FY 2004 revisions; the FY 2005 final rule (69 FR
49848, August 11, 2004) for the FY 2005 revisions; the FY 2006 final
rule (70 FR 47640, August 12, 2005) for the FY 2006 revisions; the
FY 2007 final rule (71 FR 47870) for the FY 2007 revisions; the FY
2008 final rule (72 FR 47130) for the FY 2008 revisions; the FY 2009
final rule (73 FR 48510); the FY 2010 final rule (74 FR 43799); the
FY 2011 final rule (75 FR 50114); the FY 2012 final rule (76 FR
51542); and the FY 2013 final rule (77 FR 53315). In the FY 2000
final rule (64 FR 41490, July 30, 1999), we did not modify the CC
Exclusions List because we did not make any changes to the ICD-9-CM
codes for FY 2000.
---------------------------------------------------------------------------
(1) No Proposed Revisions Based on Changes to the ICD-9-CM Diagnosis
Codes for FY 2014
For FY 2014, there were no changes made to the ICD-9-CM coding
system effective October 1, 2013, due to the partial code freeze. (We
refer readers to section II.G.10. of the preamble of this proposed rule
for a discussion of the ICD-9-CM coding system.)
(2) Suggested Changes to the MS-DRG Diagnosis Codes for FY 2014
(A) Coronary Atherosclerosis Due to Calcified Coronary Lesion
We received a request that we consider changing the severity levels
for the following ICD-9-CM diagnosis code: 414.4 (Coronary
atherosclerosis due to calcified coronary lesion). The requestor
suggested that we change the severity level for diagnosis code 414.4
from a non-CC to an MCC.
The following chart shows the analysis of the MedPAR claims data
for FY 2012 for ICD-9-CM diagnosis code 414.4.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cnt 1 Cnt 2 Cnt 3
Code Diagnosis description CC level Cnt 1 impact Cnt 2 impact Cnt 3 impact
--------------------------------------------------------------------------------------------------------------------------------------------------------
414.4................................ Coronary atherosclerosis due Non-CC 1,390 1.58 2,174 2.31 2,001 3.11
to calcified lesion.
--------------------------------------------------------------------------------------------------------------------------------------------------------
We ran the above data as described in the FY 2008 IPPS final rule
with comment period (72 FR 47158 through 47161). The C1 value reflects
a patient with no other secondary diagnosis or with all other secondary
diagnoses that are non-CCs. The C2 value reflects a patient with at
least one other secondary diagnosis that is a CC, but none that is an
MCC. The C3 value reflects a patient with at least one other secondary
diagnosis that is an MCC.
The chart above shows that the C1 finding is 1.58. A value close to
1.0 in the C1 field suggests that the diagnosis produces the same
expected value as a non-CC. A value close to 2.0 suggests the condition
is more like a CC than a non-CC, but not as significant in resource
usage as an MCC. A value close to 3.0 suggests the condition is
expected to consume resources more similar to an MCC than a CC or a
non-CC.
The C2 finding was 2.31. A C2 value close to 2.0 suggests the
condition is more like a CC than a non-CC, but not as significant in
resource usage as an MCC when there is at least one other secondary
diagnosis that is a CC but none that is an MCC.
While the C1 value of 1.58 is above the 1.0 value for a non-CC, it
does not support reclassification to an MCC. As stated earlier, a value
close to 3.0 suggests the condition is expected to consume resources
more similar to an MCC than a CC or a non-CC. The C2 finding of 2.31
also does not support reclassifying this diagnosis code to an MCC. We
also considered reclassifying the severity level of diagnosis code
414.4 to a CC; however, the C1 finding of 1.58 also does not support
reclassifying the severity level to a CC. Our clinical advisors
reviewed the data and evaluated this condition. They recommended that
we not change the severity level of diagnosis code 414.4 from a non-CC
to an MCC or a CC. They do not believe that this diagnosis would
increase the severity level of patients. They pointed out that a
similar code, diagnosis code 414.2 (Chronic total occlusion of coronary
artery), is a non-CC. Our clinical advisors believe that diagnosis code
414.4 represents patients who are less severe than diagnosis code
414.2. Considering the C1 and C2 ratings and the input from our
clinical advisors, we are not proposing to reclassify diagnosis code
414.4 to an MCC; the diagnosis code would continue to be considered a
non-CC.
Therefore, based on the data and clinical analysis, we are
proposing to maintain diagnosis code 414.4 as a non-CC. We are inviting
public comment on our proposal.
(B) Acute Cholecystitis Diagnosis Code
We received a comment recommending that we add diagnosis code 575.0
(Acute cholecystitis) to the CC Exclusion List when reported as a
secondary diagnosis code with a principal diagnosis code 574.00
(Calculus of gallbladder with acute cholecystitis without mention of
obstruction). We note that, there is an ``excludes note'' under
diagnosis code 575.0 which excludes ``that with cholelithiasis
(574.00)''. Therefore, diagnosis codes 575.0 and 574.00 should not be
reported on the same claim. However, the commenter stated that there
may be double reporting.
Our clinical advisors agree with the commenter that diagnosis codes
575.0 and 574.00 capture the same clinical context. Therefore, we are
proposing to add diagnosis code 575.0 to the CC Exclusion List when
reported as a secondary diagnosis code with a principal diagnosis code
574.00. We are
[[Page 27523]]
inviting public comments on our proposal.
(C) Chronic Total Occlusion (CTO) of Artery of the Extremities
Diagnosis Code
We received a request to consider removing atherosclerosis and
aneurysm codes from the CC Exclusion List for diagnosis code 440.4
(Chronic total occlusion of artery of the extremities). For FY 2013, we
changed the designation of diagnosis code 440.4 from a non-CC level to
a CC level. The CC Exclusion List for diagnosis code 440.4 includes the
following diagnosis codes:
----------------------------------------------------------------------------------------------------------------
Diagnosis code Code description
----------------------------------------------------------------------------------------------------------------
440.20......................................... Atherosclerosis of native arteries of the extremities,
unspecified.
440.21......................................... Atherosclerosis of native arteries of the extremities with
intermittent claudication.
440.22......................................... Atherosclerosis of native arteries of the extremities with rest
pain.
440.23......................................... Atherosclerosis of native arteries of the extremities with
ulceration.
440.24......................................... Atherosclerosis of native arteries of the extremities with
gangrene.
440.29......................................... Other atherosclerosis of native arteries of the extremities.
440.30......................................... Atherosclerosis of unspecified bypass graft of the extremities.
440.31......................................... Atherosclerosis of autologous vein bypass graft of the
extremities.
440.32......................................... Atherosclerosis of nonautologous biological bypass graft of the
extremities.
440.4.......................................... Chronic total occlusion of artery of the extremities.
441.00......................................... Dissection of aorta, unspecified site.
441.01......................................... Dissection of aorta, thoracic.
441.02......................................... Dissection of aorta, abdominal.
441.03......................................... Dissection of aorta, thoracoabdominal.
441.1.......................................... Thoracic aneurysm, ruptured.
441.2.......................................... Thoracic aneurysm without mention of rupture.
441.3.......................................... Abdominal aneurysm, ruptured.
441.4.......................................... Abdominal aneurysm without mention of rupture.
441.5.......................................... Aortic aneurysm of unspecified site, ruptured.
441.6.......................................... Thoracoabdominal aneurysm, ruptured.
441.7.......................................... Thoracoabdominal aneurysm, without mention of rupture.
441.9.......................................... Aortic aneurysm of unspecified site without mention of rupture.
442.0.......................................... Aneurysm of artery of upper extremity.
442.2.......................................... Aneurysm of iliac artery.
442.3.......................................... Aneurysm of artery of lower extremity.
442.9.......................................... Aneurysm of unspecified site.
443.22......................................... Dissection of iliac artery.
443.29......................................... Dissection of other artery.
443.81......................................... Peripheral angiopathy in diseases classified elsewhere.
443.82......................................... Erythromelalgia.
443.89......................................... Other specified peripheral vascular diseases.
443.9.......................................... Peripheral vascular disease, unspecified.
444.01......................................... Saddle embolus of abdominal aorta.
444.09......................................... Other arterial embolism and thrombosis of abdominal aorta.
444.1.......................................... Embolism and thrombosis of thoracic aorta.
444.21......................................... Arterial embolism and thrombosis of upper extremity.
444.22......................................... Arterial embolism and thrombosis of lower extremity.
444.81......................................... Embolism and thrombosis of iliac artery.
444.89......................................... Embolism and thrombosis of other specified artery.
444.9.......................................... Embolism and thrombosis of unspecified artery.
445.01......................................... Atheroembolism of upper extremity.
445.02......................................... Atheroembolism of lower extremity.
445.81......................................... Atheroembolism of kidney.
445.89......................................... Atheroembolism of other site.
447.0.......................................... Arteriovenous fistula, acquired.
447.1.......................................... Stricture of artery.
447.2.......................................... Rupture of artery.
447.5.......................................... Necrosis of artery.
447.6.......................................... Arteritis, unspecified.
447.70......................................... Aortic ectasia, unspecified site.
447.71......................................... Thoracic aortic ectasia.
447.72......................................... Abdominal aortic ectasia.
447.73......................................... Thoracoabdominal aortic ectasia.
449............................................ Septic arterial embolism.
----------------------------------------------------------------------------------------------------------------
Diagnosis code 440.4 is a CC except if one of the diagnosis codes
listed above is reported as a principal diagnosis. If one of the
diagnosis codes listed above is reported on a claim as a principal
diagnosis and code 440.4 is reported as a secondary diagnosis, code
440.4 would not be counted as a CC. The commenter requested that we
remove atherosclerosis codes 440.20 through 440.32, 443.22, 443.29,
443.81 through 443.9, and aneurysm codes 441.00 through 441.03, 441.1
through 441.7, 441.9, 442.0, 442.2, 442.3, and 442.9 from the CC
Exclusion List for diagnosis code 440.4.
According to the commenter, aneurysm diagnoses are not closely
related clinically to peripheral CTOs. Aneurysm physiology, clinical
symptomology, and patient risk profile
[[Page 27524]]
are fundamentally different than CTOs. Aneurysms result from the
weakening of an artery wall and manifest in an out-pouched pocket of
the lumen. Conversely, patients with CTOs present with extended
segments of diseased and narrowed vessels and in most cases, complex
lesions containing fibro-calcified plaques. The commenter stated that
CTOs represent a high severity complication, which is not closely
related to basic atherosclerosis.
Our clinical advisors agree with the commenter that the aneurysm
and most of the atherosclerosis codes should be removed from the CC
Exclusion List for diagnosis code 440.4. A case with a principal
diagnosis of aneurysm with CTO adds substantial complexity and does not
necessarily have the same immediate cause. A case with a principal
diagnosis of atherosclerosis with CTO reported represents a more severe
form of the disease and, therefore, is more complex. Our clinical
advisors do not agree with the commenter that diagnosis codes 443.81
through 443.9 (Other and unspecified peripheral vascular diseases)
should be removed from the CC Exclusion List. These cases are more
likely related to CTO and meet one of the principles for exclusion that
we previously outlined above.
Therefore, for FY 2014, we are proposing to remove the following
diagnosis codes from the CC Exclusion List for diagnosis code 440.4:
atherosclerosis codes 440.20 through 440.32, 443.22, and 443.29, and
aneurysm codes 441.00 through 441.03, 441.1 through 441.7, 441.9,
442.0, 442.2, 442.3, and 442.9. Diagnosis codes 443.81 through 443.9
would remain on the CC Exclusion List for diagnosis code 440.4. We are
inviting public comments on this proposal.
For FY 2014, we are proposing changes to Table 6G (Additions to the
CC Exclusion List) and Table 6H (Deletions from the CC Exclusion List).
As we discussed earlier, we are not proposing changes to the severity
level for diagnosis code 414.4. These tables, which contain codes that
are effective for discharges occurring on or after October 1, 2013, are
not being published in the Addendum to this proposed rule because of
the length of the two tables. Instead, we are making them available
through the Internet on the CMS Web site at: http://www.cms.hhs.gov/
Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
Each of these principal diagnosis codes for which there is a CC
exclusion is shown in Tables 6G and 6H with an asterisk, and the
conditions that will not count as a CC are provided in an indented
column immediately following the affected principal diagnosis.
A complete updated MCC, CC, and Non-CC Exclusions List is available
through the Internet on the CMS Web site at: http://www.cms.hhs.gov/
Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
Beginning with discharges on or after October 1 of each fiscal year,
the indented diagnoses are not recognized by the GROUPER as valid CCs
for the asterisked principal diagnosis.
There are no new, revised, or deleted diagnosis codes for FY 2014.
Therefore, there are no Tables 6A, 6C, and 6E published for FY 2014.
There are no proposed additions or deletions to the MS-DRG MCC List
for FY 2014. There also are no proposed additions or deletions to the
MS-DRG CC List for FY 2014. Therefore, there are no Tables 6I.1 through
6I.2 and 6J.1 through 6J.2 published for FY 2014.
Alternatively, the complete documentation of the GROUPER logic,
including the current CC Exclusions List, is available from 3M/Health
Information Systems (HIS), which, under contract with CMS, is
responsible for updating and maintaining the GROUPER program. The
current MS-DRG Definitions Manual, Version 30.0, is available on a CD
for $225.00. Version 31.0 of this manual, which will include the final
FY 2014 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.
10. Review of Procedure Codes in MS DRGs 981 Through 983; 984 Through
986; and 987 Through 989
Each year, we review cases assigned to former CMS DRG 468
(Extensive O.R. Procedure Unrelated to Principal Diagnosis), CMS DRG
476 (Prostatic O.R. Procedure Unrelated to Principal Diagnosis), and
CMS DRG 477 (Nonextensive O.R. Procedure Unrelated to Principal
Diagnosis) to determine whether it would be appropriate to change the
procedures assigned among these CMS DRGs. Under the MS-DRGs that we
adopted for FY 2008, CMS DRG 468 was split three ways and became MS-
DRGs 981, 982, and 983 (Extensive O.R. Procedure Unrelated to Principal
Diagnosis with MCC, with CC, and without CC/MCC, respectively). CMS DRG
476 became MS-DRGs 984, 985, and 986 (Prostatic O.R. Procedure
Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC,
respectively). CMS DRG 477 became MS-DRGs 987, 988, and 989
(Nonextensive O.R. Procedure Unrelated to Principal Diagnosis with MCC,
with CC, and without CC/MCC, respectively).
MS-DRGs 981 through 983, 984 through 986, and 987 through 989
(formerly CMS DRGs 468, 476, and 477, respectively) are reserved for
those cases in which none of the O.R. procedures performed are related
to the principal diagnosis. These MS-DRGs are intended to capture
atypical cases, that is, those cases not occurring with sufficient
frequency to represent a distinct, recognizable clinical group. MS-DRGs
984 through 986 (previously CMS DRG 476) are assigned to those
discharges in which one or more of the following prostatic procedures
are performed and are unrelated to the principal diagnosis:
60.0 (Incision of prostate)
60.12 (Open biopsy of prostate)
60.15 (Biopsy of periprostatic tissue)
60.18 (Other diagnostic procedures on prostate and
periprostatic tissue)
60.21 (Transurethral prostatectomy)
60.29 (Other transurethral prostatectomy)
60.61 (Local excision of lesion of prostate)
60.69 (Prostatectomy, not elsewhere classified)
60.81 (Incision of periprostatic tissue)
60.82 (Excision of periprostatic tissue)
60.93 (Repair of prostate)
60.94 (Control of (postoperative) hemorrhage of prostate)
60.95 (Transurethral balloon dilation of the prostatic
urethra)
60.96 (Transurethral destruction of prostate tissue by
microwave thermotherapy)
60.97 (Other transurethral destruction of prostate tissue
by other thermotherapy)
60.99 (Other operations on prostate)
All remaining O.R. procedures are assigned to MS-DRGs 981 through
983 and 987 through 989, with MS-DRGs 987 through 989 assigned to those
discharges in which the only procedures performed are nonextensive
procedures that are unrelated to the principal diagnosis.\2\
---------------------------------------------------------------------------
\2\ The original list of the ICD-9-CM procedure codes for the
procedures we consider nonextensive procedures, if performed with an
unrelated principal diagnosis, was published in Table 6C in section
IV. of the Addendum to the FY 1989 final rule (53 FR 38591). As part
of the FY 1991 final rule (55 FR 36135), the FY 1992 final rule (56
FR 43212), the FY 1993 final rule (57 FR 23625), the FY 1994 final
rule (58 FR 46279), the FY 1995 final rule (59 FR 45336), the FY
1996 final rule (60 FR 45783), the FY 1997 final rule (61 FR 46173),
and the FY 1998 final rule (62 FR 45981), we moved several other
procedures from DRG 468 to DRG 477, and some procedures from DRG 477
to DRG 468. No procedures were moved in FY 1999, as noted in the
final rule (63 FR 40962), in the FY 2000 (64 FR 41496), in the FY
2001 (65 FR 47064), or in the FY 2002 (66 FR 39852). In the FY 2003
final rule (67 FR 49999), we did not move any procedures from DRG
477. However, we did move procedure codes from DRG 468 and placed
them in more clinically coherent DRGs. In the FY 2004 final rule (68
FR 45365), we moved several procedures from DRG 468 to DRGs 476 and
477 because the procedures are nonextensive. In the FY 2005 final
rule (69 FR 48950), we moved one procedure from DRG 468 to 477. In
addition, we added several existing procedures to DRGs 476 and 477.
In FY 2006 (70 FR 47317), we moved one procedure from DRG 468 and
assigned it to DRG 477. In FY 2007, we moved one procedure from DRG
468 and assigned it to DRGs 479, 553, and 554. In FYs 2008, 2009,
2010, 2011, 2012, and 2013, no procedures were moved, as noted in
the FY 2008 final rule with comment period (72 FR 46241), in the FY
2009 final rule (73 FR 48513), in the FY 2010 final rule (74 FR
43796), in the FY 2011 final rule (75 FR 50122), in the FY 2012
final rule (76 FR 51549), and in the FY 2013 final rule (77 FR
53321).
---------------------------------------------------------------------------
[[Page 27525]]
Our review of MedPAR claims data showed that there were no cases
that merited movement or should logically be assigned to any of the
other MDCs. Therefore, for FY 2014, we are not proposing to change the
procedures assigned among these MS-DRGs.
a. Moving Procedure Codes from MS-DRGs 981 through 983 or MS-DRGs 987
through 989 into MDCs
We annually conduct a review of procedures producing assignment to
MS-DRGs 981 through 983 (Extensive O.R. procedure unrelated to
principal diagnosis with MCC, with CC, and without CC/MCC,
respectively) or MS-DRGs 987 through 989 (Nonextensive O.R. procedure
unrelated to principal diagnosis with MCC, with CC, and without CC/MCC,
respectively) on the basis of volume, by procedure, to see if it would
be appropriate to move procedure codes out of these MS-DRGs into one of
the surgical MS-DRGs for the MDC into which the principal diagnosis
falls. The data are arrayed in two ways for comparison purposes. We
look at a frequency count of each major operative procedure code. We
also compare procedures across MDCs by volume of procedure codes within
each MDC.
We identify those procedures occurring in conjunction with certain
principal diagnoses with sufficient frequency to justify adding them to
one of the surgical MS-DRGs for the MDC in which the diagnosis falls.
As noted above, there were no cases that merited movement or that
should logically be assigned to any of the other MDCs. Therefore, for
FY 2014, we are not proposing 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.
b. Reassignment of Procedures Among MS-DRGs 981 Through 983, 984
Through 986, and 987 Through 989
We also annually review the list of ICD-9-CM procedures that, when
in combination with their principal diagnosis code, result in
assignment to MS-DRGs 981 through 983, 984 through 986 (Prostatic O.R.
procedure unrelated to principal diagnosis with MCC, with CC, or
without CC/MCC, respectively), and 987 through 989, to ascertain
whether any of those procedures should be reassigned from one of these
three MS-DRGs to another of the three MS-DRGs based on average costs
and the length of stay. We look at the data for trends such as shifts
in treatment practice or reporting practice that would make the
resulting MS-DRG assignment illogical. If we find these shifts, we
would propose to move cases to keep the MS-DRGs clinically similar or
to provide payment for the cases in a similar manner. Generally, we
move only those procedures for which we have an adequate number of
discharges to analyze the data.
There were no cases representing shifts in treatment practice or
reporting practice that would make the resulting MS-DRG assignment
illogical, or that merited movement so that cases should logically be
assigned to any of the other MDCs. Therefore, for FY 2014, we are not
proposing to move any procedure codes among these MS-DRGs.
c. Adding Diagnosis or Procedure Codes to MDCs
Based on the review of cases in the MDCs as described above in
sections II.G.1. through 6. of this preamble, we are not proposing to
add any diagnosis or procedure codes to MDCs for FY 2014.
11. Proposed 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, cochaired by the National Center
for Health Statistics (NCHS), the Centers for Disease Control and
Prevention, and CMS, charged with maintaining and updating the ICD-9-CM
system. The Committee is jointly responsible for approving coding
changes, and developing errata, addenda, and other modifications to the
ICD-9-CM to reflect newly developed procedures and technologies and
newly identified diseases. The Committee is also responsible for
promoting the use of Federal and non-Federal educational programs and
other communication techniques with a view toward standardizing coding
applications and upgrading the quality of the classification system.
The Official list of valid ICD-9-CM diagnosis and procedure codes
can be found on the CMS Web site at: http://cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/codes.html. The NCHS has lead
responsibility for the ICD-9-CM diagnosis codes included in the Tabular
List and Alphabetic Index for Diseases, while CMS has lead
responsibility for the ICD-9-CM procedure codes included in the Tabular
List and Alphabetic Index for Procedures.
The Committee encourages participation in the above process by
health related organizations. In this regard, the Committee holds
public meetings for discussion of educational issues and proposed
coding changes. These meetings provide an opportunity for
representatives of recognized organizations in the coding field, such
as the American Health Information Management Association (AHIMA), the
American Hospital Association (AHA), and various physician specialty
groups, as well as individual physicians, health information management
professionals, and other members of the public, to contribute ideas on
coding matters. After considering the opinions expressed at the public
meetings and in writing, the Committee formulates recommendations,
which then must be approved by the agencies.
The Committee presented proposals for coding changes for
implementation in FY 2014 at a public meeting held on September 19,
2012, and finalized the coding changes after consideration of comments
received at the meetings and in writing by November 16, 2012. There
were no changes to the ICD-9-CM coding system for FY 2014. There were
no new, revised or deleted diagnosis or procedure codes for FY 2014.
The Committee held its 2013 meeting on March 5, 2013. Any new codes
for which there was consensus of public support and for which complete
tabular and indexing changes will be made by May 2013 will be included
in the
[[Page 27526]]
October 1, 2013 update to ICD-9-CM. Any code revisions that were
discussed at the March 5, 2013 Committee meeting but that could not be
finalized in time to include them in the tables listed in section VI.
of the Addendum to this proposed rule will be included in Table 6B,
which is listed in section VI. of the Addendum to the final rule and
available via the Internet on the CMS Web site, and will be marked with
an asterisk (*).
For FY 2014, there were no changes to the ICD-9-CM coding system
due to the partial code freeze or for new technology. Therefore, there
are no new, revised, or deleted diagnosis codes and no new, revised, or
deleted procedure codes that are usually announced in Tables 6A (New
Diagnosis Codes), 6B (New Procedure Codes), 6C (Invalid Diagnosis
Codes), 6D (Invalid Procedure Codes), 6E (Revised Diagnosis Code
Titles), and 6F (Revised Procedure Codes). Therefore, there are no
Tables 6A through 6F published as part of this proposed rule for FY
2014. We note that, there may be ICD-9-CM coding changes finalized
after this proposed rule based on public comments that we receive after
the March 5, 2013 ICD-9-CM Coordination and Maintenance Committee
meeting. If there are changes, we will include these changes in the
final rule.
Copies of the minutes of the procedure codes discussions at the
Committee's September 19, 2012 meeting and March 5, 2013 meeting can be
obtained from the CMS Web site at: http://cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html?redirect=/icd9ProviderDiagnosticCodes/03_meetings.asp. The minutes of the
diagnosis codes discussions at the September 19, 2012 meeting and March
5, 2013 meeting are found at: http://www.cdc.gov/nchs/icd.htm. These
Web sites also provide detailed information about the Committee,
including information on requesting a new code, attending a Committee
meeting, and timeline requirements and meeting dates.
We encourage commenters to address suggestions on coding issues
involving diagnosis codes to: Donna Pickett, Co-Chairperson, ICD-9-CM
Coordination and Maintenance Committee, NCHS, Room 2402, 3311 Toledo
Road, Hyattsville, MD 20782. Comments may be sent by Email to:
[email protected].
Questions and comments concerning the procedure codes should be
addressed to: Patricia E. Brooks, Co-Chairperson, ICD-9-CM Coordination
and Maintenance Committee, CMS, Center for Medicare Management,
Hospital and Ambulatory Policy Group, Division of Acute Care, C4-08-06,
7500 Security Boulevard, Baltimore, MD 21244-1850. Comments may be sent
by Email to: [email protected].
In the September 7, 2001 final rule implementing the IPPS new
technology add-on payments (66 FR 46906), we indicated we would attempt
to include proposals for procedure codes that would describe new
technology discussed and approved at the Spring meeting as part of the
code revisions effective the following October.
Section 503(a) of Public Law 108-173 included a requirement for
updating ICD-9-CM codes twice a year instead of a single update on
October 1 of each year. This requirement was included as part of the
amendments to the Act relating to recognition of new technology under
the IPPS. Section 503(a) amended section 1886(d)(5)(K) of the Act by
adding a clause (vii) which states that the ``Secretary shall provide
for the addition of new diagnosis and procedure codes on April 1 of
each year, but the addition of such codes shall not require the
Secretary to adjust the payment (or diagnosis-related group
classification) . . . until the fiscal year that begins after such
date.'' This requirement improves the recognition of new technologies
under the IPPS system by providing information on these new
technologies at an earlier date. Data will be available 6 months
earlier than would be possible with updates occurring only once a year
on October 1.
While section 1886(d)(5)(K)(vii) of the Act states that the
addition of new diagnosis and procedure codes on April 1 of each year
shall not require the Secretary to adjust the payment, or DRG
classification, under section 1886(d) of the Act until the fiscal year
that begins after such date, we have to update the DRG software and
other systems in order to recognize and accept the new codes. We also
publicize the code changes and the need for a mid-year systems update
by providers to identify the new codes. Hospitals also have to obtain
the new code books and encoder updates, and make other system changes
in order to identify and report the new codes.
The ICD-9-CM Coordination and Maintenance Committee holds its
meetings in the spring and fall in order to update the codes and the
applicable payment and reporting systems by October 1 of each year.
Items are placed on the agenda for the ICD-9-CM Coordination and
Maintenance Committee meeting if the request is received at least 2
months prior to the meeting. This requirement allows time for staff to
review and research the coding issues and prepare material for
discussion at the meeting. It also allows time for the topic to be
publicized in meeting announcements in the Federal Register as well as
on the CMS Web site. The public decides whether or not to attend the
meeting based on the topics listed on the agenda. Final decisions on
code title revisions are currently made by March 1 so that these titles
can be included in the IPPS proposed rule. A complete addendum
describing details of all changes to ICD-9-CM, both tabular and index,
is published on the CMS and NCHS Web sites in May of each year.
Publishers of coding books and software use this information to modify
their products that are used by health care providers. This 5-month
time period has proved to be necessary for hospitals and other
providers to update their systems.
A discussion of this timeline and the need for changes are included
in the December 4-5, 2005 ICD-9-CM Coordination and Maintenance
Committee Meeting minutes. The public agreed that there was a need to
hold the fall meetings earlier, in September or October, in order to
meet the new implementation dates. The public provided comment that
additional time would be needed to update hospital systems and obtain
new code books and coding software. There was considerable concern
expressed about the impact this new April update would have on
providers.
In the FY 2005 IPPS final rule, we implemented section
1886(d)(5)(K)(vii) of the Act, as added by section 503(a) of Public Law
108-173, by developing a mechanism for approving, in time for 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
[[Page 27527]]
requests approved for an expedited April l, 2013 implementation of an
ICD-9-CM code at the September 19, 2012 Committee meeting. Therefore,
there were no new ICD-9-CM codes implemented on April 1, 2013.
Current addendum and code title information is published on the CMS
Web site at: http://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html?redirect=/
icd9ProviderDiagnosticCodes/01overview.asp#TopofPage. Information on
ICD-9-CM diagnosis codes, along with the Official ICD-9-CM Coding
Guidelines, can be found on the Web site at: http://www.cdc.gov/nchs/icd9.htm. Information on new, revised, and deleted ICD-9-CM codes is
also provided to the AHA for publication in the Coding Clinic for ICD-
9-CM. AHA also distributes information to publishers and software
vendors.
CMS also sends copies of all ICD-9-CM coding changes to its
Medicare contractors for use in updating their systems and providing
education to providers.
These same means of disseminating information on new, revised, and
deleted ICD-9-CM codes will be used to notify providers, publishers,
software vendors, contractors, and others of any changes to the ICD-9-
CM codes that are implemented in April. The code titles are adopted as
part of the ICD-9-CM Coordination and Maintenance Committee process.
Therefore, although we publish the code titles in the IPPS proposed and
final rules, they are not subject to comment in the proposed or final
rules. We will continue to publish the October code updates in this
manner within the IPPS proposed and final rules. For codes that are
implemented in April, we will assign the new procedure code to the same
MS-DRG in which its predecessor code was assigned so there will be no
MS-DRG impact as far as MS-DRG assignment. Any midyear coding updates
will be available through the Web sites indicated above and through the
Coding Clinic for ICD-9-CM. Publishers and software vendors currently
obtain code changes through these sources in order to update their code
books and software systems. We will strive to have the April 1 updates
available through these Web sites 5 months prior to implementation
(that is, early November of the previous year), as is the case for the
October 1 updates.
b. Code Freeze
The International Classification of Diseases, 10th Revision (ICD-
10) coding system applicable to hospital inpatient services was to be
implemented on October 1, 2013, as described in the Health Insurance
Portability and Accountability Act of 1996 (HIPAA) Administrative
Simplification: Modifications to Medical Data Code Set Standards to
Adopt ICD-10-CM and ICD-10-PCS final rule (74 FR 3328 through 3362,
January 16, 2009). However, the Secretary of Health and Human Services
issued a final rule that delays, from October 1, 2013, to October 1,
2014, the compliance date for the International Classification of
Diseases, 10th Edition diagnosis and procedure codes (ICD-10). The
final rule, CMS-0040-F, was published in the Federal Register on
September 5, 2012 (77 FR 54664) and is available for viewing on the
Internet at: http://www.gpo.gov/fdsys/pkg/FR-2012-09-05/pdf/2012-21238.pdf.
The ICD-10 coding system includes the International Classification
of Diseases, 10th Revision, Clinical Modification (ICD-10-CM) for
diagnosis coding and the International Classification of Diseases, 10th
Revision, Procedure Coding System (ICD-10-PCS) for inpatient hospital
procedure coding, as well as the Official ICD-10-CM and ICM-10-PCS
Guidelines for Coding and Reporting. In the January 16, 2009 ICD-10-CM
and ICD-10-PCS final rule (74 FR 3328 through 3362), there was a
discussion of the need for a partial or total freeze in the annual
updates to both ICD-9-CM and ICD-10-CM and ICD-10-PCS codes. The public
comment addressed in that final rule stated that the annual code set
updates should cease l year prior to the implementation of ICD-10. The
commenters stated that this freeze of code updates would allow for
instructional and/or coding software programs to be designed and
purchased early, without concern that an upgrade would take place
immediately before the compliance date, necessitating additional
updates and purchases.
HHS responded to comments in the ICD-10 final rule that the ICD-9-
CM Coordination and Maintenance Committee has jurisdiction over any
action impacting the ICD-9-CM and ICD-10 code sets. Therefore, HHS
indicated that the issue of consideration of a moratorium on updates to
the ICD-9-CM, ICD-10-CM, and ICD-10-PCS code sets in anticipation of
the adoption of ICD-10-CM and ICD-10-PCS would be addressed through the
Committee at a future public meeting.
The code freeze was discussed at multiple meetings of the ICD-9-CM
Coordination and Maintenance Committee and public comment was actively
solicited. The Committee evaluated all comments from participants
attending the Committee meetings as well as written comments that were
received. The Committee also considered the delay in implementation of
ICD-10 until October 1, 2014. There was an announcement at the
September 19, 2012 ICD-9-CM Coordination and Maintenance Committee
meeting that a partial freeze of both ICD-9-CM and ICD-10 codes will be
implemented as follows:
The last regular annual update to both ICD-9-CM and ICD-10
code sets was made on October 1, 2011.
On October 1, 2012 and October 1, 2013, there will be only
limited code updates to both ICD-9-CM and ICD-10 code sets to capture
new technology and new diseases.
On October 1, 2014, there were to be only limited code
updates to ICD-10 code sets to capture new technology and diagnoses as
required by section 503(a) of Public Law 108-173. There were to be no
updates to ICD-9-CM on October 1, 2014, as the system would no longer
be a HIPAA standard and, therefore, no longer be used for reporting.
On October 1, 2015, one year after the implementation of
ICD-10, regular updates to ICD-10 will begin.
The ICD-9-CM Coordination and Maintenance Committee announced that
it would continue to meet twice a year during the freeze. At these
meetings, the public will be encouraged to comment on whether or not
requests for new diagnosis and procedure codes should be created based
on the need to capture new technology and new diseases. Any code
requests that do not meet the criteria will be evaluated for
implementation within ICD-10 on or after October 1, 2015, once the
partial freeze is ended.
Complete information on the partial code freeze and discussions of
the issues at the Committee meetings can be found on the ICD-9-CM
Coordination and Maintenance Committee Web site at: http://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/meetings.html. A summary of the September 19, 2012 Committee meeting,
along with both written and audio transcripts of this meeting, are
posted on the Web site at: http://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials-Items/2012-09-19-MeetingMaterials.html.
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,
[[Page 27528]]
2011, hospitals could submit up to 25 diagnoses and 25 procedures.
However, CMS' system limitations allowed for the processing of only the
first 9 diagnosis codes and 6 procedure codes. We discussed this change
in processing claims in the FY 2011 IPPS/LTCH PPS final rule (75 FR
50127), in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25843), in a
correction notice issued in the Federal Register on June 14, 2011 (76
FR 24633), and in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51553).
As discussed in these prior rules, CMS undertook an expansion of our
internal system capability so that we are able to process up to 25
diagnoses and 25 procedures on hospital inpatient claims as part of the
HIPAA ASC X12 Technical Reports Type 3, Version 005010 (Version 5010)
standards system update. We recognize the value of the additional
information provided by this coded data for multiple uses such as for
payment, quality measures, outcome analysis, and other important uses.
We will continue to process up to 25 diagnosis codes and 25 procedure
codes when received on the 5010 format.
d. ICD-10 MS-DRGs
In response to the FY 2011 IPPS/LTCH PPS proposed rule, we received
comments on the creation of the ICD-10 version of the MS-DRGs, which
will be implemented at the same time as ICD-10 (75 FR 50127 and 50128).
As we stated earlier, the Secretary of Health and Human Services has
delayed the compliance date of ICD-10 from October 1, 2013 to October
1, 2014 (77 FR 54664). While we did not propose an ICD-10 version of
the MS DRGs in the FY 2011 IPPS/LTCH PPS proposed rule, we noted that
we have been actively involved in converting our current MS-DRGs from
ICD-9-CM codes to ICD-10 codes and sharing this information through the
ICD-9-CM Coordination and Maintenance Committee. We undertook this
early conversion project to assist other payers and providers in
understanding how to go about their own conversion projects. We posted
ICD-10 MS-DRGs based on Version 26.0 (FY 2009) of the MS-DRGs. We also
posted a paper that describes how CMS went about completing this
project and suggestions for others to follow. All of this information
can be found on the CMS Web site at: http://cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. We have continued
to keep the public updated on our maintenance efforts for ICD-10-CM and
ICD 10-PCS coding systems, as well as the General Equivalence Mappings
that assist in conversion through the ICD-9-CM Coordination and
Maintenance Committee. Information on these committee meetings can be
found on the CMS Web site at: http://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html.
During FY 2011, we developed and posted Version 28.0 of the ICD-10
MS-DRGs based on the FY 2011 MS-DRGs (Version 28.0) that we finalized
in the FY 2011 IPPS/LTCH PPS final rule on the CMS Web site. This ICD-
10 MS-DRGs Version 28.0 also included the CC Exclusion List and the
ICD-10 version of the hospital-acquired conditions (HACs), which was
not posted with Version 26.0. We also discussed this update at the
September 15-16, 2010 and the March 9-10, 2011 meetings of the ICD-9-CM
Coordination and Maintenance Committee. The minutes of these two
meetings are posted on the CMS Web site at: http://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html.
We reviewed comments on the ICD-10 MS-DRGs Version 28.0 and made
updates as a result of these comments. We called the updated version
the ICD-10 MS DRGs Version 28 R1. We posted a Definitions Manual of
ICD-10 MS-DRGs Version 28 R1 on our ICD-10 MS-DRG Conversion Project
Web site at: http://cms.hhs.gov/Medicare/Coding/ICD10/ICD10-MS-DRG-Conversion-Project.html. To make the review of Version 28 R1 updates
easier for the public, we also made available pilot software on a CD
ROM that could be ordered through the National Technical Information
Service (NTIS). A link to the NTIS ordering page was provided on the
CMS ICD-10 MS-DRG Web page. We stated that we believed that, by
providing the ICD-10 MS-DRG Version 28 R1 Pilot Software (distributed
on CD ROM), the public would be able to more easily review and provide
feedback on updates to the ICD-10 MS-DRGs. We discussed the updated
ICD-10 MS-DRGs Version 28 R1 at the September 14, 2011 ICD-9-CM
Coordination and Maintenance Committee meeting. We encouraged the
public to continue to review and provide comments on the ICD-10 MS-DRGs
so that CMS could continue to update the system.
In FY 2012, we prepared the ICD-10 MS-DRGs Version 29.0, based on
the FY 2012 MS-DRGs (Version 29.0) that we finalized in the FY 2012
IPPS/LTCH PPS final rule. We posted a Definitions Manual of ICD-10 MS-
DRGs Version 29.0 on our ICD-10 MS-DRG Conversion Project Web site. We
also prepared a document that describes changes made from Version 28.0
to Version 29.0 to facilitate a review. The ICD-10 MS-DRGs Version 29.0
was discussed at the ICD-9-CM Coordination and Maintenance Committee
meeting on March 5, 2012. Information was provided on the types of
updates made. Once again the public was encouraged to review and
comment on the most recent update to the ICD-10 MS-DRGs.
CMS prepared the ICD-10 MS-DRGs Version 30.0 based on the FY 2013
MS-DRGs (Version 30.0) that we finalized in the FY 2013 IPPS/LTCH PPS
final rule. We posted a Definitions Manual of the ICD-10 MS-DRGs
Version 30.0 on our ICD-10 MS-DRG Conversion Project Web site at:
http://www.cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. We also prepared a document that describes changes made
from Version 29.0 to Version 30.0 to facilitate a review. We produced
mainframe and computer software for Version 30.0, which was made
available to the public in February 2013. Information on ordering the
mainframe and computer software through NTIS can be found on the CMS
Web site at: http://cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html under the ``Related Links'' section. This ICD-
10 MS-DRGs Version 30.0 computer software should facilitate additional
review of the ICD-10 MS-DRGs conversion.
We provided information on a study conducted on the impact on
converting MS-DRGs to ICD-10. Information on this study is summarized
in a paper entitled ``Impact of the Transition to ICD-10 on Medicare
Inpatient Hospital Payments.'' This paper was posted on the CMS ICD-10
MS-DRGs Conversion Project Web site and was distributed and discussed
at the September 15, 2010 ICD-9-CM Coordination and Maintenance
Committee meeting. The paper described CMS' approach to the conversion
of the MS-DRGs from ICD-9-CM codes to ICD-10 codes. The study was
undertaken using the ICD-9-CM MS-DRGs Version 27.0 (FY 2010) and
converted to the ICD-10 MS-DRGs Version 27.0. The study estimated the
impact on aggregate payment to hospitals and the distribution of
payments across hospitals. The impact of the conversion from ICD-9-CM
to ICD-10 on Medicare MS-DRG hospital payments was estimated using 2009
Medicare data. The study found a hospital payment increase of 0.05
percent using the ICD-10 MS-DRGs Version 27.0.
CMS provided an overview of this hospital payment impact study at
the March 5, 2012 ICD-9-CM Coordination
[[Page 27529]]
and Maintenance Committee meeting. This presentation followed
presentations on the creation of ICD-10 MS-DRGs Version 29.0. A summary
report of this meeting can be found on the CMS Web site at: http://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html.
At this March 2012 meeting, CMS announced that it would produce an
update on this impact study based on an updated version of the ICD 10
MS-DRGs. This update of the impact study was presented at the March 5,
2013 ICD-9-CM Coordination and Maintenance Committee meeting. The
updated paper is posted on CMS' Web site at: http://cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html under the
``Downloads'' section. Information on the March 5, 2013 ICD-9-CM
Coordination and Maintenance Committee meeting can be found on the CMS
Web site at: http://cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials.html.
This update of the impact paper and the ICD-10 MS-DRG Version 30.0
software will provide additional information to the public who are
evaluating the conversion of the MS-DRGs to ICD-10 MS-DRG.
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.
H. Recalibration of the Proposed FY 2014 MS-DRG Relative Weights
1. Data Sources for Developing the Proposed Relative Weights
In developing the proposed FY 2014 system of weights, we used two
data sources: claims data and cost report data. As in previous years,
the claims data source is the MedPAR file. This file is based on fully
coded diagnostic and procedure data for all Medicare inpatient hospital
bills. The FY 2012 MedPAR data used in this proposed rule include
discharges occurring on October 1, 2011, through September 30, 2012,
based on bills received by CMS through December 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 2012 MedPAR file used in calculating the
proposed relative weights includes data for approximately 10,364,125
Medicare discharges from IPPS providers. Discharges for Medicare
beneficiaries enrolled in a Medicare Advantage managed care plan are
excluded from this analysis. These discharges are excluded when the
MedPAR ``GHO Paid'' indicator field on the claim record is equal to
``1'' or when the MedPAR DRG payment field, which represents the total
payment for the claim, is equal to the MedPAR ``Indirect Medical
Education (IME)'' payment field, indicating that the claim was an ``IME
only'' claim submitted by a teaching hospital on behalf of a
beneficiary enrolled in a Medicare Advantage managed care plan. In
addition, the December 31, 2012 update of the FY 2012 MedPAR file
complies with version 5010 of the X12 HIPAA Transaction and Code Set
Standards, and includes a variable called ``claim type.'' Claim type
``60'' indicates that the claim was an inpatient claim paid as fee-for-
service. Claim types ``61,'' ``62,'' ``63,'' and ``64'' relate to
encounter claims, Medicare Advantage IME claims, and HMO no-pay claims.
Therefore, the calculation of the proposed relative weights for FY 2014
also excludes claims with claim type values not equal to ``60.'' The
data exclude CAHs, including hospitals that subsequently became CAHs
after the period from which the data were taken. The second data source
used in the cost-based relative weighting methodology is the Medicare
cost report data files from the HCRIS. Normally, we use the HCRIS
dataset that is 3 years prior to the IPPS fiscal year. Specifically, we
used cost report data from the December 31, 2012 update of the FY 2011
HCRIS for calculating the proposed FY 2014 cost-based relative weights.
2. Methodology for Calculation of the Proposed Relative Weights
As we explain in section II.E.2. of the preamble of this proposed
rule, we are proposing to calculate the relative weights based on 19
CCRs, instead of the 15 CCRs previously used. The methodology we used
to calculate the proposed FY 2014 MS-DRG cost-based relative weights
based on claims data in the FY 2012 MedPAR file and data from the FY
2011 Medicare cost reports is as follows:
To the extent possible, all the claims were regrouped
using the proposed FY 2014 MS-DRG classifications discussed in sections
II.B. and II.G. of the preamble of this proposed rule.
The transplant cases that were used to establish the
relative weights for heart and heart-lung, liver and/or intestinal, and
lung transplants (MS-DRGs 001, 002, 005, 006, and 007, respectively)
were limited to those Medicare-approved transplant centers that have
cases in the FY 2011 MedPAR file. (Medicare coverage for heart, heart-
lung, liver and/or intestinal, and lung transplants is limited to those
facilities that have received approval from CMS as transplant centers.)
Organ acquisition costs for kidney, heart, heart-lung,
liver, lung, pancreas, and intestinal (or multivisceral organs)
transplants continue to be paid on a reasonable cost basis. Because
these acquisition costs are paid separately from the prospective
payment rate, it is necessary to subtract the acquisition charges from
the total charges on each transplant bill that showed acquisition
charges before computing the average cost for each MS-DRG and before
eliminating statistical outliers.
Claims with total charges or total lengths of stay less
than or equal to zero were deleted. Claims that had an amount in the
total charge field that differed by more than $10.00 from the sum of
the routine day charges, intensive care charges, pharmacy charges,
special equipment charges, therapy services charges, operating room
charges, cardiology charges, laboratory charges, radiology charges,
other service charges, labor and delivery charges, inhalation therapy
charges, emergency room charges, blood charges, and anesthesia charges
were also deleted.
At least 92.7 percent of the providers in the MedPAR file
had charges for 14 of the 19 cost centers. All claims of providers that
did not have charges greater than zero for at least 14 of the 19 cost
centers were deleted. In other words, a provider must have no more than
five blank cost centers. If a provider did not have charges greater
than zero in more than five cost centers, the claims for the provider
were deleted. For FY 2014, as explained in section II.E.2. of the
preamble of this proposed rule, we are proposing to calculate the
relative weights using 19 cost centers instead of the 15 cost centers
previously used in calculating the FY 2013 relative weights. In
calculating the FY 2014 relative weights, we also are proposing to
continue to remove claims of providers with more than five blank cost
centers from the dataset used to calculate the relative weights. (We
refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53326) for
the edit threshold related to FY 2013 and prior fiscal years). In
recent years, this trim
[[Page 27530]]
kept approximately 96 percent of IPPS providers in the MedPAR file upon
which we base our relative weight calculations. (For examples of our
FYs 2012 and 2013 relative weight calculations, we refer readers to the
FY 2012 IPPS/LTCH PPS final rule (76 FR 51558) and the FY 2013 IPPS/
LTCH PPS final rule 77 FR 53326).) However, under the proposal
presented in this proposed rule to add 4 cost centers to the relative
weight calculations, this trim kept approximately 92.7 percent of the
IPPS providers in the MedPAR file upon which we base our proposed FY
2014 relative weight calculations.
Although this trim is now removing a greater percentage of
providers' claims from the relative weight calculations than were
previously removed, we believe that it is appropriate to propose to
continue to remove providers' claims that do not have charges greater
than zero in more than five cost centers. We believe that this proposal
is appropriate because we are not introducing new costs into the
relative weight calculation; we are only proposing to make use of more
refined, granular costs by breaking out implantable devices from the
Supplies and Equipment CCR, MRIs and CT scans from the Radiology CCR,
and cardiac catheterization from the Cardiology CCR. Furthermore,
because we are proposing to make use of more refined cost report data
for these cost centers, we believe that it is also appropriate to edit
the claims with a more refined threshold. We are inviting public
comments on the proposal to trim the data used in our relative weight
calculations.
Statistical outliers were eliminated by removing all cases
that were beyond 3.0 standard deviations from the geometric mean of the
log distribution of both the total charges per case and the total
charges per day for each MS-DRG.
Effective October 1, 2008, because hospital inpatient
claims include a POA indicator field for each diagnosis present on the
claim, only for purposes of relative weight-setting, the POA indicator
field was reset to ``Y'' for ``Yes'' for all claims that otherwise have
an ``N'' (No) or a ``U'' (documentation insufficient to determine if
the condition was present at the time of inpatient admission) in the
POA field.
Under current payment policy, the presence of specific HAC codes,
as indicated by the POA field values, can generate a lower payment for
the claim. Specifically, if the particular condition is present on
admission (that is, a ``Y'' indicator is associated with the diagnosis
on the claim), it is not a HAC, and the hospital is paid for the higher
severity (and, therefore, the higher weighted MS-DRG). If the
particular condition is not present on admission (that is, an ``N''
indicator is associated with the diagnosis on the claim) and there are
no other complicating conditions, the DRG GROUPER assigns the claim to
a lower severity (and, therefore, the lower weighted MS-DRG) as a
penalty for allowing a Medicare inpatient to contract a HAC. While the
POA reporting meets policy goals of encouraging quality care and
generates program savings, it presents an issue for the relative
weight-setting process. Because cases identified as HACs are likely to
be more complex than similar cases that are not identified as HACs, the
charges associated with HAC cases are likely to be higher as well.
Therefore, if the higher charges of these HAC claims are grouped into
lower severity MS-DRGs prior to the relative weight-setting process,
the relative weights of these particular MS-DRGs would become
artificially inflated, potentially skewing the relative weights. In
addition, we want to protect the integrity of the budget neutrality
process by ensuring that, in estimating payments, no increase to the
standardized amount occurs as a result of lower overall payments in a
previous year that stem from using weights and case-mix that are based
on lower severity MS-DRG assignments. If this would occur, the
anticipated cost savings from the HAC policy would be lost.
To avoid these problems, we reset the POA indicator field to ``Y''
only for relative weight-setting purposes for all claims that otherwise
have an ``N'' or a ``U'' in the POA field. This resetting ``forced''
the more costly HAC claims into the higher severity MS-DRGs as
appropriate, and the relative weights calculated for each MS-DRG more
closely reflect the true costs of those cases.
Once the MedPAR data were trimmed and the statistical outliers were
removed, the charges for each of the 19 cost groups for each claim were
standardized to remove the effects of differences in area wage levels,
IME and DSH payments, and for hospitals located in Alaska and Hawaii,
the applicable cost-of-living adjustment. Because hospital charges
include charges for both operating and capital costs, we standardized
total charges to remove the effects of differences in geographic
adjustment factors, cost-of-living adjustments, and DSH payments under
the capital IPPS as well. Charges were then summed by MS-DRG for each
of the 19 cost groups so that each MS-DRG had 19 standardized charge
totals. These charges were then adjusted to cost by applying the
national average CCRs developed from the FY 2011 cost report data.
The 19 cost centers that we used in the proposed relative weight
calculation are shown in the following table. The table shows the lines
on the cost report and the corresponding revenue codes that we used to
create the 19 national cost center CCRs. (We note that we have made
several changes to the table, most importantly, to remove the columns
listing the cost centers from the CMS Form 2552-96 cost reports.
Because we are proposing to use data from FY 2011 cost reports, which
were filed on the CMS Form 2552-10, the columns referencing the CMS
Form 2552-96 cost report are no longer relevant. We also have updated
and refined the table to reflect the proposed 19 CCRs, instead of the
current 15, and we have made some minor corrections to revenue codes
and cost report cost centers that are grouped with each CCR.)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Charges from
Cost from HCRIS HCRIS
Revenue codes (worksheet C, (worksheet C, Medicare charges from
Cost center group name (19 MedPAR charge contained in Cost report line part 1, column 5 part 1, column HCRIS (worksheet D-3,
total) field MedPAR charge description and line number) 6 & 7 and line column and line number)
field form CMS-2552- number) form form CMS-2552-10
10 CMS-2552-10
--------------------------------------------------------------------------------------------------------------------------------------------------------
Routine Days.................. Private Room 011X and 014X.... Adults & C--1--C5--30..... C--1--C6--30.... D3--HOS--C2--30
Charges. Pediatrics
(General Routine
Care).
Semi[dash]Private 012X, 013X and
Room Charges. 016X[dash]019X.
Ward Charges..... 015X.............
[[Page 27531]]
Intensive Days................ Intensive Care 020X............. Intensive Care C--1--C5--31..... C--1--C6--31.... D3--HOS--C2--31
Charges. Unit.
Coronary Care 021X............. Coronary Care C--1--C5--32..... C--1--C6--32.... D3--HOS--C2--32
Charges. Unit.
Burn Intensive C--1--C5--33..... C--1--C6--33.... D3--HOS--C2--33
Care Unit.
Surgical C--1--C5--34..... C--1--C6--34.... D3--HOS--C2--34
Intensive Care
Unit.
Other Special C--1--C5--35..... C--1--C6--35.... D3--HOS--C2--35
Care Unit.
Drugs......................... Pharmacy Charges. 025X, 026X and Intravenous C--1--C5--64..... C--1--C6--64.... D3--HOS--C2--64
063X. Therapy.
C--1--C7--64....
Drugs Charged To C--1--C5--73..... C--1--C6--73.... D3--HOS--C2--73
Patient.
C--1--C7--73....
Supplies and Equipment........ Medical/Surgical 0270, 0271, 0272, Medical Supplies C--1--C5--71..... C--1--C6--71.... D3--HOS--C2--71
Supply Charges. 0273, 0274, Charged to
0277, and 0621, Patients.
0622, 0623.
C--1--C7--71....
Durable Medical 0290, 0291, 0292 DME[dash]Rented.. C--1--C5--96..... C--1--C6--96.... D3--HOS--C2--96
Equipment and
Charges. 0294[dash]0299.
C--1--C7--96....
Used Durable 0293............. DME[dash]Sold.... C--1--C5--67..... C--1--C6--97.... D3--HOS--C2--97
Medical Charges.
C--1--C7--97....
Implantable Devices........... 0275, 0276, 0278, Implantable C--1--C5--72..... C--1--C6--72.... D3--HOS--C2--72
0624. Devices Charged
to Patients.
C--1--C7--72....
Therapy Services.............. Physical Therapy 042X............. Physical Therapy. C--1--C5--66..... C--1--C6--66.... D3--HOS--C2--66
Charges.
C--1--C7--66....
Occupational 043X............. Occupational C--1--C5--67..... C--1--C6--67.... D3--HOS--C2--67
Therapy Charges. Therapy.
C--1--C7--67....
Speech Pathology 044X and 047X.... Speech Pathology. C--1--C5--68..... C--1--C6--68.... D3--HOS--C2--68
Charges.
C--1--C7--68....
Inhalation Therapy............ Inhalation 041X and 046X.... Respiratory C--1--C5--65..... C--1--C6--65.... D3--HOS--C2--65
Therapy Charges. Therapy.
C--1--C7--65....
Operating Room................ Operating Room 036X............. Operating Room... C--1--C5--50..... C--1--C6--50.... D3--HOS--C2--50
Charges.
C--1--C7--50....
071X............ Recovery Room.... C--1--C5--51..... C--1--C6--51.... D3--HOS--C2--51
C--1--C7--51....
Labor & Delivery.............. Operating Room 072X............. Delivery Room and C--1--C5--52..... C--1--C6--52.... D3--HOS--C2--52
Charges. Labor Room.
C--1--C7--52....
Anesthesia.................... Anesthesia 037X............. Anesthesiology... C--1--C5--53..... C--1--C6--53.... D3--HOS--C2--53
Charges.
C--1--C7--53....
Cardiology.................... Cardiology 048X and 073X.... Electrocardiology C--1--C5--69..... C--1--C6--69.... D3--HOS--C2--69
Charges.
C--1--C7--69....
Cardiac Catheterization....... 0481............. Cardiac C--1--C5--59..... C--1--C6--59.... D3--HOS--C2--59
Catheterization.
C--1--C7--59....
Laboratory.................... Laboratory 030X, 031X, and Laboratory....... C--1--C5--60..... C--1--C6--60.... D3--HOS--C2--60
Charges. 075X.
C--1--C7--60....
PBP Clinic C--1--C5--61..... C--1--C6--61.... D3--HOS--C2--61
Laboratory
Services.
C--1--C7--61....
074X, 086X Electro- C--1--C5--70..... C--1--C6--70.... D3--HOS--C2--70
encephalography.
C--1--C7--70....
Radiology..................... Radiology Charges 032X, 040X....... Radiology--Diagno C--1--C5--54..... C--1--C6--54.... D3--HOS--C2--54
stic.
C--1--C7--54....
028x, 0331, 0332, Radiology--Therap C--1--C5--55..... C--1--C6--55.... D3--HOS--C2--55
0333, 0335, eutic.
0339, 0342.
0343 and 344..... Radioisotope..... C--1--C5--56..... C--1--C6--56.... D3--HOS--C2--56
C--1--C7--56....
Computed Tomography (CT) Scan. CT Scan Charges.. 035X............. Computed C--1--C5--57..... C--1--C6--57.... D3--HOS--C2--57
Tomography (CT)
Scan.
[[Page 27532]]
C--1--C7--57....
Magnetic Resonance Imaging MRI Charges...... 061X............. Magnetic C--1--C5--58..... C--1--C6--58.... D3--HOS--C2--58
(MRI). Resonance
Imaging (MRI).
C--1--C7--58....
Emergency Room................ Emergency Room 045x............. Emergency........ C--1--C5--91..... C--1--C6--91.... D3--HOS--C2--91
Charges.
C--1--C7--91....
Blood and Blood Products...... Blood Charges.... 038x............. Whole Blood & C--1--C5--62..... C--1--C6--62.... D3--HOS--C2--62
Packed Red Blood
Cells.
C--1--C7--62.....
Blood Storage/ 039x............. Blood Storing, C--1--C5--63..... C--1--C6--63.... D3--HOS--C2--63
Processing. Processing, & C--1--C7--63....
Transfusing.
Other Services............... Other Service 0002-0099, 022X,
Charge. 023X, 024X,
052X, 053X.
055X-060X, 064X-
070X, 076X-078X,
090X-095X and
099X.
Renal Dialysis... 0800X............ Renal Dialysis... C--1--C5--74..... C--1--C6--74.... D3--HOS--C2--74
ESRD Revenue 080X and 082X- C--1--C7--74....
Setting Charges. 088X.
Home Program C--1--C5--94..... C--1--C6--94.... D3--HOS--C2--94
Dialysis. C--1--C7--94....
Outpatient 049X............. ASC (Non Distinct C--1--C5--75..... C--1--C6--75.... D3--HOS--C2--75
Service Charges. Part). C--1--C7--75....
Lithotripsy 079X. ................
Charge.
Other Ancillary.. C--1--C5--76..... C--1--C6--76.... D3--HOS--C2--76
C--1--C7--76....
Clinic Visit 051X............. Clinic........... C--1--C5--90..... C--1--C6--90.... D3--HOS--C2--90
Charges. C--1--C7--90....
................
Observation beds. C--1--C5--92.01.. C--1--C6--92.01. D3--HOS--C2--92.01
C--1--C7--92.01.
Professional Fees 096X, 097X, and Other Outpatient C--1--C5--93..... C--1--C6--93.... D3--HOS--C2--93
Charges. 098X. Services. C--1--C7--93....
................
Ambulance Charges 054X............. Ambulance........ C--1--C5--95..... C--1--C6--95.... D3--HOS--C2--95
C--1--C7--95....
................
Rural Health C--1--C5--88..... C--1--C6--88.... D3--HOS--C2--88
Clinic.
C--1--C7--88....
FQHC............. C--1--C5--89..... C--1--C6--89.... D3--HOS--C2--89
C--1--C7--89....
--------------------------------------------------------------------------------------------------------------------------------------------------------
3. Development of National Average CCRs
We developed the national average CCRs as follows:
Using the FY 2011 cost report data, we removed CAHs, Indian Health
Service hospitals, all-inclusive rate hospitals, and cost reports that
represented time periods of less than 1 year (365 days). We included
hospitals located in Maryland because we include their charges in our
claims database. We then created CCRs for each provider for each cost
center (see prior table for line items used in the calculations) and
removed any CCRs that were greater than 10 or less than 0.01. We
normalized the departmental CCRs by dividing the CCR for each
department by the total CCR for the hospital for the purpose of
trimming the data. We then took the logs of the normalized cost center
CCRs and removed any cost center CCRs where the log of the cost center
CCR was greater or less than the mean log plus/minus 3 times the
standard deviation for the log of that cost center CCR. Once the cost
report data were trimmed, we calculated a Medicare-specific CCR. The
Medicare-specific CCR was determined by taking the Medicare charges for
each line item from Worksheet D-3 and deriving the Medicare-specific
costs by applying the hospital-specific departmental CCRs to the
Medicare-specific charges for each line item from Worksheet D-3. Once
each hospital's Medicare-specific costs were established, we summed the
total Medicare-specific costs and divided by the sum of the total
Medicare-specific charges to produce national average, charge-weighted
CCRs.
After we multiplied the total charges for each MS-DRG in each of
the 19 cost centers by the corresponding national average CCR, we
summed the 19 ``costs'' across each MS-DRG to produce a total
standardized cost for the MS-DRG. The average standardized cost for
each MS-DRG was then computed as the total standardized cost for the
MS-DRG divided by the transfer-adjusted case count for the MS-DRG. The
average cost for each MS-DRG was then divided by the national average
standardized cost per case to determine the relative weight.
The proposed FY 2014 cost-based relative weights were then
normalized by an adjustment factor of 1.6122128377 so that the average
case weight after recalibration was equal to the average case weight
before recalibration. The normalization adjustment is intended to
[[Page 27533]]
ensure that recalibration by itself neither increases nor decreases
total payments under the IPPS, as required by section
1886(d)(4)(C)(iii) of the Act.
The proposed 19 national average CCRs for FY 2014 are as follows:
------------------------------------------------------------------------
Group CCR
------------------------------------------------------------------------
Routine Days................................................... 0.502
Intensive Days................................................. 0.423
Drugs.......................................................... 0.193
Supplies & Equipment........................................... 0.293
Implantable Devices............................................ 0.361
Therapy Services............................................... 0.355
Laboratory..................................................... 0.133
Operating Room................................................. 0.225
Cardiology..................................................... 0.132
Cardiac Catheterization........................................ 0.135
Radiology...................................................... 0.170
MRIs........................................................... 0.091
CT Scans....................................................... 0.045
Emergency Room................................................. 0.207
Blood and Blood Products....................................... 0.371
Other Services................................................. 0.399
Labor & Delivery............................................... 0.445
Inhalation Therapy............................................. 0.187
Anesthesia..................................................... 0.120
------------------------------------------------------------------------
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 this FY 2014 proposed rule, we are
proposing to use that same case threshold in recalibrating the proposed
MS-DRG weights for FY 2014. Using data from the FY 2012 MedPAR file,
there were 7 MS-DRGs that contain fewer than 10 cases. Under the MS-
DRGs, we have fewer low-volume DRGs than under the CMS DRGs because we
no longer have separate DRGs for patients aged 0 to 17 years. With the
exception of newborns, we previously separated some DRGs based on
whether the patient was age 0 to 17 years or age 17 years and older.
Other than the age split, cases grouping to these DRGs are identical.
The DRGs for patients aged 0 to 17 years generally have very low
volumes because children are typically ineligible for Medicare. In the
past, we have found that the low volume of cases for the pediatric DRGs
could lead to significant year-to-year instability in their relative
weights. Although we have always encouraged non-Medicare payers to
develop weights applicable to their own patient populations, we have
received frequent complaints from providers about the use of the
Medicare relative weights in the pediatric population. We believe that
eliminating this age split in the MS-DRGs will provide more stable
payment for pediatric cases by determining their payment using adult
cases that are much higher in total volume. Newborns are unique and
require separate MS-DRGs that are not mirrored in the adult population.
Therefore, it remains necessary to retain separate MS-DRGs for
newborns. All of the low-volume MS-DRGs listed below are for newborns.
In FY 2014, because we do not have sufficient MedPAR data to set
accurate and stable cost weights for these low-volume MS-DRGs, we are
proposing to compute weights for the low-volume MS-DRGs by adjusting
their FY 2013 weights by the percentage change in the average weight of
the cases in other MS-DRGs. The crosswalk table is shown below:
------------------------------------------------------------------------
Low-volume MS-DRG MS-DRG title Crosswalk to MS-DRG
------------------------------------------------------------------------
789......................... Neonates, Died or FY 2013 FR weight
Transferred to (adjusted by
Another Acute Care percent change in
Facility. average weight of
the cases in other
MS-DRGs).
790......................... Extreme Immaturity FY 2013 FR weight
or Respiratory (adjusted by
Distress Syndrome, percent change in
Neonate. average weight of
the cases in other
MS-DRGs).
791......................... Prematurity with FY 2013 FR weight
Major Problems. (adjusted by
percent change in
average weight of
the cases in other
MS-DRGs).
792......................... Prematurity without FY 2013 FR weight
Major Problems. (adjusted by
percent change in
average weight of
the cases in other
MS-DRGs).
793......................... Full-Term Neonate FY 2013 FR weight
with Major Problems. (adjusted by
percent change in
average weight of
the cases in other
MS-DRGs).
794......................... Neonate with Other FY 2013 FR weight
Significant (adjusted by
Problems. percent change in
average weight of
the cases in other
MS-DRGs).
795......................... Normal Newborn...... FY 2013 FR weight
(adjusted by
percent change in
average weight of
the cases in other
MS-DRGs).
------------------------------------------------------------------------
4. Bundled Payments for Care Improvement (BPCI) Initiative
The Bundled Payments for Care Improvement (BPCI) initiative,
developed under the authority of section 3021 of the Affordable Care
Act (codified at section 1115A of the Act), is comprised of four
broadly defined models of care, which link payments for multiple
services beneficiaries receive during an episode of care. Under the
BPCI initiative, organizations enter into payment arrangements that
include financial and performance accountability for episodes of care.
On January 31, 2013, CMS announced the health care organizations
selected to participate in the BPCI initiative. For additional
information on the BPCI initiative, we refer readers to the CMS' Center
for Medicare and Medicaid Innovation's Web site at http://innovation.cms.gov/initiatives/Bundled-Payments/index.html and to
section IV.H.4. of the preamble of the FY 2013 IPPS/LTCH PPS final rule
(77 FR 53341 through 53343) for a discussion on the BPCI initiative.
In the FY 2013 IPPS/LTCH PPS final rule, for FY 2013 and subsequent
fiscal years, we finalized a policy to treat hospitals that participate
in the BPCI initiative the same as prior fiscal years for the IPPS
payment modeling and ratesetting process without regard to a hospital's
participation within these bundled payment models (that is, as if a
hospital were not participating in those models under the BPCI
initiative). Therefore, for FY 2014, we are proposing to continue to
include all applicable data from subsection (d) hospitals participating
in BPCI Models 1, 2, and 4 in our IPPS payment modeling and ratesetting
calculations. We refer readers to the FY 2013 IPPS/LTCH PPS final rule
for a complete discussion on our final policy for the treatment of
hospitals participating in the BPCI initiative in our ratesetting
process.
I. Proposed 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
[[Page 27534]]
that a medical service or technology will be considered new if it meets
criteria established by the Secretary after notice and opportunity for
public comment. Section 1886(d)(5)(K)(ii)(I) of the Act specifies that
a new medical service or technology may be considered for new
technology add-on payment if, ``based on the estimated costs incurred
with respect to discharges involving such service or technology, the
DRG prospective payment rate otherwise applicable to such discharges
under this subsection is inadequate.'' We note that beginning with
discharges occurring in FY 2008, CMS transitioned from CMS-DRGs to MS-
DRGs.
The regulations at 42 CFR 412.87 implement these provisions and
specify three criteria for a new medical service or technology to
receive the additional payment: (1) The medical service or technology
must be new; (2) the medical service or technology must be costly such
that the DRG rate otherwise applicable to discharges involving the
medical service or technology is determined to be inadequate; and (3)
the service or technology must demonstrate a substantial clinical
improvement over existing services or technologies. Below we highlight
some of the major statutory and regulatory provisions relevant to the
new technology add-on payment criteria as well as other information.
For a complete discussion on the new technology add-on payment
criteria, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76
FR 51572 through 51574).
Under the first criterion, as reflected in Sec. 412.87(b)(2), a
specific medical service or technology will be considered ``new'' for
purposes of new medical service or technology add-on payments until
such time as Medicare data are available to fully reflect the cost of
the technology in the MS-DRG weights through recalibration. We note
that we do not consider a service or technology to be new if it is
substantially similar to one or more existing technologies. That is,
even if a technology receives a new FDA approval, it may not
necessarily be considered ``new'' for purposes of new technology add-on
payments if it is ``substantially similar'' to a technology that was
approved by FDA and has been on the market for more than 2 to 3 years.
In the FY 2006 IPPS final rule (70 FR 47351) and the FY 2010 IPPS/RY
2010 LTCH PPS final rule (74 FR 43813 and 43814), we explained our
policy regarding substantial similarity in detail.
Under the second criterion, Sec. 412.87(b)(3) further provides
that, to be eligible for the add-on payment for new medical services or
technologies, the MS-DRG prospective payment rate otherwise applicable
to the discharge involving the new medical services or technologies
must be assessed for adequacy. Under the cost criterion, to assess the
adequacy of payment for a new technology paid under the applicable MS-
DRG prospective payment rate, we evaluate whether the charges for cases
involving the new technology exceed certain threshold amounts. Table 10
that was released with the FY 2013 IPPS/LTCH PPS final rule contains
the final thresholds that will be used to evaluate applications for new
technology add-on payments for FY 2014. We refer readers to the CMS Web
site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY-2013-IPPS-Final-Rule-Home-Page.html for a complete
viewing of Table 10 from the FY 2013 IPPS/LTCH PPS final rule.
In the September 7, 2001 final rule that established the new
technology add-on payment regulations (66 FR 46917), we discussed the
issue of whether the Health Insurance Portability and Accountability
Act (HIPAA) Privacy Rule at 45 CFR Parts 160 and 164 applies to claims
information that providers submit with applications for new technology
add-on payments. We refer readers to the FY 2012 IPPS/LTCH PPS final
rule (76 FR 51573) for complete information on this issue.
Under the third criterion, Sec. 412.87(b)(1) of our existing
regulations provides that a new technology is an appropriate candidate
for an additional payment when it represents ``an advance that
substantially improves, relative to technologies previously available,
the diagnosis or treatment of Medicare beneficiaries.'' For example, a
new technology represents a substantial clinical improvement when it
reduces mortality, decreases the number of hospitalizations or
physician visits, or reduces recovery time compared to the technologies
previously available. (We refer readers to the September 7, 2001 final
rule for a more detailed discussion of this criterion (66 FR 46902).)
The new medical service or technology add-on payment policy under
the IPPS provides additional payments for cases with relatively high
costs involving eligible new medical services or technologies while
preserving some of the incentives inherent under an average-based
prospective payment system. The payment mechanism is based on the cost
to hospitals for the new medical service or technology. Under Sec.
412.88, if the costs of the discharge (determined by applying cost-to-
charge ratios (CCRs) as described in Sec. 412.84(h)) exceed the full
DRG payment (including payments for IME and DSH, but excluding outlier
payments), Medicare will make an add-on payment equal to the lesser of:
(1) 50 percent of the estimated costs of the new technology (if the
estimated costs for the case including the new technology exceed
Medicare's payment); or (2) 50 percent of the difference between the
full DRG payment and the hospital's estimated cost for the case. Unless
the discharge qualifies for an outlier payment, the additional Medicare
payment is limited to the full MS-DRG payment plus 50 percent of the
estimated costs of the new technology.
Section 503(d)(2) of Public Law 108-173 provides that there shall
be no reduction or adjustment in aggregate payments under the IPPS due
to add-on payments for new medical services and technologies.
Therefore, in accordance with section 503(d)(2) of Public Law 108-173,
add-on payments for new medical services or technologies for FY 2005
and later years have not been subjected to budget neutrality.
In the FY 2009 IPPS final rule (73 FR 48561 through 48563), we
modified our regulations at Sec. 412.87 to codify our longstanding
practice of how CMS evaluates the eligibility criteria for new medical
service or technology add-on payment applications. That is, we first
determine whether a medical service or technology meets the newness
criteria, and only if so, do we then make a determination as to whether
the technology meets the cost threshold and represents a substantial
clinical improvement over existing medical services or technologies. We
also amended Sec. 412.87(c) to specify that all applicants for new
technology add-on payments must have FDA approval or clearance for
their new medical service or technology by July 1 of each year prior to
the beginning of the fiscal year that the application is being
considered.
The Council on Technology and Innovation (CTI) at CMS oversees the
agency's cross-cutting priority on coordinating coverage, coding and
payment processes for Medicare with respect to new technologies and
procedures, including new drug therapies, as well as promoting the
exchange of information on new technologies between CMS and other
entities. The CTI, composed of senior CMS staff and clinicians, was
established under section 942(a) of Public Law 108-173. The Council is
co-chaired by the Director of the Center for Clinical Standards and
Quality (CCSQ) and the Director of the Center for
[[Page 27535]]
Medicare (CM), who is also designated as the CTI's Executive
Coordinator.
The specific processes for coverage, coding, and payment are
implemented by CM, CCSQ, and the local claims-payment contractors (in
the case of local coverage and payment decisions). The CTI supplements,
rather than replaces, these processes by working to assure that all of
these activities reflect the agency-wide priority to promote high-
quality, innovative care. At the same time, the CTI also works to
streamline, accelerate, and improve coordination of these processes to
ensure that they remain up to date as new issues arise. To achieve its
goals, the CTI works to streamline and create a more transparent coding
and payment process, improve the quality of medical decisions, and
speed patient access to effective new treatments. It is also dedicated
to supporting better decisions by patients and doctors in using
Medicare-covered services through the promotion of better evidence
development, which is critical for improving the quality of care for
Medicare beneficiaries.
To improve the understanding of CMS' processes for coverage,
coding, and payment and how to access them, the CTI has developed an
``Innovator's Guide'' to these processes. The intent is to consolidate
this information, much of which is already available in a variety of
CMS documents and in various places on the CMS Web site, in a user-
friendly format. This guide was published in August 2008 and is
available on the CMS Web site at: http://www.cms.gov/CouncilonTechInnov/Downloads/InnovatorsGuide5_10_10.pdf.
As we indicated in the FY 2009 IPPS final rule (73 FR 48554), we
invite any product developers or manufacturers of new medical
technologies to contact the agency early in the process of product
development if they have questions or concerns about the evidence that
would be needed later in the development process for the agency's
coverage decisions for Medicare.
The CTI aims to provide useful information on its activities and
initiatives to stakeholders, including Medicare beneficiaries,
advocates, medical product manufacturers, providers, and health policy
experts. Stakeholders with further questions about Medicare's coverage,
coding, and payment processes, or who want further guidance about how
they can navigate these processes, can contact the CTI at
[email protected].
We note that applicants for add-on payments for new medical
services or technologies for FY 2015 must submit a formal request,
including a full description of the clinical applications of the
medical service or technology and the results of any clinical
evaluations demonstrating that the new medical service or technology
represents a substantial clinical improvement, along with a significant
sample of data to demonstrate that the medical service or technology
meets the high-cost threshold. Complete application information, along
with final deadlines for submitting a full application, will be posted
as it becomes available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/newtech.html. To allow interested parties to identify the new medical
services or technologies under review before the publication of the
proposed rule for FY 2015, the Web site also will post the tracking
forms completed by each applicant.
2. Public Input Before Publication of a Notice of Proposed Rulemaking
on Add-On Payments
Section 1886(d)(5)(K)(viii) of the Act, as amended by section
503(b)(2) of Public Law 108-173, provides for a mechanism for public
input before publication of a notice of proposed rulemaking regarding
whether a medical service or technology represents a substantial
clinical improvement or advancement. The process for evaluating new
medical service and technology applications requires the Secretary to--
Provide, before publication of a proposed rule, for public
input regarding whether a new service or technology represents an
advance in medical technology that substantially improves the diagnosis
or treatment of Medicare beneficiaries;
Make public and periodically update a list of the services
and technologies for which applications for add-on payments are
pending;
Accept comments, recommendations, and data from the public
regarding whether a service or technology represents a substantial
clinical improvement; and
Provide, before publication of a proposed rule, for a
meeting at which organizations representing hospitals, physicians,
manufacturers, and any other interested party may present comments,
recommendations, and data regarding whether a new medical service or
technology represents a substantial clinical improvement to the
clinical staff of CMS.
In order to provide an opportunity for public input regarding add-
on payments for new medical services and technologies for FY 2014 prior
to publication of this FY 2014 IPPS/LTCH PPS proposed rule, we
published a notice in the Federal Register on November 23, 2012 (77 FR
70163 through 70165), and held a town hall meeting at the CMS
Headquarters Office in Baltimore, MD, on February 5, 2013. In the
announcement notice for the meeting, we stated that the opinions and
alternatives provided during the meeting would assist us in our
evaluations of applications by allowing public discussion of the
substantial clinical improvement criterion for each of the FY 2014 new
medical service and technology add-on payment applications before the
publication of this FY 2014 proposed rule.
Approximately 60 individuals registered to attend the town hall
meeting in person, while additional individuals listened over an open
telephone line. We also live-streamed the town hall meeting over the
Internet and received very positive feedback from the public on use of
this option. We are considering no longer holding an in-person town
hall meeting in Baltimore, MD, and instead holding a virtual town hall
meeting that would be live-streamed on the Internet. We are inviting
public comments on the possibility of holding a virtual town hall
meeting instead of an in-person town hall meeting in Baltimore, MD.
Four of the five FY 2014 applicants presented information on their
technologies, 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 February 26, 2013, in our evaluation of the new
technology add-on payment applications for FY 2014 in this proposed
rule.
In response to the published notice and the new technology town
hall meeting, we received written comments regarding applications for
FY 2014 new technology add-on payments. We summarize these comments
below or, if applicable, indicate that there were no comments received,
at the end of each discussion of the individual applications in this
proposed rule.
A number of attendees at the new technology town hall meeting
provided comments that were unrelated to ``substantial clinical
improvement.'' As explained above and in the Federal Register notice
announcing the new technology town hall meeting (77 FR 70163 through
70165), the purpose of the new technology town hall meeting was
specifically to discuss the
[[Page 27536]]
substantial clinical improvement criterion in regard to pending new
technology applications for FY 2014. Therefore, we are not summarizing
those comments in this proposed rule. Commenters are welcome to
resubmit these comments in response to proposals presented in this
proposed rule.
3. FY 2014 Status of Technologies Approved for FY 2013 Add-On Payments
a. Auto Laser Interstitial Thermal Therapy (AutoLITTTM)
System
Monteris Medical submitted an application for new technology add-on
payments for FY 2011 for the AutoLITTTM.
AutoLITTTM 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 AutoLITTTM received a 510(k) FDA clearance in May
2009. The AutoLITTTM 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 AutoLITTTM may be used in patients with
glioblastoma multiforme brain tumors. The applicant stated in its
application and through supplemental information that, due to required
updates, the technology was actually introduced to the market in
December 2009. After evaluation of the newness, costs, and substantial
clinical improvement criteria for new technology add-on payments for
the AutoLITTTM and consideration of the public comments we
received in response to the FY 2011 IPPS/LTCH PPS proposed rule,
including the additional analysis of clinical data and supporting
information submitted by the applicant, we approved the
AutoLITTTM for new technology add-on payments for FY 2011.
In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27935 through 27936),
based on the original information provided by the applicant, we
believed that the newness date for the AutoLITTTM began in
December 2009. However, as summarized in the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53345 through 53346), the applicant submitted a
public comment (in response to the FY 2013 proposed rule) demonstrating
that the AutoLITTTM was first available on May 11, 2010. The
manufacturer explained that some of the sterile disposable products
were not released from quarantine until May 11, 2010, which prevented
the AutoLITTTM from being used prior to May 11, 2010.
Therefore, the manufacturer asserted that the first time the
AutoLITTTM was available on the market was May 11, 2010. As
a result of this information, we continued to make new technology add-
on payments for the AutoLITTTM in FY 2013. (We refer readers
to the FY 2013 IPPS/LTCH PPS final rule for a complete discussion on
this issue).
Consistent with the applicant's clinical trial, the add-on payment
is intended only for use of the device in cases of glioblastoma
multiforme. Therefore, we limited the new technology add-on payment to
cases involving the AutoLITTTM in MS-DRGs 025 (Craniotomy
and Endovascular Intracranial Procedures with Major Complications or
Comorbidities (MCC)), 026 (Craniotomy and Endovascular Intracranial
Procedures with Complications or Comorbidities (CC)), and 027
(Craniotomy and Endovascular Intracranial Procedures without CC or
MCC). Cases involving the AutoLITTTM that are eligible for
the new technology add-on payment are identified by assignment to MS-
DRGs 025, 026, and 027 with a procedure code of 17.61 (Laser
interstitial thermotherapy of lesion or tissue of brain under guidance)
in combination with a principal diagnosis code that begins with a
prefix of 191 (Malignant neoplasm of brain). We note that using the
procedure and diagnosis codes above and restricting the add-on payment
to cases that map to MS-DRGs 025, 026, and 027 is consistent with
information provided by the applicant, which demonstrated that cases of
the AutoLITTTM 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 AutoLITTTM 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 AutoLITTTM is $5,300.
The new technology add-on payment regulations provide that ``a
medical service or technology may be considered new within 2 or 3 years
after the point at which data begin to become available reflecting the
ICD-9-CM code assigned to the new service or technology'' (Sec.
412.87(b)(2)). Our practice has been to begin and end new technology
add-on payments on the basis of a fiscal year, and we have generally
followed a guideline that uses a 6-month window before and after the
start of the fiscal year to determine whether to extend the new
technology add-on payment for an additional fiscal year. In general, we
extend add-on payments for an additional year only if the 3-year
anniversary date of the product's entry on the market occurs in the
latter half of the fiscal year (70 FR 47362). With regard to the
newness criterion for the AutoLITTTM, as stated above, we
consider the beginning of the newness period for the device to commence
when the AutoLITTTM was first available on May 11, 2010.
Because the 3-year anniversary date of the AutoLITTTM entry
onto the market will expire May 11, 2013, which is prior to the
beginning of FY 2014, we are proposing to discontinue new technology
add-on payments for the AutoLITTTM for FY 2014. We are
inviting public comments on this proposal.
b. Glucarpidase (Trade Brand Voraxaze[supreg])
BTG International, Inc. submitted an application for new technology
add-on payments for Glucarpidase (trade brand Voraxaze[supreg]) for FY
2013. Glucarpidase is used in the treatment of patients who have been
diagnosed with toxic methotrexate (MTX) concentrations as of result of
renal impairment. The administration of Glucarpidase causes a rapid and
sustained reduction of toxic MTX concentrations.
Voraxaze[supreg] was approved by the FDA on January 17, 2012.
Beginning in 1993, certain patients could obtain expanded access for
treatment use to Voraxaze[supreg] as an investigational drug. Since
2007, the applicant has been authorized to recover the costs of making
Voraxaze[supreg] available through its expanded access program. We
describe expanded access for treatment use of investigational drugs and
authorization to recover certain costs of investigational drugs in the
FY 2013 IPPS/LTCH PPS final rule (77 FR 53346 through 53350).
Voraxaze[supreg] was available on the market in the United States as a
commercial product to the larger population as of April 30, 2012.
[[Page 27537]]
In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27936 through 27939),
we expressed concerns about whether Voraxaze[supreg] could be
considered new for FY 2013. After consideration of all of the public
comments received, in the FY 2013 IPPS/LTCH PPS final rule, we stated
that we considered Voraxaze[supreg] to be ``new'' as of April 30, 2012,
which is the date of market availability.
After evaluation of the newness, costs, and substantial clinical
improvement criteria for new technology payments for Voraxaze[supreg]
and consideration of the public comments we received in response to the
FY 2013 IPPS/LTCH PPS proposed rule, we approved Voraxaze[supreg] for
new technology add-on payments for FY 2013. Cases of Voraxaze[supreg]
are identified with ICD-9-CM procedure code 00.95 (Injection or
infusion of glucarpidase). The cost of Voraxaze[supreg] is $22,500 per
vial. The applicant stated that an average of four vials is used per
Medicare beneficiary. Therefore, the average cost per case for
Voraxaze[supreg] is $90,000 ($22,500 x 4). Under Sec. 412.88(a)(2),
new technology add-on payments are limited to the lesser of 50 percent
of the average cost of the technology or 50 percent of the costs in
excess of the MS-DRG payment for the case. As a result, the maximum new
technology add-on payment for Voraxaze[supreg] is $45,000 per case.
As stated above, the new technology add-on payment regulations
provide that ``a medical service or technology may be considered new
within 2 or 3 years after the point at which data begin to become
available reflecting the ICD-9-CM code assigned to the new service or
technology'' (Sec. 412.87(b)(2)). With regard to the newness criterion
for Voraxaze[supreg], as stated above, we consider the beginning of the
newness period to commence when Voraxaze[supreg] was first available on
the market on April 30, 2012. Because Voraxaze[supreg] is still within
the 3-year newness period, we are proposing to continue new technology
add-on payments for this technology for FY 2014. We are inviting public
comments on this proposal.
c. DIFICIDTM (Fidaxomicin) Tablets
Optimer Pharmaceuticals, Inc. submitted an application for new
technology add-on payments for FY 2013 for the use of
DIFICIDTM tablets. As indicated on the labeling submitted to
the FDA, the applicant noted that Fidaxomicin is taken twice a day as a
daily dosage (200 mg tablet twice daily = 400 mg per day) as an oral
antibiotic. The applicant asserted that Fidaxomicin provides potent
bactericidal activity against C. Diff., and moderate bactericidal
activity against certain other gram-positive organisms, such as
enterococcus and staphylococcus. Unlike other antibiotics used to treat
CDAD, the applicant noted that the effects of Fidaxomicin preserve
bacteroides organisms in the fecal flora. These are markers of normal
anaerobic microflora. The applicant asserted that this helps prevent
pathogen introduction or persistence, which potentially inhibits the
re-emergence of C. Diff., and reduces the likelihood of overgrowths as
a result of vancomycin-resistant Enterococcus (VRE). Because of this
narrow spectrum of activity, the applicant asserted that Fidaxomicin
does not alter this native intestinal microflora.
In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27939 through
27941), we expressed concern that DIFICIDTM may not be
eligible for new technology add-on payments because eligibility is
limited to new technologies associated with procedures described by
ICD-9-CM codes. We further stated that drugs that are only taken orally
(such as DIFICIDTM) may not be eligible for consideration
for new technology add-on payments because there is no procedure
associated with these drugs and, therefore, no ICD-9-CM code(s). In the
FY 2013 IPPS/LTCH PPS final rule (77 FR 53350 through 53358), after
consideration of the public comments received, we revised our policy to
allow the use of National Drug Codes (NDCs) to identify oral
medications that have no inpatient procedure for the purposes of new
technology add-on payments. The revised policy is effective for
payments for discharges occurring on or after October 1, 2012. We refer
readers to the FY 2013 IPPS/LTCH PPS final rule for a complete
discussion on this issue.
With regard to the newness criterion, Fidaxomicin was approved by
the FDA on May 27, 2011, for the treatment of CDAD in adult patients,
18 years of age and older. In the FY 2013 IPPS/LTCH PPS final rule, we
established that the beginning of the newness period for this
technology is its FDA approval date of May 27, 2011.
After evaluation of the newness, costs, and substantial clinical
improvement criteria for new technology add-on payments for
DIFICIDTM and consideration of the public comments we
received in response to the FY 2013 IPPS/LTCH PPS proposed rule, we
approved DIFICIDTM for new technology add-on payments for FY
2013. Cases of DIFICIDTM are identified with ICD-9-CM
diagnosis code 008.45 (Intestinal infection due to Clostridium
difficile) in combination with NDC code 52015-0080-01. Providers must
report the NDC on the 837i Health Care Claim Institutional form (in
combination with ICD-9-CM diagnosis code 008.45) in order to receive
the new technology add-on payment. According to the applicant, the cost
of DIFICIDTM is $2,800 for a 10-day dosage. The average cost
per day for DIFICIDTM is $280 ($2,800/10). Cases of
DIFICIDTM 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). 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 is $868.
As stated above, the new technology add-on payment regulations
provide that ``a medical service or technology may be considered new
within 2 or 3 years after the point at which data begin to become
available reflecting the ICD-9-CM code assigned to the new service or
technology'' (Sec. 412.87(b)(2)). Our practice has been to begin and
end new technology add-on payments on the basis of a fiscal year, and
we have generally followed a guideline that uses a 6-month window
before and after the start of the fiscal year to determine whether to
extend the new technology add-on payment for an additional fiscal year.
In general, we extend add-on payments for an additional year only if
the 3-year anniversary date of the product's entry on the market occurs
in the latter half of the fiscal year (70 FR 47362). With regard to the
newness criterion for DIFICIDTM, as stated above, we
consider the beginning of the newness period to commence when
DIFICIDTM was first approved by the FDA on May 27, 2011.
Because the 3-year anniversary date of DIFICIDTM will occur
in the second half of the fiscal year (after April 1, 2014), we are
proposing to continue new technology add-on payments for
DIFICIDTM for FY 2014. We are inviting public comments on
this proposal.
d. Zenith[supreg] Fenestrated Abdominal Aortic Aneurysm (AAA)
Endovascular Graft
Cook[supreg] Medical submitted an application for new technology
add-on payments for the Zenith[supreg] Fenestrated Abdominal Aortic
Aneurysm (AAA) Endovascular Graft (Zenith[supreg] F. Graft) for FY
2013. The applicant stated that the current treatment for patients who
have had an AAA is an endovascular graft. The applicant explained that
the Zenith[supreg] F. Graft is an implantable device designed to treat
patients who
[[Page 27538]]
have an AAA and who are anatomically unsuitable for treatment with
currently approved AAA endovascular grafts because of the length of the
infrarenal aortic neck. The applicant noted that, currently, an AAA is
treated through an open surgical repair or medical management for those
patients not eligible for currently approved AAA endovascular grafts.
With respect to newness, the applicant stated that FDA approval for
the use of the Zenith[supreg] F. Graft was granted on April 4, 2012. In
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53360 through 53365), we
stated that because the Zenith[supreg] F. Graft was approved by the FDA
on April 4, 2012, we believed that the Zenith[supreg] F. Graft met the
newness criterion as of that date.
After evaluation of the newness, costs, and substantial clinical
improvement criteria for new technology add-on payments for the
Zenith[supreg] F. Graft and consideration of the public comments we
received in response to the FY 2013 IPPS/LTCH PPS proposed rule, we
approved the Zenith[supreg] F. Graft for new technology add-on payments
for FY 2013. Cases involving the Zenith[supreg] F. Graft that are
eligible for new technology add-on payments are identified by ICD-9-CM
procedure code 39.78 (Endovascular implantation of branching or
fenestrated graft(s) in aorta). In the application, the applicant
provided a breakdown of the costs of the Zenith[supreg] F. Graft. The
total cost of the Zenith[supreg] F. Graft utilizing bare metal (renal)
alignment stents was $17,264. Of the $17,264 in costs for the
Zenith[supreg] F. Graft, $921 are for components that are used in a
standard Zenith AAA Endovascular Graft procedure. Because the costs for
these components are already reflected within the MS-DRGs (and are no
longer ``new''), in the FY 2013 IPPS/LTCH PPS final rule, we stated
that we do not believe it is appropriate to include these costs in our
calculation of the maximum cost to determine the maximum add-on payment
for the Zenith[supreg] F. Graft. Therefore, the total maximum cost for
the Zenith[supreg] F. Graft is $16,343 ($17,264 - $921). Under Sec.
412.88(a)(2), new technology add-on payments are limited to the lesser
of 50 percent of the average cost of the device or 50 percent of the
costs in excess of the MS-DRG payment for the case. As a result, the
maximum add-on payment for a case involving the Zenith[supreg] F. Graft
is $8,171.50.
As stated above, the new technology add-on payment regulations
provide that ``a medical service or technology may be considered new
within 2 or 3 years after the point at which data begin to become
available reflecting the ICD-9-CM code assigned to the new service or
technology'' (Sec. 412.87(b)(2)). With regard to the newness criterion
for the Zenith[supreg] F. Graft, as stated above, we consider the
beginning of the newness period to commence when the Zenith[supreg] F.
Graft was approved by the FDA on April 4, 2012. Because the
Zenith[supreg] F. Graft is still within the 3-year newness period, we
are proposing to continue new technology add-on payments for this
technology for FY 2014. We are inviting public comments on this
proposal.
4. FY 2014 Applications for New Technology Add-On Payments
We received five applications for new technology add-on payments
for FY 2014.
a. KcentraTM
CSL Behring submitted an application for new technology add-on
payments for KcentraTM for FY 2014. KcentraTM is
a replacement therapy for fresh frozen plasma (FFP) for patients with
an acquired coagulation factor deficiency due to warfarin and who are
experiencing a severe bleed. KcentraTM contains the Vitamin
K dependent coagulation factors II, VII, IX and X, together known as
the prothrombin complex, and antithrombotic proteins C and S. Factor IX
is the lead factor for the potency of the preparation. The product is a
heat-treated, non-activated, virus filtered and lyophilized plasma
protein concentrate made from pooled human plasma. KcentraTM
is available as a lyophilized powder that needs to be reconstituted
with sterile water prior to administration via intravenous infusion.
The product is dosed based on Factor IX units. Concurrent Vitamin K
treatment is recommended to maintain blood clotting factor levels once
the effects of KcentraTM have diminished.
The applicant expects to receive FDA approval for
KcentraTM in the second quarter of 2013. The technology is
not described by any current ICD-9-CM procedure codes. The applicant
applied for a new ICD-9-CM procedure code for consideration at the
March 5, 2013 ICD-9-CM Coordination and Maintenance Committee Meeting.
More information on this request can be found on the CMS Web site at:
http://cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials-Items/2013-03-05-MeetingMaterials.html. We note
that any final decisions on new codes approved at the March 5, 2013
ICD-9-CM Coordination and Maintenance Committee meeting will be
included in the ICD-9-CM code addendum posted on the CMS Web site in
June 2013 at: http://cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/addendum.html. In addition, code revisions
that were discussed at the March 5, 2013 ICD-9-CM Coordination and
Maintenance Committee meeting but that could not be finalized in time
to include them in the tables for this proposed rule will be included
in the appropriate table for the final rule (the tables for both the
proposed rule and the final rule are available via the Internet on the
CMS Web site).
We note that we are concerned that KcentraTM may be
substantially similar to FFP and/or Vitamin K therapy. If so,
KcentraTM would not meet the newness criterion because costs
associated with FFP and/or Vitamin K therapy are already reflected
within the MS-DRGs. In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74
FR 43813 through 43814), we established criteria for evaluating whether
a new technology is substantial similar to an existing technology,
specifically: (1) whether a product uses the same or a similar
mechanism of action to achieve a therapeutic outcome; (2) whether a
product is assigned to the same or a different MS-DRG; and (3) whether
the new use of the technology involves the treatment of the same or
similar type of disease and the same or similar patient population. If
a technology meets all three of the criteria above, it would be
considered substantially similar to an existing technology and would
not be considered ``new'' for purposes of new technology add-on
payments.
In evaluating the first criterion, we believe that both FFP and
KcentraTM use the same mechanism of action of Vitamin K
dependent coagulation to reverse the anti-coagulation effects of
warfarin. With respect to the second criterion, we believe that cases
involving both FFP and KcentraTM would be assigned to the
same MS-DRGs. Finally, with respect to the third criterion, we believe
that both technologies treat the same disease and patient population.
Specifically, the patient population for both KcentraTM and
FFP are patients with an acquired coagulation factor deficiency due to
warfarin and who are experiencing a severe bleed. Delay of treatment of
these patients can lead to an increase in complications as well as an
increase of the severity of the bleed. Although FFP needs to thaw for a
couple of hours before it can be administered (thus delaying treatment)
compared to KcentraTM, which can be used instantly, we
believe that both KcentraTM and FFP treat the same patient
population. Based on evaluation of the similarity criteria, it appears
that KcentraTM is
[[Page 27539]]
substantially similar to FFP. Therefore, KcentraTM may not
be considered ``new'' for purposes of new technology add-on payments.
We are inviting public comments regarding whether KcentraTM
is substantially similar to existing technologies and whether
KcentraTM meets the newness criterion.
According to the applicant, the technology is eligible to be used
across all MS-DRGs. To demonstrate that it meets the cost criterion,
the applicant searched the FY 2011 MedPAR file (across all MS DRGs) for
cases reporting a primary or secondary diagnosis of E934.2 (Adverse
events due to anticoagulants), V58.61 (Long term (current) use of
anticoagulants), or 964.2 (Poisoning by anticoagulants) in combination
with procedure code 99.07 (Transfusion of the serum). The applicant
believed that this combination identified cases that suggest the use of
a Vitamin K antagonist therapy as well as a major bleed.
The applicant found 66,749 cases across all MS-DRGs and noted that
18 percent of all cases would map to MS-DRGs 377 (Gastrointestinal
Hemorrhage with MCC), 378 (Gastrointestinal Hemorrhage with CC), and
379 (Gastrointestinal Hemorrhage without CC/MCC), while the top 20 MS-
DRGs would account for 41 percent of all cases. The applicant
standardized charges (for all 66,749 cases) and removed charges for FFP
therapy, which equated to a case-weighted average standardized charge
per case of $49,748. The applicant calculated a case-weighted threshold
of $46,068 across all MS-DRGs. The applicant asserted that the average
case-weighted standardized charge per case without including charges
for KcentraTM exceeded the case-weighted threshold of
$46,068. Therefore, the applicant maintained that it meets the cost
criterion. We are inviting public comments regarding whether
KcentraTM meets the cost criterion, particularly with regard
to the assumptions and methodology used in the applicant's analysis.
With regard to substantial clinical improvement, according to the
applicant, KcentraTM is the first prothrombin complex
concentrate (PCC) that will be FDA-approved for rapid warfarin reversal
in patients experiencing an acute major bleed. The manufacturer
maintained that KcentraTM represents a substantial clinical
improvement in the treatment of patients with acute severe bleeding who
require immediate reversal of their Vitamin K antagonist (VKA) therapy
by (1) providing a rapid, beneficial resolution of the patient's blood
clotting factor deficiency, (2) decreasing the risk of exposure to
blood borne pathogens, and (3) reducing the rate of transfusion-
associated complications.
The applicant cited its pivotal study (a noninferior, randomized
clinical trial) \3\ and noted that KcentraTM was able to
reverse the effects of warfarin to a target International Normalized
Ratio (INR) of less than or equal to 1.3 within 30 minutes in 62
percent of patients compared to less than 10 percent success for
plasma. Also, serum levels of the key coagulant and anti-thrombotic
proteins were normalized in less than an hour with
KcentraTM, but remained depressed with plasma for hours.
---------------------------------------------------------------------------
\3\ Sarode R, et al., Efficacy and Safety of a Four Factor
Prothrombin Complex Concentrate in Patients on Vitamin K Antagonists
Presenting with Major Bleeding: A Randomized, Plasma Controlled,
Phase IIIb Study. Circulation. Submitted October 31, 2012. Copy to
be provided upon acceptance.
---------------------------------------------------------------------------
The applicant also explained that KcentraTM undergoes a
dedicated pathogen removal process and plasma does not. The applicant
asserted that this drastically reduces the risk of transmitting both
known and unknown blood borne pathogens. The applicant cited a
retrospective analysis of scientific publications \4\ on the use of
KcentraTM in the European Union (EU), including the
pharmacovigilance database from 1996 through 2008. The applicant noted
that an estimated 350,000 patients have been treated with
KcentraTM (known as Beriplex in the EU) with no cases of
viral transmission.
---------------------------------------------------------------------------
\4\ Hanke A, et al., Efficacy and Long-Term Safety of a
Pasteurized Nanofiltrated Prothrombin Complex Concentrate
(BERIPLEX[supreg] P/N), 2009, J Thromb Haemost, Vol. 7 (Suppl.2) PP-
WE-697.
---------------------------------------------------------------------------
The applicant also stated that, in the United States, blood
suppliers follow a strict set of regulations for screening and testing
the blood supply, but these tests and donor questionnaires do not
account for emerging pathogens that could contaminate the blood supply.
The applicant explained that parasitic infections and diseases (such as
babesiosis and Chaga's disease) have already been documented in U.S.
patients as a result of transfusion. However, there is no screening
test to date for some of these parasitic infections and diseases. The
applicant believed that the multi-step manufacturing process for
KcentraTM, including heat treatment and nanofiltration,
reduces the risk of transmitting such infections and diseases.
The applicant also noted that another benefit of
KcentraTM is the ability to rapidly prepare and administer
the product in an emergency situation. In addition to the benefit of
room temperature storage, KcentraTM can be rapidly
reconstituted. In the clinical study, the applicant found that the
average administration time for KcentraTM was less than 30
minutes. However, the applicant stated, other treatments such as FFP
and intravenous Vitamin K therapies act slowly, and FFP can be
difficult to use. The applicant explained that FFP therapy requires
blood-type matching, usually requires thawing, and is often located
away from the point of care. The applicant also cited a study \5\ that
demonstrated the median time from time of diagnosis to plasma infusion
was 90 minutes, which did not include time to infuse the plasma which
can take hours.
---------------------------------------------------------------------------
\5\ Goldstein, Joshua N., et al., Timing of Fresh Frozen Plasma
Administration and Rapid Correction of Coagulopathy in Warfarin-
Related Intracerebral Hemorrhage, Stroke 37.1 (2006):151-155.
---------------------------------------------------------------------------
The applicant further noted that essential blood coagulation
factors in one vial of KcentraTM are approximately 25 times
more concentrated than the equivalent plasma dose. According to the
applicant, this translated to an infusion volume that was 87 percent
greater in the plasma group of patients as seen in the pivotal study.
The applicant explained that high transfusion volumes of treatments
such as FFP therapy can lead to transfusion-associated circulator
overload (TACO). According to the applicant, when TACO occurs, acute
left ventricular failure may occur resulting in shortness of breath,
tachypnea (rapid breathing), and other harmful effects.
Finally, the applicant noted that KcentraTM is the
standard of care in the new guidelines issued by the American College
of Chest Physicians (ACCP). In addition, the applicant noted that the
American Association of Blood Banks (AABB) stated that plasma should no
longer be used to reverse warfarin in bleeding patients when specific
factor concentrates are available.
In conclusion, the applicant maintained that KcentraTM
represents a substantial clinical improvement over existing
technologies. We are inviting public comments regarding whether
KcentraTM meets the substantial clinical improvement
criterion.
We note, if KcentraTM were to be approved for new
technology add-on payments, we do not believe such payments would be
available with respect to discharges for which the hospital receives an
add-on payment for blood clotting factor administered to a Medicare
beneficiary with hemophilia who is a hospital inpatient. Under section
1886(d)(1)(A)(iii) of the Act, the national adjusted DRG prospective
payment rate is ``the amount of the
[[Page 27540]]
payment with respect to the operating costs of inpatient hospital
services (as defined in subsection (a)(4) of this section)'' for
discharges on or after April 1, 1988. Section 1886(a)(4) of the Act
excludes from the term ``operating costs of inpatient hospital
services'' the costs with respect to administering blood clotting
factors to individuals with hemophilia. The costs of administering
blood clotting factor to Medicare beneficiaries who have hemophilia and
are hospital inpatients are paid separately from the IPPS. (For
information on how the clotting factor add-on payment is made, we refer
readers to section 20.7.3 of Chapter Three of the Medicare Claims
Processing Manual, which can be downloaded from the CMS Web site at:
http://cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03.pdf.) If KcentraTM is approved by FDA as a blood
clotting factor, we believe that it may be eligible for clotting factor
add-on payments when administered to Medicare beneficiaries with
hemophilia. CMS would make an add-on payment for KcentraTM
for such discharges in accordance with our policy for payment of blood
clotting factor, and it would be excluded from the operating costs of
inpatient hospital services as set forth in section 1886(a)(4) of the
Act.
Section 1886(d)(5)(K)(i) of the Act requires the Secretary to
``establish a mechanism to recognize the costs of new medical services
and technologies under the payment system established under this
subsection'' beginning with discharges on or after October 1, 2001. We
believe it is reasonable to interpret this requirement to mean that the
payment mechanism established by the Secretary recognizes only costs
for those items that would otherwise be paid based on the prospective
payment system (that is, ``the payment system established under this
subsection''). As noted above, under section 1886(d)(1)(A)(iii) of the
Act, the national adjusted DRG prospective payment rate is the amount
of payment for the operating costs of inpatient hospital services, as
defined in section 1886(a)(4) of the Act, for discharges on or after
April 1, 1988. We understand this to mean that a new medical service or
technology must be an operating cost of inpatient hospital services
paid based on the prospective payment system, and not excluded from
such costs, in order to be eligible for the new technology add-on
payment. We point out that new technology add-on payments are based on
the operating costs per case relative to the prospective payment rate
as described in 42 CFR 412.88. Therefore, we believe that new
technology add-on payments are appropriate only when the new technology
is an operating cost of inpatient hospital services and are not
appropriate when the new technology is excluded from such costs.
If KcentraTM were to be approved for new technology add-
on payments, we believe that hospitals may only receive that add-on
payment for discharges where KcentraTM is an operating cost
of inpatient hospital services. In other words, we do not believe a
hospital could be eligible to receive the new technology add-on payment
when it is administering KcentraTM in treating a Medicare
beneficiary who has hemophilia. In those instances,
KcentraTM is specifically excluded from the operating costs
of inpatient hospital services in accordance with section 1886(a)(4) of
the Act and paid separately from the IPPS. However, when a hospital
administers KcentraTM to a Medicare beneficiary who does not
have hemophilia, the hospital could be eligible for a new technology
add-on payment because KcentraTM would not be excluded from
the operating costs of inpatient hospital services. Therefore, we do
not believe that discharges where the hospital receives a clotting
factor add-on payment are eligible for a new technology add-on payment
for the blood clotting factor.
To summarize, we believe it would be inappropriate to make an add-
on payment for new technology for a blood clotting factor when a blood
clotting factor add-on payment has been made. We welcome public comment
on our proposal to only make new technology add-on payments for
KcentraTM in cases when it is included in the operating
costs of inpatient hospital services (that is, when no add-on payment
is made for clotting factor).
b. Argus[supreg] II Retinal Prosthesis System
Second Sight Medical Products, Inc. submitted an application for
new technology add-on payments for the Argus[supreg] II Retinal
Prosthesis System (Argus[supreg] II System) for FY 2014. The
Argus[supreg] II System is an active implantable medical device that is
intended to provide electrical stimulation of the retina to induce
visual perception in patients who are profoundly blind due to retinitis
pigmentosa (RP). These patients have bare or no light perception in
both eyes. The system employs electrical signals to bypass dead photo-
receptor cells and stimulate the overlying neurons according to a real-
time video signal that is wirelessly transmitted from an externally
worn video camera. The Argus[supreg] II implant is intended to be
implanted in a single eye, typically the worse-seeing eye. Currently,
bilateral implants are not intended for this technology. According to
the applicant, the surgical implant procedure takes approximately 4
hours and is performed under general anesthesia.
The Argus[supreg] II System consists of three primary components:
(1) An implant which is an epiretinal prosthesis that is fully
implanted on and in the eye (that is, there are no percutaneous leads);
(2) external components worn by the user; and (3) a ``fitting'' system
for the clinician that is periodically used to perform diagnostic tests
with the system and to custom-program the external unit for use by the
patient. We describe these components more fully below.
Implant: The retinal prosthesis implant is responsible for
receiving information from the external components of the system and
electrically stimulating the retina to induce visual perception. The
retinal implant consists of: (a) a receiving coil for receiving
information and power from the external components of the Argus[supreg]
II System; (b) electronics to drive stimulation of the electrodes; and
(c) an electrode array. The receiving coil and electronics are secured
to the outside of the eye using a standard scleral band and sutures,
while the electrode array is secured to the surface of the retina
inside the eye by a retinal tack. A cable, which passes through the eye
wall, connects the electronics to the electrode array. A pericardial
graft is placed over the extra-ocular portion on the outside of the
eye.
External Components: The implant receives power and data
commands wirelessly from an external unit of components, which include
the Argus II Glasses and Video Processing Unit (VPU). A small
lightweight video camera and transmitting coil are mounted on the
glasses. The telemetry coils and radio-frequency system are mounted on
the temple arm of the glasses for transmitting data from the VPU to the
implant. The glasses are connected to the VPU by a cable. This VPU is
worn by the patient, typically on a belt or a strap, and is used to
process the images from the video camera and convert the images into
electrical stimulation commands, which are transmitted wirelessly to
the implant.
``Fitting System'': To be able to use the Argus[supreg] II
System, a patient's VPU needs to be custom-programmed. This process,
which the applicant called ``fitting'', occurs in the hospital/clinic
shortly after the implant surgery and then periodically thereafter as
needed. The clinician/physician also uses the
[[Page 27541]]
``Fitting System'' to run diagnostic tests (for example, to obtain
electrode and impedance waveform measurements or to check the radio-
frequency link between the implant and external unit). This ``Fitting
System'' can also be connected to a ``Psychophysical Test System'' to
evaluate patients' performance with the Argus[supreg] II System on an
ongoing basis.
These three components work together to stimulate the retina and
allow a patient to perceive phosphenes (spots of light), which they
then need to learn to interpret. While using the Argus[supreg] II
System, the video camera on the patient-worn glasses captures a video
image. The video camera signal is sent to the VPU, which processes the
video camera image and transforms it into electrical stimulation
patterns. The electrical stimulation data are then sent to a
transmitter coil mounted on the glasses. The transmitter coil sends
both data and power via radio-frequency (RF) telemetry to the implanted
retinal prosthesis. The implant receives the RF commands and delivers
stimulation to the retina via an array of electrodes that is secured to
the retina with a retinal tack.
In patients with RP, the photoreceptor cells in the retina, which
normally transduce incoming light into an electro-chemical signal, have
lost most of their function. The stimulation pulses delivered to the
retina via the electrode array of the Argus[supreg] II Retinal
Prosthesis System are intended to mimic the function of these
degenerated photoreceptors cells. These pulses induce cellular
responses in the remaining, viable retinal nerve cells that travel
through the optic nerve to the visual cortex where they are perceived
as phosphenes (spots of light). Patients learn to interpret the visual
patterns produced by these phosphenes.
With respect to the newness criterion, according to the applicant,
the FDA designated the Argus[supreg] II System a Humanitarian Use
Device in May 2009 (HUD designation 09-0216). The applicant
submitted a Humanitarian Device Exemption (HDE) application
(H110002) to the FDA in May 2011 to obtain market approval for
the Argus[supreg] II System. The HDE was referred to the Ophthalmic
Devices Panel of the FDA's Medical Devices Advisory Committee for
review and recommendation. At the Panel's meeting held on September 28,
2012, the Panel voted 19 to 0 that the probable benefits of the
Argus[supreg] II System outweigh the risks of the system for the
proposed indication for use. The applicant received the HDE approval
from the FDA on February 14, 2013. Currently there are no other
approved treatments for patients with severe to profound RP. The
Argus[supreg] II System has an IDE number of G050001 and is a Class III
device. There are no existing ICD-9-CM or ICD-10-CMS/PCS codes for the
implantation of a retina prosthesis. The applicant applied for three
new ICD-9-CM procedure codes for consideration at the March 5, 2013
ICD-9-CM Coordination and Maintenance Committee meeting. More
information on this request can be found on the CMS Web site at: http://cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials-Items/2013-03-05-MeetingMaterials.html. We note that
any final decisions on new codes approved at the March 5, 2013
Coordination and Maintenance Committee meeting will be included in the
ICD-9-CM code addendum posted on the CMS Web site in June 2013 at:
http://cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/addendum.html. In addition, code revisions that were discussed at the
March 5, 2013 Committee meeting but that could not be finalized in time
to include them in the tables for this proposed rule will be included
in the appropriate table in the final rule (the tables for both the
proposed rule and the final rule are made available via the Internet on
the CMS Web site). We are inviting public comments on whether the
Argus[supreg] II System meets the newness criterion.
With regard to the cost criterion, the applicant identified all
discharges from claims in the FY 2011 MedPAR file for MS-DRGs 116
(Intraocular Procedures with CC/MCC) and 117 (Intraocular Procedures
without CC/MCC) with the presence of ICD-9-CM procedure code 14.73
(Anterior vitrectomy), or 14.74 (Posterior vitrectomy). (We note that
because no procedure code exists for this technology, these cases would
include patients that are not eligible for or would not otherwise
receive this technology.) The applicant found 199 cases (47.6 percent
of all cases) in MS-DRG 116 and 219 cases (52.3 percent of all cases)
in MS-DRG 117. This resulted in an average charge per case of $40,957
for MS-DRG 116 and $20,621 for MS-DRG 117, equating to a case-weighted
average charge per case of $24,011.
The applicant then standardized the charges using the FY 2011 final
rule impact file and converted the cost of the device to a charge by
dividing the operating costs by a CCR of 0.50 (which equates to a 100
percent markup). Although the applicant submitted data related to the
estimated cost of the Argus[supreg] II System, the applicant noted that
the cost of the technology was proprietary information. The applicant
then added the charges related to the device to the case-weighted
average standardized charge per case and determined a final case-
weighted average standardized charge per case of $311,180. Using the FY
2014 Table 10 thresholds, the case-weighted threshold for MS-DRGs 116
and 117 was $30,328 (all calculations above were performed using
unrounded numbers). Because the final case-weighted average
standardized charge per case for the applicable MS-DRGs exceed the
case-weighted threshold amount, the applicant maintained that the
Argus[supreg] II System would meet the cost criterion.
We note that, although we cannot disclose the cost of the
technology, the device is very costly. Because of its high costs, the
technology would easily exceed the case-weighted threshold. In
addition, because of the high cost of the device it is likely that
claims with the device would receive an outlier payment. The applicant
anticipates that approximately 65 Argus[supreg] II Systems will be sold
in FY 2014, of which approximately 50 systems would be provided to
Medicare patients. The target disease population is extremely limited
as required and supported by the HDE application. Most patients for
whom this technology is indicated may be eligible for Medicare based on
their age or a disability that is associated with profound blindness.
We also note that these types of procedures are often performed in
the outpatient setting. We are concerned that if new technology add-on
payments were to be approved, this would serve as a financial incentive
to inappropriately shift utilization from an outpatient to an inpatient
setting, although medical review may result in very few of these cases
being paid as inpatient hospital services if the patient can be
appropriately treated as an outpatient. We continue to emphasize that
it is critical that physicians use their clinical judgment in
determining the medical necessity of an inpatient admission and stress
that care should be provided in the appropriate setting. We are
inviting public comments on whether the Argus[supreg] II System meets
the cost criterion, particularly based on the assumptions and
methodology used in the applicant's analysis. We also have general
concerns relating to the descriptions of the medical necessity of
performing this procedure on an inpatient basis. Therefore, we are
inviting public comments to further our understanding regarding whether
approving new technology add-on payments for the Argus[supreg] II
System would create a financial incentive that
[[Page 27542]]
would shift utilization inappropriately from an outpatient to an
inpatient setting.
With regard to the substantial clinical improvement criterion, the
Argus[supreg] II System is intended to provide electrical stimulation
of the retina to induce visual perception in blind patients with the
indication of severe to profound RP with bare or no light perception in
both eyes. According to the applicant, an estimated 1 in 3,037
Americans suffers from RP, and the incidence of people with severe to
profound RP is significantly lower. According to the applicant, the
need for treatments for RP is high, given the impact of loss of vision.
According to the applicant, numerous experimental research programs
are currently underway to slow, stop, or reverse the progress of RP,
including gene therapy, tissue and cell transplants, and some
pharmacologic neuroprotection therapies. However, these approaches so
far have had fairly limited success in treating RP patients, and some
approaches are intended for an extremely small segment of the RP
population. Currently there are no other approved treatments for
patients with severe to profound RP. Therefore, the Argus[supreg] II
device treats a patient population that has no other treatment options.
The applicant submitted the results of a clinical trial to
demonstrate substantial clinical improvement. This clinical trial
enrolled 30 patients. The median age of patients was 57.9 years at the
time of implantation and the range was 28 to 77 years of age. Thirty
percent of the patients were female, and 70 percent were male. All of
the patients had bare or no light perception in both eyes. Fourteen of
the patients were Medicare eligible. As part of the methods for the
study, the applicant stated that while working within the framework of
clinical trials for other ophthalmic devices, the manufacturer and its
team of scientific advisors selected or designed several tests that
would address the main elements of the system that should be assessed
for these types of devices--visual function (that is, how the eye as an
organ works [for example, visual acuity]), functional vision (that is,
how the patient performs in vision-related activities of daily living),
and quality of life. The endpoints that were selected provided a
mixture of objective and subjective data. The study design was
strengthened by the fact that controlled observations could be obtained
by performing assessments with the Argus[supreg] II System ``on'' and
``off'' (that is, control was available at each time point).
According to the applicant, there were no unexpected adverse
events. Non-serious adverse events represented the majority of events.
The safety review concluded that the Argus[supreg] II System has a
reasonable safety profile for an ophthalmic device that requires
vitreoretinal surgery to implant. In addition, the applicant noted that
the device can be extracted and is reversible. The Argus[supreg] II
System provided all 30 patients with benefit as measured by high-
contrast visual function tests. The applicant stated that the degree of
benefit varied from patient to patient and provided the following
results:
All subjects were able to see visual percepts when the
Argus[supreg] II System was electrically activated.
On the Square Localization Test (that is, object
localization), patients (on average) performed better with the system
``on'' rather than ``off'' at all follow-up time points. At 24 months,
on average, patients missed the target by approximately 50 pixels with
the system ``on'' versus approximately 250 pixels with the system
``off''.
On the Direction of Motion Test, which tested the
patients' ability to determine the direction of a moving bar, patients
had higher mean accuracy with the system ``on'' than they did with the
system ``off'' at all follow-up time points, indicating that the
Argus[supreg] II System improved their performance on a spatial vision
task. At 24 months, the mean response error was approximately 60[deg]
with the system ``on'' versus more than 80[deg] with the system
``off''. According to the applicant, this is nearly the error expected
by chance.
On the Grating Visual Acuity Test, which assessed the
patients' visual acuity using the principles of acuity charts designed
for extremely low vision patients, 27 percent of the patients were able
to score on the scale (between 1.6 and 2.9 log MAR) at least once with
the system ``on'', while none of the Argus[supreg] II patients were
able to score on the scale with the system ``off.''
A large number of patients were able to recognize large
letters and numbers with the system ``on'' (but not with the system
``off''), and some of the patients were able to read short words. The
median percent correct with the system ``on'' was approximately 50
percent higher than with the system ``off.''
The trial also measured objectively-scored functional
vision tests. The patients performed better with the Argus[supreg] II
System ``on'' versus ``off'' on orientation and mobility tests (finding
a door and following a line) and on functional vision tasks (sorting
white, black, and grey socks, following an outdoor sidewalk, and
determining the direction of a person walking by).
Analysis of the Functional Low-vision Observer Rated
Assessment (FLORA) results showed that three-quarters of the patients
received a positive benefit in terms of well-being and/or functional
vision, while none of the patients experienced a negative effect.
We note that we are concerned that the study did not have pre-
specified endpoints and changed measurements mid trial. In addition, we
are concerned about the reliability of the measures used for the tests
and the inconsistency of the results across different patients, which
lead us to question the long-term benefits associated with this device.
We are inviting public comments on whether the Argus[supreg] II System
meets the substantial clinical improvement criterion, specifically in
regard to the measures used in the study and the lack of pre-specified
endpoints.
We received two comments on the Argus[supreg]II System during the
town hall meeting's public comment period. These comments are
summarized below.
Comment: Several commenters supported approving the Argus[supreg]
II System for new technology add-on payments. One commenter, a society
of retina specialists, stated that the Argus[supreg] II System is the
first and only approved treatment in the United States for patients
suffering from severe to profound cases of retinitis pigmentosa with
bare or no light perception in both eyes. The commenter explained that
while the Argus[supreg] II System does not restore vision, it provides
visual information that can range, depending on the patient, from light
detection to form detection. The commenter asserted that, for patients
with bare or no light perception, even limited restoration of vision
can make a substantial difference, restoring a patient's ability to
visually connect and interact with others and providing greater
independence.
Another commenter, a foundation for supporting blindness, stated
that it is essential that CMS is progressive in making therapies like
the Argus[supreg] II System accessible for these patients who have no
other treatment alternatives. The commenter recommended approving the
Argus[supreg] II System for new technology add-on payments. The
commenter noted that for patients with rare retinal diseases like
retinitis pigmentosa, the Argus[supreg] II System represents the first
approved breakthrough to help restore sight and improve quality of
life.
Response: We appreciate the commenters' support. We considered
[[Page 27543]]
these comments presented during the town hall meeting's public comment
period in the development of this proposed rule. As stated above, we
are inviting additional public comments on whether the Argus[supreg] II
System meets the substantial clinical improvement criterion,
specifically in regard to the measures used in the study and the lack
of pre-specified endpoints.
c. Responsive Neurostimulator (RNS[supreg]) System
NeuroPace, Inc. submitted an application for new technology add-on
payments for FY 2014 for the use of the RNS[supreg] System. Seizures
occur when brain function is disrupted by abnormal electrical activity.
Epilepsy is a brain disorder characterized by recurrent, unprovoked
seizures. According to the applicant, the RNS[supreg] System is the
first implantable medical device (developed by NeuroPace, Inc.) for
treating persons with epilepsy whose partial onset seizures have not
been adequately controlled with antiepileptic medications. The
applicant further stated that the RNS[supreg] System is the first
closed loop, responsive system to treat partial onset seizures.
Responsive electrical stimulation is delivered directly to the seizure
focus in the brain when abnormal brain activity is detected. A
cranially implanted programmable neurostimulator senses and records
brain activity through one or two electrode-containing leads that are
placed at the patient's seizure focus/foci. The neurostimulator detects
electrographic patterns previously identified by the physician as
abnormal, and then provides brief pulses of electrical stimulation
through the leads to interrupt those patterns. Stimulation is delivered
only when abnormal electrocorticographic activity is detected. The
typical patient is treated with a total of 5 minutes of stimulation a
day. The RNS[supreg] incorporates remote monitoring, which allows
patients to share information with their physicians remotely.
With respect to the newness criterion, the applicant stated that
some patients with partial onset seizures that cannot be controlled
with antiepileptic medications may be candidates for the vagus nerve
stimulator (VNS) or for surgical removal of the seizure focus.
According to the applicant, these treatments are not appropriate or
helpful for all patients. Therefore, the applicant believed that there
is an unmet clinical need for additional therapies for partial onset
seizures. The applicant further stated that the RNS[supreg] System
addresses this unmet clinical need by providing a novel treatment
option for treating persons with medically intractable partial onset
seizures. The applicant anticipates FDA premarket approval of the
RNS[supreg] System in the second quarter of 2013.
The following ICD[hyphen]9[hyphen]CM procedure codes are used to
identify this technology: 01.20 (Cranial implantation or replacement of
neurostimulator pulse generator); 01.29 (Removal of cranial
neurostimulator pulse generator); and 02.93 (Implantation or
replacement of intracranial neurostimulator lead(s)). We are inviting
public comments on whether the technology meets the newness criterion.
With regard to the cost criterion, the applicant stated that cases
eligible for the RNS[supreg] System would map to MS-DRG 024 (Craniotomy
with Major Device Implant/Acute Complex Central Nervous System
Principal Diagnosis without MCC). The applicant further stated that
while it was possible for cases to occur in MS-DRG 023 (Craniotomy with
Major Device Implant/Acute Complex Central Nervous System Principal
Diagnosis with MCC or Chemotherapy Implant), it would be extremely rare
because the applicant believed that these major complications and/or
comorbidities would probably preclude a patient from receiving the
technology because the technology is an elective procedure.
The applicant submitted two analyses to demonstrate that it meets
the cost criterion. For the first analysis, the applicant used clinical
trial claims data collected in the RNS[supreg] System Pivotal Clinical
Investigation to calculate the anticipated average standardized charge.
The applicant maintained that this analysis best represents the
anticipated charges for the technology because it is based on actual
cases treated with this technology. The applicant analyzed 163 claims
from 28 hospitals participating in the clinical trial. Five claims from
one site were excluded because no hospital-specific information
regarding standardization was available. The resulting 158 claims
included dates of service ranging from May 2006 through May 2009. The
average charge per case for these 158 claims was $54,961.
The applicant then standardized the charges for each claim. The
applicant noted that it was not necessary to remove any charges from
these claims because the technology was provided at no charge in the
trial. After standardizing the charges, the applicant inflated each
claim using the Consumer Price Index for Inpatient Hospital Services
(CPI-IP) to inflate the data to the same period. Specifically, because
the publicly available FY 2011 MedPAR data do not identify the month of
the discharge on inpatient claims but identify the calendar quarter,
the applicant used a mid-month convention to determine the relevant
monthly CPI-IP for each calendar quarter. The applicant then calculated
the percentage change from the relevant quarter to the quarter of the
most recently available CPI-IP, which was the August 2012 CPI-IP.
Specifically, the applicant used the following assumptions:
----------------------------------------------------------------------------------------------------------------
Percent change
FY 2011 Calendar quarter Midpoint of quarter CPI IP to August
2012
----------------------------------------------------------------------------------------------------------------
Q4 2010....................................... Nov-10.......................... 227.186 9.54
Q1 2011....................................... Feb-11.......................... 232.933 6.84
Q2 2011....................................... May-11.......................... 235.567 5.64
Q3 2011....................................... Aug-11.......................... 237.219 4.91
Most recent as of application................. Aug-12.......................... 248.856 ..............
----------------------------------------------------------------------------------------------------------------
Source as cited by applicant: Bureau of Labor Statistics' Web site, accessed October 15, 2012; Base Period:
December 1996 = 100.
After inflating the charges, the applicant estimated charges for
the RNS[supreg] System by multiplying the device cost to the hospital
by an anticipated hospital markup of 100 percent, or conversely by
dividing the device cost by a CCR of 0.50. The applicant based its
estimated CCR on four analyses. First, the applicant reviewed the 2007
and 2008 reports prepared by RTI for CMS on charge compression, which
found that the national aggregate CCR for devices and implants was 0.43
and 0.467 in the respective reports. Second, the applicant queried
hospitals participating in the RNS[supreg] System Pivotal trial, and
these queries yielded a mean and median CCR for implantable
[[Page 27544]]
devices of 0.37 and 0.36, respectively. Third, the applicant reviewed
data from the (all payor) Premier database for cases performed in 2000
through 2010 that reported ICD-9 CM procedure codes 02.93 and/or 86.95
on a claim and calculated a mean and median CCR for implanted leads and
neurostimulators of 0.50 and 0.44, respectively. The applicant then
reviewed other discussions of past new technology add-on payment
applications published in the Federal Register and noted that other
applicants used lower CCRs (higher markups) for implanted devices than
the 0.50 CCR used in the applicant's analyses.
Using this approach, the applicant added the anticipated hospital
charge for the implantable RNS[supreg] System to the inflated average
standardized charge per case and determined a final inflated average
standardized charge per case of $121,990. Although the applicant
submitted data related to the estimated cost of the RNS[supreg] System,
the applicant noted that the cost of the technology was proprietary
information. Using the FY 2014 Table 10 thresholds, the threshold for
MS-DRG 024 is $78,039. Because the final inflated average standardized
charge per case of $121,990 for MS-DRG 024 exceeds the threshold
amount, the applicant maintained that the RNS[supreg] System would meet
the cost criterion.
In the second analysis, which the applicant characterizes as
supplementary, the applicant searched the FY 2011 MedPAR file for cases
reporting the combination of ICD-9-CM procedures codes 02.93
(Implantation or replacement of intracranial neurostimulator lead(s))
and 86.95 (Insertion or replacement of multiple array neurostimulator
pulse generator, not specified as rechargeable), or the combination of
ICD-9-CM procedures codes 02.93 (Implantation or replacement of
intracranial neurostimulator lead(s)) and 01.20 (Cranial implantation
or replacement of neurostimulator pulse generator) that mapped to MS-
DRG 024.
The applicant found 565 claims reporting the combination of ICD-9-
CM procedures codes 02.93 and 01.20, and pointed out that these cases
were coded with procedure code 01.20 in error because no new
RNS[supreg] System implantations occurred after May 2009. The applicant
analyzed these 565 claims and found that more than 90 percent of these
cases had a primary or secondary diagnosis of Parkinson's disease,
essential tremor, or dystonia. These diagnoses are FDA-approved
indications for deep brain stimulation (DBS). In addition, the
applicant noted that the total covered charges for these cases were
less than the estimated charges for a full DBS system and hypothesized
that these cases did not represent implantation of a full DBS system
but implementation of leads only. The applicant contacted two hospitals
that reported claims where total covered charges were less than the
charges for a full DBS system, and the hospitals confirmed that their
claims represented lead implantation alone. Therefore, for this second
analysis, the applicant included all of the cases in MS-DRG 024
reported with a combination of ICD-9-CM procedures codes 02.93 and
86.95 and all of the cases in MS-DRG 024 reported with ICD-9-CM
procedures codes 02.93 and 01.20 where the covered charges were greater
than or equal to the estimated charges of a full DBS system. The
applicant maintained that 485 claims from 130 providers met these
criteria and that these data represented claims from the fourth
calendar quarter of 2010 through the third calendar quarter of 2011, or
FY 2011. Based on this assumption, the applicant calculated an average
charge per case of $60,955. The applicant then removed DBS charges from
the average charge per case. The applicant estimated charges for DBS
and maintained that the average cost for a DBS system was $25,979.
Similar to its first analysis, the applicant assumed a CCR of 0.50, or
100 percent markup, which resulted in estimated charges for DBS of
$51,958. After removing DBS charges, the applicant standardized charges
and then inflated the charges to the current period using the same
methodology in the first analysis. The applicant then added charges for
the RNS[supreg] System and determined a final inflated average
standardized charge per case of $118,408. As noted above, although the
applicant submitted data that related to the estimated cost of the
RNS[supreg] System, the applicant noted that the cost of the technology
was proprietary information. Using the FY 2014 Table 10 thresholds, the
threshold for MS-DRG 024 is $78,039. Because the final inflated average
standardized charge per case of $118,408 for MS-DRG 024 exceeds the
threshold amount, the applicant maintained that the RNS[supreg] System
would meet the cost criterion.
Under either analysis, the applicant maintained that the final
inflated average standardized charge per case would exceed the case-
weighted threshold. We are inviting public comments on whether the
RNS[supreg] System meets the cost criterion, particularly based on the
assumptions and methodology used in the applicant's analyses.
With regard to substantial clinical improvement, as previously
stated, some patients with partial onset seizures may not be able to
control their seizures with antiepileptic medications, VNS, or with
surgical removal of the seizure focus. The applicant stated that the
RNS[supreg] System provides treatment for those patients who fail
treatment with antiepileptic medications, or fail VNS therapy and are
ineligible for respective surgery due to the extent and/or location of
the seizure, or patients who do not elect surgery. According to the
applicant, the RNS[supreg] System clinical trials provide Class I
evidence that treatment with the RNS[supreg] System substantially
reduces disabling seizures in patients with severe epilepsy who have
tried and failed treatment with antiepileptic medications, and in many
cases VNS or epilepsy surgery. The applicant maintained that the
results from their clinical trials demonstrate significant and
sustained improvements in health outcomes over the controlled period
and over the long term.
The applicant stated that their pivotal trial met its primary
effectiveness endpoint by proving that there was a statistically
significant greater reduction in seizures in the treatment group
compared to the control group (p = 0.012). Significant improvements at
1 and 2 years post[hyphen]implant included:
A significant reduction in disabling seizures of 44
percent and 53 percent at 1 and 2 years, respectively; and
Significant improvements in overall quality of life as
well as individual quality of life measures including memory, language,
attention, concentration and medication effects.
The applicant asserted that there was no negative effect of
treatment with the RNS[supreg] System on neuropsychological function
(including verbal functioning, visual-spatial processing, and memory)
or mood. The applicant concluded that the RNS[supreg] System Pivotal
trial provides Class I evidence that responsive cortical stimulation is
effective in significantly reducing seizure frequency in adults with 1
or 2 seizure foci who have failed 2 or more antiepileptic medication
trials. The applicant stated that experience across all of the
RNS[supreg] System trials demonstrates the reduction in seizure
frequency of disabling partial seizures improves over time. In
addition, the applicant noted that sustained improvements were also
seen in quality of life. Finally, the applicant noted that safety and
tolerability compares favorably to alternative treatments such as
[[Page 27545]]
antiepileptic medications, VNS, and epilepsy surgery.
With regard to the substantial clinical improvement criterion, we
are concerned that the average age of patients in the applicant's study
was 35 years. Although the applicant maintained that 31 percent of the
patients enrolled in the pivotal trial were Medicare beneficiaries, we
are unsure of the extent to which this technology would be used by
Medicare beneficiaries due to the relatively young age of the majority
of patients enrolled in the pivotal trial. We also are concerned that
further clarification on how the RNS[supreg] System compares to other
neurostimulation treatments was not provided by the applicant. The
applicant did provide the following comparison of VNS to the
RNS[supreg] System:
Key Differences Between the RNS[supreg] System and DBS and VNS Systems
----------------------------------------------------------------------------------------------------------------
Deep brain stimulator Vagus nerve stimulator
RNS[supreg] System (DBS) (VNS)
----------------------------------------------------------------------------------------------------------------
Type of stimulation.................. Closed loop: responsive Open loop: scheduled.
-------------------------------------------------
Stimulation time/day................. About 5 minutes........
Stimulation target................... Cortical; varies Deep brain nuclei...... Ascending vagus nerve.
according to seizure
focus.
-------------------------------------------------
Neurostimulator...................... Cranially implanted.... Subcutaneously (pectorally) implanted.
-------------------------------------------------
Programming changes.................. According to clinical According to clinical response.
and electrographic
response.
-------------------------------------------------
Information from device.............. Device data, Device data.
detections,
stimulations and
electrocorticograms.
-------------------------------------------------
Physician data review................ At time of programming At time of programming.
as well as online
access to stored data.
----------------------------------------------------------------------------------------------------------------
Because the applicant included claims with DBS in one of its cost
analyses, we believe that the similarities and differences between DBS
and the RNS[supreg] System may also be relevant under the substantial
clinical improvement criterion. In addition, we are concerned that the
time period in the clinical trial may not be sufficient to confirm
durability. In the RNS[supreg] System Pivotal Clinical Investigation,
the primary effectiveness endpoint considered seizure frequency over
the last 3 months of the blinded period of the trial. We note that the
applicant is currently conducting a 5-year study. We are inviting
public comments on whether the RNS[supreg] System meets the substantial
clinical improvement criterion, particularly in regard to the degree in
which the technology would be used by Medicare beneficiaries, the
comparison to other neurostimulation treatments, and its durability.
We received two comments on the RNS[supreg] System during the town
hall meeting's public comment period. These comments are summarized
below.
Comment: One commenter stated that it looked forward to the
RNS[supreg] System's commercial availability and encouraged CMS to
approve the RNS[supreg] System for new technology add-on payments. The
commenter noted that the benefits of the RNS[supreg] System therapy
include a significant reduction in seizure frequency and severity, and
for some patients, extended periods of seizure freedom. The commenter
asserted that this reduction in seizure frequency improves over time
and is sustained over several years of follow-up, and can result in
improved cognition and a better quality of life. The commenter added
that, most impressively, these positive results were achieved with no
chronic side effects from stimulation. The commenter also noted that a
significant number of these individuals are eligible for Medicare due
to their disability.
Another commenter stated that the pivotal trial findings, in both
the blinded period and the open-label period, have provided compelling
support for what had previously been an only theoretical concept for
non-ablative intervention. The commenter explained that those patients
with seizure foci in eloquent areas or with hi-hippocampal seizure
onset, the most difficult patient cohort to address, have been well-
suited to RNS and often substantially benefited from this intervention.
The commenter noted that in the functional and stereotactic
neurosurgical community, the most exciting and compelling advances have
arisen from those non-resective strategies by which maladaptive
pathophysiology and its symptoms have been ameliorated by targeted
electrical stimulation and neural function preserved with the NeuroPace
experience--the most compelling in epilepsy.
The commenter concluded with the following: the RNS[supreg] System
has had a remarkable and reassuring safety track record; the surgery
for its implementation is comparable to that of deep brain stimulation
system placement; the permanent and serious morbidity have been
extremely low and the serious and life-threatening risks associated
with medically intractable epilepsy, in comparison, are generally
underappreciated and substantially higher.
Response: We appreciate the commenters' support. We considered
these comments presented during the town hall meeting's public comment
period in the development of this proposed rule. As stated above, we
are inviting additional public comments on whether the RNS[supreg]
System meets the substantial clinical improvement criterion,
particularly in regard to the degree in which the technology would be
used by Medicare beneficiaries, the comparison to other
neurostimulation treatments, and its durability.
d. Zilver[supreg] PTX[supreg] Drug Eluting Peripheral Stent
Cook[supreg] Medical submitted an application for new technology
add-on payments for the Zilver[supreg] PTX[supreg] Drug Eluting
Peripheral Stent (Zilver[supreg] PTX[supreg]) for FY 2014. The
Zilver[supreg] PTX[supreg] is intended for use in the treatment of
peripheral artery disease (PAD) of the above-the-knee femoropopliteal
arteries (superficial femoral arteries). According to the applicant,
the stent is percutaneously inserted into the artery(s), usually by
accessing the common femoral artery in the groin. The applicant stated
that an introducer catheter is inserted over the wire guide
[[Page 27546]]
and into the target vessel where the lesion will first be treated with
an angioplasty balloon to prepare the vessel for stenting. The
applicant indicated that the stent is self-expanding, made of nitinol
(nickel titanium), and is coated with the drug Paclitaxel. Paclitaxel
is a drug approved for use as an anticancer agent and for use with
coronary stents to reduce the risk of renarrowing of the coronary
arteries after stenting procedures.
The applicant received FDA approval on November 15, 2012, for the
Zilver[supreg] PTX[supreg]. The applicant maintains that the
Zilver[supreg] PTX[supreg] is the first drug-eluting stent used for
superficial femoral arteries. The technology is currently described by
ICD-9-CM procedure code 00.60 (Insertion of drug-eluting stent(s) of
the superficial femoral artery). We are inviting public comments
regarding how the Zilver[supreg] PTX[supreg] meets the newness
criterion.
With regard to the cost criterion, the applicant believed that
cases of superficial femoral arteries typically map to MS-DRGs 252
(Other Vascular Procedures with MCC), 253 (Other Vascular Procedures
with CC), and 254 (Other Vascular Procedures without CC/MCC). The
applicant searched the FY 2010 MedPAR file for cases reporting
procedure code 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), or 440.24
(Atherosclerosis of the extremities with gangrene). The applicant noted
that the Zilver[supreg] PTX[supreg] is available in an 80 mm size and
is approved for lesions in native vascular disease of the above-the-
knee femoropopliteal arteries having reference vessel diameter from 4
mm to 9 mm and total lesion lengths up to 140 mm per limb. The
applicant further noted that bare metal stents typically are available
up to lengths of 200 mm. Therefore, in order to target cases eligible
for the Zilver[supreg] PTX[supreg], the applicant believed it was only
appropriate to target those cases with one or two bare metal stents.
The applicant was able to identify the amount of stents used per claim
by searching for ICD-9-CM procedure codes 00.45 (Insertion of one
vascular stent) and 00.46 (Insertion of two vascular stents). The
applicant submitted two methodologies: one with cases that received one
bare metal stent and the other with cases that received one or two bare
metal stents.
Under the first methodology (one bare metal stent), the applicant
found 2,062 cases (or 19.7 percent of all cases) in MS-DRG 252, 3,385
cases (or 32.3 percent of all cases) in MS-DRG 253, and 5,019 cases (or
48 percent of all cases) in MS-DRG 254. The average charge per case was
$89,194 for MS-DRG 252, $67,965 for MS-DRG 253, and $46,539 for MS-DRG
254, equating to a case-weighted average charge per case of $60,855.
The case-weighted average charge per case above does not include
charges related to the Zilver[supreg] PTX[supreg]. Therefore, it is
first necessary to remove the amount of charges related to the non-
drug-eluting peripheral vessel stent and replace them with charges
related to the Zilver[supreg] PTX[supreg]. The applicant multiplied the
use of the single stent used per case by the average market price for
non-drug-eluting peripheral vessel stents and then converted the cost
of the stents used per case to a charge by dividing the results by the
hospital-specific CCR (from the FY 2010 IPPS impact file). The
applicant removed the appropriate amount of charges per case and then
standardized the charges per case.
Because the applicant used FY 2010 MedPAR data, it was necessary to
inflate the charges from FY 2010 to FY 2013. Using data from the Bureau
of Labor Statistics Consumer Price Index, the applicant inflated the
average standardized charge per case with an inflation factor of 7
percent. To determine the amount of Zilver[supreg] PTX[supreg] stents
per case, instead of using the amount of stents used per case based on
the ICD-9-CM codes above, the applicant used an average of 1.9 stents
per case based on the Zilver[supreg] PTX[supreg] Global Registry
Clinical Study \6\. The applicant believed that it is appropriate to
use data from the clinical study (to determine the average amount of
stents used per case) rather than the actual data from the claims
because the length of a non-drug-eluting peripheral vessel stent
typically ranges from 80mm to 120 mm, while the length of the
Zilver[supreg] PTX[supreg] is 80 mm (which could cause a variance in
the actual amount of stents used per case when using the Zilver[supreg]
PTX[supreg]). The applicant then multiplied the average of 1.9 stents
used per case by the future market price for the Zilver[supreg]
PTX[supreg] and then converted the cost of the stents used per claim to
a charge by dividing the results by the hospital-specific CCR (from the
FY 2010 IPPS impact file). The applicant then added the amount of
charges related to the Zilver[supreg] PTX[supreg] to the inflated
average standardized charge per case and determined a final inflated
case-weighted average standardized charge per case of $58,419. Although
the applicant submitted data that related to the estimated cost of the
Zilver[supreg] PTX[supreg], the applicant noted that the cost of the
technology was proprietary information. Using the FY 2014 Table 10
thresholds, the case-weighted threshold for MS-DRGs 252, 253, and 254
was $54,547 (all calculations above were performed using unrounded
numbers). Because the final inflated case-weighted average standardized
charge per case for the applicable MS-DRGs exceeded the case-weighted
threshold amount, the applicant maintained that the Zilver[supreg]
PTX[supreg] would meet the cost criterion.
---------------------------------------------------------------------------
\6\ Dake, M.D., Ansel, G.M., Jaff, M.R., Ohki, T., Saxon, R.R.,
Smouse, H.B., Zeller, T., Roubin, G.S., Burket, M.W., Khatib, Y.,
Snyder, S.A., Ragheb, A.O., White, J.K., Machan, L.S. (2011),
Paclitaxel-eluting stents show superiority to balloon angioplasty
and bare metal stents in femoropopliteal disease: twelve-month
zilver PTX randomized study results. Circulation Cardiovascular
Interventions, published online September 27, 2011, 495-504.
---------------------------------------------------------------------------
The applicant used the same methodology above to demonstrate that
it meets the cost criterion with the only difference being that it
included cases that used one or two bare metal stents instead of just
one bare metal stent. Using this methodology, the applicant determined
a final inflated case-weighted average standardized charge per case of
$62,455. Using the FY 2014 Table 10 thresholds, the case-weighted
threshold for MS-DRGs 252, 253, and 254 was $54,474 (all calculations
above were performed using unrounded numbers). Because the final
inflated case-weighted average standardized charge per case for the
applicable MS-DRGs exceeded the case-weighted threshold amount, the
applicant maintained that the Zilver[supreg] PTX[supreg] would meet the
cost criterion.
We are inviting public comments on whether or not the
Zilver[supreg] PTX[supreg] meets the cost criterion. In addition, we
are inviting public comments on the methodologies used by the applicant
in its analysis, including its assumptions regarding the types of cases
in which this technology could potentially be used and the number of
stents required for each case.
In an effort to demonstrate that the technology meets the
substantial clinical improvement criterion, the applicant shared
several findings from the clinical trial data. The applicant stated
that current treatment options for patients who have been diagnosed
with PAD includes angioplasty, bare metal stenting, bypass graft, and
endarterectomy. The applicant asserted that the Zilver[supreg]
PTX[supreg] meets the substantial clinical improvement criterion
because it decreases the
[[Page 27547]]
recurrence of symptoms arising from restenotic SFA lesions, the rate of
subsequent diagnostic or therapeutic interventions required to address
restenotic lesions, and the number of future hospitalizations.
The applicant cited a 479-patient, multicenter, multinational
randomized controlled trial that compared the Zilver[supreg]
PTX[supreg] to balloon angioplasty \7\; an additional component of the
study allowed a direct comparison of the Zilver[supreg] PTX[supreg] to
a bare (uncoated) metal Zilver[supreg] stent. Patients were randomized
to treatment with the Zilver[supreg] PTX[supreg] stent (treatment
group) or with PTA (control group). Recognizing that balloon
angioplasty may not be successful acutely, the trial design mandated
provisional stent placement immediately after failure of balloon
angioplasty in instances of acute PTA failure. Therefore, patients with
suboptimal (failed) PTA underwent a secondary randomization to stenting
with either Zilver[supreg] PTX[supreg] or bare Zilver stents. This
secondary randomization allows evaluation of the Zilver[supreg]
PTX[supreg] stent compared to a bare metal stent. The primary safety
endpoint of the randomized controlled study was ``Event-Free Survival''
(EFS), defined as ``freedom from the major adverse events of death,
target lesion revascularization, target limb ischemia requiring
surgical intervention or surgical repair of the target vessel, and
freedom of worsening systems as described by the Rutherford
classification by 2 classes or to class 5 or 6.'' The primary
effectiveness endpoint was primary patency (defined as a less than 50
percent re-narrowing). We note that we are concerned that other
endpoints such as walking, walking speed, and climbing were not
considered as primary endpoints to demonstrate the effectiveness of the
Zilver[supreg] PTX[supreg].
---------------------------------------------------------------------------
\7\ Dake, M.D., Ansel, G.M., Jaff, M.R., Ohki, T., Saxon, R.R.,
Smouse, H.B., Zeller, T., Roubin, G.S., Burket, M.W., Khatib, Y.,
Snyder, S.A., Ragheb, A.O., White, J.K., Machan, L.S. (2011),
Paclitaxeleluting stents show superiority to balloon angioplasty and
bare metal stents in femoropopliteal disease: twelve-month zilver
PTX randomized study results. Circulation Cardiovascular
Interventions, published online September 27, 2011, 495-504.
---------------------------------------------------------------------------
According to the applicant, the Zilver[supreg] PTX[supreg] had an
EFS of 90.4 percent compared to balloon angioplasty, which had an EFS
of 83.9 percent, at 12 months demonstrating that the Zilver[supreg]
PTX[supreg] is as safe or safer than balloon angioplasty. The applicant
further stated that this benefit was maintained at 24 months. In
addition, the applicant noted that the Zilver[supreg] PTX[supreg]
demonstrated a 50-percent reduction in restenosis rates compared to
angioplasty and a 20-percent reduction compared to bare metal stents.
The 12-month patency rate for the Zilver[supreg] PTX[supreg] was 82.7
percent, which compared favorably to the balloon angioplasty patency
rate of 32.7 percent. In the provisional stenting arm of the study,
which allowed a direct comparison of the Zilver[supreg] PTX[supreg] and
a bare metal stent, the Zilver[supreg] PTX[supreg] primary patency
exceeded the bare metal stent patency by nearly 20 percent (87.3
percent versus 72.3 percent at 12 months). The applicant stated that
these differences are significant, as they result in a substantial
clinical improvement compared to angioplasty and bare metal stenting,
with patients being spared a recurrence of their leg pain and the need
to be admitted to the hospital for repeat procedures on these treated
lesions. The applicant also submitted 3 years of follow-up data, which
the applicant maintained support that the Zilver[supreg] PTX[supreg] is
more effective in maintaining primary patency.\8\
---------------------------------------------------------------------------
\8\ Dake, MD., VIVA 2012, October 10, 2012; Las Vegas, Nevada.
---------------------------------------------------------------------------
The applicant also cited a prospective, multicenter, multinational,
787-patient single arm study on the Zilver[supreg] PTX[supreg] that
demonstrated similar safety and effectiveness results consistent with
those from the pivotal randomized controlled study above. The applicant
cited an EFS for the Zilver[supreg] PTX[supreg] of 89.0 percent and an
86.2 percent primary patency rate. According to the applicant, these
results confirm the safety and effectiveness of the Zilver[supreg]
PTX[supreg], and compare favorably to current results for angioplasty
and bare metal stenting. The applicant further stated that these
results also demonstrate a 67 to 81 percent relative reduction in
Target Lesion Revascularization (the need to retreat an already treated
lesion that has restenosed, resulting in a recurrence of symptoms)
rates compared to recently published results of contemporary bare metal
stents.\9\
---------------------------------------------------------------------------
\9\ Dake, M. D., Scheinert, D., Tepe, G., Tessarek, J., Fanelli,
F., Bosiers, M., et al., (2011). Nitinol stents with polymer-free
paclitaxel coating for lesions in the superficial femoral and
popliteal arteries above the knee: Twelve-month safety and
effectiveness results from the Zilver PTX single-arm clinical study.
Journal of Endovascular Therapy, 18(5), 613-623.
---------------------------------------------------------------------------
We also are concerned that on April 24, 2013, the FDA announced
that, based on its investigation into a small number of complaints that
the delivery system of the device had separated at the tip of the inner
catheter, Cook Medical has initiated a nationwide/global voluntary
recall of its Zilver[supreg] PTX[supreg] Drug Eluting Peripheral Stent.
We refer readers to http://www.fda.gov/Safety/Recalls/ucm349421.htm?source=govdelivery for more information regarding this
announcement.
We are inviting public comments regarding whether the
Zilver[supreg] PTX[supreg] meets the substantial clinical improvement
criterion. We note that we did not receive any public comments on the
Zilver[supreg] PTX[supreg] during the new technology town hall
meeting's public comment period.
e. MitraClip[supreg] System
Abbott Vascular submitted an application for new technology add-on
payments for the MitraClip[supreg] System for FY 2014. The
MitraClip[supreg] System is a transcatheter mitral valve system that
includes a MitraClip[supreg] device implant, a Steerable Guide
Catheter, and a Clip Delivery System. It is designed to perform
reconstruction of the insufficient mitral valve for high risk patients
who are not candidates for conventional open mitral valve surgery.
Mitral regurgitation (MR), also referred to as mitral insufficiency
or mitral incompetence, occurs when the mitral valve fails to close
completely causing the blood to leak or flow backwards (regurgitate)
into the mitral valve as the heart contracts. If the amount of blood
that leaks back into the mitral valve is minimal then intervention is
usually not necessary. However, if the amount of blood becomes
significant this can cause the left ventricle to work harder to meet
the body's need for oxygenated blood. Severity levels of MR can range
from grade 1+ through grade 4+. If left untreated, severe mitral
regurgitation can lead to heart failure and death. The American College
of Cardiology (ACC) and the American Heart Association (AHA) issued
practice guidelines in 2006 recommending intervention for moderate-
severe or severe MR (3+ to 4+). The applicant stated that the
MitraClip[supreg] System is intended ``for patients with symptomatic,
significant mitral regurgitation who have been determined by a cardiac
surgeon to be too high risk for open mitral valve surgery and in whom
existing co-morbidities would not preclude the expected benefit from
correction of the mitral regurgitation.''
The MitraClip[supreg] System performs percutaneous mitral valve
repair. The applicant noted that the MitraClip[supreg] mitral valve
repair procedure is based on the double-orifice surgical repair
technique that has been used as a surgical technique in open chest,
arrested-heart surgery for the treatment
[[Page 27548]]
of MR since the early 1990s.10 11 12
13 14 According to the applicant, in utilizing
the double-orifice technique, a portion of the anterior leaflet is
sutured to the corresponding portion of the posterior leaflet using
standard techniques and forceps and suture, creating a point of
permanent coaptation (``approximation'') of the two leaflets. As a
result, when the suture is placed in the middle of the valve, the valve
will have a functional double orifice during diastole, thus the
alternate name for the procedure ``Double Orifice Repair.''
---------------------------------------------------------------------------
\10\ Maisano, F., et al., The double-orifice technique as a
standardized approach to treat mitral regurgitation due to severe
myxomatous disease: surgical technique, Eur J Cardiothorac Surg,
2000, 17(3): p. 201-5.
\11\ Maisano, F., et al., The edge-to-edge technique: a
simplified method to correct mitral insufficiency, Eur J
Cardiothorac Surg, 1998, 13(3): p. 240-5; discussion 245-6.
\12\ Totaro, P., et al., Mitral valve repair for isolated
prolapse of the anterior leaflet: an 11-year follow-up, Eur J
Cardiothorac Surg, 1999, 15(2): p. 119-26.
\13\ Umana, J.P., et al., ``Bow-tie'' mitral valve repair: an
adjuvant technique for ischemic mitral regurgitation, Ann Thorac
Surg, 1998, 66(5): p. 1640-6.
\14\ Alfieri, O. and F. Maisano, An effective technique to
correct anterior mitral leaflet prolapse, J Card Surg, 1999, 14(6):
p. 468-70.
---------------------------------------------------------------------------
With regard to the newness criterion, the manufacturer submitted a
Premarket Approval (PMA) application in support of obtaining FDA
approval for the MitraClip[supreg] System. Effective October 1, 2010,
ICD-9-CM procedure code 35.97 (Percutaneous mitral valve repair with
implant) was created to identify and describe the MitraClip[supreg]
technology. On March 20, 2013, a meeting was held by the Circulatory
System Devices Panel of the Medical Devices Advisory Committee of the
FDA to discuss, make recommendations, and vote on information related
to the PMA application for the MitraClip[supreg] System. Specifically,
the Committee was charged with determining if the data presented by the
applicant demonstrated a reasonable assurance of safety and
effectiveness. We refer readers to the following FDA Web site for
additional detailed information and meeting materials regarding the
MitraClip[supreg] System http://www.fda.gov/AdvisoryCommittees/Calendar/ucm339809.htm. In addition, a summary of the March 20, 2013
meeting can be located on the following FDA Web site http://www.fda.gov/downloads/AdvisoryCommittees/CommitteesMeetingMaterials/MedicalDevices/MedicalDevicesAdvisoryCommittee/CirculatorySystemDevicesPanel/UCM345235.pdf. We are inviting public
comments regarding how the MitraClip[supreg] System meets the newness
criterion.
With regard to the cost criterion, the applicant conducted four
separate analyses. The applicant noted that while ICD-9-CM procedure
code 35.97 groups to MS-DRGs 246 (Percutaneous Cardiovascular Procedure
with Drug- Eluting Stent with Major Complication or Comorbidity (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), clinical experience with the MitraClip[supreg] has demonstrated
that it is extremely rare for a patient to receive stents concurrently
with the MitraClip[supreg] procedure. The applicant further cited the
FY 2013 IPPS/LTCH PPS final rule (77 FR 55308) which stated,
``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 a result, the applicant
stated that it conducted its analyses solely for MS-DRGs 250 and 251 to
demonstrate that the cases involving MitraClip[supreg] meet the
incremental cost thresholds provided in Table 10 for those MS-DRGs.
The applicant included two analyses that utilize the FY 2011 MedPAR
file and two analyses of hospital UB-04 claims data from the EVEREST II
Continued Access Study that were collected during FY 2012. Below is a
summary of the applicant's four data analyses, including the
methodology and the findings for each.
Analysis 1: The applicant searched the FY 2011 MedPAR file
for cases reporting procedure code 35.97 that mapped to MS-DRGs 250 and
251. According to the applicant, this search yielded actual
MitraClip[supreg] procedures that were performed in an IDE study
setting where hospitals obtained the MitraClip[supreg] System at a
reduced investigational price; the applicant stated that it is likely
that hospitals did not bill at all for the investigational device or
submitted billed charges that were significantly less than the actual
device acquisition costs (we refer readers to the explanation below).
The applicant found 39 cases in MS-DRG 250 (29 percent of all cases),
and 94 cases in MS-DRG 251 (71 percent of all cases), which resulted in
a case-weighted average charge per case of $97,918. The applicant then
standardized the charges using the FY 2011 final rule impact file and
inflated the standardized charges using two different inflation
factors. The first approach used a factor of 4.6 percent, which was
based on data from the U.S. Department of Labor's Bureau of Labor
Statistics non-seasonally adjusted Consumer Price Index for All Urban
Consumers between January 2011 and January 2013. This resulted in an
inflated case-weighted average standardized charge per case of $79,346.
The second approach used a factor of 18.6 percent based on the growth
in charges between 2009 and 2011 in MS-DRGs 250 and 251 and adjusting
for case-mix year over year. This resulted in an inflated case-weighted
average standardized charge per case of $89,986. The applicant noted
that both approaches used to determine the inflated case-weighted
average standardized charge per case were calculated without any
adjustments to reflect the reduced investigational price or inadequate
hospital billing.
In order to determine if hospitals adequately billed for the
device, the applicant analyzed the cost of the device on each claim by
summing the charges that map to the 15 CMS IPPS cost centers (77 FR
53340). The applicant then calculated the standardized cost for this
subset of charges by multiplying the standardized charges in each cost
center by the CMS national CCR for each cost center in the FY 2013
IPPS/LTCH PPS final rule (77 FR 53340). The applicant asserted that,
whereas all hospitals in the study were charged a uniform
investigational price for the MitraClip[supreg] System, this analysis
confirmed that some hospitals did not bill at all for the device or
charged substantially less than the actual hospital acquisition cost,
which is likely due to the investigational status of the technology.
The applicant explained that the mean total standardized costs in the
``Supplies and Equipment'' cost center in the FY 2011 MedPAR file for
MitraClip[supreg] cases were remarkably low for MS-DRGs 250 and 251,
respectively. According to the applicant, the mean total standardized
costs in the ``Supplies and Equipment'' cost center reflect only 50
percent of the actual MitraClip[supreg] System costs not inclusive of
other supply and equipment costs associated with the MitraClip[supreg]
procedure and hospital stay. Therefore, the applicant
[[Page 27549]]
believed that Analysis 1 severely underestimated the actual hospital
costs.
Using the FY 2014 Table 10 thresholds, the case-weighted threshold
for MS-DRGs 250 and 251 was $63,097 (all calculations above were
performed using unrounded numbers). Because the inflated case-weighted
average standardized charge per case for the applicable MS-DRGs for
both approaches discussed above exceeds the case-weighted threshold
amount, the applicant maintained that the MitraClip[supreg] System
would meet the cost criterion.
Analysis 2: The second analysis is identical to the first
analysis (the applicant searched the FY 2011 MedPAR file for cases
reporting procedure code 35.97 that mapped to MS-DRGs 250 and 251)
except that the applicant excluded hospital claims that either did not
include any charge for the device-dependent procedure or included a
charge that was significantly less than the actual device acquisition
cost. The applicant believed that these exclusions would provide more
accurate data on the costs associated with the MitraClip[supreg]
procedure in the IDE study when hospitals obtained the
MitraClip[supreg] System at a reduced investigational price. The
applicant explained that it included only those cases where the
standardized charge for the ``Supplies and Equipment'' cost center,
reduced by each hospital's average hospital-wide CCR (rather than using
CMS national CCRs for each cost center), was greater than $10,000,
which is lower than the acquisition cost for the MitraClip[supreg]
System. The applicant stated that this analysis reflects a conservative
but more appropriate estimate of the actual costs incurred by the
hospitals during the clinical trial than the first analysis.
Using the methodology above, the applicant found 12 cases in MS-DRG
250 (22 percent of all cases) and 43 cases in MS-DRG 251 (78 percent of
all cases), which resulted in a case-weighted average charge per case
of $112,434. The applicant then standardized the charges using the FY
2011 final rule impact file and inflated the standardized charges using
two different inflation factors. The first approach used a factor of
4.6 percent, which was based on data from the U.S. Department of
Labor's Bureau of Labor Statistics non-seasonally adjusted Consumer
Price Index for All Urban Consumers between January 2011 and January
2013. This resulted in an inflated case-weighted average standardized
charge per case of $97,289. The second approach used a factor of 18.6
percent based on the growth in charges between 2009 and 2011 in MS-DRGs
250 and 251 and adjusting for case-mix year over year. This resulted in
an inflated case-weighted average standardized charge per case of
$110,335.
Using the FY 2014 Table 10 thresholds, the case-weighted threshold
for MS-DRGs 250 and 251 was $61,896 (all calculations above were
performed using unrounded numbers). Because the inflated case-weighted
average standardized charge per case for the applicable MS-DRGs for
both charge inflation approaches discussed above exceeds the case-
weighted threshold amount, the applicant maintained that the
MitraClip[supreg] System would meet the cost criterion.
Analysis 3: Because the first two analyses sought only to
estimate standardized charges for the MitraClip[supreg] procedure in an
investigational setting with a reduced price for the device, the
applicant submitted two additional analyses using hospital charges in a
commercial setting and a commercial device price. Rather than using
MedPAR data, the applicant utilized hospital UB-04 claims collected
from the ongoing EVEREST II Continued Access Study in addition to
claims from compassionate-use cases. The applicant stated that patient
characteristics and charges for both of these cases were not
significantly different.
The applicant analyzed 98 claims from 21 sites (for discharges on
or after October 1, 2011 through discharges on or before September 30,
2012 (FY 2012 claims data)) and excluded 18 cases because the cases
either did not map to MS-DRGs 250 or 251, or the patient was below the
age of 65 years. Of these remaining 80 cases, 17 mapped to MS-DRG 250
(21.3 percent of all cases) and 63 mapped to MS-DRG 251 (78.8 percent
of all cases), which resulted in a case-weighted average charge per
case of $112,509. The case-weighted average charge per case above
includes clinical trial charges related to the MitraClip[supreg]
System, which does not reflect the full commercial charge for the
MitraClip[supreg] System. Therefore, the applicant removed the amount
of clinical trial charges related to the MitraClip[supreg] System. The
applicant then standardized the charges using the FY 2012 final rule
impact file and inflated the standardized charges using the two
different approaches described in the first and second analyses (an
inflation factor of 4.6 percent and 18.6 percent, respectively).
The applicant then added commercial charges for the device to the
inflated standardized charges (for both charge inflation approaches).
Although the applicant submitted data that related to the estimated
cost of the MitraClip[supreg] System, the applicant noted that the cost
of the technology was proprietary information. To compute the
commercial charges for the MitraClip[supreg] System, the applicant took
the European commercial price of the MitraClip[supreg] System,
converted the cost to U.S. dollars by multiplying the amount by an
exchange rate of 1.38, and then divided the result by the ``Supplies
and Equipment'' cost center CCR (in the FY 2013 IPPS/LTCH PPS final
rule) of 0.335. This resulted in an inflated case-weighted average
standardized charge per case of $129,019 and $132,372 under the first
and second charge inflation approaches, respectively.
Using the FY 2014 Table 10 thresholds, the case-weighted threshold
for MS-DRGs 250 and 251 was $61,805 (all calculations above were
performed using unrounded numbers). Because the inflated case-weighted
average standardized charge per case for the applicable MS-DRGs for
both charge inflation approaches exceeds the case-weighted threshold
amount, the applicant maintained that the MitraClip[supreg] System
would meet the cost criterion.
Analysis 4: The fourth analysis was similar to the third
analysis. However, instead of basing commercial charges on the European
commercial price, the applicant used the anticipated U.S. commercial
price to determine the commercial charges for the device. Similar to
above, the applicant determined a case-weighted average charge per case
of $112,509. The applicant then removed the clinical trial charges
related to the MitraClip[supreg] System (for each claim), standardized
the charges using the FY 2012 final rule impact file, and inflated the
standardized charges using both charge inflation approaches discussed
above.
The applicant then added commercial charges for the device to the
inflated standardized charges (for both charge inflation approaches).
As mentioned above, although the applicant submitted data that related
to the estimated cost of the MitraClip[supreg] System, the applicant
noted that the cost of the technology was proprietary information. To
compute the commercial charges for the MitraClip[supreg] System, the
applicant used the anticipated U.S. commercial price of the
MitraClip[supreg] System and divided the amount by the ``Supplies and
Equipment'' cost center CCR (in the FY 2013 IPPS/LTCH PPS final rule)
of 0.335. This resulted in an inflated case-weighted average
standardized charge per case of $136,183 and $139,535
[[Page 27550]]
under the first and second charge inflation approaches, respectively.
Using the FY 2014 Table 10 thresholds, the case-weighted threshold
for MS-DRGs 250 and 251 was $61,805 (all calculations above were
performed using unrounded numbers). Because the inflated case-weighted
average standardized charge per case for the applicable MS-DRGs for
both charge inflation approaches exceeds the case-weighted threshold
amount, the applicant maintained that the MitraClip[supreg] System
would meet the cost criterion.
We are inviting public comments on whether or not the
MitraClip[supreg] System meets the cost criterion. In addition, we are
inviting public comments on the methodologies used by the applicant in
its four analyses.
The applicant asserted that the MitraClip[supreg] System meets the
substantial clinical improvement criterion. The applicant explained
that studies have indicated that a significant proportion of patients
are not eligible for mitral valve repair and/or replacement surgery
because of risk factors including reduced left ventricular function,
significant comorbidities, and advanced age. As a result, the applicant
stated that there is a significant unmet clinical need for patients
with severe MR who are too high risk for surgery and receiving
palliative medical management.
The applicant further stated that although many of the patients who
are refused surgery die in the intervening months to years, the
economic burden to the healthcare system of mitral regurgitation in
elderly patients not deemed suitable for conventional open chest
surgery is considerable. The applicant noted that the vast majority of
such patients are repeatedly hospitalized, often with prolonged lengths
of in-hospital stays, and, even when returned to the community, they
consume additional resources from the primary care and social services.
The applicant asserted that the quality of life enjoyed by these
patients is also poor and their mortality rates are high. The applicant
cited the 2012 European Society of Cardiology (ESC) and European
Association for Cardio-Thoracic Surgery (EACTS) clinical practice
guideline for valvular heart disease, which recommended that the
MitraClip[supreg] procedure be considered in high surgical risk
patients with symptomatic severe secondary MR.
The applicant also stated that it would meet the substantial
clinical improvement criterion based on clinical studies that have
consistently shown that the MitraClip[supreg] procedure leads to a
significant reduction of MR, improvements in left ventricular (LV)
function including LV volumes and dimensions, improved patient outcomes
as measured by improvements in New York Heart Association (NYHA)
functional class, health-related quality of life and reductions in
heart-failure related hospitalizations, and significantly lower
mortality than predicted surgical mortality.
The applicant cited clinical data from the EVEREST II High Risk
Study \15\ and from the EVEREST II Continued Access Study/Registry
(REALISIM) \16\. The applicant also cited clinical data from a high
risk cohort of patients (EVEREST II High Risk Cohort), which is an
integrated analysis of the following: (1) Patients within the EVEREST
II High Risk Study who met eligibility criteria for being too high risk
to undergo mitral valve surgery; and (2) patients within the EVEREST II
Continued Access Study/Registry who were too high risk for surgery
using identical eligibility inclusion criteria.
---------------------------------------------------------------------------
\15\ Whitlow et al., Acute and 12-Month Results With Catheter-
Based Mitral Valve Leaflet Repair: The EVEREST II (Endovascular
Valve Edge-to-Edge Repair) High Risk Study. JACC 2012;59:130-139.
\16\ Feldman et al., Percutaneous Repair or Surgery for Mitral
Regurgitation. NEJM 2011;364:1395-1406.
---------------------------------------------------------------------------
In addition to the published clinical experience from the EVEREST
studies, the applicant cited data on the use of the MitraClip[supreg]
device in a ``real-world'' setting published recently by a select
number of European centers as part of their individual and/or multi-
center commercial experience or enrollment in the MitraClip[supreg]
device group of the ACCESS-EU post-approval clinical trial in Europe.
The European use of the MitraClip[supreg] device is focused on patients
who are too high risk for surgery and patients are selected for therapy
using a multi-disciplinary ``heart team'' approach.
The applicant stated that published reports of the
MitraClip[supreg] procedure have consistently demonstrated a
significant reduction in MR that is durable out to 1, 2, and 3 years.
The applicant cited the EVEREST II High Risk Study, which demonstrated
that the MitraClip[supreg] procedure successfully reduced MR for high-
risk patients with results durable out to 2 years. The applicant also
noted that the proportion of patients with significant MR (MR grade
>=3+) was reduced from 99 percent at baseline to 22 percent at 1 year
follow-up (p<0.0001). The applicant further noted that reduction of MR
was also associated with significant improvements in left ventricular
dimensions including LV end diastolic and systolic volumes (p<0.0001)
consistent with positive ventricular remodeling.
According to the applicant, the most recent available data from the
EVEREST II High Risk Cohort submitted to the FDA for high-risk patients
demonstrated a significant reduction in severe MR from 86 percent at
baseline to 13 percent at 2 years (p<0.0001), improvements in LV
dimensions and volumes sustained at 2 years, and a 48-percent reduction
in rates of heart failure-related hospitalizations between the baseline
and the 12-month follow-up period after the MitraClip[supreg] procedure
(p<0.0001).
The applicant noted that patients treated with MitraClip[supreg]
reported substantial clinical improvements in NYHA functional class
from baseline at both 1 and 2 year followup. The applicant explained
that the NYHA classification system assigns patients into one of four
categories representing the extent of heart failure based on how much
they are limited during physical activity. In the EVEREST II High-Risk
Cohort, the applicant stated that the proportion of patients with NYHA
class III/IV representing marked or severe limitations in activity was
significantly reduced from 82 percent at baseline to 17 percent at 1
year (p<0.0001). The applicant noted that these results also have been
consistently shown in multiple other published studies.
Based on data from the EVEREST II High Risk Cohort, the applicant
cited additional data demonstrating that the MitraClip[supreg]
treatment is associated with clinically and statistically significant
improvements in general health-related quality of life. The applicant
explained that the RAND SF-36 health survey, a quality of life
instrument, demonstrated similar physical and mental component scores
after 30 days and 1 year. In addition, the applicant stated that the
MitraClip[supreg] is associated with lower than predicted mortality
rates at 30 days as measured by the Society for Thoracic Surgery (STS)
Mortality Risk Score. Also, mortality at 1 year is favorable when (1)
comparing the MitraClip[supreg] to published literature
17 18 19 20 21 22 23 and
[[Page 27551]]
(2) comparing MitraClip[supreg] mortality to a high-risk concurrent
control group of patients treated with medical management.
---------------------------------------------------------------------------
\17\ Mirabel M, Iung B, Baron G, et al. What are the
characteristics of patients with severe, symptomatic, mitral
regurgitation who are denied surgery? Eur Heart J. 2007
Jun;28(11):1358-65.
\18\ Patel JB, Borgeson DD, Barnes ME, Rihal CS, Daly RC,
Redfield MM.: Mitral regurgitation in patients with advanced
systolic heart failure. J Card Fail. 2004 Aug;10(4):285-91.
\19\ Trichon BH, Felker GM, Shaw LK, Cabell CH, O'Connor CM:
Relation of frequency and severity of mitral regurgitation to
survival among patients with left ventricular systolic dysfunction
and heart failure, Am J Cardiol. 2003 Mar 1. 91(5):538-43.
\20\ Bursi F, Enriquez-Sarano M, Nkomo VT, Jacobsen SJ, Weston
SA, Meverden RA, Roger VL: Heart failure and death after myocardial
infarction in the community: the emerging role of mitral
regurgitation. Circulation. 2005 Jan 25;111(3):295-301.34.
\21\ Grigioni F, Enriquez-Sarano M, Zehr KJ, Bailey KR, Tajik
AJ: Ischemic mitral regurgitation: long-term outcome and prognostic
implications with quantitative Doppler assessment. Circulation. 2001
Apr 3;103(13):1759-64.
\22\ Koelling TM, Aaronson KD, Cody RJ, Bach DS, Armstrong WF:
Prognostic significance of mitral regurgitation and tricuspid
regurgitation in patients with left ventricular systolic
dysfunction, Am Heart J. 2002 Sep;144(3):524-9.
\23\ Cioffi G, Tarantini L, De Feo S, Pulignano G, Del Sindaco
D, Stefenelli C, Di Lenarda A, Opasich C.: Functional mitral
regurgitation predicts 1-year mortality in elderly patients with
systolic chronic heart failure. Eur J Heart Fail. 2005
Dec;7(7):1112-7.
---------------------------------------------------------------------------
In conclusion, the applicant cited data from the ACCESS-EU study as
presented at the European Society of Cardiology Congress in August
2012, which demonstrated improvement in disease-specific quality of
life measures including the Minnesota Living with Heart Failure
Questionnaire and Six Minute Walk Test.
We note that, similar to the FDA, as referenced above, we are
concerned that the applicant performed post hoc analyses on a different
patient population and revised the initial indication for use for the
MitraClip[supreg] after learning that the FDA expressed concern
regarding the PMA based on insufficient data resulting from the initial
indication for use and patient population in the EVEREST II RCT. As we
discuss below, data results from 2 years of the EVEREST II RCT also
demonstrated that surgery reduced mitral regurgitation more than the
percutaneous MitraClip[supreg] System. However, both the surgical
patients and the MitraClip[supreg] patients showed comparable results
for improved left ventricular function, NYHA functional class, and
quality of life. Subsequent to this trial, the applicant conducted a
retrospective review of registry data to support the revised indication
for use. This retrospective analysis involved pooling two registry data
sets (the EVEREST II High Risk Registry (HRR) and the REALISM HRR
Continued Access Protocol (CAP)) in a post hoc manner, which resulted
in major design flaws and data interpretation limitations. The pooled
registry data sets were referred to as the Integrated High Surgical
Risk Cohort.
We note that, the EVEREST II HRR and the REALISM HRR CAP were not
intended to be used as pivotal data sets. The applicant was previously
informed by the FDA that without positive pivotal trial results, the
PMA application could not be approved based on the data results of the
EVEREST II RCT by itself. Therefore, the FDA suggested the additional
studies (the EVEREST II HRR and the REALISM HRR CAP) to complement the
randomized study and, therefore, could be considered adjunctive to the
EVEREST II RCT.
In our review of the clinical trials' data, we agree with the FDA
regarding the following key points:
Post hoc analyses of pooled data sets retain all of the
individual shortcomings of the individual data sets;
Pooling does not enhance the utility and scientific value
of uncontrolled single arm registries with no comparators; and
Inappropriate pooling introduces additional confounders.
It is also unclear what the appropriate target population for the
MitraClip[supreg] System is because clinical trials conducted by the
applicant included patients with both functional and degenerative
mitral regurgitation, which makes it difficult to determine which group
of patients may benefit more or less from the technology. For example,
in a subgroup analysis of the EVEREST II RCT, authors concluded that
older patients and those patients with functional mitral regurgitation
or abnormal left ventricular function had results more comparable to
surgical repair. Data results from 2 years of the EVEREST II RCT also
demonstrated that surgery reduced mitral regurgitation more than the
percutaneous MitraClip[supreg] System. However, both the surgical
patients and the MitraClip[supreg] System's patients showed comparable
results for improved left ventricular function, NYHA functional class,
and quality of life.
We are inviting public comments on whether this technology meets
the substantial clinical improvement criterion, particularly in
comparison to other surgical therapies such as mitral valve repair or
replacement, and also with regard to the appropriate target population
for this technology.
We received nine comments on the MitraClip[supreg] System during
the town hall meeting's public comment period. These comments are
summarized below.
Comment: Several commenters expressed support for new technology
add-on payments for the MitraClip[supreg] System and recommended that
the technology be reassigned from MS-DRGs 250 and 251 (Percutaneous
Cardiovascular Procedure without Coronary Artery Stent or AMI with and
without MCC, respectively) to MS-DRGs 216, 217, 218, 219, 220, and 221
(Cardiac Valve and Other Major Cardiothoracic Procedure with and
without Cardiac Catheterization with MCC, CC, and without CC/MCC,
respectively).
Response: We appreciate the commenters' support. However, we note
that we did not request public comments nor propose to make any changes
to the MS-DRG classification for the MitraClip[supreg] System. Because
these comments are outside the scope of the new technology add-on
payment application included in this proposed rule, we are not
providing a complete summary of and response to these comments. We
encourage the commenters to review the process for submitting comments
regarding MS-DRG classifications as outlined in section II.G. of the
preamble of this proposed rule.
Comment: Several commenters stated that they supported the
application for new technology add-on payments for the
MitraClip[supreg] System because it is a novel technology utilizing the
transcatheter approach to repair the mitral valve and has demonstrated
substantial clinical improvement. According to the commenters, the
technology is intended to be used for high-risk patients who do not
have other treatment options available due to the severity of their
mitral regurgitation and other comorbidities, such as heart failure.
The commenters noted that the percutaneous MitraClip[supreg] System
results in significant improvement in quality of life for this group of
patients for whom conventional surgery is contraindicated.
One commenter stated that another benefit of the MitraClip[supreg]
System is that it offers patients with all forms of mitral
regurgitation the opportunity to receive treatment much earlier,
thereby resulting in improved cardiac function, reduced heart failure,
and increased savings to the healthcare system.
Another commenter expressed support for the MitraClip[supreg]
System and noted that surgery for this high-risk patient population is
not a viable alternative and neither are the currently available
medical therapy options, as evidenced by the readmission rates for
congestive heart failure exacerbations in this group of patients. This
commenter also noted that the MitraClip[supreg] device has proven to
reduce the degree of mitral regurgitation as shown in a number of high-
risk patient registries and clinical trials. The commenter further
noted that savings could be realized with the reductions in
readmissions for heart failure exacerbations for this group of
patients.
[[Page 27552]]
One commenter indicated that the MitraClip[supreg] System meets the
substantial clinical improvement criterion because it offers
nonoperative patients a device that could ``potentially revolutionize
management of nonsurgical patients with severe mitral regurgitation.''
Another commenter stated that the MitraClip[supreg] System ``represents
a landmark in our ability to perform mitral valve surgeries with less
risk.'' This commenter further stated that the ``MitraClip[supreg]
joins TAVR (Transcatheter aortic valve replacement) and TPVI
(Transcatheter pulmonary valve implantation) as new percutaneous
surgical therapies for patients with valvular heart disease who are not
candidates for traditional valve replacement or repair.''
Another commenter noted that the MitraClip[supreg] System has shown
substantial clinical improvement in patients considered too high risk
for surgery as demonstrated by the EVEREST II cohort, including
improvement in patients NYHA functional class, reduced
hospitalizations, and improved left ventricular function.
Response: We appreciate the commenters' support. We have considered
these comments received during the town hall meeting's public comment
period in this proposed rule. As stated above, we are inviting
additional public comments on whether the MitraClip[supreg] System
meets the substantial clinical improvement criterion, particularly in
comparison to other surgical therapies such as mitral valve repair or
replacement, and also with regard to the appropriate target population
for this technology.
III. Proposed 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.'' We
currently define hospital labor market areas based on the delineations
of statistical areas established by the Office of Management and Budget
(OMB). A discussion of the proposed FY 2014 hospital wage index based
on the statistical areas appears under section III.B. of the preamble
of this proposed rule.
Section 1886(d)(3)(E) of the Act requires the Secretary to update
the wage index annually and to base the update on a survey of wages and
wage-related costs of short-term, acute care hospitals. This provision
also requires that any updates or adjustments to the wage index be made
in a manner that ensures that aggregate payments to hospitals are not
affected by the change in the wage index. The proposed adjustment for
FY 2014 is discussed in section II.B. of the Addendum to this proposed
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 proposed budget neutrality
adjustment for FY 2014 is discussed in section II.A.4.b. of the
Addendum to this proposed rule.
Section 1886(d)(3)(E) of the Act also provides for the collection
of data every 3 years on the occupational mix of employees for short-
term, acute care hospitals participating in the Medicare program, in
order to construct an occupational mix adjustment to the wage index. A
discussion of the occupational mix adjustment that we are proposing to
apply beginning October 1, 2013 (the FY 2014 wage index) appears under
section III.F. of the preamble of this proposed rule.
B. Core-Based Statistical Areas for the Hospital Wage Index
The wage index is calculated and assigned to hospitals on the basis
of the labor market area in which the hospital is located. Under
section 1886(d)(3)(E) of the Act, beginning with FY 2005, we define
hospital labor market areas based on the Core-Based Statistical Areas
(CBSAs) established by OMB. The current statistical areas are based on
OMB standards published on December 27, 2000 (65 FR 82228) and Census
2000 data and Census Bureau population estimates for 2007 and 2008 (OMB
Bulletin No. 10-02). For a discussion of OMB's delineations of CBSAs
and our implementation of the CBSA definitions, we refer readers to the
preamble of the FY 2005 IPPS final rule (69 FR 49026 through 49032). We
also discussed in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51582)
and the FY 2013 IPPS/LTCH PPS final rule (77 FR 53365) that, in 2013,
OMB 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. On February 28, 2013, OMB issued OMB Bulletin No. 13-01,
which established revised delineations for Metropolitan Statistical
Areas, Micropolitan Statistical Areas, and Combined Statistical Areas,
and provides guidance on the use of the delineations of these
statistical areas. A copy of this bulletin may be obtained at http://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b-13-01.pdf.
According to OMB, ``[t]his bulletin provides the delineations of all
Metropolitan Statistical Areas, Metropolitan Divisions, Micropolitan
Statistical Areas, Combined Statistical Areas, and New England City and
Town Areas in the United States and Puerto Rico based on the standards
published on June 28, 2010, in the Federal Register (75 FR 37246-37252)
and Census Bureau data.''
In order to implement these changes for the IPPS, it is necessary
to identify the new area designation for each county and hospital in
the country. While the revisions OMB published on February 28, 2013 are
not as sweeping as the changes OMB announced in 2003, the February 28,
2013 bulletin does contain a number of significant changes. For
example, there are new CBSAs, urban counties that become rural, rural
counties that become urban, and existing CBSAs that have been split
apart. In addition, the effect of the new designations on various
hospital reclassifications, the outmigration adjustment (established by
section 505 of Pub. L. 108-173), and treatment of hospitals located in
certain rural counties (that is, ``Lugar'' hospitals) provided for
under section 1886(d)(8)(B) of the Act must be considered. These are
just a few of the many issues that need to be considereed regarding the
effects of the new designations prior to proposing and establishing
policies.
However, because the bulletin was not issued until February 28,
2013, with supporting data not available until later, and because the
changes made by the bulletin and their ramifications must be
extensively reviewed and verified, we were unable to undertake such a
lengthy process before publication of this FY 2014 proposed rule. By
the time the bulletin was issued, the FY 2014 IPPS proposed rule was in
the advanced stages of development. We had already developed the FY
2014 proposed wage index based on the previous OMB definitions. We note
that, in June 2003,
[[Page 27553]]
OMB announced changes resulting from the 2000 Census, and at that time,
CMS proposed and implemented the changes during the following year's
rulemaking cycle for FY 2005. Although OMB published the data earlier
than June this year, we still are in essentially the same situation as
we were in 2003 because the data are not available in time to be
incorporated into this year's rulemaking cycle. To allow for sufficient
time to assess the new changes and their ramifications, we intend to
propose changes to the wage index based on the newest CBSA changes in
the FY 2015 proposed rule. We refer readers to the FY 2005 IPPS final
rule (69 FR 49026 through 49034) for those interested in learning about
the issues we may need to address next year in proposing to implement
the latest OMB update for FY 2015, and some of the policy decisions
that we may consider making.
C. Worksheet S-3 Wage Data for the Proposed FY 2014 Wage Index
The proposed FY 2014 wage index values are based on the data
collected from the Medicare cost reports submitted by hospitals for
cost reporting periods beginning in FY 2010 (the FY 2013 wage indices
were based on data from cost reporting periods beginning during FY
2009).
1. Included Categories of Costs
The proposed FY 2014 wage index includes the following categories
of data associated with costs paid under the IPPS (as well as
outpatient costs):
Salaries and hours from short-term, acute care hospitals
(including paid lunch hours and hours associated with military leave
and jury duty);
Home office costs and hours;
Certain contract labor costs and hours (which includes
direct patient care, certain top management, pharmacy, laboratory, and
nonteaching physician Part A services, and certain contract indirect
patient care services (as discussed in the FY 2008 final rule with
comment period (72 FR 47315 through 47318)); and
Wage-related costs, including pension costs (based on
policies adopted in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51586
through 51590)) and other deferred compensation costs.
2. Excluded Categories of Costs
Consistent with the wage index methodology for FY 2013, the
proposed wage index for FY 2014 also excludes the direct and overhead
salaries and hours for services not subject to IPPS payment, such as
SNF services, home health services, costs related to GME (teaching
physicians and residents) and certified registered nurse anesthetists
(CRNAs), and other subprovider components that are not paid under the
IPPS. The proposed FY 2014 wage index also excludes the salaries,
hours, and wage-related costs of hospital-based rural health clinics
(RHCs), and Federally qualified health centers (FQHCs) because Medicare
pays for these costs outside of the IPPS (68 FR 45395). In addition,
salaries, hours, and wage-related costs of CAHs are excluded from the
wage index, for the reasons explained in the FY 2004 IPPS final rule
(68 FR 45397 through 45398).
3. Use of Wage Index Data by Providers Other Than Acute Care Hospitals
Under the IPPS
Data collected for the IPPS wage index are also currently used to
calculate wage indices applicable to other providers, such as SNFs,
home health agencies (HHAs), and hospices. In addition, they are used
for prospective payments to IRFs, IPFs, and LTCHs, and for hospital
outpatient services. We note that, in the IPPS rules, we do not address
comments pertaining to the wage indices for non-IPPS providers, other
than for LTCHs. Such comments should be made in response to separate
proposed rules for those providers.
D. Verification of Worksheet S-3 Wage Data
The wage data for the proposed FY 2014 wage index were obtained
from Worksheet S-3 of the Medicare cost report for cost reporting
periods beginning on or after October 1, 2009, and before October 1,
2010. For wage index purposes, we refer to cost reports during this
period as the ``FY 2010 cost report,'' the ``FY 2010 wage data,'' or
the ``FY 2010 data.'' Instructions for completing the wage index
sections of Worksheet S-3 are included in the Provider Reimbursement
Manual (PRM), Part 2 (Pub. No. 15-2), Chapter 36, Sections 3605.2 and
3605.3 for Form CMS-2552-96 and Chapter 40, Sections 4005.2 through
4005.4 for Form CMS-2552-10. Hospitals with cost reporting periods
beginning on or after October 1, 2009 and before May 1, 2010 reported
FY 2010 data on Form CMS-2552-96. Hospitals with cost reporting periods
beginning on or after May 1, 2010 and before October 1, 2010 reported
FY 2010 data on the new Form CMS-2552-10. The data file used to
construct the wage index includes FY 2010 data submitted to us as of
March 1, 2013. As in past years, we performed an extensive review of
the wage data, mostly through the use of edits designed to identify
aberrant data.
We asked our fiscal intermediaries/MACs to revise or verify data
elements that result in specific edit failures. For the proposed FY
2014 wage index, we identified and excluded 44 providers with data that
were too aberrant to include in the proposed wage index, although if
data elements for some of these providers are corrected, we intend to
include some of these providers in the final FY 2014 wage index. We
instructed fiscal intermediaries/MACs to complete their data
verification of questionable data elements and to transmit any changes
to the wage data no later than April 10, 2013. We intend that all
unresolved data elements will be resolved by the date the FY 2014 final
rule is issued. The revised data will be reflected in the FY 2014 IPPS
final rule.
In constructing the proposed FY 2014 wage index, we included the
wage data for facilities that were IPPS hospitals in FY 2010, inclusive
of those facilities that have since terminated their participation in
the program as hospitals, as long as those data did not fail any of our
edits for reasonableness. We believe that including the wage data for
these hospitals is, in general, appropriate to reflect the economic
conditions in the various labor market areas during the relevant past
period and to ensure that the current wage index represents the labor
market area's current wages as compared to the national average of
wages. However, we excluded the wage data for CAHs as discussed in the
FY 2004 IPPS final rule (68 FR 45397 through 45398). For this proposed
rule, we removed 4 hospitals that converted to CAH status on or after
February 14, 2012, the cut-off date for CAH exclusion from the FY 2013
wage index, and through and including February 14, 2013, the cut-off
date for CAH exclusion from the FY 2014 wage index. After removing
hospitals with aberrant data and hospitals that converted to CAH
status, the proposed FY 2014 wage index is calculated based on 3,427
hospitals.
For the proposed FY 2014 wage index, we allotted the wages and
hours data for a multicampus hospital among the different labor market
areas where its campuses are located in the same manner that we
allotted such hospitals' data in the FY 2013 wage index (77 FR 53366).
Table 2 containing the proposed FY 2014 wage index associated with this
proposed rule (available on the CMS Web site) includes separate wage
data for the campuses of six multicampus hospitals (two additional
multicampus hospitals have been added to the wage index calculation for
FY 2014).
[[Page 27554]]
E. Method for Computing the Proposed FY 2014 Unadjusted Wage Index
The method used to compute the proposed FY 2014 wage index without
an occupational mix adjustment follows the same methodology that we
used to compute the FY 2012 final wage index without an occupational
mix adjustment (76 FR 51591 through 51593) and which we discussed and
used for the FY 2013 final wage index without an occupational mix
adjustment (77 FR 53366 through 53367).
As discussed in the FY 2012 final rule, in ``Step 5,'' for each
hospital, we adjust the total salaries plus wage-related costs to a
common period to determine total adjusted salaries plus wage-related
costs. To make the wage adjustment, we estimate the percentage change
in the employment cost index (ECI) for compensation for each 30-day
increment from October 14, 2009, through April 15, 2011, for private
industry hospital workers from the BLS' Compensation and Working
Conditions. We have consistently used the ECI as the data source for
our wages and salaries and other price proxies in the IPPS market
basket, and we are not proposing any changes to the usage for FY 2014.
The factors used to adjust the hospital's data were based on the
midpoint of the cost reporting period, as indicated below.
Midpoint of Cost Reporting Period
------------------------------------------------------------------------
Adjustment
After Before factor
------------------------------------------------------------------------
10/14/2009.............................. 11/15/2009 1.02682
11/14/2009.............................. 12/15/2009 1.02490
12/14/2009.............................. 01/15/2010 1.02299
01/14/2010.............................. 02/15/2010 1.02116
02/14/2010.............................. 03/15/2010 1.01941
03/14/2010.............................. 04/15/2010 1.01768
04/14/2010.............................. 05/15/2010 1.01591
05/14/2010.............................. 06/15/2010 1.01412
06/14/2010.............................. 07/15/2010 1.01235
07/14/2010.............................. 08/15/2010 1.01064
08/14/2010.............................. 09/15/2010 1.00898
09/14/2010.............................. 10/15/2010 1.00738
10/14/2010.............................. 11/15/2010 1.00584
11/14/2010.............................. 12/15/2010 1.00434
12/14/2010.............................. 01/15/2011 1.00288
01/14/2011.............................. 02/15/2011 1.00143
02/14/2011.............................. 03/15/2011 1.00000
03/14/2011.............................. 04/15/2011 0.99860
------------------------------------------------------------------------
For example, the midpoint of a cost reporting period beginning
January 1, 2010, and ending December 31, 2010, is June 30, 2010. An
adjustment factor of 1.01235 would be applied to the wages of a
hospital with such a cost reporting period.
Using the data as described above and in the FY 2013 IPPS/LTCH PPS
final rule, the proposed FY 2014 national average hourly wage
(unadjusted for occupational mix) is $38.2384. The proposed FY 2014
Puerto Rico overall average hourly wage (unadjusted for occupational
mix) is $16.4873.
F. Proposed Occupational Mix Adjustment to the Proposed FY 2014 Wage
Index
As stated earlier, section 1886(d)(3)(E) of the Act provides for
the collection of data every 3 years on the occupational mix of
employees for each short-term, acute care hospital participating in the
Medicare program, in order to construct an occupational mix adjustment
to the wage index, for application beginning October 1, 2004 (the FY
2005 wage index). The purpose of the occupational mix adjustment is to
control for the effect of hospitals' employment choices on the wage
index. For example, hospitals may choose to employ different
combinations of registered nurses, licensed practical nurses, nursing
aides, and medical assistants for the purpose of providing nursing care
to their patients. The varying labor costs associated with these
choices reflect hospital management decisions rather than geographic
differences in the costs of labor.
1. Development of Data for the Proposed FY 2014 Occupational Mix
Adjustment Based on the 2010 Occupational Mix Survey
As provided for under section 1886(d)(3)(E) of the Act, we collect
data every 3 years on the occupational mix of employees for each short-
term, acute care hospital participating in the Medicare program.
As discussed in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53367
through 53368), the occupational mix adjustment to the FY 2013 wage
index was based on data collected on the 2010 Medicare Wage Index
Occupational Mix Survey (Form CMS-10079 (2010)). For the FY 2014 wage
index, we are proposing to again use occupational mix data collected on
the 2010 survey to compute the occupational mix adjustment for FY 2014.
We are including data for 3,188 hospitals that also have wage data
included in the proposed FY 2014 wage index.
2. New 2013 Occupational Mix Survey for the FY 2016 Wage Index
As stated earlier, section 304(c) of Public Law 106-554 amended
section 1886(d)(3)(E) of the Act to require CMS to collect data every 3
years on the occupational mix of employees for each short-term, acute
care hospital participating in the Medicare program. We used
occupational mix data collected on the 2010 survey to compute the
occupational mix adjustment for FY 2013 and the proposed FY 2014 wage
index associated with this proposed rule. We also plan to use the 2010
survey data for the FY 2015 wage index. Therefore, a new measurement of
occupational mix will be required for FY 2016.
On December 7, 2012, we published in the Federal Register a notice
soliciting comments on the proposed 2013 Medicare Wage Index
Occupational Mix Survey (77 FR 73032 through 73033). The new 2013
survey includes the same data elements and definitions as the 2010
survey and
[[Page 27555]]
provides for the collection of hospital-specific wages and hours data
for nursing employees for calendar year 2013 (that is, payroll periods
ending between January 1, 2013 and December 31, 2013). The comment
period for the notice ended on February 5, 2013. After considering the
public comments that we received on the December 2012 notice, we made a
few minor editorial changes and published the 2013 survey in the
Federal Register on February 28, 2013 (78 FR 13679). This survey is
pending OMB review, and is available on the CMS Web site at: http://www.cms.hhs.gov/PaperworkReductionActof1995 by clicking on ``PRA
Listings.'' (The OMB control number for this collection of information
is 0938-0907.) Hospitals are required to submit their completed 2013
surveys to their fiscal intermediaries/MACs by July 1, 2014. The
preliminary, unaudited 2013 survey data will be released afterward,
along with the FY 2012 Worksheet S-3 wage data, for the FY 2016 wage
index review and correction process.
3. Calculation of the Proposed Occupational Mix Adjustment for FY 2014
For FY 2014, we are proposing to calculate the occupational mix
adjustment factor using the same methodology that we used for the FY
2012 and FY 2013 wage indices (76 FR 51582 through 51586, and 77 FR
53367 through 53368, respectively). As a result of applying this
methodology, the proposed FY 2014 occupational mix adjusted national
average hourly wage is $38.2094. The proposed FY 2014 occupational mix
adjusted Puerto Rico-specific average hourly wage is $16.5300.
Because the occupational mix adjustment is required by statute, all
hospitals that are subject to payments under the IPPS, or any hospital
that would be subject to the IPPS if not granted a waiver, must
complete the occupational mix survey, unless the hospital has no
associated cost report wage data that are included in the proposed FY
2014 wage index. For the FY 2010 survey, the response rate was 91.7
percent. In the proposed FY 2014 wage index established in this
proposed rule, we applied proxy data for noncompliant hospitals, new
hospitals, or hospitals that submitted erroneous or aberrant data in
the same manner that we applied proxy data for such hospitals in the FY
2012 wage index occupational mix adjustment (76 FR 51586).
In the FY 2011 IPPS/LTCH PPS proposed rule and final rule (75 FR
23943 and 75 FR 50167, respectively), we stated that, in order to gain
a better understanding of why some hospitals are not submitting the
occupational mix data, we will require hospitals that do not submit
occupational mix data to provide an explanation for not complying. This
requirement was effective beginning with the 2010 occupational mix
survey. We instructed fiscal intermediaries/MACs to continue gathering
this information as part of the FY 2014 wage index desk review process.
We will review these data for future analysis and consideration of
potential penalties for noncompliant hospitals.
G. Analysis and Implementation of the Proposed Occupational Mix
Adjustment and the Proposed FY 2014 Occupational Mix Adjusted Wage
Index
1. Analysis of the Proposed Occupational Mix Adjustment and the
Proposed Occupational Mix Adjusted Wage Index
As discussed in section III.F. of this preamble, for FY 2014, we
are proposing to apply the proposed occupational mix adjustment to 100
percent of the proposed FY 2014 wage index. We calculated the proposed
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 proposed FY 2014 wage
index results in a proposed national average hourly wage of $38.2094
and a proposed Puerto-Rico specific average hourly wage of $16.5300.
After excluding data of hospitals that either submitted aberrant data
that failed critical edits, or that do not have FY 2010 Worksheet S-3,
Parts II and III, cost report data for use in calculating the proposed
FY 2014 wage index, we calculated the proposed FY 2014 wage index using
the occupational mix survey data from 3,188 hospitals. Using the
Worksheet S-3, Parts II and III, cost report data of 3,427 hospitals
and occupational mix survey data from 3,188 hospitals represents a 93.0
percent survey response rate. The proposed FY 2014 national average
hourly wages for each occupational mix nursing subcategory as
calculated in Step 2 of the occupational mix calculation are as
follows:
------------------------------------------------------------------------
Proposed
Occupational mix nursing subcategory average hourly
wage
------------------------------------------------------------------------
National RN............................................ 37.432120148
National LPN and Surgical Technician................... 21.773706724
National Nurse Aide, Orderly, and Attendant............ 15.327583858
National Medical Assistant............................. 17.213605923
National Nurse Category................................ 31.811167234
------------------------------------------------------------------------
The proposed national average hourly wage for the entire nurse
category as computed in Step 5 of the occupational mix calculation is
$31.811167234. 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 43.44
percent, and the national percentage of hospital employees in the all
other occupations category is 56.56 percent. At the CBSA level, the
percentage of hospital employees in the nurse category ranged from a
low of 21.9 percent in one CBSA, to a high of 62.0 percent in another
CBSA.
We compared the proposed FY 2014 occupational mix adjusted wage
indices for each CBSA to the proposed unadjusted wage indices for each
CBSA. As a result of applying the proposed occupational mix adjustment
to the wage data, the proposed wage index values for 204 (52.2 percent)
urban areas and 32 (66.7 percent) rural areas would increase. One
hundred and eighteen (30.2 percent) urban areas would increase by 1
percent or more, and 4 (1.02 percent) urban areas would increase by 5
percent or more. Thirteen (27.1 percent) rural areas would increase by
1 percent or more, and no rural areas would increase by 5 percent or
more. However, the proposed wage index values for 186 (47.6 percent)
urban areas and 16 (33.3 percent) rural areas would decrease. Seventy-
nine (20.2 percent) urban areas would decrease by 1 percent or more,
and 1 urban area would decrease by 5 percent or more (0.26 percent).
Seven (14.6 percent) rural areas would decrease by 1 percent or more,
and no rural areas would decrease by 5 percent or more. The largest
positive impacts are 6.61 percent for an urban area and 2.66
[[Page 27556]]
percent for a rural area. The largest negative impacts are 5.28 percent
for an urban area and 3.17 percent for a rural area. One urban area's
wage index, but no rural area wage indices, would remain unchanged by
application of the proposed occupational mix adjustment. These results
indicate that a larger percentage of rural areas (66.7 percent) would
benefit from the proposed occupational mix adjustment than would urban
areas (52.2 percent). However, approximately one-third (33.3 percent)
of rural CBSAs would still experience a decrease in their proposed wage
indices as a result of the proposed occupational mix adjustment.
2. Proposed Application of the Rural, Imputed, and Frontier Floors
a. Proposed Rural Floor
Section 4410(a) of Public Law 105-33 provides that, for discharges
on or after October 1, 1997, the area wage index applicable to any
hospital that is located in an urban area of a State may not be less
than the area wage index applicable to hospitals located in rural areas
in that State. This provision is referred to as the ``rural floor.''
Section 3141 of Public Law 111-148 also requires that a national budget
neutrality adjustment be applied in implementing the rural floor. In
the proposed FY 2014 wage index associated with this proposed rule and
available on the CMS Web site, we estimated that 434 hospitals would
receive an increase in their FY 2014 proposed wage index due to the
application of the rural floor.
b. Proposed Imputed Floor
In the FY 2005 IPPS final rule (69 FR 49109 through 49111), we
adopted the ``imputed floor'' policy as a temporary 3-year regulatory
measure to address concerns from hospitals in all-urban States that
have argued that they are disadvantaged by the absence of rural
hospitals to set a wage index floor for those States. Since its initial
implementation, we have extended the imputed floor policy three times,
the last of which was adopted in the FY 2013 IPPS/LTCH PPS final rule
and is set to expire on September 30, 2014 (we refer readers to the
discussion in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53368 through
53369) and to our regulations at 42 CFR 412.64(h)(4)). There are
currently two all-urban States, New Jersey and Rhode Island, that have
a range of wage indices assigned to hospitals in the State, including
through reclassification or redesignation (we refer readers to
discussions of geographic reclassifications and redesignations in
section III.H. of this preamble). However, as we explain below, the
method as of FY 2012 for computing the imputed floor, which we will
refer to as the original methodology, benefitted only New Jersey, and
not Rhode Island.
In computing the imputed floor for an all-urban State under the
original methodology, we calculated the ratio of the lowest-to-highest
CBSA wage index for each all-urban State (that is, New Jersey and Rhode
Island) as well as the average of the ratios of lowest-to-highest CBSA
wage indices of those all-urban States. We compared the State's own
ratio to the average ratio for all-urban States and whichever is higher
was multiplied by the highest CBSA wage index value in the State--the
product of which established the imputed floor for the State. Rhode
Island has only one CBSA (Providence-New Bedford-Fall River, RI-MA);
therefore, Rhode Island's own ratio equals 1.0, and its imputed floor
was equal to its original CBSA wage index value. Conversely, New Jersey
has 10 CBSAs. Because the average ratio of New Jersey and Rhode Island
was higher than New Jersey's own ratio, the original methodology
provided a benefit for New Jersey, but not for Rhode Island.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53368 through
53369), for the FY 2013 wage index, the final year of the extension of
the imputed floor policy under Sec. 412.64(h)(4), we did not make any
changes to the original methodology and we finalized a proposed
alternative, temporary methodology for computing the imputed floor wage
index to address the concern that the then-current imputed floor
methodology guaranteed a benefit for one all-urban State with multiple
wage indices but could not benefit the other. The alternative
methodology for calculating the imputed floor was established using
data from the application of the rural floor policy for FY 2013. We
first determined the average percentage difference between the post-
reclassified, pre-floor area wage index and the post-reclassified,
rural floor wage index (without rural floor budget neutrality applied)
for all CBSAs receiving the rural floor. (Table 4D associated with the
FY 2013 rule, which is available on the CMS Web site, included the
CBSAs receiving a State's rural floor wage index.) The lowest post-
reclassified wage index assigned to a hospital in an all-urban State
having a range of such values would then be increased by this factor,
the result of which established the State's alternative imputed floor.
We refer to this methodology as the alternative methodology. We also
adopted a policy that, for discharges on or after October 1, 2012, and
before October 1, 2013, the minimum wage index value for the State is
the higher of the value determined under the original methodology or
the value computed using the alternative methodology. We amended Sec.
412.64(h)(4) of the regulations to add new paragraph (vi) to
incorporate the finalized alternative methodology policies, and to make
conforming references in paragraph (v).
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. For FY 2014, we are
proposing to extend the imputed floor policy (both the original
methodology and the alternative methodology) for one additional year,
through September 30, 2014, while we continue to explore potential wage
index reforms. We are proposing to revise the regulations at Sec.
412.64(h)(4) to reflect the proposed 1-year extension. We are inviting
public comments regarding the 1-year extension of the imputed floor.
The wage index and impact tables associated with this FY 2014
proposed rule that are available on the CMS Web site include the
application of the proposed imputed floor policy at Sec. 412.64(h)(4)
and a proposed national budget neutrality adjustment for the proposed
rural floor (which includes the proposed imputed floor). There are 35
hospitals in New Jersey that would receive an increase in their FY 2014
wage index due to the imputed floor policy. The proposed wage index and
impact tables for this proposed rule also reflect the application of
the alternative methodology for computing the imputed floor, which will
benefit four hospitals in Rhode Island.
c. Proposed Frontier Floor
Section 10324 of Public Law 111-148 requires that hospitals in
frontier States cannot be assigned a wage index of less than 1.0000 (we
refer readers to regulations at 42 CFR 412.64(m) and to a discussion of
the implementation of this provision in the FY 2011 IPPS/LTCH PPS final
rule (75 FR 50160 through 50161). Forty-six hospitals would receive the
frontier floor value of 1.0000 for their proposed FY 2014 wage index in
this proposed rule. These hospitals are located in Montana, North
Dakota, South Dakota, and Wyoming. Although Nevada is also defined as a
frontier State, its proposed FY 2014 rural floor value of 1.1503 is
greater than 1.0000, and therefore no Nevada hospitals would receive a
frontier floor
[[Page 27557]]
value for their proposed FY 2014 wage index.
The areas affected by the proposed rural, imputed, and frontier
floor policies for the proposed FY 2014 wage index are identified in
Table 4D associated with this proposed rule and available on the CMS
Web site.
3. Proposed FY 2014 Wage Index Tables
The proposed wage index values for FY 2014 (except those for
hospitals receiving wage index adjustments under section 1886(d)(13) of
the Act), included in Tables 4A, 4B, 4C, and 4F, available on the CMS
Web site, include the proposed occupational mix adjustment, geographic
reclassification or redesignation as discussed in section III.H. of the
preamble of this proposed rule, and the application of the rural,
imputed, and frontier State floors as discussed in section III.G.2. of
the preamble of this proposed rule.
Tables 3A and 3B, available on the CMS Web site, list the 3-year
average hourly wage for each labor market area before the redesignation
or reclassification of hospitals based on FYs 2008, 2009, and 2010 cost
reporting periods. Table 3A lists these data for urban areas, and Table
3B lists these data for rural areas. In addition, Table 2, which is
available on the CMS Web site, includes the adjusted average hourly
wage for each hospital from the FY 2008 and FY 2009 cost reporting
periods, as well as the FY 2010 period used to calculate the proposed
FY 2014 wage index. The 3-year averages are calculated by dividing the
sum of the dollars (adjusted to a common reporting period using the
method described 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 proposed average hourly wages in
Tables 2, 3A, and 3B, which are available on the CMS Web site, include
the proposed occupational mix adjustment. The proposed wage index
values in Tables 4A, 4B, 4C, and 4D also include the proposed national
rural floor budget neutrality adjustment (which includes the proposed
imputed floor). The proposed wage index values in Table 2 also include
the proposed out-migration adjustment for eligible hospitals.
H. Revisions to the Wage Index Based on Hospital Redesignations and
Reclassifications
1. General Policies and Effects of Reclassification and Redesignation
Under section 1886(d)(10) of the Act, the MGCRB considers
applications by hospitals for geographic reclassification for purposes
of payment under the IPPS. Hospitals must apply to the MGCRB to
reclassify not later than 13 months prior to the start of the fiscal
year for which reclassification is sought (generally by September 1).
Generally, hospitals must be proximate to the labor market area to
which they are seeking reclassification and must demonstrate
characteristics similar to hospitals located in that area. The MGCRB
issues its decisions by the end of February for reclassifications that
become effective for the following fiscal year (beginning October 1).
The regulations applicable to reclassifications by the MGCRB are
located in 42 CFR 412.230 through 412.280. (We refer readers to a
discussion in the FY 2002 IPPS final rule (66 FR 39874 and 39875)
regarding how the MGCRB defines mileage for purposes of the proximity
requirements.) The general policies for reclassifications and
redesignations that we are proposing for FY 2014, and the policies for
the effects of hospitals' reclassifications and redesignations on the
wage index, are the same as those discussed in the FY 2012 IPPS/LTCH
PPS final rule for the FY 2012 final wage index (76 FR 51595 and
51596). Also, in the FY 2012 IPPS/LTCH PPS final rule, we discussed the
effects on the wage index of urban hospitals reclassifying to rural
areas under 42 CFR 412.103. Hospitals that are geographically located
in States without any rural areas are ineligible to apply for rural
reclassification pursuant to 42 CFR 412.103.
2. FY 2014 MGCRB Reclassifications
a. FY 2014 Reclassification Requirements and Approvals
Under section 1886(d)(10) of the Act, the MGCRB considers
applications by hospitals for geographic reclassification for purposes
of payment under the IPPS. The specific procedures and rules that apply
to the geographic reclassification process are outlined in regulations
under 42 CFR 412.230 through 412.280.
At the time this proposed rule was developed, the MGCRB had
completed its review of FY 2014 reclassification requests. Based on
such reviews, there were 332 hospitals approved for wage index
reclassifications by the MGCRB for FY 2014. Because MGCRB wage index
reclassifications are effective for 3 years, for FY 2014, hospitals
reclassified during FY 2012 or FY 2013 are eligible to continue to be
reclassified to a particular labor market area based on such prior
reclassifications. There were 249 hospitals approved for wage index
reclassifications in FY 2012, and 192 hospitals approved for wage index
reclassifications in FY 2013. Of all the hospitals approved for
reclassification for FY 2012, FY 2013, and FY 2014, based upon the
review at the time of this proposed rule, 773 hospitals are in a
reclassification status for FY 2014.
Under the regulations at 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 through 39888) and the FY 2003 IPPS final rule (67 FR
50065 through 50066). Additional discussion on withdrawals and
terminations, and clarifications regarding reinstating
reclassifications and ``fallback'' reclassifications, were included in
the FY 2008 IPPS final rule (72 FR 47333).
Changes to the wage index that result from withdrawals of requests
for reclassification, terminations, wage index corrections, appeals,
and the Administrator's review process for FY 2014 will be incorporated
into the wage index values published in the FY 2014 IPPS/LTCH PPS final
rule. These changes affect not only the wage index value for specific
geographic areas, but also the wage index value redesignated/
reclassified hospitals receive; that is, whether they receive the wage
index that includes the data for both the hospitals already in the area
and the redesignated/reclassified hospitals. Further, the wage index
value for the area from which the hospitals are redesignated/
reclassified may be affected.
b. Applications for Reclassifications for FY 2015
Applications for FY 2015 reclassifications are due to the MGCRB by
September 3, 2013 (the first working day of September 2013). We note
that this is also the deadline for canceling a previous wage index
reclassification withdrawal or termination under 42 CFR 412.273(d). As
mentioned in section III.B. of the preamble of this proposed rule,
although OMB has
[[Page 27558]]
issued revisions on February 28, 2013 to its area delineations, we are
not proposing to adopt those revisions for the FY 2014 wage index, and
we will not be adopting the revisions before the September 3, 2013
deadline for applications for the FY 2015 wage index. Therefore,
hospitals must apply for reclassifications based on the delineations we
are using for FY 2014. Applications and other information about MGCRB
reclassifications may be obtained, beginning in mid-July 2013, 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.
(We note that, as mentioned in section III.B. of the preamble of this
proposed rule, although OMB has issued revisions on February 28, 2013,
to its area delineations based on 2010 census data, we are not
proposing to adopt these revisions for the FY 2014 wage index.)
Hospitals located in these counties have been known as ``Lugar''
hospitals and the counties themselves are often referred to as
``Lugar'' counties. The FY 2014 chart with the listing of the rural
counties containing the hospitals designated as urban under section
1886(d)(8)(B) of the Act is available via the Internet on the CMS Web
site.
4. Hospitals Redesignated Under Section 1886(d)(8)(B) of the Act
Seeking Reclassification by the MGCRB
As in the past, hospitals redesignated under section 1886(d)(8)(B)
of the Act are also eligible to be reclassified to a different area by
the MGCRB. Using Table 4C associated with this proposed rule (which is
available via the Internet on the CMS Web site), affected hospitals may
compare the reclassified wage index for the labor market area into
which they would be reclassified by the MGCRB to the reclassified wage
index for the area to which they are redesignated under section
1886(d)(8)(B) of the Act. Hospitals may withdraw from an MGCRB
reclassification within 45 days of the publication of this FY 2014
proposed rule. (We refer readers to the FY 2012 IPPS/LTCH PPS final
rule (76 FR 51598 through 51599) for the procedural rules and
requirements for a hospital that is redesignated under section
1886(d)(8)(B) of the Act and seeking reclassification under the MGCRB,
as well as our policy of measuring the urban area, exclusive of the
Lugar County, for purposes of meeting proximity requirements.) We treat
New England deemed counties in a manner consistent with how we treat
Lugar counties. (We refer readers to the FY 2008 IPPS final rule with
comment period (72 FR 47337 through 47338) for a discussion of this
policy.)
5. Waiving Lugar Redesignation for the Out-Migration Adjustment
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51599 through
51600), we adopted the policy that, beginning with FY 2012, an eligible
hospital that waives its Lugar status in order to receive the out-
migration adjustment has effectively waived its deemed urban status
and, thus, is rural for all purposes under the IPPS, including being
considered rural for the DSH payment adjustment, effective for the
fiscal year in which the hospital receives the out-migration
adjustment. (We refer readers to a discussion of DSH payment adjustment
under section V.E. of the preamble of this proposed rule.)
In addition, we adopted a minor procedural change that would allow
a Lugar hospital that qualifies for and accepts the out-migration
adjustment (through written notification to CMS within the requisite
number of days from the publication of the proposed rule \24\) 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.
---------------------------------------------------------------------------
\24\ Hospitals generally have 45 days from publication of the
proposed rule to request an out-migration adjustment in lieu of the
section 1886(d)(8) deemed urban status.
---------------------------------------------------------------------------
We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR
51599 through 51600) for a detailed discussion of the policy and
process for waiving Lugar status for the out-migration adjustment.
I. Proposed FY 2014 Wage Index Adjustment Based on Commuting Patterns
of Hospital Employees
In accordance with the broad discretion granted to the Secretary
under section 1886(d)(13) of the Act, as added by section 505 of Public
Law 108-173, beginning with FY 2005, we established a process to make
adjustments to the hospital wage index based on commuting patterns of
hospital employees (the ``out-migration'' adjustment). The process,
outlined in the FY 2005 IPPS final rule (69 FR 49061), provides for an
increase in the wage index for hospitals located in certain counties
that have a relatively high percentage of hospital employees who reside
in the county but work in a different county (or counties) with a
higher wage index. The proposed FY 2014 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) of the Act
to have waived the out-migration adjustment, in the FY 2012 IPPS/LTCH
PPS final rule (76 FR 51601 through 51602).) Table 4J, which is
available via the Internet on the CMS Web site, lists the proposed out-
migration adjustments for the proposed FY 2014 wage index.
J. Process for Requests for Wage Index Data Corrections
The preliminary, unaudited Worksheet S-3 wage data and occupational
mix survey data files for the proposed FY 2014 wage index were made
available on October 3, 2012, through the Internet on the CMS Web site
at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY_2014_Wage_Index_Home_Page.html.
In the interest of meeting the data needs of the public, beginning
with the proposed FY 2009 wage index, we post
[[Page 27559]]
an additional public use file on our Web site that reflects the actual
data that are used in computing the proposed wage index. The release of
this new file does not alter the current wage index process or
schedule. We notify the hospital community of the availability of these
data as we do with the current public use wage data files through our
Hospital Open Door forum. We encourage hospitals to sign up for
automatic notifications of information about hospital issues and the
scheduling of the Hospital Open Door forums at the CMS Web site at:
http://www.cms.gov/Outreach-and-Education/Outreach/OpenDoorForums/index.html.
In a memorandum dated October 19, 2012, we instructed all fiscal
intermediaries/MACs to inform the IPPS hospitals they service of the
availability of the wage index data files and the process and timeframe
for requesting revisions (including the specific deadlines listed
below). We also instructed the fiscal intermediaries/MACs to advise
hospitals that these data were also made available directly through
their representative hospital organizations.
If a hospital wished to request a change to its data as shown in
the October 3, 2012 wage and occupational mix data files, the hospital
was to submit corrections along with complete, detailed supporting
documentation to its fiscal intermediary/MAC by December 10, 2012. (We
note that this date was originally December 3, 2012. However, in a
memorandum dated October 25, 2012, we instructed all fiscal
intermediaries/MACs to inform the IPPS hospitals they service that we
extended the deadline to December 10, 2012.) Hospitals were notified of
this deadline and of all other deadlines and requirements, including
the requirement to review and verify their data as posted in the
preliminary wage index data files on the Internet, through the October
19, 2012 memorandum referenced above.
In the October 19, 2012 memorandum, we also specified that a
hospital requesting revisions to its occupational mix survey data was
to copy its record(s) from the CY 2010 occupational mix preliminary
files posted to the CMS Web site in October, highlight the revised
cells on its spreadsheet, and submit its spreadsheet(s) and complete
documentation to its fiscal intermediary/MAC no later than December 10,
2012.
The fiscal intermediaries/MACs notified the hospitals by mid-
February 2013 of any changes to the wage index data as a result of the
desk reviews and the resolution of the hospitals' early-December
revision requests. The fiscal intermediaries/MACs also submitted the
revised data to CMS by mid-February 2013. CMS published the proposed
wage index public use files that included hospitals' revised wage index
data on February 21, 2013. Hospitals had until March 4, 2013, to submit
requests to the fiscal intermediaries/MACs for reconsideration of
adjustments made by the fiscal intermediaries/MACs as a result of the
desk review, and to correct errors due to CMS' or the fiscal
intermediary's (or, if applicable, the MAC's) mishandling of the wage
index data. Hospitals also were required to submit sufficient
documentation to support their requests.
After reviewing requested changes submitted by hospitals, fiscal
intermediaries/MACs were required to transmit any additional revisions
resulting from the hospitals' reconsideration requests by April 10,
2013. The deadline for a hospital to request CMS intervention in cases
where the hospital disagreed with the fiscal intermediary's (or, if
applicable, the MAC's) policy interpretations was April 17, 2013.
Hospitals should examine Table 2, which is listed in section VI. of
the Addendum to this proposed rule and available via the Internet on
the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY_2014_Wage_Index_Home_Page.html. Table 2 contains each hospital's adjusted
average hourly wage used to construct the wage index values for the
past 3 years, including the FY 2010 data used to construct the proposed
FY 2014 wage index. We note that the hospital average hourly wages
shown in Table 2 only reflect changes made to a hospital's data that
were transmitted to CMS by March 4, 2013.
We will release the final wage index data public use files in early
May 2013 on the Internet at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY_2014_Wage_Index_Home_Page.html. The May 2013 public use files are made
available solely for the limited purpose of identifying any potential
errors made by CMS or the fiscal intermediary/MAC in the entry of the
final wage index data that resulted from the correction process
described above (revisions submitted to CMS by the fiscal
intermediaries/MACs by April 10, 2013). If, after reviewing the May
2013 final public use files, a hospital believes that its wage or
occupational mix data are incorrect due to a fiscal intermediary/MAC or
CMS error in the entry or tabulation of the final data, the hospital
should send a letter to both its fiscal intermediary/MAC and CMS that
outlines why the hospital believes an error exists and provide all
supporting information, including relevant dates (for example, when it
first became aware of the error). CMS and the fiscal intermediaries
(or, if applicable, the MACs) must receive these requests no later than
June 3, 2013.
Each request also must be sent to the fiscal intermediary/MAC. The
fiscal intermediary/MAC will review requests upon receipt and contact
CMS immediately to discuss any findings.
After the release of the May 2013 wage index data files, changes to
the wage and occupational mix data will only be 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 will approve the following types of requests:
Requests for wage index data corrections that were
submitted too late to be included in the data transmitted to CMS by
fiscal intermediaries or the MACs on or before April 10, 2013.
Requests for correction of errors that were not, but could
have been, identified during the hospital's review of the February 21,
2013 wage index public use files.
Requests to revisit factual determinations or policy
interpretations made by the fiscal intermediary or the MAC or CMS
during the wage index data correction process.
Verified corrections to the wage index data received timely by CMS
and the fiscal intermediaries or the MACs (that is, by June 3, 2013)
will be incorporated into the final wage index in the FY 2014 IPPS/LTCH
PPS final rule, which will be effective October 1, 2013.
We created the processes described above to resolve all substantive
wage index data correction disputes before we finalize the wage and
occupational mix data for the FY 2014 payment rates. Accordingly,
hospitals that do 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
[[Page 27560]]
data revision. We refer readers also to the FY 2000 IPPS final rule (64
FR 41513) for a discussion of the parameters for appeals to the PRRB
for wage index data corrections.
Again, we believe the wage index data correction process described
above provides hospitals with sufficient opportunity to bring errors in
their wage and occupational mix data to the fiscal intermediary's (or,
if applicable, the MAC's) attention. Moreover, because hospitals have
access to the final wage index data by early May 2013, they have the
opportunity to detect any data entry or tabulation errors made by the
fiscal intermediary or the MAC or CMS before the development and
publication of the final FY 2014 wage index by August 2013, and the
implementation of the FY 2014 wage index on October 1, 2013. If
hospitals avail themselves of the opportunities afforded to provide and
make corrections to the wage and occupational mix data, the wage index
implemented on October 1 should be accurate. Nevertheless, in the event
that errors are identified by hospitals and brought to our attention
after June 3, 2013, we retain the right to make midyear changes to the
wage index under very limited circumstances.
Specifically, in accordance with 42 CFR 412.64(k)(1) of our
existing regulations, we make midyear corrections to the wage index for
an area only if a hospital can show that: (1) The fiscal intermediary
or the MAC or CMS made an error in tabulating its data; and (2) the
requesting hospital could not have known about the error or did not
have an opportunity to correct the error, before the beginning of the
fiscal year. For purposes of this provision, ``before the beginning of
the fiscal year'' means by the June 3 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 through 47387 and
47485), we revised 42 CFR 412.64(k)(2) to specify that, effective on
October 1, 2005, that is, beginning with the FY 2006 wage index, a
change to the wage index can be made retroactive to the beginning of
the Federal fiscal year only when CMS determines all of the following:
(1) The fiscal intermediary (or, if applicable, the MAC) or CMS made an
error in tabulating data used for the wage index calculation; (2) the
hospital knew about the error and requested that the fiscal
intermediary (or, if applicable, the MAC) and CMS correct the error
using the established process and within the established schedule for
requesting corrections to the wage index data, before the beginning of
the fiscal year for the applicable IPPS update (that is, by the June 3,
2013 deadline for the FY 2014 wage index); and (3) CMS agreed before
October 1 that the fiscal intermediary (or, if applicable, the MAC) or
CMS made an error in tabulating the hospital's wage index data and the
wage index should be corrected.
In those circumstances where a hospital requested a correction to
its wage index data before CMS calculated the final wage index (that
is, by the June 3, 2013 deadline), 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 Proposed FY 2014 Wage Index
Section 1886(d)(3)(E) of the Act directs the Secretary to adjust
the proportion of the national prospective payment system base payment
rates that are attributable to wages and wage-related costs by a factor
that reflects the relative differences in labor costs among geographic
areas. It also directs the Secretary to estimate from time to time the
proportion of hospital costs that are labor-related: ``The Secretary
shall adjust the proportion, (as estimated by the Secretary from time
to time) of hospitals' costs which are attributable to wages and wage-
related costs, of the DRG prospective payment rates[hellip].'' We refer
to the portion of hospital costs attributable to wages and wage-related
costs as the labor-related share. The labor-related share of the
prospective payment rate is adjusted by an index of relative labor
costs, which is referred to as the wage index.
Section 403 of Public Law 108-173 amended section 1886(d)(3)(E) of
the Act to provide that the Secretary must employ 62 percent as the
labor-related share unless this ``would result in lower payments to a
hospital than would otherwise be made.'' However, this provision of
Public Law 108-173 did not change the legal requirement that the
Secretary estimate ``from time to time'' the proportion of hospitals'
costs that are ``attributable to wages and wage-related costs.'' Thus,
hospitals receive payment based on either a 62-percent labor-related
share, or the labor-related share estimated from time to time by the
Secretary, depending on which labor-related share results in a higher
payment.
In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43850
through 43857), we rebased and revised the IPPS market basket and the
labor-related share, using FY 2006 as the base year. The labor-related
share for FY 2010 through FY 2013 is 68.8 percent.
For FY 2014, as described in section IV. of the preamble of this
proposed rule, we are proposing to rebase and revise the IPPS market
basket using FY 2010 as the base year. Using the proposed FY 2010-based
IPPS market basket, we also are proposing to recalculate the labor-
related share for discharges occurring on or after October 1, 2013. As
discussed in Appendix A of this proposed rule, we are proposing this
revised and rebased labor-related share in a budget neutral manner.
However, consistent with section 1886(d)(3)(E) of the Act, we are not
taking into account the additional payments that would be made as a
[[Page 27561]]
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. As described in section IV. of the preamble of this proposed
rule, we are proposing to include in the labor-related share the
national average proportion of operating costs that are attributable to
wages and salaries, employee benefits, contract labor, the labor-
related portion of professional fees, administrative and facilities
support services, and all other labor-related services as measured in
the proposed IPPS market basket, as based on FY 2010. Therefore, for FY
2014, we are proposing to use a labor-related share of 69.6 percent for
discharges occurring on or after October 1, 2013. Tables 1A and 1B,
which are published in section VI. of the Addendum to this proposed
rule and are available via the Internet, reflect this proposed 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 FY 2014, for all IPPS
hospitals whose wage indices are less than 1.0000, we are proposing to
apply the wage index to a labor-related share of 62 percent of the
national standardized amount. For all IPPS hospitals whose wage indices
are greater than 1.0000, for FY 2014, we are proposing to apply the
wage index to a labor-related share of 69.6 percent of the national
standardized amount. We note that, for Puerto Rico hospitals, the
national labor-related share is 62 percent because the national wage
index for all Puerto Rico hospitals is less than 1.0.
In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43850
through 43856), we also rebased and revised the labor-related share for
the Puerto Rico-specific standardized amounts using FY 2006 as a base
year. We finalized a labor-related share for the Puerto Rico-specific
standardized amounts for FY 2010 through FY 2013 of 62.1 percent. As
described in section IV. of the preamble of this proposed rule, for FY
2014, we also are proposing to rebase and revise the labor-related
share for the Puerto Rico-specific standardized amounts using FY 2010
as a base year. For FY 2014, we are proposing a labor-related share for
the Puerto Rico-specific standardized amounts of 63.2 percent for
discharges occurring on or after October 1, 2013. Consistent with our
methodology for determining the national labor-related share, we added
the Puerto Rico-specific relative weights for wages and salaries,
employee benefits, contract labor, with the national proportion of
costs for the labor-related portion of professional fees,
administrative and facilities support services, and all other labor-
related services to determine the labor-related share. Puerto Rico
hospitals are paid based on 75 percent of the national standardized
amounts and 25 percent of the Puerto Rico-specific standardized
amounts. For FY 2014, we are proposing that the labor-related share of
a hospital's Puerto Rico-specific rate will be either the Puerto Rico-
specific labor-related share of 63.2 percent or 62 percent, depending
on which results in higher payments to the hospital. If the hospital
has a Puerto Rico-specific wage index of greater than 1.0 for FY 2014,
we will set the hospital's rates using a labor-related share of 63.2
percent for the 25 percent portion of the hospital's payment determined
by the Puerto Rico standardized amounts because this amount will result
in higher payments. Conversely, a hospital with a Puerto Rico-specific
wage index of less than 1.0 for FY 2014 will be paid using the Puerto
Rico-specific labor-related share of 62 percent of the Puerto Rico-
specific rates because the lower labor-related share will result in
higher payments. The proposed Puerto Rico labor-related share of 63.2
percent for FY 2014 is reflected in Table 1C, which is published in
section VI. of the Addendum to this proposed rule and available via the
Internet.
IV. Proposed Rebasing and Revision of the Hospital Market Baskets for
Acute Care Hospitals
A. Background
Effective for cost reporting periods beginning on or after July 1,
1979, we developed and adopted a hospital input price index (that is,
the hospital market basket for operating costs). Although ``market
basket'' technically describes the mix of goods and services used in
providing hospital care, this term is also commonly used to denote the
input price index (that is, cost category weights and price proxies
combined) derived from that market basket. Accordingly, the term
``market basket'' as used in this document refers to the hospital input
price index.
The percentage change in the market basket reflects the average
change in the price of goods and services hospitals purchase in order
to provide inpatient care. We first used the market basket to adjust
hospital cost limits by an amount that reflected the average increase
in the prices of the goods and services used to provide hospital
inpatient care. This approach linked the increase in the cost limits to
the efficient utilization of resources.
Since the inception of the IPPS, the projected change in the
hospital market basket has been the integral component of the update
factor by which the prospective payment rates are updated every year.
An explanation of the hospital market basket used to develop the
prospective payment rates was published in the Federal Register on
September 1, 1983 (48 FR 39764). We also refer readers to the FY 2010
IPPS/RY 2010 LTCH PPS final rule (74 FR 43843) in which we discussed
the most recent previous rebasing of the hospital input price index.
The hospital market basket is a fixed-weight, Laspeyres-type price
index. A Laspeyres-type price index measures the change in price, over
time, of the same mix of goods and services purchased in the base
period. Any changes in the quantity or mix of goods and services (that
is, intensity) purchased over time are not measured.
The index itself is constructed in three steps. First, a base
period is selected (in this proposed rule, we are proposing to use FY
2010 as the base period) and total base period expenditures are
estimated for a set of mutually exclusive and exhaustive spending
categories, with the proportion of total costs that each category
represents being calculated. These proportions are called ``cost
weights'' or ``expenditure weights.'' Second, each expenditure category
is matched to an appropriate price or wage variable, referred to as a
``price proxy.'' In almost every instance, these price proxies are
derived from publicly available statistical series that are published
on a consistent schedule (preferably at least on a quarterly basis).
Finally, the expenditure weight for each cost category is multiplied by
the level of its respective price proxy. The sum of these products
(that is, the expenditure weights multiplied by their price index
levels) for all cost categories yields the composite index level of the
market basket in a given period. Repeating this step for other periods
produces a series of market basket levels over time. Dividing an index
level for a given period by an index level for an earlier period
produces a rate of growth in the input price index over that timeframe.
As noted above, the market basket is described as a fixed-weight
index
[[Page 27562]]
because it represents the change in price over time of a constant mix
(quantity and intensity) of goods and services needed to provide
hospital services. The effects on total expenditures resulting from
changes in the mix of goods and services purchased subsequent to the
base period are not measured. For example, a hospital hiring more
nurses to accommodate the needs of patients would increase the volume
of goods and services purchased by the hospital, but would not be
factored into the price change measured by a fixed-weight hospital
market basket. Only when the index is rebased would changes in the
quantity and intensity be captured, with those changes being reflected
in the cost weights. Therefore, we rebase the market basket
periodically so that the cost weights reflect recent changes in the mix
of goods and services that hospitals purchase (hospital inputs) to
furnish inpatient care between base periods. We last rebased the
hospital market basket cost weights effective for FY 2010 (74 FR
43843), with FY 2006 data used as the base period for the construction
of the market basket cost weights.
B. Rebasing and Revising the IPPS Market Basket
The terms ``rebasing'' and ``revising,'' while often used
interchangeably, actually denote different activities. ``Rebasing''
means moving the base year for the structure of costs of an input price
index (for example, in this proposed rule, we are proposing to shift
the base year cost structure for the IPPS hospital index from FY 2006
to FY 2010). ``Revising'' means changing data sources, or price
proxies, used in the input price index. As published in the FY 2006
IPPS final rule (70 FR 47387), in accordance with section 404 of Public
Law 108-173, CMS determined a new frequency for rebasing the hospital
market basket. We established a rebasing frequency of every 4 years
and, therefore, for the FY 2014 IPPS update, we are proposing to rebase
and revise the IPPS market basket. We are inviting public comments on
our proposed methodology discussed below.
1. Development of Cost Categories and Weights
a. Medicare Cost Reports
The major source of expenditure data for developing the rebased and
revised hospital market basket cost weights is the FY 2010 Medicare
cost reports. These FY 2010 Medicare cost reports are for cost
reporting periods beginning on and after October 1, 2009 and before
October 1, 2010. We are proposing to use FY 2010 as the base year
because we believe that the FY 2010 Medicare cost reports represent the
most recent, complete set of Medicare cost report data available for
IPPS hospitals. As was done in previous rebasings, these cost reports
are from IPPS hospitals only (hospitals excluded from the IPPS and CAHs
are not included) and are based on IPPS Medicare-allowable operating
costs. IPPS Medicare-allowable operating costs are costs that are
eligible to be paid for under the IPPS. For example, the IPPS market
basket excludes home health agency (HHA) costs as these costs would be
paid under the HHA PPS and, therefore, these costs are not IPPS
Medicare-allowable costs.
We are proposing to obtain seven major expenditures or cost
categories for the FY 2010 IPPS market basket from the Medicare cost
reports--the same as in the FY 2006-based hospital market basket: wages
and salaries, employee benefits, contract labor, pharmaceuticals,
professional liability insurance (malpractice), blood and blood
products, and a residual ``all other.'' The proposed cost weights that
were obtained directly from the Medicare cost reports are reported in
Table IV01. We are proposing to then supplement these Medicare cost
report cost weights with information obtained from other data sources
to derive the proposed IPPS market basket cost weights.
Table IV01--Major Cost Categories and Their Respective Cost Weights as
Calculated Directly From the Medicare Cost Reports
------------------------------------------------------------------------
Proposed FY
Major cost categories FY 2006-based 2010-based
market basket market basket
------------------------------------------------------------------------
Wages and salaries...................... 45.156 45.819
Employee benefits....................... 11.873 12.713
Contract labor.......................... 2.598 1.806
Professional Liability Insurance 1.661 1.330
(Malpractice)..........................
Pharmaceuticals......................... 5.380 5.402
Blood and blood products................ 1.078 1.069
All other............................... 32.254 31.861
------------------------------------------------------------------------
From FY 2006 to FY 2010, the wages and salaries and employee
benefits cost weights as calculated directly from the Medicare cost
reports increased by approximately 0.7 and 0.8 percentage point,
respectively, while the contract labor cost weight decreased by 0.8
percentage point. As we did for the FY 2006-based IPPS market basket
(74 FR 43847), we are proposing to allocate contract labor costs to the
wages and salaries and employee benefits cost weights based on their
relative proportions for employed labor under the assumption that
contract labor costs are comprised of both wages and salaries and
employee benefits. The contract labor allocation proportion for wages
and salaries is equal to the wages and salaries cost weight as a
percent of the sum of the wages and salaries cost weight and the
employee benefits cost weight. Using the FY 2010 Medicare cost report
data, this percentage is 78.3 percent; therefore, we are proposing to
allocate approximately 78.3 percent of the contract labor cost weight
to the wages and salaries cost weight. Table IV02 shows the wages and
salaries and employee benefit cost weights after contract labor
allocation for both the FY 2006-based IPPS market basket and the
proposed FY 2010-based IPPS market basket.
[[Page 27563]]
Table IV02--Wages and Salaries and Employee Benefits Cost Weights After
Contract Labor Allocation
------------------------------------------------------------------------
Proposed FY
Major cost categories FY 2006-based 2010-based
market basket market basket
------------------------------------------------------------------------
Wages and salaries...................... 47.213 47.233
Employee benefits....................... 12.414 13.105
------------------------------------------------------------------------
After the allocation of contract labor, the proposed FY 2010-based
wages and salaries cost weight is relatively similar to the FY 2006-
based wages and salaries cost weight while the proposed FY 2010-based
employee benefits cost weight increased 0.7 percentage point. This is
primarily a result of an increase in benefits costs relative to wages
and salaries costs from the Medicare cost report data for employed
workers; in 2006, the ratio of the employee benefits cost weight to the
wages and salaries cost weight was 26.3 percent while in 2010, this
ratio increased to 27.8 percent.
b. Other Data Sources
In addition to the data from the Medicare cost reports, the other
data source we are proposing to use to develop the FY 2010-based IPPS
market basket cost weights is the 2002 Benchmark Input-Output (I-O)
Tables created by the Bureau of Economic Analysis (BEA), U.S.
Department of Commerce. We are proposing to use the 2002 BEA Benchmark
I-O data to disaggregate the ``all other'' (residual) cost category
(31.861 percent) into more detailed hospital expenditure category
shares. The BEA Benchmark I-O accounts provide the most detailed
information on the goods and services purchased by an industry, which
allows for a more detailed disaggregation of expenses in the market
basket for which we can then proxy the appropriate price inflation.
The BEA Benchmark I-O data are generally scheduled for publication
every 5 years. The most recent data available are for 2002. BEA also
produces Annual I-O estimates; however, the 2002 Benchmark I-O data
represent a much more comprehensive and detailed set of data that are
derived from the 2002 Economic Census. In the FY 2010 IPPS/RY 2010 LTCH
PPS final rule (74 FR 43845), we used the 2002 Benchmark I-O data (aged
to FY 2006) for the FY 2006-based IPPS market basket, to be effective
for FY 2010. Because BEA has not yet released new Benchmark I-O data,
and we believe the data to be comprehensive and complete as indicated
above, we are currently proposing to use the 2002 Benchmark I-O data in
the FY 2010-based IPPS market basket.
Therefore, instead of using the less detailed, less accurate Annual
I-O data, we are proposing to age the 2002 Benchmark I-O data forward
to FY 2010. The methodology we are proposing to use to age the data
forward involves applying the annual price changes from the respective
price proxies to the appropriate cost categories. We repeat this
practice for each year. We also are proposing that, if more recent BEA
benchmark I-O data for 2007 is released between the proposed and final
rule with sufficient time to incorporate such data into the final rule,
we would incorporate these data into the FY 2010-based IPPS market
basket for the final rule. The 2007 BEA I-O data is expected to be
released in the summer of 2013.
The ``all other'' cost category expenditure shares are determined
as being equal to each category's proportion to total ``all other''
expenditures based on the aged 2002 Benchmark I-O data. For instance,
if the cost for telephone services represented 10 percent of the sum of
the ``all other'' Benchmark I-O hospital expenditures, telephone
services would represent 10 percent of the ``all other'' cost category
of the proposed IPPS market basket.
Following publication of the FY 2010 IPPS/RY 2010 LTCH PPS proposed
rule, and in an effort to provide greater transparency, we posted on
the CMS market basket Web page at: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html an illustrative
spreadsheet that shows how the detailed cost weights in the proposed
rule (that is, those not calculated using Medicare cost reports) were
determined using the 2002 Benchmark I-O data. As stated above, we are
proposing to use the 2007 Benchmark BEA I-O data if available before
the final rule with sufficient time to incorporate such data into the
final rule. We would use the same methodology as described above in
determining the detailed weights in the ``all other'' cost weight.
2. Cost Category Computation
As stated previously, for the proposed FY 2010-based market basket
we are proposing to use data from the Medicare cost reports to derive
seven major cost categories. We are proposing the same detailed cost
categories as the FY 2006-based IPPS market basket. Also, we are not
proposing to change our definition of the labor-related share. As
discussed in more detail below and similar to the previous rebasing, we
classify a cost category as labor-related and include it in the labor-
related share if the cost category is defined as being labor-intensive
and its cost varies with the local labor market.
3. Selection of Price Proxies
After computing the FY 2010 cost weights for the proposed IPPS
market basket, it was necessary to select appropriate wage and price
proxies to reflect the rate of price change for each expenditure
category. We are proposing to use the same price proxies that were used
in the FY 2006-based IPPS market basket. A discussion of our rationale
for selecting these price proxies can be found in the FY 2010 IPPS/RY
2010 LTCH PPS final rule (74 FR 43845).
With the exception of the proxy for professional liability
insurance (PLI), all the proxies we are proposing are based on Bureau
of Labor Statistics (BLS) data and are grouped into one of the
following BLS categories:
Producer Price Indexes--Producer Price Indexes (PPIs)
measure price changes for goods sold in markets other than the retail
market. PPIs are preferable price proxies for goods and services that
hospitals purchase as inputs because PPIs better reflect the actual
price changes encountered by hospitals. For example, we are proposing
to use a PPI for prescription drugs, rather than the Consumer Price
Index (CPI) for prescription drugs, because hospitals generally
purchase drugs directly from a wholesaler. The PPIs that we are
proposing to use measure price changes at the final stage of
production.
Consumer Price Indexes--Consumer Price Indexes (CPIs)
measure change in the prices of final goods and services bought by the
typical consumer. Because they may not
[[Page 27564]]
represent the price faced by a producer, we are proposing to use CPIs
only if an appropriate PPI is not available, or if the expenditures are
more like those faced by retail consumers in general rather than by
purchasers of goods at the wholesale level. For example, the CPI for
food purchased away from home is proposed to be used as a proxy for
contracted food services.
Employment Cost Indexes--Employment Cost Indexes (ECIs)
measure the rate of change in employee wage rates and employer costs
for employee benefits per hour worked. These indexes are fixed-weight
indexes and strictly measure the change in wage rates and employee
benefits per hour. Appropriately, they are not affected by shifts in
employment mix.
We evaluated the price proxies using the criteria of reliability,
timeliness, availability, and relevance. Reliability indicates that the
index is based on valid statistical methods and has low sampling
variability. Timeliness implies that the proxy is published regularly,
preferably at least once a quarter. Availability means that the proxy
is publicly available. Finally, relevance means that the proxy is
applicable and representative of the cost category weight to which it
is applied. We believe the proposed PPIs, CPIs, and ECIs selected meet
these criteria.
Table IV03 below sets forth the proposed FY 2010-based IPPS market
basket, including the cost categories and their respective weights and
price proxies. For comparison purposes, the corresponding FY 2006-based
IPPS market basket cost weights also are listed. A summary outlining
the choice of the various proxies follows the table.
Table IV03--Proposed FY 2010-Based IPPS Hospital Market Basket Cost Categories, Cost Weights, and Price Proxies
Compared to FY 2006-Based IPPS Market Basket Cost Weights
----------------------------------------------------------------------------------------------------------------
FY Proposed FY
2006[dash]based 2010[dash]based
Cost categories hospital hospital Proposed FY 2010-based hospital
market basket market basket market basket price proxies
cost weights cost weights
----------------------------------------------------------------------------------------------------------------
1. Compensation........................... 59.627 60.338 ..................................
A. Wages and Salaries \1\............. 47.213 47.233 ECI for Wages and Salaries,
Civilian Hospital Workers.
B. Employee Benefits \1\.............. 12.414 13.105 ECI for Benefits, Civilian
Hospital Workers.
2. Utilities.............................. 2.180 2.246 ..................................
A. Fuel, Oil, and Gasoline............ 0.418 0.447 PPI for Petroleum Refineries.
B. Electricity........................ 1.645 1.666 PPI for Commercial Electric Power.
C. Water and Sewage................... 0.117 0.133 CPI-U for Water & Sewerage
Maintenance.
3. Professional Liability Insurance....... 1.661 1.330 CMS Professional Liability
Insurance Premium Index.
4. All Other.............................. 36.533 36.086 ..................................
A. All Other Products................. 19.473 19.458 ..................................
(1.) Pharmaceuticals................. 5.380 5.402 PPI for Pharmaceuticals for Human
Use, Prescription.
(2.) Food: Direct Purchases.......... 3.982 4.206 PPI for Processed Foods & Feeds.
(3.) Food: Contract Services......... 0.575 0.578 CPI-U for Food Away From Home.
(4.) Chemicals \2\................... 1.538 1.529 Blend of Chemical PPIs.
(5.) Blood and Blood Products........ 1.078 1.069 PPI for Blood and Organ Banks.
(6.) Medical Instruments............. 2.762 2.577 PPI for Medical, Surgical, and
Personal Aid Devices.
(7.) Rubber and Plastics............. 1.659 1.637 PPI for Rubber & Plastic Products.
(8.) Paper and Printing Products..... 1.492 1.507 PPI for Converted Paper &
Paperboard Products.
(9.) Apparel......................... 0.325 0.299 PPI for Apparel.
(10.) Machinery and Equipment........ 0.163 0.151 PPI for Machinery & Equipment.
(11.) Miscellaneous Products......... 0.519 0.503 PPI for Finished Goods less Food
and Energy.
B. Labor-related Services............. 9.175 9.249 ..................................
(1.) Professional Fees: Labor-related 5.356 5.500 ECI for Compensation for
Professional and Related
Occupations.
(2.) Administrative and Facilities 0.626 0.619 ECI for Compensation for Office
Support Services \3\. and Administrative Services.
(3.) All Other: Labor-Related 3.193 3.130 ECI for Compensation for Private
Services. Service Occupations.
C. Nonlabor-Related Services.......... 7.885 7.379 ..................................
(1.) Professional Fees: Nonlabor- 4.074 3.687 ECI for Compensation for
Related. Professional and Related
Occupations.
(2.) Financial Services.............. 1.281 1.239 ECI for Compensation for Financial
Activities.
(3.) Telephone Services.............. 0.627 0.597 CPI-U for Telephone Services.
(4.) Postage......................... 0.963 0.956 CPI-U for Postage.
(5.) All Other: Nonlabor-Related 0.940 0.900 CPI-U for All Items less Food and
Services. Energy.
----------------------------------
Total............................. 100.000 100.000
----------------------------------------------------------------------------------------------------------------
Note: Detail may not add to total due to rounding.
\1\ Contract labor is distributed to wages and salaries and employee benefits based on the share of total
compensation that each category represents.
\2\ To proxy the ``chemicals'' cost category, we used a blended PPI composed of the PPI for industrial gas
manufacturing, the PPI for other basic inorganic chemical manufacturing, the PPI for other basic organic
chemical manufacturing, and the PPI for soap and cleaning compound manufacturing. For more detail about this
proxy, see the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43845).
\3\ We note that this cost category in the FY 2006-based IPPS market basket was ``Administrative and Business
Support Services.'' We changed the name slightly to be more clear what type of costs are included in this cost
category, but we did not change the classification of which costs are included in the category.
[[Page 27565]]
As stated above, we are proposing to use the same price proxies
used in the FY 2006-based IPPS market basket. A rationale for selecting
these price proxies can be found in the FY 2010 IPPS/RY 2010 LTCH PPS
final rule (74 FR 43845). The price proxies we are proposing were
selected to most closely match the costs included in each of the cost
categories of the proposed FY 2010-based IPPS market basket. As
discussed above, we are proposing that, if the 2007 Benchmark I-O data
become available between the proposed and final rule with sufficient
time to incorporate such data into the final rule, we would incorporate
this data into the FY 2010-based IPPS market basket for the final rule.
As a result, to the extent the incorporation of the 2007 Benchmark I-O
data results in a different composition of costs included in a
particular cost category, we are proposing that we may choose to revise
that specific price proxy to ensure that the costs included in each
detailed cost category are best aligned with the associated price
proxy. Below is a list of the price proxies we are proposing for the FY
2010-based IPPS market basket.
a. Wages and Salaries
We are proposing to use the ECI for Wages and Salaries for Hospital
Workers (All Civilian) (BLS series code CIU1026220000000I) to measure
the price growth of this cost category.
b. Employee Benefits
We are proposing to use the ECI for Employee Benefits for Hospital
Workers (All Civilian) to measure the price growth of this cost
category.
c. Fuel, Oil, and Gasoline
We are proposing to use the PPI for Petroleum Refineries (BLS
series code PCU324110324110) to measure the price growth of this cost
category.
d. Electricity
We are proposing to use the PPI for Commercial Electric Power (BLS
series code WPU0542) to measure the price growth of this cost category.
e. Water and Sewage
We are proposing to use the CPI for Water and Sewerage Maintenance
(All Urban Consumers) (BLS series code CUUR0000SEHG01) to measure the
price growth of this cost category.
f. Professional Liability Insurance
We are proposing to proxy price changes in hospital professional
liability insurance premiums (PLI) using percentage changes as
estimated by the CMS Hospital Professional Liability Insurance Premium
Index. To generate these estimates, we collect commercial insurance
premiums for a fixed level of coverage while holding nonprice factors
constant (such as a change in the level of coverage). This method is
also used to proxy PLI price changes in the Medicare Economic Index (75
FR 73268).
g. Pharmaceuticals
We are proposing to use the PPI for Pharmaceuticals for Human Use,
Prescription (BLS series code WPUSI07003) to measure the price growth
of this cost category. This is the same proxy that was used in the FY
2006-based IPPS market basket, although BLS since changed the naming
convention for this series.
h. Food: Direct Purchases
We are proposing to use the PPI for Processed Foods and Feeds (BLS
series code WPU02) to measure the price growth of this cost category.
i. Food: Contract Services
We are proposing to use the CPI for Food Away From Home (All Urban
Consumers) (BLS series code CUUR0000SEFV) to measure the price growth
of this cost category.
j. Chemicals
We are proposing to use a blended PPI composed of the PPI for
Industrial Gas Manufacturing (NAICS 325120) (BLS series code
PCU325120325120P), the PPI for Other Basic Inorganic Chemical
Manufacturing (NAICS 325180) (BLS series code PCU32518-32518-), the PPI
for Other Basic Organic Chemical Manufacturing (NAICS 325190) (BLS
series code PCU32519-32519), and the PPI for Soap and Cleaning Compound
Manufacturing (NAICS 325610) (BLS series code PCU32561-32561-).
k. Blood and Blood Products
We are proposing to use the PPI for Blood and Organ Banks (BLS
series code PCU621991621991) to measure the price growth of this cost
category.
l. Medical Instruments
We are proposing to use the PPI for Medical, Surgical, and Personal
Aid Devices (BLS series code WPU156) to measure the price growth of
this cost category.
m. Rubber and Plastics
We are proposing to use the PPI for Rubber and Plastic Products
(BLS series code WPU07) to measure price growth of this cost category.
n. Paper and Printing Products
We are proposing to use the PPI for Converted Paper and Paperboard
Products (BLS series code WPU0915) to measure the price growth of this
cost category.
o. Apparel
We are proposing to use the PPI for Apparel (BLS series code
WPU0381) to measure the price growth of this cost category.
p. Machinery and Equipment
We are proposing to use the PPI for Machinery and Equipment (BLS
series code WPU11) to measure the price growth of this cost category.
q. Miscellaneous Products
We are proposing to use the PPI for Finished Goods Less Food and
Energy (BLS series code WPUSOP3500) to measure the price growth of this
cost category.
r. Professional Fees: Labor-Related and Professional Fees: Nonlabor-
Related
We are proposing to use the ECI for Compensation for Professional
and Related Occupations (Private Industry) (BLS series code
CIU2010000120000I) to measure the price growth of these cost
categories.
s. Administrative and Facilities Support Services
We are proposing to use the ECI for Compensation for Office and
Administrative Support Services (Private Industry) (BLS series code
CIU2010000220000I) to measure the price growth of this category.
t. All Other: Labor-Related Services
We are proposing to use the ECI for Compensation for Service
Occupations (Private Industry) (BLS series code CIU2010000300000I) to
measure the price growth of this cost category.
u. Financial Services
We are proposing to use the ECI for Compensation for Financial
Activities (Private Industry) (BLS series code CIU201520A000000I) to
measure the price growth of this cost category.
v. Telephone Services
We are proposing to use the CPI for Telephone Services (BLS series
code CUUR0000SEED) to measure the price growth of this cost category.
w. Postage
We are proposing to use the CPI for Postage (BLS series code
CUUR0000SEEC01) to measure the price growth of this cost category.
[[Page 27566]]
x. All Other: Nonlabor-Related Services
We are proposing to use the CPI for All Items Less Food and Energy
(BLS series code CUUR0000SA0L1E) to measure the price growth of this
cost category.
Table IV04 compares both the historical and forecasted percent
changes in the FY 2006-based IPPS market basket and the proposed FY
2010-based IPPS market basket.
Table IV04--FY 2006-Based and Proposed FY 2010-Based Prospective Payment
Hospital Operating Index Percent Change, FY 2008 through FY 2016
------------------------------------------------------------------------
Proposed FY
FY 2006-based 2010-based
IPPS market IPPS market
Fiscal year (FY) basket basket
operating operating
index percent index percent
change change
------------------------------------------------------------------------
Historical data:
FY 2008............................. 4.0 4.0
FY 2009............................. 2.6 2.6
FY 2010............................. 2.1 2.1
FY 2011............................. 2.7 2.7
FY 2012............................. 2.2 2.2
Average FYs 2008-2012............... 2.7 2.7
Forecast:
FY 2013............................. 2.2 2.2
FY 2014............................. 2.5 2.5
FY 2015............................. 2.7 2.7
FY 2016............................. 3.0 3.0
Average FYs 2013-2016............... 2.6 2.6
------------------------------------------------------------------------
Source: IHS Global Insight, Inc., 1st Quarter 2013.
The differences between the FY 2006-based and the proposed FY 2010-
based IPPS market basket increases are minimal. While the percent
changes differ slightly, when rounded to the nearest tenth, the updates
based on the FY 2006-based and the proposed FY 2010-based IPPS market
baskets are the same.
4. Labor-Related Share
Under section 1886(d)(3)(E) of the Act, the Secretary estimates
from time to time the proportion of payments that are labor-related.
``The Secretary shall adjust the proportion, (as estimated by the
Secretary from time to time) of hospitals' costs which are attributable
to wages and wage-related costs, of the DRG prospective payment rates .
. . .'' We refer to the proportion of hospitals' costs that are
attributable to wages and wage-related costs as the ``labor-related
share.''
The labor-related share is used to determine the proportion of the
national PPS base payment rate to which the area wage index is applied.
We include a cost category in the labor-related share if the costs are
labor intensive and vary with the local labor market. Because of this
approach, we are proposing to include in the labor-related share the
national average proportion of operating costs that are attributable to
wages and salaries, employee benefits, contract labor, the labor-
related portion of professional fees, administrative and facilities
support services, and all other: labor-related services, as we did in
the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43850). Consistent
with previous rebasings, the ``all other: labor-related services'' cost
category is mostly comprised of building maintenance and security
services (including, but not limited to, commercial and industrial
machinery and equipment repair, nonresidential maintenance and repair,
and investigation and security services). Because these services tend
to be labor-intensive and are mostly performed at the hospital facility
(and, therefore, unlikely to be purchased in the national market), we
believe that they meet our definition of labor-related services.
Similar to the FY 2006-based IPPS market basket, we are proposing
that the professional fees: labor-related cost category includes
expenses associated with advertising and a proportion of legal
services, accounting and auditing, engineering, management consulting,
and management of companies and enterprises expenses. As was done in
the FY 2006-based IPPS market basket rebasing, we are proposing to
determine the proportion of legal, accounting and auditing,
engineering, and management consulting services that meet our
definition of labor-related services based on a survey of hospitals
conducted by CMS in 2008. We notified the public of our intent to
conduct this survey on December 9, 2005 (70 FR 73250) and received no
comments (71 FR 8588).
With approval from the OMB, we contacted the industry and received
responses to our survey from 108 hospitals. Using data on FTEs to
allocate responding hospitals across strata (region of the country and
urban/rural status), we calculated poststratification weights. A more
thorough discussion of the composition of the survey and
poststratification can be found in the FY 2010 IPPS/RY 2010 LTCH PPS
final rule (74 FR 43850 through 43856). Based on the weighted results
of the survey, we determined that hospitals purchase, on average, the
following portions of contracted professional services outside of their
local labor market:
34 percent of accounting and auditing services;
30 percent of engineering services;
33 percent of legal services; and
42 percent of management consulting services.
We are proposing to apply each of these percentages to its
respective Benchmark I-O cost category underlying the professional fees
cost category. This is the methodology that we used to separate the FY
2006-based IPPS market basket professional fees category into
professional fees: labor-related and professional fees: nonlabor-
related cost categories. We are proposing to use the same methodology
and survey results to separate the FY 2010-based IPPS market basket
professional fees category into professional fees: labor-related and
professional fees: nonlabor-related cost categories. We believe these
survey results are appropriate to use for the FY
[[Page 27567]]
2010-based IPPS market basket rebasing as they empirically determine
the proportion of contracted professional services purchased by the
industry that is attributable to local firms and the proportion that is
purchased from national firms.
In the proposed FY 2010-based IPPS market basket, nonmedical
professional fees that were subject to allocation based on the survey
results represent 2.059 percent of total costs (and are limited to
those fees related to Accounting & Auditing, Legal, Engineering, and
Management Consulting services). Based on our survey results, we are
apportioning 1.301 percentage points of the 2.059 percentage point
figure into the labor-related share and designating the remaining 0.758
percentage point as nonlabor-related.
In addition to the professional services listed above, we also
classify a proportion of the expenses under NAICS 55, Management of
Companies and Enterprises, into the professional fees: labor-related
cost category as was done in the previous rebasing. The NAICS 55 data
are mostly comprised of corporate, subsidiary, and regional managing
offices, or otherwise referred to as home offices. As was done for the
FY 2006-based IPPS market basket we are proposing to include only a
portion of the home office costs in the labor related share as not all
hospitals are located in the same geographic area as their home office.
Our proposed methodology is based on data from the Medicare cost
reports, as well as a CMS database of Home Office Medicare Records
(HOMER) (a database that provides city and State information
(addresses) for home offices). The Medicare cost report requires
hospitals to report their home office provider numbers and locations.
Using the data reported on the Medicare Cost Report as well as the
HOMER database to determine the home office location for each home
office provider number, we compared the location of the hospital with
the location of the hospital's home office. We determined the
proportion of costs that should be allocated to the labor-related share
based on the percent of total hospital home office compensation costs
for those hospitals that had home offices located in their respective
local labor markets--defined as being in the same Metropolitan
Statistical Area (MSA). We primarily determined a hospital's and home
office's MSAs using their zip code information from the Medicare cost
report. For any home offices for which we could not identify a MSA from
the Medicare cost report, we used the Medicare HOMER database to
identify the home office's city and State.
We are proposing to determine the proportion of costs that should
be allocated to the labor-related share based on the percent of
hospital home office compensation as reported in Worksheet S-3, part
II. Using this proposed methodology, we determined that 62 percent of
hospitals' home office compensation costs were for home offices located
in their respective local labor markets, and therefore, we are
proposing to allocate 62 percent of NAICS 55 expenses to the labor-
related share.
In the proposed FY 2010-based IPPS market basket, NAICS 55 expenses
that were subject to allocation based on the home office allocation
methodology represent 5.650 percent of the total operating costs. Based
on the home office results, we are apportioning 3.503 percentage points
of the 5.650 percentage points figure into the labor-related share and
designating the remaining 2.147 percentage points as nonlabor-related.
In sum, based on the two proposed allocations mentioned above, we are
proposing to apportion 4.804 percentage points into the labor-related
share. This amount is added to the 0.696 percentage point of
professional fees that we already identified as labor-related,
resulting in a proposed professional fees: labor-related cost weight of
5.500 percent.
Below is a table comparing the proposed FY 2010-based labor-related
share and the FY 2006-based labor-related share. As discussed in
section IV.B.3. of the preamble of this proposed rule, the wages and
salaries and employee benefits cost weight reflect contract labor
costs.
Table IV05--Comparison of the Proposed FY 2010-Based Labor-Related Share
and the FY 2006-Based Labor-Related Share
------------------------------------------------------------------------
Proposed FY
FY 2006-based 2010-based
market basket market basket
cost weights cost weights
------------------------------------------------------------------------
Wages and Salaries...................... 47.213 47.233
Employee Benefits....................... 12.414 13.105
Professional Fees: Labor-Related........ 5.356 5.500
Administrative and Facilities........... 0.626 0.619
Support Services........................
All Other: Labor-Related Services....... 3.193 3.130
-------------------------------
Total Labor-Related Share........... 68.802 69.587
------------------------------------------------------------------------
Using the cost category weights from the proposed FY 2010-based
IPPS market basket, we calculated a labor-related share of 69.587
percent, approximately 0.8 percentage point higher than the current
labor-related share of 68.802.
We continue to believe, as we have stated in the past, that these
operating cost categories are related to, influenced by, or vary with
the local markets. Therefore, our definition of the labor-related share
continues to be consistent with section 1886(d)(3) of the Act.
Using the proposed cost category weights that we determined in
section IV.B.1. of the preamble of this proposed rule, we calculated a
proposed labor-related share of 69.587 percent, using the proposed FY
2010-based IPPS market basket. Accordingly, we are proposing to
implement a labor-related share of 69.6 percent for discharges
occurring on or after October 1, 2013. We note that section 403 of
Public Law 108-173 amended sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv)
of the Act to provide that the Secretary must employ 62 percent as the
labor-related share unless 62 percent ``would result in lower payments
to a hospital than would otherwise be made.''
We also are proposing to update the labor-related share for Puerto
Rico. Consistent with our methodology for determining the national
labor-related
[[Page 27568]]
share, we calculate the Puerto Rico-specific relative weights for wages
and salaries, employee benefits, and contract labor using FY 2010
Medicare cost report data for IPPS hospitals located in Puerto-Rico.
Because there are no Puerto Rico-specific relative weights for
professional fees and labor intensive services, we use the national
weights as shown in Table IV05. This is the same methodology we used to
determine the FY 2006-based Puerto Rico-specific labor-related share
derived during the FY 2006-based IPPS market basket rebasing (74 FR
43856).
Below is a table comparing the proposed FY 2010-based Puerto Rico-
specific labor-related share and the FY 2006-based Puerto Rico-specific
labor-related share.
Table IV06--Comparison of the Proposed FY 2010-Based Puerto Rico-
Specific Labor-Related Share and FY 2006-Based Puerto Rico-Specific
Labor-Related Share
------------------------------------------------------------------------
Proposed FY
FY 2006-based 2010-based
market basket market basket
cost weights cost weights
------------------------------------------------------------------------
Wages and Salaries...................... 44.221 44.918
Benefits................................ 8.691 8.990
Professional Fees: Labor-Related........ 5.356 5.500
Administrative and Facilities Support 0.626 0.619
Services...............................
All Other: Labor-Related Services....... 3.193 3.130
-------------------------------
Total Labor-Related Share........... 62.087 63.157
------------------------------------------------------------------------
Using the proposed FY 2010-based Puerto Rico cost category weights,
we calculated a labor-related share of 63.157 percent, approximately
1.1 percentage points higher than the current Puerto-Rico specific
labor-related share of 62.087. Accordingly, we are proposing to adopt
an updated Puerto Rico labor-related share of 63.2 percent.
C. Market Basket for Certain Hospitals Presently Excluded From the IPPS
In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43857), we
adopted the use of the FY 2006-based IPPS operating market basket
percentage increase to update the target amounts for children's
hospitals, PPS-excluded cancer hospitals and religious nonmedical
health care institutions (RNHCIs). Children's hospitals and PPS-
excluded cancer hospitals and RNHCIs are still reimbursed solely under
the reasonable cost-based system, subject to the rate-of-increase
limits. Under these limits, an annual target amount (expressed in terms
of the inpatient operating cost per discharge) is set for each hospital
based on the hospital's own historical cost experience trended forward
by the applicable rate-of-increase percentages.
Under the broad authority in sections 1886(b)(3)(A) and (B),
1886(b)(3)(E), and 1871 of the Act and section 4454 of the BBA,
consistent with our use of the IPPS operating market basket percentage
increase to update target amounts, we are proposing to use the FY 2010-
based IPPS operating market basket percentage increase to update the
target amounts for children's hospitals, 11 PPS-excluded cancer
hospitals, and RNHCIs that are paid on the basis of reasonable cost
subject to the rate-of-increase limits under Sec. 413.40.
Due to the small number of children's and cancer hospitals and
RNHCIs that receive, in total, less than 1 percent of all Medicare
payments to hospitals and because these hospitals provide limited
Medicare cost report data, we are unable to create a separate market
basket specifically for these hospitals. Due to the limited cost report
data available, we believe that the proposed FY 2010-based IPPS
operating market basket most closely represents the cost structure of
children's hospitals, PPS-excluded cancer hospitals, and RNHCIs. We
believe this is appropriate as the IPPS operating market basket would
reflect the input price growth for providing inpatient hospital
services (similar to the services provided by the above excluded
hospitals) based on the specific mix of goods and services required.
Therefore, we believe that the percentage change in the proposed FY
2010-based IPPS operating market basket is the best available measure
of the average increase in the prices of the goods and services
purchased by the 11 cancer hospitals, children's hospitals, and RNHCIs
in order to provide care.
D. Rebasing and Revising the Capital Input Price Index (CIPI)
The CIPI was originally described in the FY 1993 IPPS final rule
(57 FR 40016). There have been subsequent discussions of the CIPI
presented in the IPPS proposed and final payment rules. The FY 2010
IPPS/RY 2010 LTCH PPS final rule (74 FR 43857) discussed the most
recent rebasing and revision of the CIPI to a FY 2006 base year, which
reflected the capital cost structure of the hospital industry in that
year.
For the FY 2014 IPPS update, we are proposing to rebase and revise
the CIPI to a FY 2010 base year to reflect the more current structure
of capital costs in hospitals. As with the FY 2006-based index, we
developed two sets of weights in order to calculate the proposed FY
2010-based CIPI. The first set of weights identifies the proportion of
hospital capital expenditures attributable to each expenditure
category, while the second set of weights is a set of relative vintage
weights for depreciation and interest. The set of vintage weights is
used to identify the proportion of capital expenditures within a cost
category that is attributable to each year over the useful life of the
capital assets in that category. A more thorough discussion of vintage
weights is provided later in this section.
Both sets of weights are developed using the best data sources
available. In reviewing source data, we determined that the Medicare
cost reports provided accurate data for all capital expenditure cost
categories. We used the FY 2010 Medicare cost reports for IPPS
hospitals to determine weights for all three cost categories:
depreciation, interest, and other capital expenses.
Lease expenses are unique in that they are not broken out as a
separate cost category in the CIPI, but rather are proportionally
distributed among the cost categories of Depreciation, Interest, and
Other, reflecting the assumption that the underlying cost structure and
price movement of leases is similar to that of capital costs in
general. As was done in previous rebasings of the CIPI, we first
assumed 10 percent of lease expenses represents overhead and assigned
those costs to the Other category accordingly. The remaining
[[Page 27569]]
lease expenses were distributed across the three cost categories based
on the respective weights of Depreciation, Interest, and Other not
including lease expenses.
Depreciation contains two subcategories: (1) Building and Fixed
equipment; and (2) Movable Equipment. The proposed apportionment
between building and fixed equipment and movable equipment was
determined using the Medicare cost reports. This methodology was also
used to compute the apportionment used in the FY 2006-based index.
The total Interest cost category is split between government/
nonprofit interest and for-profit interest. The FY 2006-based CIPI
allocated 85 percent of the total interest cost weight to government/
nonprofit interest and proxied that category by the average yield on
domestic municipal bonds. The remaining 15 percent of the interest cost
weight was allocated to for-profit interest and was proxied by the
average yield on Moody's Aaa bonds (74 FR 43857).
For the FY 2010-based CIPI, we are proposing to derive the split
using the relative FY 2010 Medicare cost report data on interest
expenses for government/nonprofit and for-profit hospitals. Based on
these data, we calculated an 89/11 split between government/nonprofit
and for-profit interest. We believe it is important that this split
reflects the latest relative cost structure of interest expenses.
Table IV07 presents a comparison of the proposed FY 2010-based CIPI
cost weights and the FY 2006-based CIPI cost weights.
Table IV07--Proposed FY 2010-Based CIPI Cost Categories, Weights, and Price Proxies with FY 2006-Based CIPI
Included for Comparison
----------------------------------------------------------------------------------------------------------------
FY 2006 Proposed FY
Cost categories weights 2010 weights Price proxy
----------------------------------------------------------------------------------------------------------------
Total...................................... 100.00 100.00 ...................................
Total depreciation......................... 75.154 74.011 ...................................
Building and fixed equipment depreciation.. 35.789 36.153 BEA chained price index for
nonresidential construction for
hospitals and special care
facilities--vintage-weighted (26
years).
Movable equipment depreciation............. 39.365 37.858 PPI for machinery and equipment--
vintage-weighted (12 years).
Total interest............................. 17.651 19.157 ...................................
Government/nonprofit interest.............. 15.076 17.051 Average yield on domestic municipal
bonds (Bond Buyer 20 bonds)--
vintage-weighted (26 years).
For-profit interest........................ 2.575 2.106 Average yield on Moody's Aaa bonds--
vintage-weighted (26 years).
Other...................................... 7.195 6.832 CPI-U for residential rent.
----------------------------------------------------------------------------------------------------------------
Because capital is acquired and paid for over time, capital
expenses in any given year are determined by both past and present
purchases of physical and financial capital. The vintage-weighted CIPI
is intended to capture the long-term consumption of capital, using
vintage weights for depreciation (physical capital) and interest
(financial capital). These vintage weights reflect the proportion of
capital purchases attributable to each year of the expected life of
building and fixed equipment, movable equipment, and interest. We used
the vintage weights to compute vintage-weighted price changes
associated with depreciation and interest expense. Following
publication of the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule, and in
order to provide greater transparency, we posted on the CMS market
basket Web page at: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html an illustrative spreadsheet that contains an
example of how the vintage-weighted price indexes are calculated.
Vintage weights are an integral part of the CIPI. Capital costs are
inherently complicated and are determined by complex capital purchasing
decisions, over time, based on such factors as interest rates and debt
financing. In addition, capital is depreciated over time instead of
being consumed in the same period it is purchased. The CIPI accurately
reflects the annual price changes associated with capital costs, and is
a useful simplification of the actual capital investment process. By
accounting for the vintage nature of capital, we are able to provide an
accurate, stable annual measure of price changes. Annual nonvintage
price changes for capital are unstable due to the volatility of
interest rate changes and, therefore, do not reflect the actual annual
price changes for Medicare capital-related costs. The CIPI reflects the
underlying stability of the capital acquisition process and provides
hospitals with the ability to plan for changes in capital payments.
To calculate the vintage weights for depreciation and interest
expenses, we needed a time series of capital purchases for building and
fixed equipment and movable equipment. We found no single source that
provides a uniquely best time series of capital purchases by hospitals
for all of the above components of capital purchases. The early
Medicare cost reports did not have sufficient capital data to meet this
need. Data we obtained from the American Hospital Association (AHA) do
not include annual capital purchases. However, AHA does provide a
consistent database back to 1963. We used data from the AHA Panel
Survey and the AHA Annual Survey to obtain a time series of total
expenses for hospitals. We then used data from the AHA Panel Survey
supplemented with the ratio of depreciation to total hospital expenses
obtained from the Medicare cost reports to derive a trend of annual
depreciation expenses for 1963 through 2010.
In order to estimate capital purchases using data on depreciation
expenses, the expected life for each cost category (building and fixed
equipment, movable equipment, and interest) is needed to calculate
vintage weights. We used FY 2010 Medicare cost reports to determine the
expected life of building and fixed equipment and of movable equipment.
The expected life of any piece of equipment can be determined by
dividing the value of the asset (excluding fully depreciated assets) by
its current year depreciation amount. This calculation yields the
estimated useful life of an asset if depreciation were to continue at
current year levels, assuming straight-line depreciation. From the FY
2010 Medicare cost reports, the proposed expected life of building and
fixed equipment was determined to be 26 years, and the proposed
expected life of movable equipment was determined to be 12
[[Page 27570]]
years. The FY 2006-based CIPI was based on an expected life of building
and fixed equipment of 25 years and 12 years as the expected life for
movable equipment.
We are proposing to use the building and fixed equipment and
movable equipment weights derived from FY 2010 Medicare cost reports to
separate the depreciation expenses into annual amounts of building and
fixed equipment depreciation and movable equipment depreciation. Year-
end asset costs for building and fixed equipment and movable equipment
were determined by multiplying the annual depreciation amounts by the
expected life calculations from the FY 2010 Medicare cost reports. We
then calculated a time series back to 1963 of annual capital purchases
by subtracting the previous year asset costs from the current year
asset costs. From this capital purchase time series, we were able to
calculate the vintage weights for building and fixed equipment and for
movable equipment. Each of these sets of vintage weights is explained
in more detail below.
For building and fixed equipment vintage weights, we used the real
annual capital purchase amounts for building and fixed equipment to
capture the actual amount of the physical acquisition, net of the
effect of price inflation. This real annual purchase amount for
building and fixed equipment was produced by deflating the nominal
annual purchase amount by the building and fixed equipment price proxy,
BEA's chained price index for nonresidential construction for hospitals
and special care facilities. Because building and fixed equipment have
an expected life of 26 years, the vintage weights for building and
fixed equipment are deemed to represent the average purchase pattern of
building and fixed equipment over 26-year periods. With real building
and fixed equipment purchase estimates available back to 1963, we
averaged twenty-two 26-year periods to determine the average vintage
weights for building and fixed equipment that are representative of
average building and fixed equipment purchase patterns over time.
Vintage weights for each 26-year period are calculated by dividing the
real building and fixed capital purchase amount in any given year by
the total amount of purchases in the 26-year period. This calculation
is done for each year in the 26-year period, and for each of the
twenty-two 26-year periods. We used the average of each year across the
twenty-two 26-year periods to determine the average building and fixed
equipment vintage weights for the proposed FY 2010-based CIPI.
For movable equipment vintage weights, the real annual capital
purchase amounts for movable equipment were used to capture the actual
amount of the physical acquisition, net of price inflation. This real
annual purchase amount for movable equipment was calculated by
deflating the nominal annual purchase amounts by the movable equipment
price proxy, the PPI for machinery and equipment. Based on our
determination that movable equipment has an expected life of 12 years,
the vintage weights for movable equipment represent the average
expenditure for movable equipment over a 12-year period. With real
movable equipment purchase estimates available back to 1963, thirty-six
12-year periods were averaged to determine the average vintage weights
for movable equipment that are representative of average movable
equipment purchase patterns over time. Vintage weights for each 12-year
period are calculated by dividing the real movable capital purchase
amount for any given year by the total amount of purchases in the 12-
year period. This calculation was done for each year in the 12-year
period and for each of the thirty-six 12-year periods. We used the
average of each year across the thirty-six 12-year periods to determine
the average movable equipment vintage weights for the proposed FY 2010-
based CIPI.
For interest vintage weights, the nominal annual capital purchase
amounts for total equipment (building and fixed, and movable) were used
to capture the value of the debt instrument. Because we have determined
that hospital debt instruments have an expected life of 26 years, the
vintage weights for interest are deemed to represent the average
purchase pattern of total equipment over 26-year periods. With nominal
total equipment purchase estimates available back to 1963, twenty-two
26-year periods were averaged to determine the average vintage weights
for interest that are representative of average capital purchase
patterns over time. Vintage weights for each 26-year period are
calculated by dividing the nominal total capital purchase amount for
any given year by the total amount of purchases in the 26-year period.
This calculation is done for each year in the 26-year period and for
each of the twenty-two 26-year periods. We used the average of each
year across the twenty-two 26-year periods to determine the average
interest vintage weights for the proposed FY 2010-based CIPI.
The vintage weights for the FY 2006-based CIPI and the proposed FY
2010-based CIPI are presented in Table IV08.
Table IV08--FY 2006 Vintage Weights and Proposed FY 2010 Vintage Weights for Capital-Related Price Proxies
--------------------------------------------------------------------------------------------------------------------------------------------------------
Building and fixed equipment Movable equipment Interest
-----------------------------------------------------------------------------------------------
Year \1\ FY 2006 25 FY 2010 26 FY 2006 12 FY 2010 12 FY 2006 25 FY 2010 26
years years years years years years
--------------------------------------------------------------------------------------------------------------------------------------------------------
1....................................................... 0.021 0.023 0.063 0.064 0.010 0.012
2....................................................... 0.023 0.024 0.067 0.068 0.012 0.013
3....................................................... 0.025 0.026 0.071 0.071 0.014 0.015
4....................................................... 0.027 0.028 0.075 0.073 0.016 0.017
5....................................................... 0.029 0.029 0.079 0.076 0.018 0.018
6....................................................... 0.031 0.031 0.082 0.078 0.020 0.021
7....................................................... 0.032 0.032 0.085 0.084 0.023 0.023
8....................................................... 0.033 0.034 0.086 0.088 0.025 0.025
9....................................................... 0.036 0.036 0.090 0.092 0.028 0.028
10...................................................... 0.038 0.038 0.093 0.098 0.031 0.030
11...................................................... 0.040 0.040 0.102 0.103 0.034 0.033
12...................................................... 0.042 0.041 0.106 0.106 0.038 0.036
13...................................................... 0.044 0.042 .............. .............. 0.041 0.038
14...................................................... 0.045 0.042 .............. .............. 0.044 0.040
15...................................................... 0.046 0.043 .............. .............. 0.047 0.043
[[Page 27571]]
16...................................................... 0.047 0.044 .............. .............. 0.050 0.045
17...................................................... 0.048 0.044 .............. .............. 0.053 0.047
18...................................................... 0.050 0.044 .............. .............. 0.057 0.048
19...................................................... 0.050 0.044 .............. .............. 0.059 0.051
20...................................................... 0.050 0.044 .............. .............. 0.060 0.052
21...................................................... 0.048 0.045 .............. .............. 0.060 0.056
22...................................................... 0.048 0.045 .............. .............. 0.062 0.057
23...................................................... 0.047 0.045 .............. .............. 0.063 0.060
24...................................................... 0.049 0.046 .............. .............. 0.068 0.062
25...................................................... 0.048 0.045 .............. .............. 0.069 0.064
26...................................................... .............. 0.045 .............. .............. .............. 0.066
-----------------------------------------------------------------------------------------------
Total............................................... 1.000 1.000 1.000 1.000 1.000 1.000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Detail may not add to total due to rounding.
\1\ Year 1 represents the vintage weight applied to the farthest year while the vintage weight for year 26, for example, would apply to the most recent
year.
After the capital cost category weights were computed, it was
necessary to select appropriate price proxies to reflect the rate-of-
increase for each expenditure category. We are proposing to use the
same price proxies for the FY 2010-based CIPI that were used in the FY
2006-based CIPI. The rationale for selecting the price proxies was
explained more fully in the FY 1997 IPPS final rule (61 FR 46196) and
the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43857). These
proposed price proxies are presented in Table IV07.
Table IV09 below compares both the historical and forecasted
percent changes in the FY 2006-based CIPI and the proposed FY 2010-
based CIPI.
Table IV09--Comparison of FY 2006-Based and Proposed FY 2010-Based
Capital Input Price Index, Percent Change, FY 2008 Through FY 2016
------------------------------------------------------------------------
CIPI, FY 2006- Proposed CIPI,
Fiscal year based FY 2010-based
------------------------------------------------------------------------
FY 2008................................. 1.5 1.1
FY 2009................................. 1.5 1.2
FY 2010................................. 1.0 0.7
FY 2011................................. 1.2 0.9
FY 2012................................. 1.2 1.0
Forecast:
FY 2013............................. 1.2 1.0
FY 2014............................. 1.4 1.2
FY 2015............................. 1.5 1.3
FY 2016............................. 1.7 1.5
Average:
FYs 2008-2012....................... 1.3 1.0
FYs 2013-2016....................... 1.5 1.3
------------------------------------------------------------------------
Source: IHS Global Insight, Inc., 1st Quarter 2013 forecast.
IHS Global Insight, Inc. forecasts a 1.2 percent increase in the FY
2010-based CIPI for FY 2014, as shown in Table IV09. The underlying
vintage-weighted price increases for depreciation (including building
and fixed equipment and movable equipment) and interest (including
government/nonprofit and for-profit) are included in Table IV10.
Table IV10--CMS Capital Input Price Index Percent Changes, Total and Depreciation and Interest Components--FYs
2008 Through 2016
----------------------------------------------------------------------------------------------------------------
Fiscal year Total Depreciation Interest
----------------------------------------------------------------------------------------------------------------
FY 2008......................................................... 1.1 2.0 -3.1
FY 2009......................................................... 1.2 2.0 -2.0
FY 2010......................................................... 0.7 1.7 -2.8
FY 2011......................................................... 0.9 1.7 -2.3
FY 2012......................................................... 1.0 1.7 -2.7
Forecast:
FY 2013..................................................... 1.0 1.7 -2.8
[[Page 27572]]
FY 2014..................................................... 1.2 1.8 -2.3
FY 2015..................................................... 1.3 1.9 -1.7
FY 2016..................................................... 1.5 1.9 -0.7
----------------------------------------------------------------------------------------------------------------
Source: IHS Global Insight, Inc., 1st Quarter 2013 forecast
Rebasing the CIPI from FY 2006 to FY 2010 decreased the percent
change in the forecasted update for FY 2014 by 0.2 percentage point,
from 1.4 percent to 1.2 percent, as shown in Table IV09. The difference
in the forecasted market basket update for FY 2014 is primarily due to
the rebasing of the index to FY 2010 and revising the base year cost
weights to incorporate the FY 2010 Medicare cost report data.
V. Other Decisions and Proposed Changes to the IPPS for Operating Costs
and GME Costs
A. Proposed Changes in the Inpatient Hospital Update for FY 2014
(Sec. Sec. 412.64(d) and 412.211(c))
1. Proposed FY 2014 Inpatient Hospital Update
In accordance with section 1886(b)(3)(B)(i) of the Act, each year
we update the national standardized amount for inpatient operating
costs by a factor called the ``applicable percentage increase.''
Section 1886(b)(3)(B) of the Act, as amended by sections 3401(a) and
10319(a) of the Affordable Care Act, sets the applicable percentage
increase under the IPPS for FY 2014 as equal to the rate-of-increase in
the hospital market basket for IPPS hospitals in all areas, subject to
a reduction of 2.0 percentage points if the hospital fails to submit
quality information under rules established by the Secretary in
accordance with section 1886(b)(3)(B)(viii) of the Act, and then
subject to an adjustment based on changes in economy-wide productivity
(the multifactor productivity (MFP) adjustment), and an additional
reduction of 0.3 percentage point. Sections 1886(b)(3)(B)(xi) and
(b)(3)(B)(xii) of the Act, as added by section 3401(a) of the
Affordable Care Act, state that application of the MFP adjustment and
the additional FY 2014 adjustment of 0.3 percentage point may result in
the applicable percentage increase being less than zero.
We note, in compliance with section 404 of the MMA, in this
proposed rule, we are proposing to replace the FY 2006-based IPPS
operating and capital market baskets with the revised and rebased FY
2010-based IPPS operating and capital market baskets for FY 2014.
We also are proposing to rebase the labor-related share to reflect
the more recent base year. The current labor-related share, which is
based on the FY 2006-based IPPS market basket, is 68.8 percent. We are
proposing a labor-related share of 69.6 percent, which is based on the
proposed rebased and revised FY 2010-based IPPS market basket. For a
complete discussion on the rebasing of the market basket and labor-
related share, we refer readers to section IV. of the preamble of this
proposed rule.
Based on the most recent data available for this proposed rule, in
accordance with section 1886(b)(3)(B) of the Act, we are proposing to
base the proposed FY 2014 market basket update used to determine the
applicable percentage increase for the IPPS on the IHS Global Insight,
Inc. (IGI's) first quarter 2013 forecast of the FY 2010-based IPPS
market basket rate-of-increase, which is estimated to be 2.5 percent.
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689 through 51692), we
finalized our methodology for calculating and applying the MFP
adjustment. For FY 2014, we are not proposing any change in our
methodology for calculating and applying the MFP adjustment. However,
for this proposed rule, we are using the most recent data available to
compute the MFP adjustment. Using the methodology that we finalized in
the FY 2012 IPPS/LTCH PPS final rule (76 FR 51690), the proposed FY
2014 market basket update, subject to the hospital submitting quality
data under rules established by the Secretary in accordance with
section 1886(b)(3)(B)(viii) of the Act, is then reduced by the most
recent estimate of the MFP adjustment (the 10-year moving average of
MFP for the period ending FY 2014) of 0.4 percent. Following
application of the MFP adjustment, the applicable percentage increase
is then reduced by 0.3 percentage point, as required by section
1886(b)(3)(B)(xii) of the Act (as discussed in section I. of the
Addendum to this proposed rule).
Consistent with current law, and based on IGI's first quarter 2013
forecast of the FY 2014 market basket increase, we are proposing an
applicable percentage increase to the FY 2014 operating standardized
amount of 1.8 percent (that is, the FY 2014 estimate of the market
basket rate-of-increase of 2.5 percent less an adjustment of 0.4
percentage point for economy-wide productivity (that is, the MFP
adjustment) and less 0.3 percentage point) for hospitals in all areas,
provided the hospital submits quality data under rules established in
accordance with section 1886(b)(3)(B)(viii) of the Act. For hospitals
that do not submit these quality data, we are proposing an applicable
percentage increase to the operating standardized amount of -0.2
percent (that is, the FY 2014 estimate of the market basket rate-of-
increase of 2.5 percent, less 2.0 percentage points for failure to
submit quality data, less an adjustment of 0.4 percentage point for the
MFP adjustment, and less an additional adjustment of 0.3 percentage
point). Lastly, we also are proposing that if more recent data become
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 2014 market basket update and MFP
adjustment in the final rule.
We are proposing to revise the existing regulations at 42 CFR
412.64(d) to reflect the current law for the FY 2014 update.
Specifically, in accordance with section 1886(b)(3)(B) of the Act, we
are proposing to add a new paragraph (v) to Sec. 412.64(d)(1) to
reflect the applicable percentage increase to the FY 2014 operating
standardized amount as the percentage increase in the market basket
index less an MFP adjustment and less an additional reduction of 0.3
percentage point.
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,
[[Page 27573]]
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, we are proposing an
update to the hospital-specific rates applicable to SCHs of 1.8 percent
for hospitals that submit quality data or -0.2 percent for hospitals
that fail to submit quality data. For FY 2014, the existing regulations
in Sec. Sec. 412.73(c)(16), 412.75(d), 412.77(e) and 412.78(e) contain
provisions that set the update factor for SCHs equal to the update
factor applied to the national standardized amount for all IPPS
hospitals. Therefore, we are not proposing to make any further changes
to these four regulatory provisions to reflect the FY 2014 update
factor for the hospital-specific rates of SCHs.
We note that, as discussed in section V.F. of this preamble,
section 606 of the American Taxpayer Relief Act of 2012 extended the
MDH program from the end of FY 2012 (that is, for discharges occurring
before October 1, 2012) to the end of FY 2013 (that is, for discharges
occurring before October 1, 2013). Under prior law, the MDH program was
to be in effect through the end of FY 2012 only. Absent additional
legislation further extending the MDH program, the MDH program will
expire for discharges beginning in FY 2014. Accordingly, we are not
including MDHs in our proposal to update the hospital-specific rates
for FY 2014.
2. Proposed FY 2014 Puerto Rico Hospital Update
Puerto Rico hospitals are paid a blended rate for their inpatient
operating costs based on 75 percent of the national standardized amount
and 25 percent of the Puerto Rico-specific standardized amount. Section
1886(d)(9)(C)(i) of the Act is the basis for determining the applicable
percentage increase applied to the Puerto Rico-specific standardized
amount. Section 401(c) of Public Law 108-173 amended section
1886(d)(9)(C)(i) of the Act, which states that, for discharges
occurring in a fiscal year (beginning with FY 2004), the Secretary
shall compute an average standardized amount for hospitals located in
any area of Puerto Rico that is equal to the average standardized
amount computed under subclause (I) for fiscal year 2003 for hospitals
in a large urban area (or, beginning with FY 2005, for all hospitals in
the previous fiscal year) increased by the applicable percentage
increase under subsection (b)(3)(B) for the fiscal year involved.
Therefore, the update to the Puerto Rico-specific operating
standardized amount equals the applicable percentage increase set forth
in section 1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a)
and 10319(a) of the Affordable Care Act (that is, the same update
factor as for all other hospitals subject to the IPPS). Accordingly, we
are proposing an applicable percentage increase to the Puerto Rico-
specific operating standardized amount of 1.8 percent for FY 2014. The
regulations at Sec. 412.211(c) currently set the update factor for the
Puerto Rico-specific operating standardized amount equal to the update
factor applied to the national standardized amount for all IPPS
hospitals. Therefore, it is not necessary to propose any changes to the
existing regulatory text.
B. Rural Referral Centers (RRCs): Proposed Annual Update to Case-Mix
Index and Discharge Criteria (Sec. 412.96)
Under the authority of section 1886(d)(5)(C)(i) of the Act, the
regulations at Sec. 412.96 set forth the criteria that a hospital must
meet in order to qualify under the IPPS as a rural referral center
(RRC). RRCs receive 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 proposed national
median CMI value for FY 2014 includes data from all urban hospitals
nationwide, and the proposed regional values for FY 2014 are the median
CMI values of urban hospitals within each census region, excluding
those hospitals with approved teaching programs (that is, those
hospitals that train residents in an approved GME program as provided
in Sec. 413.75). These proposed values are based on discharges
occurring during FY 2012 (October 1, 2011 through September 30, 2012),
and include bills posted to CMS' records through December 2012.
We are proposing that, in addition to meeting other criteria, if
rural hospitals with fewer than 275 beds are to qualify for initial RRC
status for cost reporting
[[Page 27574]]
periods beginning on or after October 1, 2013, they must have a CMI
value for FY 2012 that is at least--
1.5526; or
The median CMI value (not transfer-adjusted) for urban
hospitals (excluding hospitals with approved teaching programs as
identified in Sec. 413.75) calculated by CMS for the census region in
which the hospital is located.
The proposed CMI values by region are set forth in the following
table:
------------------------------------------------------------------------
Case-mix index
Region value
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT)................. 1.3319
2. Middle Atlantic (PA, NJ, NY)......................... 1.4025
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV).. 1.4799
4. East North Central (IL, IN, MI, OH, WI).............. 1.4542
5. East South Central (AL, KY, MS, TN).................. 1.4266
6. West North Central (IA, KS, MN, MO, NE, ND, SD)...... 1.5311
7. West South Central (AR, LA, OK, TX).................. 1.5811
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)............ 1.6393
9. Pacific (AK, CA, HI, OR, WA)......................... 1.5568
------------------------------------------------------------------------
We intend to update the preceding numbers in the FY 2014 final rule
to reflect the updated FY 2012 MedPAR file, which would contain data
from additional bills received through March 2013.
A hospital seeking to qualify as an RRC should obtain its hospital-
specific CMI value (not transfer-adjusted) from its fiscal intermediary
or MAC. Data are available on the Provider Statistical and
Reimbursement (PS&R) System. In keeping with our policy on discharges,
the CMI values are computed based on all Medicare patient discharges
subject to the IPPS MS-DRG-based payment.
2. Discharges
Section 412.96(c)(2)(i) provides that CMS set forth the national
and regional numbers of discharges in each year's annual notice of
prospective payment rates for purposes of determining RRC status. As
specified in section 1886(d)(5)(C)(ii) of the Act, the national
standard is set at 5,000 discharges. We would normally propose to
update the regional standards based on discharges for urban hospitals'
cost reporting periods that began during FY 2011 (that is, October 1,
2010 through September 30, 2011), which would normally be the latest
cost report data available at the time of the development of this
proposed rule. However, due to a transition in our data system, in lieu
of a full year of FY 2011 cost report data, we are proposing to use a
combination of FY 2010 and FY 2011 cost report data in order to create
a full fiscal year of cost report data for this analysis. Due to CMS'
transition to a new cost reporting form effective for cost reporting
periods beginning on or after May 1, 2010, some FY 2011 cost reports
were not yet in our system for analysis at the time of the development
of this proposed rule. Therefore, in order to have a complete fiscal
year of cost report data, we utilized FY 2011 cost report data if
available, and for those providers whose FY 2011 cost report data was
not yet in our system, we utilized their FY 2010 cost report data. This
is similar to the process we used to establish the median number of
discharges for urban hospitals in the census region for FY 2013, where
we utilized FY 2009 and 2010 cost report data (77 FR 53406).
We are proposing that, in addition to meeting other criteria, a
hospital, if it is to qualify for initial RRC status for cost reporting
periods beginning on or after October 1, 2013, must have, as the number
of discharges for its cost reporting period that began during FY 2011
(based on a combination of FY 2010 and FY 2011 cost report data as
explained in the preceding paragraph), at least--
5,000 (3,000 for an osteopathic hospital); or
The median number of discharges for urban hospitals in the
census region in which the hospital is located, as indicated in the
following table:
------------------------------------------------------------------------
Number of
Region discharges
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT)................. 7,825
2. Middle Atlantic (PA, NJ, NY)......................... 10,891
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV).. 11,566
4. East North Central (IL, IN, MI, OH, WI).............. 8,360
5. East South Central (AL, KY, MS, TN).................. 7,378
6. West North Central (IA, KS, MN, MO, NE, ND, SD)...... 7,747
7. West South Central (AR, LA, OK, TX).................. 5,147
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)............ 9,125
9. Pacific (AK, CA, HI, OR, WA)......................... 8,525
------------------------------------------------------------------------
We intend to update these numbers in the FY 2014 final rule based
on the latest available cost report data.
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 would be the minimum criterion
for all hospitals under this proposed rule.
We reiterate that, if an osteopathic hospital is to qualify for RRC
status for cost reporting periods beginning on or after October 1,
2013, the hospital would be required to have at least 3,000 discharges
for its cost reporting period that began during FY 2011 (based on a
combination of FY 2010 and FY 2011 cost report data as explained
earlier in this section).
C. Proposed Payment Adjustment for Low-Volume Hospitals (Sec. 412.101)
1. Background
Section 1886(d)(12) of the Act provides for an additional payment
to each qualifying low-volume hospital under the IPPS beginning in FY
2005. Section 1886(d)(12) of the Act sets forth the qualifying criteria
for a qualifying low-volume hospital and the methodology for
determining the low-volume hospital payment adjustment.
Sections 3125 and 10314 of the Affordable Care Act provided for a
temporary change in the low-volume hospital payment policy for FYs 2011
and 2012 by expanding the definition of a low-volume hospital and
modifying the methodology for determining the payment adjustment for
hospitals meeting the definition. Therefore, prior to the enactment of
the American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-240) on
January 2, 2013, beginning with FY 2013, the low-volume hospital
qualifying criteria and payment adjustment requirements would have
reverted to the statutory requirements under section 1886(d)(12) of the
Act that were in effect prior to FY 2011. Section 605 of the ATRA
extended for an additional year, through FY 2013, the temporary changes
in the low-volume hospital definition and methodology for determining
the payment adjustment made by the Affordable Care Act for FYs 2011 and
2012. Beginning with FY 2014, the low-volume hospital qualifying
criteria and payment adjustment will revert to the statutory
requirements that were in effect prior to the amendments made by the
Affordable Care Act and the ATRA. In section V.D.3. of this preamble,
we discuss the proposed low-volume hospital payment adjustment policies
for FY 2014.
a. Original Implementation of the Low-Volume Hospital Payment
Adjustment
Section 1886(d)(12) of the Act, as added by section 406(a) of
Public Law
[[Page 27575]]
108-173, provides for a payment adjustment to account for the higher
costs per discharge for low-volume hospitals under the IPPS, effective
beginning FY 2005. The additional payment adjustment to a low-volume
hospital provided for under section 1886(d)(12) of the Act is ``[i]n
addition to any payment calculated under this section.'' Therefore, the
additional payment adjustment is based on the per discharge amount paid
to the qualifying hospital under section 1886 of the Act. In other
words, the low-volume hospital payment adjustment is based on total per
discharge payments made under section 1886 of the Act, including
capital, DSH, IME, and outlier payments. For SCHs and MDHs, the low-
volume hospital payment adjustment is based in part on either the
Federal rate or the hospital-specific rate, whichever results in a
greater operating IPPS payment.
Section 1886(d)(12)(C)(i) of the Act defined a low-volume hospital
as ``a subsection (d) hospital (as defined in paragraph (1)(B)) that
the Secretary determines is located more than 25 road miles from
another subsection (d) hospital and has less than 800 discharges during
the fiscal year.'' Section 1886(d)(12)(C)(ii) of the Act further
stipulates that the term ``discharge'' means ``an inpatient acute care
discharge of an individual regardless of whether the individual is
entitled to benefits under Part A.'' Therefore, the term ``discharge''
refers to total discharges, regardless of payer (that is, not only
Medicare discharges). Furthermore, under section 406(a) of Public Law
108-173, which initially added subparagraph (12) to section 1886(d) of
the Act, the provision requires the Secretary to determine an
applicable percentage increase for these low-volume hospitals based on
the ``empirical relationship'' between ``the standardized cost-per-case
for such hospitals and the total number of discharges of such hospitals
and the amount of the additional incremental costs (if any) that are
associated with such number of discharges.'' The statute thus mandates
that the Secretary develop an empirically justifiable adjustment based
on the relationship between costs and discharges for these low-volume
hospitals. Section 1886(d)(12)(B)(iii) of the Act limits the applicable
percentage increase adjustment to no more than 25 percent.
Based on an analysis we conducted for the FY 2005 IPPS final rule
(69 FR 49099 through 49102), a 25-percent low-volume hospital payment
adjustment to all qualifying hospitals with less than 200 discharges
was found to be most consistent with the statutory requirement to
provide relief to low-volume hospitals where there is empirical
evidence that higher incremental costs are associated with low numbers
of total discharges. In the FY 2006 IPPS final rule (70 FR 47432
through 47434), we stated that multivariate analyses supported the
existing low-volume hospital payment adjustment implemented in FY 2005.
Therefore, the low-volume hospital payment adjustment of an additional
25 percent continued to be provided for qualifying hospitals with less
than 200 discharges.
b. Affordable Care Act Provisions for FYs 2011 and 2012
For FYs 2011 and 2012, sections 3125 and 10314 of the Affordable
Care Act expanded the definition of low-volume hospital and modified
the methodology for determining the payment adjustment for hospitals
meeting that definition. Specifically, those provisions of the
Affordable Care Act amended the qualifying criteria for low-volume
hospitals under section 1886(d)(12)(C)(i) of the Act to specify that,
for FYs 2011 and 2012, a subsection (d) hospital qualifies as a low-
volume hospital if it is more than 15 road miles from another
subsection (d) hospital and has less than 1,600 discharges of
individuals entitled to, or enrolled for, benefits under Part A during
the fiscal year. In addition, section 1886(d)(12)(D) of the Act, as
added by the Affordable Care Act, provides that the low-volume hospital
payment adjustment (that is, the percentage increase) is to be
determined ``using a continuous linear sliding scale ranging from 25
percent for low-volume hospitals with 200 or fewer discharges of
individuals entitled to, or enrolled for, benefits under Part A in the
fiscal year to zero percent for low-volume hospitals with greater than
1,600 discharges of such individuals in the fiscal year.''
In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50238 through 50275
and 50414), we revised the regulations at 42 CFR 412.101 to reflect the
changes to the qualifying criteria and the payment adjustment for low-
volume hospitals made by sections 3125 and 10314 of the Affordable Care
Act. In addition, we defined, at Sec. 412.101(a), the term ``road
miles'' to mean ``miles'' as defined at Sec. 412.92(c)(1), and
clarified the existing regulations to indicate that a hospital must
continue to qualify as a low-volume hospital in order to receive the
payment adjustment in that year (that is, it is not based on a one-time
qualification). Furthermore, in that same final rule, we discussed the
process for requesting and obtaining the low-volume hospital payment
adjustment for FY 2011 (75 FR 50240). For the second year of the
changes to the low-volume hospital payment adjustment provided for by
section 3125 and 10314 of the Affordable Care Act (that is, FY 2012),
consistent with the regulations at Sec. 412.101(b)(2)(ii), in the FY
2012 IPPS/LTCH PPS final rule (76 FR 51677 through 51680), we updated
the discharge data source used to identify qualifying low-volume
hospitals and calculate the payment adjustment (percentage increase).
Under Sec. 412.101(b)(2)(ii), for FYs 2011 and 2012, a hospital's
Medicare discharges from the most recently available MedPAR data, as
determined by CMS, are used to determine if the hospital meets the
discharge criteria to receive the low-volume hospital payment
adjustment in the current year. In that same final rule, we established
that, for FY 2012, qualifying low-volume hospitals and their payment
adjustment are determined using Medicare discharge data from the March
2011 update of the FY 2010 MedPAR file, as these data were the most
recent data available at that time. In addition, we noted that
eligibility for the low-volume hospital payment adjustment for FY 2012
was also dependent upon meeting (if the hospital was qualifying for the
low-volume hospital payment adjustment for the first time in FY 2012),
or continuing to meet (if the hospital qualified in FY 2011), the
mileage criterion specified at Sec. 412.101(b)(2)(ii). Furthermore, we
established a procedure for a hospital to request low-volume hospital
status for FY 2012 (which was consistent with the process we employed
for the low-volume hospital payment adjustment for FY 2011).
2. Provisions of the ATRA for FY 2013
a. Background
Section 605 of the ATRA amended sections 1886(d)(12)(B), (C)(i),
and (D) of the Act to extend, for FY 2013, the temporary changes in the
low-volume hospital payment adjustment policy provided for in FYs 2011
and 2012 by the Affordable Care Act. As we have noted previously, prior
to the enactment of section 605 of the ATRA, beginning with FY 2013,
the low-volume hospital definition and payment adjustment methodology
would have reverted to the policy established under statutory
requirements that were in effect prior to the amendments made by the
Affordable Care Act.
Prior to the enactment of the ATRA, in the FY 2013 IPPS/LTCH PPS
final
[[Page 27576]]
rule (77 FR 53406 through 53409), we discussed the low-volume hospital
payment adjustment for FY 2013 and subsequent fiscal years.
Specifically, we discussed that in accordance with section 1886(d)(12)
of the Act, beginning with FY 2013, the low-volume hospital definition
and payment adjustment methodology would revert back to the statutory
requirements that were in effect prior to the amendments made by the
Affordable Care Act. Therefore, we explained, as specified under the
existing regulations at Sec. 412.101, effective for FY 2013 and
subsequent years, that in order to qualify as a low-volume hospital, a
subsection (d) hospital must be more than 25 road miles from another
subsection (d) hospital and have less than 200 discharges (that is,
less than 200 total discharges, including both Medicare and non-
Medicare discharges) during the fiscal year. We also established a
procedure for hospitals to request low-volume hospital status for FY
2013 (which was consistent with our previously established procedures
for FYs 2011 and 2012).
In a Federal Register notice published on March 7, 2013 (78 FR
14689) (hereinafter referred to as the FY 2013 IPPS notice), we
announced the extension of the Affordable Care Act amendments to the
low-volume hospital payment adjustment requirements under section
1886(d)(12) of the Act for FY 2013 pursuant to section 605 of the ATRA.
The applicable low-volume hospital percentage increase provided for by
the provisions of the Affordable Care Act and the ATRA is determined
using a continuous linear sliding scale equation that results in a low-
volume hospital payment adjustment ranging from an additional 25
percent for hospitals with 200 or fewer Medicare discharges to a zero
percent additional payment adjustment for hospitals with 1,600 or more
Medicare discharges.
In the FY 2013 IPPS notice (78 FR 14689 through 14694), to
implement the extension of the temporary change in the low-volume
hospital payment adjustment policy for FY 2013 provided for by the
ATRA, we updated the discharge data source used to identify qualifying
low-volume hospitals and calculate the payment adjustment (percentage
increase). Consistent with our implementation of the low-volume
hospital payment adjustment policy for FYs 2011 and 2012 as set forth
at existing Sec. 412.101(b)(2)(ii), we established that, for FY 2013,
qualifying low-volume hospitals and their payment adjustments are
determined using Medicare discharge data from the March 2012 update of
the FY 2011 MedPAR file, as these data were the most recent data
available at the time of the development of the FY 2013 payment rates
and factors established in the FY 2013 IPPS/LTCH PPS final rule. In
addition, we noted that eligibility for the low-volume hospital payment
adjustment for FY 2013 is also dependent upon meeting (in the case of a
hospital that did not qualify for the low-volume hospital payment
adjustment in FY 2012), or continuing to meet (in the case of a
hospital that did qualify for the low-volume hospital payment
adjustment in FY 2012), the mileage criterion specified at existing
Sec. 412.101(b)(2)(ii). We also established a procedure for a hospital
to request low-volume hospital status for FY 2013 (which is consistent
with the process for the low-volume hospital payment adjustment for FYs
2011 and 2012). Furthermore, we noted our intent to make conforming
changes to the regulations text at Sec. 412.101 to reflect the changes
to the qualifying criteria and the payment adjustment for low-volume
hospitals in accordance with the amendments made by section 605 of the
ATRA in future rulemaking. (We refer readers to the FY 2013 IPPS notice
(78 FR 14689 through 14694) for additional information on the extension
of the Affordable Care Act amendments to the low-volume hospital
payment adjustment requirements under section 1886(d)(12) of the Act
through FY 2013 in accordance with section 605 of the ATRA.)
b. Proposed Conforming Regulatory Changes
In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50238 through 50275
and 50414), we amended the regulations at Sec. 412.101 to specify
that, beginning with FY 2013, the low-volume hospital definition and
payment adjustment methodology reverted to the policy established under
statutory requirements that were in effect prior to the amendments made
by the Affordable Care Act. In this proposed rule, we are proposing to
make conforming changes to the existing regulations text at Sec.
412.101 to reflect the extension of the changes to the qualifying
criteria and the payment adjustment methodology for low-volume
hospitals through FY 2013 in accordance with section 605 of the ATRA,
as announced in the FY 2013 IPPS notice (as discussed above).
Specifically, we are proposing to revise paragraphs (b)(2)(i),
(b)(2)(ii), (c)(1), (c)(2), and (d). Under these proposed changes to
Sec. 412.101, beginning with FY 2014, consistent with section
1886(d)(12) of the Act, as amended, the low-volume hospital qualifying
criteria and payment adjustment methodology would revert to that which
was in effect prior to the amendments made by the Affordable Care Act
and the ATRA (that is, the low-volume hospital payment adjustment
policy in effect for FYs 2005 through 2010).
3. Proposed Low-Volume Hospital Definition and Payment Adjustment for
FY 2014 and Subsequent Fiscal Years
In accordance with section 1886(d)(12) of the Act, as amended,
beginning with FY 2014, the low-volume hospital definition and payment
adjustment methodology will revert back to the statutory requirements
that were in effect prior to the amendments made by the Affordable Care
Act and the ATRA. Therefore, consistent with section 1886(d)(12) of the
Act, as amended, under the proposed conforming changes to Sec.
412.101(b)(2), effective for FY 2014 and subsequent years, in order to
qualify as a low-volume hospital, a subsection (d) hospital must be
more than 25 road miles from another subsection (d) hospital and have
less than 200 discharges (that is, less than 200 discharges total,
including both Medicare and non-Medicare discharges) during the fiscal
year. Under our existing policy, effective for FY 2014 and subsequent
years, qualifying hospitals would receive the low-volume hospital
payment adjustment of an additional 25 percent for discharges occurring
during the fiscal year.
As described above, for FYs 2005 through 2010 and FY 2014 and
subsequent fiscal years, the discharge determination would be made
based on the hospital's number of total discharges, that is, Medicare
and non-Medicare discharges. The hospital's most recently submitted
cost report is used to determine if the hospital meets the discharge
criterion to receive the low-volume hospital payment adjustment in the
current year (proposed 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, 2012,
and 2013, we used the most recently available MedPAR data to determine
the hospital's Medicare discharges because only Medicare discharges
were used to determine if a hospital met the discharge criterion for
those years. In addition to a discharge criterion, the eligibility for
the low-volume hospital payment adjustment also would be dependent upon
the hospital meeting the mileage criterion
[[Page 27577]]
specified at proposed Sec. 412.101(b)(2)(i). Specifically, to meet the
mileage criterion to qualify for the low-volume hospital payment
adjustment for FY 2014 and subsequent fiscal years, a hospital must be
located more than 25 road miles from the nearest subsection (d)
hospital.
For FY 2014, we would continue to use the established process for
requesting and obtaining the low-volume hospital payment adjustment.
That is, in order to receive a low-volume hospital payment adjustment
under Sec. 412.101, a hospital must notify and provide documentation
to its fiscal intermediary or MAC that it meets the discharge and
distance requirements. The fiscal intermediary or MAC will determine,
based on the most recent data available, if the hospital qualifies as a
low-volume hospital, so that the hospital will know in advance whether
or not it will receive a payment adjustment. The fiscal intermediary or
MAC and CMS may review available data, in addition to the data the
hospital submits with its request for low-volume hospital status, in
order to determine whether or not the hospital meets the qualifying
criteria. (For additional details on our established process for the
low-volume hospital payment adjustment, we refer readers to the FY 2013
IPPS/LTCH PPS final rule (77 FR 53408).)
Consistent with our previously established procedure, for FY 2014,
a hospital must make its request for low-volume hospital status in
writing to its fiscal intermediary or MAC by September 1, 2013, in
order for the 25-percent low-volume hospital payment adjustment to be
applied to payments for its discharges beginning on or after October 1,
2013 (through September 30, 2014). If a hospital's request for low-
volume hospital status for FY 2014 is received after September 1, 2013,
and if the fiscal intermediary or MAC determines the hospital meets the
criteria to qualify as a low-volume hospital, the fiscal intermediary
or MAC will apply the 25-percent low-volume hospital payment adjustment
to determine the payment for the hospital's FY 2014 discharges,
effective prospectively within 30 days of the date of the fiscal
intermediary's or MAC's low-volume hospital status determination.
As we discussed in section V.C.2.b. of the preamble of this
proposed rule, we are proposing to make conforming changes to the
regulatory text at Sec. 412.101 to reflect the extension of the
changes to the qualifying criteria and the payment adjustment
methodology for low-volume hospitals through FY 2013 made by section
605 of the ATRA. We are proposing changes to Sec. 412.101 to conform
the regulations to the statutory requirements that, beginning with FY
2014, the low-volume hospital qualifying criteria and payment
adjustment methodology revert to that which was in effect prior to the
amendments made by the Affordable Care Act and the ATRA (that is, the
low-volume hospital payment adjustment policy in effect for FYs 2005
through 2010). Therefore, the low-volume hospital payment adjustment
policy in effect prior for FYs 2005 through 2010 would apply for FY
2014 and subsequent years.
D. Indirect Medical Education (IME) Payment Adjustment (Sec. 412.105)
1. IME Adjustment Factor for FY 2014
Under the IPPS, an additional payment amount is made to hospitals
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 2014, the
formula multiplier is 1.35. We estimate that application of this
formula multiplier for the FY 2014 IME adjustment will result in an
increase in IPPS payment of 5.5 percent for every approximately 10
percent increase in the hospital's resident to bed ratio.
2. Other Proposed Policy Changes Affecting GME
In sections IV.J. of the preamble of this proposed rule, we present
other proposed policy changes relating to GME payment. We refer readers
to that section of the preamble of this proposed rule where we present
the proposed policies.
E. Payment Adjustment for Medicare Disproportionate Share Hospitals
(DSHs) (Sec. 412.106)
1. Background
Section 1886(d)(5)(F) of the Act provides for additional Medicare
payments to subsection (d) hospitals that serve a significantly
disproportionate number of low-income patients. The Act specifies two
methods by which a hospital may qualify for the Medicare
disproportionate share hospital (DSH) adjustment. Under the first
method, hospitals that are located in an urban area and have 100 or
more beds may receive a Medicare DSH payment adjustment if the hospital
can demonstrate that, during its cost reporting period, more than 30
percent of its net inpatient care revenues are derived from State and
local government payments for care furnished to needy patients with low
incomes. This method is commonly referred to as the ``Pickle method.''
The second method for qualifying for the DSH payment adjustment, which
is the most common, is based on a complex statutory formula under which
the DSH payment adjustment is based on the hospital's geographic
designation, the number of beds in the hospital, and the level of the
hospital's disproportionate patient percentage (DPP). A hospital's DPP
is the sum of two fractions: The ``Medicare fraction'' and the
``Medicaid fraction.'' The Medicare fraction (also known as the ``SSI
fraction'' or ``SSI ratio'') is computed by dividing the number of the
hospital's inpatient days that are furnished to patients who were
entitled to both Medicare Part A and Supplemental Security Income (SSI)
benefits by the hospital's total number of patient days furnished to
patients entitled to benefits under Medicare Part A. The Medicaid
fraction is computed by dividing the hospital's number of inpatient
days furnished to patients who, for such days, were eligible for
Medicaid, but were not entitled to benefits under Medicare Part A, by
the hospital's total number of inpatient days in the same period.
Because the DSH payment adjustment is part of the IPPS, the DSH
statutory references (under section 1886(d)(5)(F) of the Act) to
``days'' apply only to hospital acute care inpatient days. Regulations
located at Sec. 412.106 govern the Medicare DSH payment adjustment and
specify how the DPP is calculated as well as how beds and patient days
are counted in determining the Medicare DSH payment adjustment. Under
Sec. 412.106(a)(1)(i), the number of beds for the Medicare DSH payment
adjustment is determined in accordance with bed counting rules for the
IME adjustment under Sec. 412.105(b).
[[Page 27578]]
2. Counting of Patient Days Associated With Patients Enrolled in
Medicare Advantage Plans in the Medicare and Medicaid Fractions of the
Disproportionate Patient Percentage (DPP) Calculation
The regulation at 42 CFR 422.2 defines Medicare Advantage (MA) plan
to mean ``health benefits coverage offered under a policy or contract
by an MA organization that includes a specific set of health benefits
offered at a uniform premium and uniform level of cost-sharing to all
Medicare beneficiaries residing in the service area of the MA plan . .
. .'' Generally, each MA plan must at least provide coverage of all
services that are covered by Medicare Part A and Part B, but also may
provide for Medicare Part D benefits and/or additional supplemental
benefits. However, certain items and services, such as hospice
benefits, continue to be covered under Medicare fee-for-service (FFS).
We note that, under Sec. 422.50 of the regulations, an individual is
eligible to elect an MA plan if he or she is entitled to Medicare Part
A and enrolled in Medicare Part B. Dual eligible beneficiaries
(individuals entitled to Medicare and eligible for Medicaid) also may
choose to enroll in a MA plan, and, as an additional supplemental
benefit, the MA plan may pay for Medicare cost-sharing not covered by
Medicaid.
In the FY 2004 IPPS proposed rule (68 FR 27208) in response to
questions about whether the patient days associated with patients
enrolled in a Medicare + Choice (M+C) plan [now Medicare Advantage (MA)
plan under Medicare Part C] should be counted in the Medicare fraction
or the Medicaid fraction of the disproportionate patient percentage
(DPP) calculation, we proposed that once a beneficiary enrolls in an
M+C plan, those patient days attributable to the beneficiary would not
be included in the Medicare fraction of the DPP. Instead, those patient
days would be included in the numerator of the Medicaid fraction, if
the patient also were eligible for Medicaid. In the FY 2004 IPPS final
rule (68 FR 45422), we did not respond to public comments on this
proposal, due to the volume and nature of the public comments we
received, and we indicated that we would address those comments later
in a separate document. In the FY 2005 IPPS proposed rule (69 FR
28286), we stated that we planned to address the FY 2004 comments
regarding M+C days in the IPPS final rule for FY 2005. In the FY 2005
IPPS final rule (69 FR 49099), we determined that, under Sec.
412.106(b)(2)(i) of the regulations, MA patient days should be counted
in the Medicare fraction of the DPP calculation. We explained that,
even where Medicare beneficiaries elect Medicare Part C coverage, they
are still entitled to benefits under Medicare Part A. Therefore, we
noted that if a Medicare M+C beneficiary is also an SSI recipient, the
patient days for that beneficiary will be included in the numerator of
the Medicare fraction (as well as in the denominator) and not in the
numerator of the Medicaid fraction. We note that, despite our explicit
statement in the final rule that the regulations also would be revised,
due to a clerical error, the corresponding regulation at Sec.
412.106(b)(2)(i) was not amended to explicitly reflect this policy
until 2007 (72 FR 47384).
On November 15, 2012, in a ruling in the case of Allina Health
Services, et al., v. Sebelius (Allina), the Federal District Court for
the District of Columbia (the court) held that the final policy of
putting MA patient days in the Medicare fraction adopted in the FY 2005
IPPS final rule was not a logical outgrowth of the FY 2004 IPPS
proposed rule. The court held that interested parties had not been put
on notice that the Secretary might adopt a final policy of counting the
days in the Medicare fraction and were not provided an adequate further
opportunity for public comment.
We continue to believe that individuals enrolled in MA plans are
``entitled to benefits under part A'' as the phrase is used in the DSH
provisions at section 1886(d)(5)(F)(vi)(I) of the Act. Section 226(a)
of the Act provides that an individual is automatically ``entitled'' to
Medicare Part A when the person reaches age 65 or becomes disabled,
provided that the individual is entitled to Social Security benefits
under section 202 of the Act. Beneficiaries who are enrolled in MA
plans provided under Medicare Part C continue to meet all of the
statutory criteria for entitlement to Medicare Part A benefits under
section 226 of the Act. First, in order to enroll in Medicare Part C, a
beneficiary must be ``entitled to benefits under Part A and enrolled
under Part B'' (section 1852(a)(1)(B)(i) of the Act). There is nothing
in the Act that suggests that beneficiaries who enroll in a Medicare
Part C plan forfeit their entitlement to Medicare Part A benefits.
Second, once a beneficiary enrolls in Medicare Part C, the MA plan must
provide the beneficiary with the benefits to which he or she is
entitled under Medicare Part A, even though it may also provide for
additional supplemental benefits (section 1852(a)(1)(A) of the Act).
Third, under certain circumstances, Medicare Part A pays for care
furnished to patients enrolled in Medicare Part C plans. For example,
if, during the course of the year, the scope of benefits provided under
Medicare Part A expands beyond a certain cost threshold due to
Congressional action or a national coverage determination, Medicare
Part A will pay the provider for the cost of those services directly
(section 1852(a)(5) of the Act). Similarly, Medicare Part A also pays
for federally qualified health center services and hospice care
furnished to MA patients (section 1853(a)(4) and (h)(2) of the Act,
respectively). Thus, we continue to believe that a patient enrolled in
an MA plan remains entitled to benefits under Medicare Part A, and
should be counted in the Medicare fraction of the DPP, and not the
Medicaid fraction.
We also believe that our policy of counting patients enrolled in MA
plans in the Medicare fraction was a logical outgrowth of the FY 2004
IPPS proposed rule, and, accordingly, have filed an appeal in the
Allina case. However, in an abundance of caution and for the reasons
discussed above, in this proposed rule, we are proposing to readopt the
policy of counting the days of patients enrolled in MA plans in the
Medicare fraction of the DPP. We are seeking public comments from
interested parties that may support or oppose the proposal to include
the MA patient days in the Medicare fraction of the DPP calculation for
FY 2014 and subsequent years. We will evaluate these public comments
and consider whether a further change in policy is warranted, and will
include our final determination in the FY 2014 IPPS final rule. We are
not proposing any change to the regulation text at this time, because
the current text reflects the policy being proposed.
3. New Payment Adjustment Methodology for Medicare Disproportionate
Share Hospitals (DSHs) Under Section 3133 of the Affordable Care Act
(Sec. 412.106)
a. General Discussion and Legislative Change
Section 3133 of the Patient Protection and Affordable Care Act
(PPACA), as amended by section 10316 of PPACA and section 1104 of the
Health Care and Education Reconciliation Act (Pub. L. 111-152), added a
new section 1886(r) to the Act that modifies the methodology for
computing the Medicare DSH payment adjustment beginning in FY 2014. For
purposes of this proposed rule, we will refer to these
[[Page 27579]]
provisions collectively as Section 3133 of the Affordable Care Act.
Currently, Medicare DSH adjustment payments are calculated under a
statutory formula that considers the hospital's Medicare utilization
attributable to beneficiaries who also receive Supplemental Security
Income (SSI) benefits and the hospital's Medicaid utilization.
Beginning for discharges in FY 2014, hospitals that qualify for
Medicare DSH payments under section 1886(d)(5)(F) will receive 25
percent of the amount they previously would have received under the
current statutory formula for Medicare DSH payments. This provision
applies equally to hospitals that qualify for DSH payments under
section 1886(d)(5)(F)(i)(II) of the Act, the so-called Pickle
hospitals. Pursuant to new section 1886(r), Pickle hospitals would
receive 25 percent of the 35 percent add-on adjustment for which they
would otherwise qualify under section 1886(d)(5)(F)(i)(II). The
remaining amount, equal to an estimate of 75 percent of what otherwise
would have been paid as Medicare DSH payments, reduced to reflect
changes in the percentage of individuals under age 65 who are
uninsured, will become available to make additional payments to each
hospital that qualifies for Medicare DSH payments and that has
uncompensated care. The payments to each hospital for a fiscal year
will be based on the hospital's amount of uncompensated care for a
given time period relative to the total amount of uncompensated care
for that same time period reported by all hospitals that receive
Medicare DSH payments for that fiscal year.
Specifically, as provided by section 3133 of the Affordable Care
Act, section 1886(r) of the Act requires that, for ``fiscal year 2014
and each subsequent fiscal year,'' a ``subsection (d) hospital'' that
would otherwise receive a ``disproportionate share hospital payment . .
. made under subsection (d)(5)(F)'' will receive two separately
calculated payments. Specifically, section 1886(r)(1) of the Act
provides that the Secretary shall pay to such a subsection (d) hospital
(including a Pickle hospital) 25 percent of the amount the hospital
would have received under section 1886(d)(5)(F) of the Act for
disproportionate share payments, which represents ``the empirically
justified amount for such payment, as determined by the Medicare
Payment Advisory Commission in its March 2007 Report to the Congress.''
We refer to this payment as the ``empirically justified Medicare DSH
payment.''
In addition to this payment, section 1886(r)(2) of the Act provides
that, for fiscal year 2014 and each subsequent fiscal year, the
Secretary shall pay to ``such subsection (d) hospital an additional
amount equal to the product of'' three factors. The first factor is the
difference between ``the aggregate amount of payments that would be
made to subsection (d) hospitals under subsection (d)(5)(F) if this
subsection did not apply'' and ``the aggregate amount of payments that
are made to subsection (d) hospitals under paragraph (1)'' for each
fiscal year. Therefore, this factor amounts to 75 percent of the
payments that would otherwise be made under section 1886(d)(5)(F) of
the Act.
The second factor is, for FYs 2014 through 2017, 1 minus the
percent change in the percent of individuals under the age of 65 who
are uninsured, determined by comparing the percent of such individuals
who are uninsured in 2013, the last year before coverage expansion
under the Affordable Care Act (as calculated by the Secretary based on
the most recent estimates available from the Director of the
Congressional Budget Office before a vote in either House on the Health
Care and Education Reconciliation Act of 2010 that, if determined in
the affirmative, would clear such Act for enrollment), minus 0.1
percentage point for FY 2014, and minus 0.2 percentage point for FYs
2015 through 2017. For FYs 2014 through 2017, the baseline for the
estimate of the change in uninsurance is fixed by the most recent
estimate of the Congressional Budget Office before the final vote on
the Health Care and Education Reconciliation Act of 2010, which is
contained in a March 20, 2010 letter from the then Director of the
Congressional Budget Office to the Speaker of the House. A link to this
letter is included in section V.E.3.d.2. of the preamble of this
proposed rule.
For FY 2018 and subsequent years, the second factor is 1 minus the
percent change in the percent of individuals who are uninsured, as
determined by comparing the percent of individuals ``who are uninsured
in 2013 (as estimated by the Secretary, based on data from the Census
Bureau or other sources the Secretary determines appropriate, and
certified by the Chief Actuary'' of CMS, and ``who are uninsured in the
most recent period for which data is available (as so estimated and
certified) minus 0.2 percentage points for FYs 2018 and 2019.'' Thus,
for FY 2018 and subsequent years, the statute provides some greater
flexibility in the choice of the data sources to be used in the
estimate of the change in the percent of the uninsured.
The third factor is a percent that, for each subsection (d)
hospital, ``represents the quotient of . . . the amount of
uncompensated care for such hospital for a period selected by the
Secretary (as estimated by the Secretary, based on appropriate data . .
.),'' including the use of alternative data ``where the Secretary
determines that alternative data is available which is a better proxy
for the costs of subsection (d) hospitals for . . . treating the
uninsured,'' and ``the aggregate amount of uncompensated care for all
subsection (d) hospitals that receive a payment under this
subsection.'' Therefore, this third factor represents a hospital's
uncompensated care amount for a given time period relative to the
uncompensated care amount for that same time period for all hospitals
that receive Medicare DSH payments in that fiscal year, expressed as a
percent. For each hospital, the product of these three factors
represents its additional payment for uncompensated care for the
applicable fiscal year. We refer to the additional payment determined
by these factors as the ``uncompensated care payment.''
Section 1886(r) of the Act states that this provision is effective
for ``fiscal year 2014 and each subsequent fiscal year.'' In this
proposed rule, we set forth our proposals for implementing the required
changes to the DSH payment methodology. We note that, because section
1886 (r) modifies the payment required under section 1886(d)(5)(F) of
the Act, it affects only the DSH payment under the operating IPPS. It
does not revise or replace the capital IPPS DSH payment provided under
the regulations at 42 CFR Part 412, Subpart M, which were established
through the exercise of the Secretary's discretion in implementing the
capital IPPS under section 1886(g)(1)(A) of the Act.
Finally, section 1886(r)(3) of the Act provides that there shall be
``no administrative or judicial review under section 1869, section
1878, or otherwise'' of ``any estimate of the Secretary for purposes of
determining the factors described in paragraph (2),'' or of ``any
period selected by the Secretary'' for the purpose of determining those
factors. Therefore, there can be no administrative or judicial review
of the estimates developed for purposes of applying the three factors
used to determine uncompensated care payments, or the periods selected
in order to develop such estimates.
[[Page 27580]]
b. Eligibility
As indicated above, the new payment methodology applies to
``subsection (d) hospitals'' that would otherwise receive a
``disproportionate share payment . . . made under subsection
(d)(5)(F).'' Therefore, eligibility for empirically justified Medicare
DSH payments is unchanged under this new provision. Consistent with the
law, hospitals must receive empirically justified Medicare DSH payments
in FY 2014 or a subsequent year to receive an additional Medicare
uncompensated care payment for that year. Specifically, section
1886(r)(2) of the Act states that, ``[i]n addition to the payment made
to a subsection (d) hospital under paragraph (1), . . . the Secretary
shall pay to such subsection (d) hospital an additional amount . . .''
(Emphasis supplied.) Because paragraph (1) refers to empirically
justified Medicare DSH payments, the additional payment under section
1886(r)(2) is, therefore, limited to hospitals that receive empirically
justified Medicare DSH payments pursuant to section 1886(r)(1) of the
Act for FY 2014 and subsequent years.
In this proposed rule, we are proposing that hospitals that are not
eligible to receive empirically justified Medicare DSH payments in FY
2014 and subsequent years would not receive uncompensated care payments
for those respective years. We also are proposing to make a
determination concerning eligibility for interim uncompensated care
payments based on each hospital's estimated DSH status for FY 2014 or
the applicable year (using the most recent data that are available).
Our final determination on the hospital's eligibility for uncompensated
care payments would be based on the hospital's actual DSH status on the
cost report for that payment year. (We discuss these proposals in more
detail below.)
In the course of developing these proposed policies for
implementing the provision of section 1886(r) of the Act, we considered
whether several specific classes of hospitals are included within the
scope of the statutory provision. In particular, we considered whether
the provision applies to (1) hospitals in the Commonwealth of Puerto
Rico, (2) hospitals in the State of Maryland paid under a waiver as
provided in section 1814(b) of the Act, (3) sole community hospitals
(SCHs), (4) hospitals participating in the Bundled Payments for Care
Improvement Initiative developed by the Center for Medicare and
Medicaid Innovation (Innovation Center), and (5) hospitals
participating in the Rural Community Hospital demonstration. We discuss
each of these specific classes of hospitals below.
(1) Puerto Rico Hospitals
Under section 1886(d)(9)(A) of the Act, Puerto Rico hospitals
subject to the IPPS are not ``subsection (d) hospitals,'' but rather
constitute a distinct class of ``subsection (d) Puerto Rico
hospitals.'' However, section 1886(d)(9)(D)(iii) of the Act specifies
that subparagraph (d)(5)(F) (the provision governing the current DSH
payment methodology) ``shall apply to subsection (d) Puerto Rico
hospitals . . . in the same manner and to the extent as [it applies] to
subsection (d) hospitals.'' While the new section 1886(r) of the Act
does not specifically address whether the methodology established there
applies to ``subsection (d) Puerto Rico hospitals,'' section 3133 of
the Affordable Care Act does make a revision to section
1886(d)(5)(F)(i) of the Act that is crucial for determining the
eligibility of Puerto Rico hospitals for empirically justified Medicare
DSH payments and uncompensated care payments under the new provision.
Specifically, section 3133 of the Affordable Care Act amended section
1886(d)(5)(F)(i) of the Act to provide that this section is ``[s]ubject
to subsection (r).'' One effect of this amendment is to provide that
all hospitals subject to section 1886(d)(5)(F)(i) of the Act, including
``subsection (d) Puerto Rico hospitals,'' also are subject to the new
payment methodology established in section 1886(r) of the Act.
In this proposed rule, we are proposing that subsection (d) Puerto
Rico hospitals that are eligible for DSH payments also would be
eligible to receive empirically justified Medicare DSH payments and
uncompensated care payments under the new payment methodology.
We are inviting public comments on this proposal.
(2) Hospitals Paid Under a Waiver Under Section 1814(b) of the Act
Under section 1814(b) of the Act, hospitals in the State of
Maryland are subject to a waiver from the Medicare payment
methodologies under which they would otherwise be paid. We have taken
the position in other contexts, for example, for purposes of EHR
incentive payments (75 FR 44448), that Maryland acute care hospitals
remain subsection (d) hospitals. This is because these hospitals are
``located in one of the fifty States or the District of Columbia'' (as
provided in the definition of subsection (d) hospitals) and do not meet
the definitions of the hospitals that are specifically excluded from
that category, such as cancer hospitals and psychiatric hospitals.
However, section 1886(r) of the Act applies to hospitals that are both
subsection (d) hospitals and hospitals that would otherwise receive a
disproportionate share payment made under the previous DSH payment
methodology. Because Maryland waiver hospitals are paid under section
1814(b)(3) of the Act and not under section 1886(d)(5)(F) of the Act,
they are not eligible to receive empirically justified Medicare DSH
payments and uncompensated care payments under the new payment
methodology of section 1886(r) of the Act.
(3) Sole Community Hospitals (SCHs)
SCHs are paid based on their hospital-specific rate from certain
specified base years or the IPPS Federal rate, whichever yields the
greatest aggregate payment for the hospital's cost reporting period.
Payments based on the Federal rate are based on the IPPS standardized
amount and include all applicable IPPS add-on payments, such as
outliers, DSH, and IME, while payments based on the hospital-specific
rate have no add-on payments. For each cost reporting period, the
fiscal intermediary/MAC determines which of the payment options will
yield the highest aggregate payment. Interim payments are automatically
made on a claim-by-claim basis at the highest rate using the best data
available at the time the fiscal intermediary/MAC makes the payment
determination for each discharge. However, it may not be possible for
the fiscal intermediary/MAC to determine in advance precisely which of
the rates will yield the highest aggregate payment by year's end. In
many instances, it is not possible to forecast outlier payments or the
final amount of the DSH payment adjustment or the IME adjustment until
cost report settlement. As noted above, these adjustment amounts are
applicable only to payments based on the Federal rate and not to
payments based on the hospital-specific rate. The fiscal intermediary/
MAC makes a final adjustment at cost report settlement after it
determines precisely which of the payment rates would yield the highest
aggregate payment to the hospital for its cost reporting period. This
payment methodology makes SCHs unique as they can change on a yearly
basis from receiving hospital-specific rate payments to receiving
Federal rate payments, or vice versa.
In order to implement the provisions of section 1886(r) of the Act,
we are proposing to continue to determine interim payments for SCHs
based on
[[Page 27581]]
what we estimate and project their DSH status to be prior to the
beginning of the Federal fiscal year (based on the best available data
at that time), subject to settlement through the cost report. We also
are proposing that SCHs that receive interim empirically justified DSH
payments in a fiscal year would receive interim uncompensated care
payments that fiscal year, subject as well to settlement through the
cost report. Final eligibility determinations would be made at the end
of the cost reporting period at settlement, and both interim
empirically justified Medicare DSH payments and uncompensated care
payments would be adjusted accordingly. We are thus proposing to follow
the same processes of interim and final payments for SCHs that we are
proposing to follow for eligible IPPS DSH hospitals generally. (We
discuss these processes in more detail below.)
As previously noted, under the SCH payment methodology, SCHs are
paid the higher of the Federal rate or a hospital-specific payment
rate. This payment methodology is defined under sections
1886(d)(5)(D)(i) and 1886(d)(1)(A)(iii) of the Act. Section 1886(d)(3)
specifically provides that SCH payments are to be made on a per-
discharge basis. Accordingly, as we also note below, we are proposing
that the uncompensated care payments would not be accounted for in
determining whether an SCH is paid the higher of the Federal rate or
the hospital-specific rate. This is because the uncompensated care
payments are not discharge-driven payments, but rather are payments
made on the basis of a hospital's overall share of uncompensated care
during a payment year. The amount of a hospital's uncompensated care
payments for a year is not directly affected by the number of the
hospital's discharges for the year. Therefore, we do not believe that
uncompensated care payments should be taken into account in a
comparison based on discharge driven hospital-specific and Federal rate
payments. Furthermore, as we propose later in this rule, we intend to
make interim uncompensated care payments on a periodic basis rather
than a per discharge basis in order to create more predictability for
hospitals and to increase administrative efficiency. To the extent the
payments are intended to reflect the relative amount of uncompensated
care furnished by the hospital, it is both reasonable and appropriate
to view this payment as an amount for the year, which in the interests
of predictability and consistency is made periodically through interim
payments.
We are inviting public comments on all of these proposals affecting
SCHs.
(4) Hospitals Participating in the Bundled Payments for Care
Improvement Initiative
IPPS hospitals that have elected to participate in the Bundled
Payments for Care Improvement initiative receive a payment that links
multiple services furnished to a patient during an episode of care. We
have stated in previous rulemaking that those hospitals continue to be
paid under the IPPS (77 FR 53342). Hospitals that elect to participate
in the initiative can still receive DSH payments while participating in
the initiative, if they otherwise meet the requirements for receiving
such payments.
In this proposed rule, we are proposing to apply the new DSH
payment methodology to the hospitals in this initiative, so that
eligible hospitals would receive empirically justified DSH payments and
uncompensated care payments.
We are inviting public comments on this proposal.
(5) Hospitals Participating in the Rural Community Hospital
Demonstration
Section 410A of the Medicare Modernization Act established the
Rural Community Hospital Demonstration Program. After the initial 5-
year period, the demonstration was extended for an additional 5-year
period by sections 3123 and 10313 of the Affordable Care Act. There are
23 hospitals currently participating in the demonstration. Under the
payment methodology provided in section 410A, participating hospitals
receive payment for Medicare inpatient services on the basis of a cost
methodology. Specifically, for discharges occurring in the hospitals'
first cost reporting period of the initial 5-year demonstration or the
first cost reporting period of the 5-year extension, they receive
payments for the reasonable cost of providing such services. For
discharges occurring in subsequent cost reporting periods during the
applicable 5-year demonstration period, hospitals receive the lesser of
the current year's reasonable cost amount, or the previous year's
amount updated by the percentage increase in the IPPS market basket
(the target amount). (We refer readers to section V.K. of the preamble
of this proposed rule for further information on the demonstration.)
The instructions (CR 5020 (April 14, 2006) and CR 7505 (July 22, 2011))
for the demonstration require that the fiscal intermediary/MAC not pay
Medicare DSH payments in addition to the amount received under the
cost-based payment methodology. Although the amounts that would
otherwise be paid for Medicare DSH payments (absent the demonstration)
are calculated and identified on the hospital cost report for
statistical and research purposes, as in the case of Maryland waiver
hospitals, hospitals in this demonstration do not receive a separate or
identifiable DSH payment.
Because hospitals participating in the Rural Community Hospital
Demonstration do not receive DSH payments, these hospitals are also
excluded from receiving empirically justified Medicare DSH payments and
uncompensated care payments under the new payment methodology.
c. Empirically Justified Medicare DSH Payments
As we have discussed above, the statute requires CMS to pay 25
percent of the ``amount of disproportionate share hospital payment that
would otherwise be made under subsection (d)(5)(F) to a subsection (d)
hospital.'' Currently, we have a system for interim payment and final
settlement of DSH payments made under section 1886(d)(5)(F).
Specifically, interim payments are made for each claim based on the
best available data concerning each hospital's eligibility for DSH
payments and the appropriate level of such payments. Final eligibility
for Medicare DSH payments and the final amount of such payments for
eligible hospitals are determined at the time of cost report
settlement. Because section 1886(r)(1) of the Act merely requires the
program to pay a designated percentage of these payments, without
revising the criteria governing eligibility for DSH payments or the
underlying payment methodology, we do not believe that it is necessary
to develop and propose any new operational mechanisms for making such
payments.
Therefore, we are proposing to implement this provision simply by
revising the claims payment methodologies to adjust the interim claim
payments to the requisite 25 percent of what would have otherwise been
paid. We will also make corresponding changes to the hospital cost
report so that these empirically justified Medicare DSH payments can be
settled at the appropriate level at the time of cost report settlement.
We will provide more detailed operational instructions and cost report
instructions following issuance of the final rule.
We are proposing to implement this provision by adding a new
paragraph (f) under the regulations at 42 CFR 412.106. This proposed
new paragraph
[[Page 27582]]
provides for reducing Medicare DSH payments by 75 percent beginning in
FY 2014.
We are inviting public comments on this proposal.
d. Uncompensated Care Payments
As we have discussed above, section 1886(r)(2) of the Act provides
that, for each eligible hospital in FY 2014 and subsequent years, the
new uncompensated care payment is the product of three factors. These
three factors represent our estimate of 75 percent of the amount of
Medicare DSH payments that would otherwise have been paid, an
adjustment to this amount for the percent change in the national rate
of uninsurance compared to a base of 2013, and each eligible hospital's
estimated uncompensated care amount relative to the estimated
uncompensated care amount for all eligible hospitals. Below we discuss
the proposed data sources and methodologies for computing each of these
factors.
Before we begin to discuss these data sources and methodologies, it
is necessary to discuss the timing and manner for determining the
eligibility of hospitals for uncompensated care payments. The statute
provides that subsection (d) hospitals that receive a payment under
section 1886(d)(5)(F) of the Act are eligible to receive a payment
under section 1886(r)(2) of the Act. Specifically, section 1886(r)(2)
of the Act states that, ``[i]n addition to the payment made to a
subsection (d) hospital under paragraph (1) . . . the Secretary shall
pay to such subsection (d) hospitals an additional amount. . . .''
Therefore, because paragraph (1) refers to empirically justified
Medicare DSH payments, the additional payment for FY 2014 and
subsequent years is limited to hospitals that receive empirically
justified Medicare DSH payments for the respective year. However, as we
have discussed above, we currently have a system for interim payment
and final settlement of DSH payments. Specifically, interim payments
are made for each claim based on the best available data concerning
each hospital's eligibility for DSH payments and the appropriate level
of such payments. Final determination of eligibility for Medicare DSH
payments and the final amount of such payments for eligible hospitals
are determined at the time of cost report settlement.
As we describe above, because section 1886(r)(1) of the Act does
not revise the criteria governing eligibility for DSH payments or the
underlying payment methodology, we do not believe that it is necessary
to develop and propose any new operational mechanisms for making such
payments and would thus continue using the existing system of interim
eligibility and payment determination with final cost report settlement
for the empirically justified Medicare DSH payments. We are proposing
to adopt a similar system of interim eligibility and payment
determination with final cost report settlement for purposes of
uncompensated care payments. We discuss the specific operational
details of this system in section V.E.3.f. of this preamble.
We are inviting public comments on these proposals.
(1) Proposed Methodology To Calculate Factor 1
Section 1886(r)(2)(A) of the Act establishes Factor 1 in the
calculation of the uncompensated care payment. Section 1886(r)(2)(A) of
the Act states that it is a factor ``equal to the difference between
(i) the aggregate amount of payments that would be made to subsection
(d) hospitals under subsection (d)(5)(F) if this subsection did not
apply for such fiscal year (as estimated by the Secretary); and (ii)
the aggregate amount of payments that are made to subsection (d)
hospitals under paragraph (1) for such a fiscal year (as so
estimated).'' Therefore, section 1886(r)(2)(A)(i) of the Act represents
the estimated Medicare DSH payment that would have been made if the
reduction to the Medicare DSH payment by 75 percent under section
1886(r)(1) of the Act did not apply for such fiscal year. In other
words, section 1886(r)(2)(A)(i) of the Act represents an estimate of
the full Medicare DSH payment amount under section 1886(d)(5)(F) prior
to the 75-percent reduction, for FY 2014 and subsequent years. This
subparagraph specifies that, for each fiscal year to which the
provision applies, such amount is to be ``estimated by the Secretary.''
Under a prospective payment system, we would not know the precise
aggregate Medicare DSH payment amount that would be paid for a Federal
fiscal year until cost report settlement for all IPPS hospitals is
completed, which occurs several years after the end of the Federal
fiscal year. Therefore, the statute gives CMS authority to estimate
this amount, by specifying that, for each fiscal year to which the
provision applies, such amount is to be ``estimated by the Secretary.''
Similarly, section 1886(r)(2)(A)(ii) of the Act represents the
estimated empirically justified Medicare DSH payments to be made in FY
2014 and subsequent years, taking into account the application of the
75 percent reduction to the DSH payment amounts prescribed under
section 1886(r)(1) of the Act. Again, section 1886(r)(2)(A)(ii) of the
Act gives CMS authority to estimate this amount.
Therefore, Factor 1 is the difference between our estimates of: (1)
The amount that would have been paid in Medicare DSH payments for FY
2014 and subsequent years, in the absence of the new payment provision;
and (2) the amount of empirically justified Medicare DSH payments that
are made for FY 2014 and subsequent years, which takes into account the
requirement to reduce Medicare DSH payments by 75 percent. In other
words, this factor represents our estimate of 75 percent (100 percent
minus 25 percent) of our estimate of Medicare DSH payments that would
otherwise be made, in the absence of section 1886(r) of the Act, for FY
2014 and subsequent years.
In order to determine Factor 1 in the uncompensated care payment
formula, we are proposing to develop final estimates of both the
aggregate amount of Medicare DSH payments that would be made in the
absence of section 1886(r)(1) and the aggregate amount of empirically
justified Medicare DSH payments to hospitals under section 1886(r)(1)
prior to each fiscal year to which the new provision applies. We
believe this will create some level of predictability and finality for
hospitals eligible for these payments, in addition to being
administratively efficient. Specifically, in order to determine the two
elements of Factor 1 (Medicare DSH payments prior to the application of
the 75 percent reduction, and empirically justified Medicare DSH
payments after application of the 75 percent reduction), we are
proposing to use the most recently available projections of Medicare
DSH payments for FY 2014 and each subsequent year, as calculated by
CMS' Office of the Actuary. The Office of the Actuary projects Medicare
DSH payments on a biannual basis, typically in February of each year
(based on data from December of the previous year) as part of the
President's Budget, and in July (based on data from June) as part of
the Midsession Review. The estimates are based on the most recently
filed Medicare hospital cost report with Medicare DSH payment
information and the most recent Medicare DSH patient percentages and
Medicare DSH payment adjustments provided in the IPPS Impact File.
Therefore, for the Office of the Actuary's February 2013 estimate,
the data are based on the December 2012 update of the Medicare Hospital
Cost Report Information System (HCRIS) and
[[Page 27583]]
the FY 2013 IPPS/LTCH PPS final rule IPPS Impact file, published in
conjunction with the publication of the FY 2013 IPPS/LTCH PPS final
rule. For the July 2013 estimate, we anticipate that the data will be
based on the March 2013 update of the Medicare Hospital Cost Report
data and this proposed rule's IPPS Impact file, published in
conjunction with this proposed rule. For purposes of this proposed
rule, we are using the February 2013 Medicare DSH estimates to
calculate Factor 1 and to model the proposed impact of this provision.
If our proposal to use the Office of the Actuary's projections for
Factor 1 is finalized, we would use the July 2013 Medicare DSH
estimates to determine Factor 1 for the FY 2014 IPPS/LTCH PPS final
rule.
In addition, because we are proposing to exclude sole community
hospitals paid under their hospital specific payment rate from the
application of section 1886(r) of the Act, we are also proposing to
exclude these hospitals from our Medicare DSH estimate. Similarly,
because Maryland hospitals and hospitals participating in the Rural
Community Hospital Demonstration do not receive DSH payments, we also
exclude these hospitals from our Medicare DSH estimate.
Using the data sources discussed above, the Office of the Actuary
uses the most recently submitted Medicare cost report data to identify
current Medicare DSH payments and the most recent DSH payment
adjustments provided in the IPPS Impact File, and applies inflation
updates and assumptions for future changes in utilization and case mix
to estimate Medicare DSH payments for the upcoming fiscal year. The
February 2013 Office of the Actuary estimate for Medicare DSH payments
for FY 2014, without regard to the application of section 1886(r)(1) of
the Act, is 12.338 billion. This estimate excludes Maryland hospitals,
sole community hospitals paid under their hospital specific payment
rate and hospitals participating in the Rural Community Hospital
Demonstration as discussed above. Therefore, based on this estimate,
the estimate for empirically justified Medicare DSH payments for FY
2014, with the application of section 1886(r)(1) of the Act, is $3.084
billion (25 percent of the total amount estimated). Under our proposal,
Factor 1 is the difference of these two estimates of the Office of the
Actuary. Therefore, for the purpose of modeling Factor 1, we calculate
Factor 1 to be $9.2535 billion.
We also are proposing to develop and use the estimates necessary
for Factor 1 on a purely prospective basis. We are proposing to use the
Actuary's most recent February Medicare DSH estimates each year to
calculate Factor 1 and to model the impact of this provision for the
IPPS/LTCH PPS proposed rule. Similarly, we are proposing to use the
Actuary's most recent July Medicare DSH estimates to determine Factor 1
for the IPPS/LTCH PPS final rule each year. In other words, we would
not revise or update our estimates after we know the final Medicare DSH
payments for FY 2014 and subsequent years. As we discussed earlier, we
do not know the aggregate Medicare DSH payment amount that would be
paid for each federal fiscal year until the time of cost report
settlements, which occur several years after the end of the fiscal
year. Because the statute provides that CMS use estimates in order to
determine Factor 1 each year, we believe that applying our best
estimates prospectively would be most conducive to administrative
efficiency, finality, and predictability in payments.
We are inviting public comments on all the elements of this
proposed methodology to calculate Factor 1.
We are proposing to add a new paragraph (g)(1)(i) under Sec.
412.106 of our regulations to define the methodology for calculating
Factor 1.
(2) Proposed Methodology To Calculate Factor 2
Section 1886(r)(2)(B) of the Act establishes Factor 2 in the
calculation of the uncompensated care payment. Specifically, section
1886(r)(2)(B)(i) of the Act provides: ``For each of fiscal years 2014,
2015, 2016, and 2017, a factor equal to 1 minus the percent change in
the percent of individuals under the age of 65 who are uninsured, as
determined by comparing the percent of such individuals (I) who are
uninsured in 2013, the last year before coverage expansion under the
Patient Protection and Affordable Care Act (as calculated by the
Secretary based on the most recent estimates available from the
Director of the Congressional Budget Office before a vote in either
House on the Health Care and Education Reconciliation Act of 2010 that,
if determined in the affirmative, would clear such Act for enrollment);
and (II) who are uninsured in the most recent period for which data is
available (as so calculated), minus 0.1 percentage points for fiscal
year 2014 and minus 0.2 percentage points for each of fiscal years
2015, 2016, and 2017.''
Section 1886(r)(2)(B) of the Act establishes, as Factor 2 in the
uncompensated care payment formula, the percent change in uninsurance,
based on a comparison of the percent of individuals under 65 without
insurance in 2013 to the percent of such individuals without insurance
in the most recent period for which we have data, minus 0.1 percentage
points for FY 2014 and 0.2 percentage points for each of FYs 2015,
2016, and 2017.
Section 1886(r)(2)(B)(i)(I) of the Act further indicates that the
percent of individuals under 65 without insurance in 2013 must be the
percent of such individuals ``who are uninsured in 2013, the last year
before coverage expansion under the Patient Protection and Affordable
Care Act (as calculated by the Secretary based on the most recent
estimates available from the Director of the Congressional Budget
Office before a vote in either House on the Health Care and Education
Reconciliation Act of 2010 that, if determined in the affirmative,
would clear such Act for enrollment).'' The Health Care and Education
Reconciliation Act (Pub. L. 111-152) was enacted on March 30, 2010. It
was passed in the House of Representatives on March 21, 2010 and by the
Senate on March 25, 2010. Because the House of Representatives was the
first House to vote on the Health Care and Education Reconciliation Act
of 2010 on March 21, 2010, we have determined that the most recent
estimate available from the Director of the Congressional Budget Office
``before a vote in either House on the Health Care and Education
Reconciliation Act of 2010 . . .'' appeared in a March 20, 2010 letter
from the director of the CBO to the Speaker of the House. (Emphasis
supplied.) Therefore, we believe that only the estimates in this March
20, 2010 letter meet the statutory requirement under section
1886(r)(2)(B)(i)(I). (To view the March 20, 2010 letter, we refer
readers to the Web site at: http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/113xx/doc11379/amendreconprop.pdf.
In its March 20, 2010 CBO letter to the Speaker of the House, the
CBO provides two estimates of the ``post-policy uninsured population.''
The first estimate is of the ``Insured Share of the Nonelderly
Population Including All Residents'' (which is 82 percent) and the
second estimate is of the ``Insured Share of the Nonelderly Population
Excluding Unauthorized Immigrants'' (83 percent). We are proposing to
use the first estimate that includes all residents, including
unauthorized immigrants. We believe this estimate is most consistent
with the statute which requires us to measure ``the percent of
individuals under the age of 65 who are uninsured,'' and provides no
exclusions except for individuals over the age 65.
[[Page 27584]]
In addition, we believe that this estimate would more fully reflect the
levels of uninsurance in the United States that influence uncompensated
care for hospitals. Therefore, using this estimate would seem more
consistent with the statutory requirement of establishing a payment for
uncompensated care. For these reasons, we are proposing to use the
estimate of the ``Insured Share of the Nonelderly Population Including
All Residents'' for 2013 to calculate the baseline percentage of
individuals under age 65 without insurance.
We are inviting public comments on this proposal.
The March 20, 2010 CBO letter reports these figures as the
estimated percentage of individuals with insurance. However, because
section 1886(r)(2)(B)(i) of the Act requires that we compare the
percent of individuals ``who are uninsured in 2013,'' we are proposing
to use the CBO insurance rate figure and subtract that amount from 100
percent (i.e., the total population, without regard to insurance
status) to estimate the 2013 baseline percentage of individuals without
insurance. In its March 20, 2010 letter, the CBO reported its estimate
of the ``Insured Share of the Nonelderly Population Including All
Residents'' as 82 percent. Therefore, we are proposing that, for FYs
2014-2017, our estimate of the uninsurance percentage for 2013 would be
18 percent. As provided for in the CBO March 20, 2010 letter, the CBO
estimate for insurance for the nonelderly (under age of 65) population
only includes residents of the 50 States and the District of Columbia,
and the count of uninsured people includes unauthorized immigrants, as
well as people who are eligible for, but not enrolled in, Medicaid. We
note that, although we are proposing that acute care hospitals located
in Puerto Rico that receive DSH payments will be eligible to receive
payments under section 1886(r) of the Act, this estimate for insurance
does not account for residents in Puerto Rico. We believe that the
impact of the exclusion of Puerto Rico from the insurance estimate is
negligible.
We are inviting public comments on this proposal.
Section 1886(r)(2)(B)(i) of the Act requires that we compare the
baseline uninsurance rate to the percent of such individuals ``who are
uninsured in the most recent period for which data is available (as so
calculated).'' We are proposing to use the same data source, CBO
estimates, to calculate this percent of individuals without insurance.
Section 1886(r)(2)(B)(i)(I) of the Act refers to the percent of
uninsured in 2013 ``as calculated by the Secretary based on'' the CBO
data. Similarly, section 1886(r)(2)(B)(i)(II) of the Act immediately
afterwards refers to the percent of uninsured for 2014 ``as so
calculated.'' (Emphasis supplied.) The phrase ``as so calculated'' in
the latter section can be reasonably interpreted to require the
calculation to similarly be based on CBO estimates. In addition, we
believe that it is preferable from a statistical point of view to
calculate a percent change in insurance over time using a consistent
data source. Furthermore, rather than using the estimates included in
the March 20, 2010 CBO letter, we believe it is appropriate to use more
recent CBO estimates of the percent of individuals with insurance. The
more recent CBO projections take into account changes in the
environment that can impact insurance rates, such as more recent
economic conditions and the Supreme Court's decision in National
Federation of Independent Business. v. Sebelius, ------ U.S. ------,
132 S. Ct. 2566 (2012), regarding Medicaid expansions authorized by the
Affordable Care Act. Because the statute requires that we use ``the
most recent period for which data is available'' to calculate the
comparison percentage of individuals without insurance, we are
proposing to use the most recent update (that is, the most recent
update available at the time of rulemaking with respect to a particular
fiscal year) to the percent of individuals with insurance provided by
the CBO to calculate this comparison figure.
In addition, for FY 2014, we are proposing to use CBO's most recent
estimate for the percent of individuals with insurance in 2014 for
purposes of section 1886(r)(2)(B)(i)(II) because this is the year in
which this provision is effective. This figure is used for Factor 2 and
later applied to Factor 1, which is also based on an estimate for FY
2014. On February 5, 2013, the CBO released its annual Budget and
Economic Outlook. The report included updated economic and budget
projections that incorporated the effects of the legislation enacted
prior to the start of the year, a revised economic forecast consistent
with the budget projections, and other changes to CBO's estimates. (To
view the report, we refer readers to the Web site at: http://www.cbo.gov/sites/default/files/cbofiles/attachments/43900_ACAInsuranceCoverageEffects.pdf.)
In this proposed rule, we are using the February 5, 2013, CBO
health insurance estimates in order to calculate the percentage of
individuals without insurance for 2014. As we did for the uninsurance
percentage estimate for 2013 (based on the March 20, 2010 CBO letter
discussed above), we are proposing to use the ``Insured Share of the
Nonelderly Population Including All Residents'' to calculate the
comparison of percentage of people without insurance for 2014.
Consistent with the CBO estimate used to calculate the baseline
uninsurance estimate, this estimate for insurance only includes
residents of the 50 States and the District of Columbia, and the count
of uninsured people includes unauthorized immigrants, as well as people
who are eligible for, but not enrolled in, Medicaid. The CBO report
projects that the ``Insured Share of the Nonelderly Population
Including All Residents'' for 2014 will be 84 percent. Therefore, in
the same manner that we calculated the uninsurance percentage for the
baseline, we are proposing that the uninsurance percentage for 2014
would be 16 percent (i.e., 100 percent minus 84 percent) for the
purpose of this proposed rule. If our proposal is finalized, and there
is a more recent estimate of the percentage of individuals with
insurance in 2014 by the CBO available for the FY 2014 IPPS/LTCH PPS
final rule, we would use that estimate to calculate Factor 2. However,
we would not adjust Factor 2 retroactively to account for estimates
that become available after publication of the final rule.
Section 1886(r)(2)(B)(i) of the Act states that Factor 2 for FY
2014 is equal to 1 minus the percent change in the percent of
individuals under the age of 65 who are uninsured, as determined by
comparing the percent of such individuals without insurance in the
baseline and in the most recent period for which we have data (minus
0.1 percentage points for FY 2014). Therefore, we are proposing that
Factor 2 is 1 minus the percent change of the baseline percentage of
individuals without insurance in 2013 (which is, for this proposed
rule, 18 percent) and the most recent percentage of individuals without
insurance for 2014 (which is, for this proposed rule, 16 percent) minus
0.1 percentage points.
Using the March 20, 2010 CBO projection for 2013 and the February
5, 2013 CBO projection of uninsurance for all residents for 2014, we
are proposing to use the following computation for Factor 2 for FY
2014:
Percent of individuals without insurance for 2013: 18 percent
Percent of individuals without insurance for 2014: 16 percent
1 - [verbar][(0.16 - 0.18)/0.18][verbar] = 1 - 0.111 = 0.889 (88.9
percent)
[[Page 27585]]
0.889 (88.9 percent) - 0.001 (0.1 percentage points) = 0.888 (88.8
percent)
0.888 = Factor 2
Accordingly, we are proposing Factor 2 to be 88.8 percent for FY
2014. In conjunction with this proposal, we are therefore proposing
that the amount available for uncompensated care payments for FY 2014
will be $8.217 billion (0.888 times our proposed Factor 1 estimate of
$9.2535 billion). As we noted previously, our proposal for Factor 2 may
be subject to change if more recent CBO estimates of the insurance rate
for 2014 become available prior to the preparation of the final rule.
We are inviting public comment on our proposed methodology to
calculate Factor 2.
In this proposed rule, we are proposing to add a new paragraph
(g)(1)(ii) under Sec. 412.106 of our regulations to define the
methodology for calculating Factor 2.
(3) Proposed Methodology To Calculate Factor 3
Section 1886(r)(2)(C) of the Act defines Factor 3 in the
calculation of the uncompensated care payment. As we have discussed
above, section 1886(r)(2)(C) of the Act states that Factor 3 is ``equal
to the percent, for each subsection (d) hospital, that represents the
quotient of (i) the amount of uncompensated care for such hospital for
a period selected by the Secretary (as estimated by the Secretary,
based on appropriate data (including, in the case where the Secretary
determines alternative data is available which is a better proxy for
the costs of subsection (d) hospitals for treating the uninsured, the
use of such alternative data)); and (ii) the aggregate amount of
uncompensated care for all subsection (d) hospitals that receive a
payment under this subsection for such period (as so estimated, based
on such data).''
Therefore, Factor 3 is a hospital-specific value that expresses the
proportion of the estimated uncompensated care amount for each
subsection (d) hospital and subsection (d) Puerto Rico hospital with
the potential to receive DSH payments relative to the estimated
uncompensated care amount for all hospitals estimated to receive DSH
payments in the fiscal year for which the uncompensated care payment is
to be made. Factor 3 is applied to the product of Factor 1 and Factor 2
to determine the amount of the uncompensated care payment that each
eligible hospital will receive for FY 2014 and subsequent years. In
order to implement the statutory requirements for this factor of the
uncompensated care payment formula, we must determine the following:
(1) The definition of uncompensated care, or in other words, the
specific items that are to be included in the numerator (that is, the
estimated uncompensated care amount for an individual hospital) and
denominator (that is, the estimated uncompensated care amount for all
hospitals estimated to receive DSH payments in the applicable FY); (2)
the data source(s) for the estimated uncompensated care amount; and (3)
the timing and manner of computing the quotient for each hospital
estimated to receive DSH payments. The statute instructs the Secretary
to estimate the amounts of uncompensated care for a period ``based on
appropriate data.'' In addition, we note that the statute permits the
Secretary to use alternative data ``in the case where the Secretary
determines that alternative data is available, which is a better proxy
for the costs of subsection (d) hospitals for treating the uninsured.
In the course of considering how to determine Factor 3, we
considered proposing to define the amount uncompensated care for a
hospital as the uncompensated care costs of that hospital and
considered potential data sources for those costs. In doing so, we
first considered which costs should be included in the definition of
``uncompensated care costs.'' We examined the broad literature on
uncompensated care and the concepts of uncompensated care used in
various public and private programs. We also considered input from
stakeholders and public comments in various forums, including the
national provider call that we held in January 2013. Our review of the
information from these sources indicated that there is some variation
in how different States, provider organizations, and Federal programs
define ``uncompensated care.'' However, a common theme of almost all
these definitions is that they include both ``charity care'' and ``bad
debt'' as constituents of ``uncompensated care.'' After considering the
various factors that are included in different definitions of
``uncompensated care,'' we considered proposing to adopt a definition
which incorporated those factors that are most commonly included within
the term. Thus we considered proposing to define ``uncompensated care''
as the cost of charity care plus bad debt which includes the cost of
non-Medicare bad debt and non-reimbursed Medicare bad debt. In turn, we
also considered proposing to define ``charity care costs'' as the cost
of care for patients that meet hospitals' individual criteria for
charity care net of any partial payment received by the hospital from
patients for that care, and to define ``non-Medicare bad debt costs''
as the cost of hospital care for non-Medicare patients that have the
financial capacity to pay, but are unwilling to settle the claim. In
addition, we considered proposing to define ``non-reimbursed Medicare
bad debt costs'' as the amount of allowable coinsurance and deductible
for Medicare patients from whom the hospital has sought to collect
payment through reasonable collection efforts as described in Sec.
413.89(e) of the Medicare regulations and not reimbursed by Medicare.
Charity care is most commonly defined as hospital care provided to
individuals that meet certain financial eligibility criteria, for which
the hospital does not expect to receive payment because of the
individual's inability to pay. Definitions of charity care also
regularly state that a patient must meet several guidelines for their
care to qualify as charity care. These guidelines usually state that
the patient must be uninsured, unqualified for a Federal program such
as Medicaid, and/or fall under a certain Federal poverty line (FPL)
standard. Some charity care is directed at insured individuals when
insurance does not cover all the costs of their hospital care or when
there are annual or lifetime limits. This definition also varies by
hospital. Some hospitals may also seek payment from individuals who
qualify for charity care as part of their financial assistance policies
or to help offset the cost of that patient's hospital care. To the
extent that hospitals receive payment from a patient that qualifies for
charity care for hospital care provided, we believe that those payments
should be subtracted from the costs of that care. In this way, the cost
of charity care reflects the financial burden on the hospital, or,
stated another way, the cost of charity care reflects only the
uncompensated portion of the charity care.
The literature suggests that bad debt has been consistently defined
as unreimbursed care for persons for which the hospital did not receive
payment. The regulations at 42 CFR 413.89(b)(1) define Medicare bad
debt as ``amounts considered to be uncollectible from accounts and
notes receivable that were created or acquired in providing services.''
The regulations also specify that: ```accounts receivable' and `notes
receivable' are designations for claims arising from the furnishing of
services, and are collectible in money in the relatively near future.''
Section 413.89(e) further specifies that under
[[Page 27586]]
Medicare ``bad debt must meet the following criteria to be allowable:
(1) The debt must be related to covered services and derived from
deductible and coinsurance amounts. (2) The provider must be able to
establish that reasonable collection efforts were made. (3) The debt
was actually uncollectible when claimed as worthless. (4) Sound
business judgment established that there was no likelihood of recovery
at any time in the future. We considered proposing to use the cost of
non-Medicare and non-reimbursed Medicare bad debt (as reported on line
29 of the Worksheet S-10) as part of the proposed definition of
``uncompensated care.''
Some definitions of uncompensated care, including that used for
calculating the Medicaid DSH hospital payment limit at 42 CFR
447.299(c)(16), also include the difference between the costs incurred
by a hospital for services to Medicaid individuals and applicable
revenues for these services. While we recognize in some cases, a
hospital may receive revenues that do not fully cover those costs, we
note that this is true for any patient population treated by a hospital
regardless of insurance status. Hospitals negotiate contractual
allowances with commercial payers, and it is possible that payment for
some of these patients would be less than the costs of their care.
We emphasize, however, that we plan to monitor the potential
effects of different definitions of uncompensated care on various
measures designed to expand health insurance coverage under the
Affordable Care Act, including Medicaid expansion.
Specifically, we wish to avoid creating a policy that would serve
as a disincentive for States wishing to expand Medicaid. Using some of
the data discussed in this proposed rule, we recognize it would be
possible for hospitals in States that choose to expand Medicaid to
receive lower uncompensated care payments because they are less likely
to have uninsured patients than hospitals in a State that does not
choose to expand Medicaid. In practice, because the available data
sources (such as the Medicare cost report) for a given federal fiscal
year are not available until some time after the end of that federal
fiscal year, we believe that data to understand these effects will not
be available until 2016 or later. However, we also note that hospitals
in expansion States would receive full Medicaid reimbursement for many
previously uninsured patients. So on balance, we believe both hospitals
and States stand to benefit greatly from Medicaid expansion, regardless
of the data used to determine Factor 3. However, if warranted, we may
in the future reconsider how to define uncompensated care, such as to
include differences between applicable Medicaid costs and revenues, or
consider other definitions that would account for differences in State
Medicaid coverage.
For purposes of selecting an appropriate data source for this
possible definition of uncompensated care costs, we reviewed the
literature and available data sources and determined that the Medicare
cost report Worksheet S-10 could potentially provide the most complete
data for Medicare hospitals. (We refer readers to the report
``Improvements to Medicare Disproportionate Share (DSH) Payments'' for
a full discussion and evaluation of the available data sources. The
report can be found on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh.html.)
However, Worksheet S-10 is a relatively new data source that has been
used for specific payment purposes only in relatively restricted ways
(e.g., to provide a source of charity care charges in the computation
of EHR incentive payments; 75 FR 44456.). Some stakeholders have
expressed concern that hospitals have not had enough time to learn how
to submit accurate and consistent data through this reporting
mechanism. Other stakeholders have maintained that some instructions
for Worksheet S-10 still require clarification in order to ensure
standardized and consistent reporting by hospitals. We understand and
appreciate the concerns of these stakeholders. At the same time,
Worksheet S-10 is the only national data source that includes data for
all Medicare hospitals and is designed to elicit data that are both
accurate and consistent with the definition of uncompensated care costs
that we considered proposing to use.
Charity care information is reported on Worksheet S-10, lines 20
through 23. On line 20, Column 3, hospitals report ``Total initial
obligation of patients approved for charity care (at full charges
excluding non-reimbursable cost centers) for the entire facility'' for
both the insured and uninsured population. On Worksheet S-10, line 21,
the charity care charges reported on line 20 are converted to charity
care costs by multiplying the charity care charges by the cost-to-
charge ratio (CCR) reported on line 1 of Worksheet S-10. Partial
payment by patients for charity care is reported on line 22 of
Worksheet S-10. Charity care costs are reported on line 23 of Worksheet
S-10 as the difference between line 21 and 22. We could use ``Cost of
Charity Care,'' line 23, Column 3 of Worksheet S-10 to identify a
hospital's charity care costs, as part of a definition of
``uncompensated care.''
Bad debt information is reported on Worksheet S-10, lines 26
through 29. On Worksheet S-10, line 26 and line 27, a hospital reports
its total bad debt expense and its Medicare reimbursed bad debt
expense, respectively. On Worksheet S-10, line 28 represents the non-
Medicare bad debt expense and non-reimbursed Medicare bad debt expense,
the difference between lines 27 and 26. The cost of non-Medicare bad
debt and non-reimbursed Medicare is reported on line 29 of the
Worksheet S-10 as the product of the CCR and the non-Medicare and non-
reimbursed Medicare bad debt expense reported on line 28. We could use
the cost of non-Medicare bad debt and non-reimbursed Medicare that is
reported on line 29 of the Worksheet S-10 to identify a hospital's bad
debt costs, as part of a definition of ``uncompensated care.''
To summarize, we could use the sum of line 23, Column 3 of
Worksheet S-10 and line 29 of Worksheet S-10 to estimate a hospital's
uncompensated care cost. A hospital's individual uncompensated care
cost based on this estimate would represent that hospital's numerator
for Factor 3. The sum of the estimated uncompensated care costs for all
the hospitals that we estimate would receive DSH payments (and thus the
uncompensated care payment) for the fiscal year would represent the
denominator of Factor 3.
In order to apply a definition of uncompensated care costs based
upon information reported on the Worksheet S-10, it would be necessary
to use the 2010/2011 cost reports, which were submitted on or after May
1, 2010, when the new Worksheet S-10 went into effect. These are the
most recently available full year of cost reports and the first cost
reports with detailed uncompensated care data on the Worksheet S-10
that would be available for use in implementing the new methodology for
uncompensated care payments for FY 2014. Concerns about the
standardization and completeness of the Worksheet S-10 data could be
more acute for data collected in the first year of the Worksheet's use.
Because of these concerns, we are not proposing to define of
uncompensated care in a way that would require use of the Worksheet S-
10 data.
We believe, however, that Worksheet S-10 of the Medicare Cost
Report would otherwise be an appropriate data source to determine
uncompensated care costs. In particular, we note that Worksheet S-
[[Page 27587]]
10 was developed specifically to collect information on uncompensated
care costs in response to interest by MedPAC and other stakeholders
regarding the topic (for example, MedPAC's March 2007 Report to
Congress) and that it is not unreasonable to expect information on the
cost report to be used for payment purposes. Furthermore, hospitals
attest to the accuracy and completeness of the information reported in
the cost report at the time of submission. While we realize that
hospitals may wish to have a more specific understanding of how this
data will be used, we believe that the discussion in this proposed rule
will help to increase their understanding and also inform our efforts
to refine the cost report and cost report instructions so that
hospitals may continue to gain experience in reporting accurate
information. We also expect reporting on Worksheet S-10 to improve over
time, particularly in the area of charity care which is already being
used and audited for payment determinations related to the electronic
health record incentive program, and will continue to monitor these
data. Accordingly, we may proceed with a proposal to use data on the
Worksheet S-10 to determine uncompensated care costs in the future,
once hospitals are submitting accurate and consistent data through this
reporting mechanism.
As we describe above, we are concerned about stakeholder input that
the variations in the data reported on Worksheet S-10 of the Medicare
cost report regarding uncompensated care may be due to hospitals'
relative lack of experience reporting all of the data elements on that
worksheet. A large number of stakeholders noted that there is
considerable variation and numerous inconsistencies in how
uncompensated care is calculated and reported in Worksheet S-10 and
they point out that these inconsistencies can produce divergent
results. Some went as far as noting that data from Worksheet S-10 is
``flawed'' and many suggested more precision in reporting instructions
to help hospitals report data in a more consistent manner. We note that
most of the data elements reported on Worksheet S-10 have been
previously unused for payment purposes, with only some data elements
recently being used for determining a hospital's electronic health
record incentive payments, and these data elements have not been
subject to audit prior to this time. We believe it is important that
data used to determine Factor 3 are data that have been historically
publicly available, subject to audit, and used for payment purposes (or
that the public understands will be used for payment purposes). It is
our belief that hospitals expend more resources to ensure data accuracy
when data are publicly available and used for payments. For example,
the National Quality Forum (NQF) first endorsed quality measures for
readmissions for heart failure (HF) in May 2008 and acute myocardial
infarction (AMI) and pneumonia (PN) in October 2008. HF was
subsequently adopted in the Hospital Inpatient Quality Reporting
Program in the FY 2009 IPPS rule and AMI and PN in the CY2009 OPPS
rule. All three were adopted for the FY 2010 HIQR program and publicly
reported in Hospital Compare in 2009. More recently, starting in FY
2013, all three were used to determine a payment adjustment under
1886(q). As the measures became linked with payment, CMS has received
an increasing number of questions regarding and requests to refine
these measures, leading us to believe that hospitals are increasingly
focused on ensuring that their data are correct. Furthermore, it is
also our belief that auditing plays an important role in ensuring data
accuracy by identifying and remediating problem areas and/or hospitals
as well as by having a sentinel effect in others. For example, each
year, CMS and its intermediaries work with hospitals to review salary
and wage data reported on Worksheet S-3 of the Medicare cost report for
use in determining the wage index. This extensive process identifies
errors and ensures that anomalous data are reviewed, corrected as
needed, and documented. Due to stakeholder concerns and our belief in
the importance of using data that have been historically publicly
available, subject to audit, and used for payment purposes (or that the
public understands will be used for payment purposes), for FY 2014, we
have serious concerns about proposing using Worksheet S-10 to determine
the amount of uncompensated care.
While the statute instructs the Secretary to estimate the amounts
of uncompensated care for a period ``based on appropriate data,''
section 1886(r)(2)(C)(i) permits the Secretary to use alternative data
``in the case where the Secretary determines that alternative data is
available which is a better proxy for the costs of subsection (d)
hospitals for treating the uninsured'' for the numerator of Factor 3.
For the denominator of that quotient, section 1886(r)(2)(C)(ii)
requires the Secretary to use ``the aggregate amount of uncompensated
care for all subsection (d) hospitals that receive a payment under this
subsection for such period (as so estimated, based on such data).
(Emphasis added.) The phrase ``as so estimated, based on such data'' in
the latter section can be reasonably interpreted to require the
calculation to similarly be based on the same data as is used to
estimate the numerator of the quotient in Factor 3, including any
alternative data which is determined to be a better proxy for the costs
of treating the uninsured. As a result of our concerns regarding
variations in the data reported on the Worksheet S-10, we believe that
it is appropriate to consider the use of alternative data, at least in
FY 2014, the first year that this provision is effective, and possibly
additional years until hospitals have adequate experience reporting all
of the data elements on Worksheet S-10. We note that this is consistent
with input we received from some stakeholders in response to the CMS
National Provider Call in January 2013, who stated their belief that
existing FY 2010 and FY 2011 data from the Worksheet S-10 cannot be
used for implementation of 1886(r) and who requested the opportunity to
re-submit the data once more specific instructions were issued by CMS.
Accordingly, we examined alternative data sources that could be used to
allow time for hospitals to gain experience with and to improve the
accuracy of their S-10 reporting. For the reasons described above, we
believe it would be appropriate to use data elements that have been
historically publicly available, subject to audit, and used for payment
purposes (or that the public understands will be used for payment
purposes) as alternative data for the first year or years of
implementation.
In order to implement the statutory requirements for Factor 3 using
alternative data, we must: (1) Determine whether alternative data would
be a better proxy for the treatment costs of the uninsured than the
information available on the Worksheet S-10; (2) identify a source for
this alternative data; and (3) determine the timing and manner of
computing the quotient for each hospital.
We believe that data on utilization for insured low-income patients
can be a reasonable proxy for the treatment costs of uninsured
patients. Moreover, due to the concerns regarding the accuracy and
consistency of the data reported on the Worksheet S-10, we believe that
this alternative data, which is currently reported on the Medicare cost
report, would be a better proxy for the amount of uncompensated care
provided by hospitals. Accordingly, we propose to use the utilization
of insured low-
[[Page 27588]]
income patients defined as inpatient days of Medicaid patients plus
inpatient days of Medicare SSI patients as defined in 42 CFR
412.106(b)(4) and 412.106(b)(2)(i), respectively to determine Factor 3.
We describe our proposal and rationale more fully below and seek public
comment.
As a preliminary matter, we note that precise data on health care
costs are difficult to obtain. We note that for Medicare payment
purposes, we estimate those costs using reported charges and cost-to-
charge ratios. This approach to estimating costs is what is used on
Worksheet S-10 to determine costs for charity care and bad debt. Even
though we do not believe it is appropriate to look beyond the Medicare
cost report for alternative data because all hospitals are required to
report data on that cost report, we think that it is important to point
out that data on uninsured patients is difficult to find in a
comprehensive manner on a hospital-specific basis. In a September 2002
report, Analysis of the Joint Distribution of Disproportionate Share
Hospital Payments, RAND and Urban Institute researchers describe this
difficulty, citing as an example how detailed inpatient utilization
data on self-pay patients were available only for the sample of
hospitals (20 percent sample) from the 24 states included in AHRQ's
HCUP database.\25\
---------------------------------------------------------------------------
\25\ Wynn, B. et al. Analysis of the Joint Distribution of
Disproportionate Share Hospital Payments. PM-1387-ASPE. September
20, 2002 http://www.urban.org/UploadedPDF/410975_ASPEDSH_final.pdf.
---------------------------------------------------------------------------
While Worksheet S-10 does contain some information regarding the
treatment costs of the uninsured, most notably of those uninsured
patients who qualify for charity care at an individual hospital, for
the reasons described above, we are concerned about the use of
information reported on the Worksheet S-10 as appropriate data for FY
2014 and possibly additional years. As a result of these concerns, in
identifying alternative data that could serve as a proxy for the
treatment costs of the uninsured, we must consider methods other than
costs to approximate the resources expended by hospitals to treat
uninsured patients. One such method is utilization. A hospital's costs
for treating uninsured patients are a function of its input costs and
utilization of services. In accordance with the statute, in order to
determine Factor 3, a hospital-level estimate of uncompensated care is
required. Such an estimate can be constructed using detailed data
regarding specific items or services. However, such data are not
available to us. In contrast, hospital level data measuring utilization
as inpatient days or discharges are available. While we note that
inpatient days or discharges would be more precise if they took into
account the relative resource utilization of individual patients, such
as case mix, no such data are available to us. In the September 2002
report discussed above, RAND and Urban Institute researchers asserted
that without specific case mix data for low income populations,
inpatient days are preferable to discharges as a way to measure
utilization. Therefore, we believe that utilization based upon
inpatient days is an appropriate method to approximate costs for the
treatment costs of the uninsured.
We further believe that utilization by insured low-income patients,
such as Medicaid patients or Medicare patients that receive SSI
benefits (Medicare SSI), can be a reasonable proxy for utilization by
uninsured patients. In its 2000 report on American's Health Care Safety
Net, the Institute of Medicine considers uninsured individuals, low-
income underinsured individuals, Medicaid beneficiaries, and patients
with special health care needs all as vulnerable populations.\26\ We
note that when studying access to care, researchers may study Medicaid
and/or low-income populations (e.g., health outcomes, utilization,
etc.) in order to understand more broadly the impact of similar policy
interventions for other vulnerable populations.\27\ For example,
recently, researchers have studied the effects of Medicaid expansions
to gauge the effects of these expansions on health status and other
indicators to inform policymakers as these expansion efforts
continue.\28\ Researchers have also studied the ability of Medicaid
patients to gain access to outpatient care in an effort to highlight
the ramifications of various policy interventions, such as mandatory
co-payments and utilization restrictions.\29\ We believe that this type
research is often used by state and other policy makers to evaluate how
Medicaid and other public health insurance can expand access to care to
uninsured populations.
---------------------------------------------------------------------------
\26\ Marion Ein Lewin and Stuart Altman, Editors; Committee on
the Changing Market, Managed Care, and the Future Viability of
Safety Net Providers, Institute of Medicine. America's Health Care
Safety Net: Intact but Endangered. 2000. http://www.nap.edu/catalog/9612.html.
\27\ John K. Iglehart. Medicaid. N Engl J Med 1993; 328:896-900.
March 25, 1993.
\28\ Benjamin D. Sommers, M.D., Ph.D., Katherine Baicker, Ph.D.,
and Arnold M. Epstein, M.D. Mortality and Access to Care among
Adults after State Medicaid Expansions. N Engl J Med 2012; 367:1025-
1034. September 13, 2012.
\29\ The Medicaid Access Study Group. Access of Medicaid
Recipients to Outpatient Care. N Engl J Med 1994; 330:1426-1430. May
19, 1994.
---------------------------------------------------------------------------
While the report by RAND and the Urban Institute cited above found
shortcomings in how well both Medicaid and Medicare DSH target funds
towards safety net hospitals, another key finding of the report was
that the allocation methods used by these programs target funds to
safety net hospitals at least as well as the alternative allocation
methods they examined. The allocation method used by Medicare for
Medicare DSH is the sum of two computations. The first computation,
defined at 42 CFR 412.106(b)(2), known as the SSI ratio or Medicare
fraction, is the proportion of a hospital's Medicare SSI days relative
to Medicare days. The second computation, defined at 42 CFR
412.106(b)(4), known as the Medicaid fraction, is the proportion of a
hospital's Medicaid days relative to total days. The by RAND and the
Urban Institute study also found that the choice of patient populations
used to evaluate how well Medicare and Medicaid DSH funds are allocated
is important. The study notes that including Medicare SSI beneficiaries
along with all other low-income patients generally performed better,
resulting in a better targeting of these payments towards safety net
hospitals. Therefore, we believe the utilization of insured low income
patients defined as insured low-income days, or inpatient days of
Medicaid patients plus inpatient days of Medicare-SSI patients could be
a proxy for the treatment costs of uninsured patients. Currently, for
the Medicare DSH adjustment, hospitals report utilization for Medicaid
and Medicare SSI patients in accordance with the regulations at 42 CFR
412.106(b)(4) and 412.106(b)(2)(i), respectively. Specifically, we
would define inpatient days for Medicaid patients as they are defined
in 42 CFR 412.106(b)(4) and inpatient days for Medicare-SSI patients as
they are defined at Sec. 412.106(b)(2)(i). A hospital's individual
insured low-income insured days based on this calculation would
represent that hospital's numerator for Factor 3. The sum of the low-
income insured days under this calculation for all the hospitals that
we estimate would receive DSH payments (and thus the uncompensated care
payment) for FY 2014 would represent the denominator of Factor 3.
It is important to point out that when these insured low-income
utilization data are used to determine Medicare DSH payments, they are
subject to additional computations as described in 42 CFR 412.106(b)
and 412.106(d).
[[Page 27589]]
Therefore, using these data to determine Factor 3 will lead to a
different set of results than using these data to determine hospitals'
Medicare DSH payments.
We believe that the data in the Medicare cost report (and data that
are used to update the SSI ratios in the cost report) are acceptable
for use as a source for this alternative data because they include data
for all Medicare hospitals. For the reasons described above, we
considered data elements from the Medicare cost report that have been
historically publicly available, subject to audit, and used for payment
purposes, as alternative data for the costs of subsection (d) hospitals
for treating the uninsured. Worksheet S-3, Part I of the CMS-2552-96
version of the Medicare cost report and Worksheet S-2, Part I of the
CMS 2552-10 version of the Medicare cost report contain information on
the utilization of Medicaid patients. Specifically, it contains
information regarding Medicaid days (i.e., the numerator of the
Medicaid fraction). The SSI ratios can be found in Worksheet E, Part A
and hospitals' SSI ratios are reported by CMS on the Medicare DSH Web
site, by Federal fiscal year, and include a hospital's Medicare SSI
days. We point out that CMS calculates the SSI ratios using the MedPAR
claims data and updates them annually in accordance with the process
and timing set forth in the FY 2011 IPPS rule (75 FR 50282), generally
issuing them in the Spring of each year for the federal fiscal year two
years prior. For instance, we would expect that the SSI ratios for FY
2011 would be made available in the Spring of 2013. SSI ratios can be
downloaded from http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh.html. The SSI ratios for a Federal fiscal
year are the data that would ultimately be used in Worksheet E, Part A
to determine a hospital's Medicare DSH adjustment for that fiscal year.
While a hospital may choose to have its DSH payments settled using an
SSI ratio based on the hospital's cost reporting period, this choice
will vary by hospital and the timing of this choice will vary. As a
result, a hospital's decision whether to have its SSI ratio calculated
on the basis of its cost reporting period may not be available at the
time we determine Factor 3 for a specific federal fiscal year.
Therefore, in an effort to balance consistency and administrative
efficiency with precision, we believe it is appropriate to use the SSI
ratios based on the federal fiscal year.
Except for the data on Worksheet S-10, the Medicare cost report
does not currently include information that would allow calculation of
the treatment costs of uninsured patients. For the reasons described
previously, for FY 2014 and possibly additional years, we have concerns
with using these data. Accordingly, we propose to use Worksheet S-3
Part I of the CMS-2552-96 version of the Medicare cost report and
Worksheet S-2, Part I of the CMS 2552-10 version of the Medicare cost
report and data that are used to update the SSI ratios on that
Worksheet E, Part A as the source of the alternative data to determine
Factor 3 for FY 2014. We may propose to use data from Worksheet S-10 to
determine uncompensated care costs in the future, once hospitals are
submitting accurate and consistent data through this reporting
mechanism.
The statute also allows the Secretary the discretion to determine
the time periods from which we will derive the data to estimate the
numerator and the denominator of the Factor 3 quotient. Specifically,
the statute defines the numerator of the quotient as ``the amount of
uncompensated care for such hospital for a period selected by the
Secretary...'' The statute defines the denominator as ``the aggregate
amount of uncompensated care for all subsection (d) hospitals that
receive a payment under this subsection for such period.'' (Emphasis
added.) As we have discussed above, we are proposing a process of
making interim payments with final cost report settlement for both the
empirically justified Medicare DSH payments and the uncompensated care
payments required by section 3133 of the Affordable Care Act.
Consistent with that proposed process, we also are proposing to
determine the time period from which to estimate the numerator and
denominator of the Factor 3 quotient in a way that will be consistent
with making interim and final payments. Specifically, we must have
Factor 3 values available for hospitals that we estimate will qualify
for Medicare DSH payments using most recently available historical data
and for those hospitals that we do not estimate will qualify for
Medicare DSH payments but that may ultimately qualify for Medicare DSH
payments at the time of cost report settlement.
We are proposing to estimate the numerator and the denominator of
Factor 3 for hospitals based on the most recently available full year
of Medicare cost report data (including the most recently available
data that may be used to update the SSI ratios) with respect to a
Federal fiscal year. In other words, we are proposing to use data from
the most recently available cost report for the Medicaid days and the
most recently available SSI ratios (that is, latest available SSI
ratios before the beginning of the Federal fiscal year) for the
Medicare-SSI days. We note that these data are publicly available,
subject to audit, and used for payment purposes. While we recognize
that older data also meet these criteria, we often use the most
recently available data for payment determinations. Therefore, for FY
2014, we are proposing to use data from the 2010/2011 cost reports for
the Medicaid days and the FY 2011 SSI ratios for the Medicare-SSI days
(or, if the FY 2011 SSIs are unavailable, the FY 2010 SSI ratios) to
estimate Factor 3 for FY 2014.
To summarize, for FY 2014, in response to stakeholder concerns
regarding data variability and lack of reporting experience with
Worksheet S-10, we propose to determine Factor 3 using insured low-
income patient days from the 2010/2011 cost reports (including the
FY2011 or FY 2010 SSI ratios, whichever represents the most recently
available inputs prior to October 1, 2013) as alternative data which
are a better proxy for the treatment costs of uninsured patients. We
further propose to define insured low-income patient days as inpatient
days of Medicaid patients plus inpatient days of Medicare SSI patients
as defined in 42 CFR 412.106(b)(4) and 412.106(b)(2)(i), respectively.
We are proposing to add a new paragraph (g)(1)(iii) under Sec.
412.106 of our regulations to define the methodology for calculating
Factor 3.
We are inviting public comments on this proposal. Notwithstanding
our concerns regarding Worksheet S-10, we are interested to hear
commenters' views on the quality of the data reported on the Worksheet
S-10, and whether it would be sufficient for use in determining
uncompensated care amounts for fiscal year 2014, either by itself or in
combination with other data. We also seek comment on how fast we could
transition to the use of Worksheet S-10 data based upon increased
reliability over time, including whether the data could be used to
determine uncompensated care in FY 2014 either alone or in combination
with other data.
In addition, we are proposing to estimate which hospitals would
receive an empirically justified DSH payment in a given Federal fiscal
year using the most recent data available. As we described previously,
only hospitals that receive Medicare DSH payments in a fiscal year may
receive an uncompensated care payment. However, because whether or not
a hospital will actually receive Medicare DSH payment is not known
until cost report
[[Page 27590]]
settlement and cost report settlement occurs several years after end of
the federal fiscal year, we believe it is necessary to estimate which
hospitals will receive Medicare DSH for a given fiscal year. Because
the uncompensated care amounts for these hospitals are used to
determine the denominator of Factor 3, this allows for the calculation
of Factor 3 in advance of or during the federal fiscal year so that
interim payments can begin during the fiscal year. We believe that this
will create some level of predictability and finality for hospitals
eligible for these payments, in addition to being administratively
efficient.
Thus for FY 2014, the denominator for Factor 3 would reflect the
estimated Medicaid and Medicare SSI patient days based on data from the
2010/2011 Medicare cost report (including the most recently available
data that may be used to update the SSI ratios) for all hospitals that
we estimate would receive an empirically justified DSH payment in FY
2014. The numerator of Factor 3 would be the estimated Medicaid and
Medicare SSI patient days for the individual hospital based on its most
recent 2010/2011 Medicare cost report data (including the most recently
available data that may be used to update the SSI ratios). We propose
to calculate a numerator for all subsection (d) hospitals and
subsection (d) Puerto Rico hospitals that have the potential of
receiving a DSH payment regardless of whether we estimate that the
hospital would receive DSH payments in the respective Federal fiscal
year. In that way, if a hospital becomes eligible to receive the
empirically justified DSH payment and also an uncompensated care
payment, we will be able to finalize its uncompensated care payment
efficiently and without affecting the uncompensated care payments of
other hospitals.
We believe that this proposed approach strikes an appropriate
balance between administrative efficiency, finality, and predictability
in payments. Therefore, we also are proposing to publish a table or
tables listing Factor 3 for all hospitals that we estimate would
receive empirically justified DSH payments in a fiscal year (that is,
hospitals that would receive interim uncompensated care payments during
the fiscal year), and for the remaining subsection (d) and subsection
(d) Puerto Rico hospitals that have the potential of receiving a DSH
payment in the event that they receive an empirically justified DSH
payment for the fiscal year as determined at cost report settlement. We
are also proposing that hospitals have 60 days from the date of display
of the IPPS/LTCH PPS proposed rule to review these tables and notify
CMS in writing of a change in a hospital's subsection (d) hospital
status, such as if a hospital has closed or converted to a CAH. We will
notify hospitals concerning the specifics of this process in program
instructions after the final rule. For FY 2014, we will allow hospitals
60 days from the date of display of the IPPS/LTCH PPS proposed rule to
review these tables and notify CMS in writing of a change in a
hospital's subsection (d) hospital status, and we may allow an
additional (perhaps shorter) such period after the publication of the
final rule. For hospitals that were not estimated to receive an
empirically justified DSH payment for a fiscal year, but ultimately
qualify for such a payment at cost report settlement, we would make the
full uncompensated care payment at that time. In the case of hospitals
that we estimated would receive an empirically justified Medicare DSH
payment for a fiscal year and that received interim empirically
justified Medicare DSH payments and uncompensated care payments, but
are found to be ineligible for DSH payments at cost report settlement,
we would recover the overpayment. However, we are proposing only to
calculate the denominator once, at the time of the IPPS/LTCH PPS final
rule each year. We are not proposing to recalculate the denominator at
the time when cost reports are settled and final eligibility
determinations for uncompensated care (and empirically justified
Medicare DSH) payments are made. We discuss our proposals for interim
payments and reconciliation processes later in this preamble.
For the purpose of this proposed rule, we are posting proposed
tables listing Factor 3 for the hospitals that we have estimated would
receive Medicare DSH payments for FY 2014 on the CMS Web site at:
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh.html. We request that hospitals review these
tables. In order to ensure that we have sufficient time to incorporate
any updated information in the tables for the final rule, hospitals
should notify CMS in writing within 60 days from the date of display of
this proposed rule of any change in a hospital's subsection (d)
hospital status. As we state above, for FY 2014, we may allow an
additional (perhaps shorter) such period after the publication of the
final rule.
Our estimates of eligibility to receive FY 2014 Medicare DSH
payments are based on the December 2012 update of the Provider Specific
File that lists the most recently available DSH patient percentage
(DPP) and DSH payment adjustments for hospitals that qualify to receive
DSH payments. We estimate that 2,349 hospitals, or 68 percent of all
applicable hospitals, would be eligible for DSH payments in FY 2014.
The proposed Factor 3 is based on the December 2012 update of the
Medicare Hospital Cost Report and FY 2010 SSI ratios. The data from
these 2,349 hospitals is used to determine the denominator for Factor
3. However, we will estimate a Factor 3 numerator for each subsection
(d) and subsection (d) Puerto Rico hospital that has the potential of
receiving DSH payments for FY 2014 and therefore of qualifying for the
uncompensated care payment in FY 2014. We intend to update in the final
rule the list of hospitals that we estimate will be eligible for DSH
payments for FY 2014 and our estimate of Factor 3 using more recent
data and verified hospital notifications regarding hospital status (for
example, closures).
e. Limitations on Review
Section 1886(r)(3) of the Act provides that there will be no
administrative or judicial review under section 1869 of the Act, 1878
of the Act, or otherwise for any of the following:
Any estimate of the Secretary for purposes of determining
the factors described in paragraph (2) of section 1886(r) of the Act.
Any period selected by the Secretary for such purposes.
We are proposing to codify this policy in new Sec. 412.106(g)(2)
of our regulations.
We invite public comment on this proposal.
f. Proposed Operational Considerations
As discussed earlier in section V.F.3.d. of the preamble of this
proposed rule, and in accordance with section 1886(r)(2) of the Act,
only subsection (d) hospitals that receive empirically justified
Medicare DSH payments in a given Federal fiscal year will also receive
the uncompensated care payment (that is, Factor 1 times Factor 2 times
Factor 3) for that given Federal fiscal year. In addition, as discussed
above in this section, we are proposing that subsection (d) Puerto Rico
hospitals that receive empirically justified Medicare DSH payments in a
given Federal fiscal year would also receive the uncompensated care
payment (that is, Factor 1 times Factor 2 times Factor 3) for that
given Federal fiscal year. As we discussed above, we intend to estimate
Factor 3 for each subsection (d) and subsection (d) Puerto Rico
hospital with the potential to receive a DSH payment prior to the
[[Page 27591]]
beginning of the Federal fiscal year and intend to make that
information available via our Web site. http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh.html.
Specifically, we are proposing to make interim uncompensated care
payments on the basis of our best available estimates concerning the
eligibility of each hospital for empirically justified Medicare DSH
payments and our best available calculations concerning the amount of
the uncompensated care payments that the hospital is eligible to
receive. We intend to make these interim uncompensated care payments on
a periodic basis and not on a per discharge basis. As discussed above,
we believe that this approach is more consistent with the plain
language of the statute describing the additional payment, which
includes no information from which it would be possible to infer that
the payment should be made on a per discharge basis. We believe that
this is the most administratively efficient means to distribute a set
dollar amount to individual hospitals and also creates an appropriate
level of predictability for hospitals. If we were to make these interim
uncompensated care payments on a per discharge basis, unless a
hospital's Medicare utilization is identical to the period used to
determine the per discharge payment level, it is certain that Medicare
would overpay or underpay. By making interim payments periodically, we
can virtually eliminate the possibility that Medicare pays a higher or
lower amount than intended and limit the need for reconciliation to
whether a hospital is eligible for Medicare DSH and thus the entire
uncompensated care payment at cost report settlement.
We also are proposing to make a final determination concerning
eligibility for uncompensated care payments at the time of cost report
settlement. As a result of this proposal, our operational system must
be able to handle the various situations that may arise between interim
and final eligibility determinations. For example, a hospital may
receive empirically justified DSH payments and uncompensated care
payments based on an initial determination that the hospital is
eligible for such payments, but the hospital may then be determined to
be ineligible for such payments at cost report settlement. In such
situations, we must be prepared and able to recoup the interim
empirically justified DSH payments and uncompensated care payments that
the hospital received.
For each Federal fiscal year, as we proposed earlier in this
section, we intend to estimate which hospitals will receive an
empirically justified DSH payment (that is, eligible hospitals). We are
proposing to provide periodic payments to these hospitals during the
relevant Federal fiscal year so that they can receive their
uncompensated care payments on an interim basis. For a fiscal year,
each eligible hospital's interim uncompensated care payments will be
determined by multiplying the final values for Factor 1, Factor 2, and
Factor 3 for that year and dividing the amount by the number of periods
over which the interim payments will be made.
Because we are using historical data to estimate each hospital's
eligibility for empirically justified DSH payments in FY 2014 and
subsequent years, a reconciliation process will be necessary to account
for cases in which a hospital's eligibility for such payments changes
after we have published our estimates during the rulemaking process.
For example, a hospital that had not been estimated to be eligible for
these payments may become eligible during the course of a given payment
period. In such cases, our estimates would have indicated that the
hospital was ineligible for empirically justified DSH payments and
therefore ineligible for uncompensated care payments. That hospital
would not receive interim payments. However, if the data available at
cost report settlement were to indicate that the hospital is eligible
for an empirically justified DSH payment, the hospital would become
eligible for an uncompensated care payment based on that hospital's
Factor 3 value.
Therefore, we are proposing that at cost report settlement, the
fiscal intermediary/MAC will make a final determination concerning
whether each hospital is eligible for empirically justified Medicare
DSH payments and, therefore, uncompensated care payments in FY 2014 and
each subsequent year. In the case where a hospital received interim
payments for its empirically justified Medicare DSH payments and
uncompensated care payments for FY 2014 or a subsequent year on the
basis of estimates prior to the payment year, but is determined to be
ineligible for the empirically justified Medicare DSH payment at cost
report settlement, the hospital would no longer be eligible for either
payment and CMS would recoup those monies. For a hospital that did not
receive interim payments for its empirically justified DSH payments and
uncompensated care payments for FY 2014 or a subsequent year, but at
cost report settlement is determined to be eligible for DSH payments,
the fiscal intermediary/MAC would calculate the uncompensated care
payment for such a hospital based on the Factor 3 value determined
prospectively for that fiscal year.
We are proposing to codify this policy regarding the manner and
timing of payments in new Sec. 412.106(h) of our regulations.
We invite public comment on this proposal.
The reconciliations at cost report settlement would be based on the
values for Factor 1, Factor 2, and Factor 3 that we have finalized
prospectively for a Federal fiscal year. For example, a hospital that
was estimated by CMS to receive empirically justified DSH payments for
FY 2014 and received interim uncompensated care payments would not
receive a different uncompensated care payment amount if the fiscal
intermediary/MAC determined that the hospital remained eligible for
empirically justified DSH payments at cost report settlement. In other
words, we are not proposing to include a reestimation of Factor 1,
Factor 2, or Factor 3 in the reconciliation process we are describing.
Rather, Factor 1, Factor 2, and Factor 3 are estimates determined
prospectively using methodologies we establish through rulemaking. We
recognize that, under this proposal, we may pay a total amount that
could either be more or less than the product of Factor 1 and Factor 2.
However, we believe this is inherent in the use of estimates to
determine the Factors, similar to the manner in which we estimate the
amount of total outlier payments under section 1886(d)(5)(A)(iv)
although, as in this case, the amount of actual total outlier payments
might vary from that estimate. We do not know of any reason to believe
that there will be a bias toward systematic overpayment or underpayment
from year to year.
We are proposing to codify this policy at Sec. 412.106(g)(1)(iv)
of our regulations.
We are inviting public comments on this proposal, especially in
regard to whether we should include Factor 3 within the reconciliation
process. Depending on the comments, we may revise our proposed policy
in the final rule so that at the time of cost report settlement and
reconciliation a hospital's final uncompensated care payments could be
based on Factor 3 numerators and denominators estimated using more
recent cost report data (and associated inputs). In addition, we may
revise our proposed reconciliation process, as appropriate, to account
for any policy changes that we make in the
[[Page 27592]]
final rule to the proposals in this proposed rule.
We also note that the uncompensated care payment will be reported
on the Medicare Hospital Cost Report. We recognize that hospitals have
their own cost reporting periods that may differ from the Federal
fiscal year and that may span more than one Federal fiscal year. We are
proposing that hospitals receive their uncompensated care payments with
respect to the fiscal year in which their cost report begins. For
example, if a hospital is estimated to be eligible for the empirically
justified DSH payment and also an uncompensated care payment in FY 2014
and has a cost report period of January 1, 2014 through December 31,
2014, this hospital would begin to receive interim payments for its
uncompensated care on October 1, 2013. If, at cost report settlement,
this hospital remained eligible for an empirically justified DSH
payment, then the hospital would receive its FY 2014 uncompensated care
payment on its cost report for the cost reporting period beginning on
January 1, 2014 (that is, the hospital would neither owe nor be owed
monies for its uncompensated care payment). As another example, if that
same hospital is no longer eligible for an empirically justified
Medicare DSH payment at the time of settlement of its cost report for
the cost reporting period beginning January 1, 2014, the hospital would
be required to pay back the interim payments it received for its
uncompensated care payments. We note that this methodology would not
delay the full payment of FY 2014 payments to hospitals with cost
reporting periods that begin after October 1, 2013. While it is
possible to align interim and final payments for the uncompensated care
payment with individual hospital's cost reporting periods, we believe
it administratively efficient and practical to pay the uncompensated
care payment on the basis of the Federal fiscal year because that is
how it is determined, and to reconcile that amount in the cost
reporting period that begins in the respective Federal fiscal year. If
this proposal is finalized, we will revise the cost report accordingly.
We are inviting public comments on our proposal.
g. National Provider Call
On January 8, 2013, CMS hosted a National Provider Call regarding
the implementation of section 3133 of the Affordable Care Act. During
this call, CMS asked Dobson DaVanzo and Associates, LLC. with its
subcontractor, KNG Health Consulting, LLC, to present information
regarding alternative definitions, measures, and data sources for the
various estimates required by section 1886(r) of the Act, including the
rate of uninsured individuals under the age of 65 years and hospital-
specific uncompensated care. Approximately 1,304 participants
participated in this call. The presentation materials from the call are
available on the CMS Web site at: http://www.cms.gov/Outreach-and-Education/Outreach/NPC/National-Provider-Calls-and-Events-Items/2013-01-08-ACA to submit public comments to CMS for consideration through
January 15, 2013, when we undertook rulemaking and other activities
related to implementation of section 1886(r) of the Act. Approximately
64 organizations submitted comments either on the National Provider
Call or subsequent to the National Provider Call. We appreciate this
input and have considered the issues raised by the commenters in
developing the proposals discussed above. The report ``Improvements to
Medicare Disproportionate Share (DSH) Payments'' discusses the issues
raised in this National Provider Call. A summary of the comments on the
National Provider Call has also been prepared. The report and summary
can be found on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh.html.
F. Medicare-Dependent, Small Rural Hospital (MDH) Program (Sec.
412.108)
1. Backgound
Section 1885(d)(5)(G) of the Act provides special payment
protections, under the IPPS, to a Medicare-dependent, small rural
hospital (MDH). (For additional information on the MDH program and the
payment methodology, we refer readers to the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51683 through 51684.) As we discussed in the FY 2011
IPPS/LTCH PPS final rule (75 FR 50287) and in the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51683 through 51684), section 3124 of the Affordable
Care Act extended the expiration of the MDH program from the end of FY
2011 (that is, for discharges occurring before October 1, 2011) to the
end of FY 2012 (that is, for discharges occurring before October 1,
2012). Under prior law, as specified in section 5003(a) of Public Law
109-171 (DRA 2005), the MDH program was to be in effect through the end
of FY 2011 only. Section 3124(a) of the Affordable Care Act amended
sections 1886(d)(5)(G)(i) and 1886(d)(5)(G)(ii)(II) of the Act to
extend the MDH program and payment methodology by striking out
``October 1, 2011'' and inserting ``October 1, 2012''. Section 3124(b)
of the Affordable Care Act made conforming amendments to sections
1886(b)(3)(D) and 1886(b)(3)(D)(iv) of the Act.
In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50287 and 50414), we
amended the regulations at Sec. 412.108(a)(1) and (c)(2)(iii) to
reflect the statutory extension of the MDH program through FY 2012. In
the FY 2012 IPPS/LTCH PPS final rule (76 FR 51683 through 51684), we
did not make any additional changes to the MDH regulatory text for FY
2012. As discussed below, the ATRA (Pub. L. 112-240) amended the Act to
extend the MDH program through the end of FY 2013.
2. Provisions of the ATRA for FY 2013
a. Background
Prior to the enactment of the ATRA, under section 3124 of the
Affordable Care Act, the MDH program authorized by section
1886(d)(5)(G) of the Act was set to expire at the end of FY 2012.
Section 606 of the ATRA amended sections 1886(d)(5)(G)(i) and
1886(d)(5)(G)(ii)(II) of the Act to provide for an additional 1-year
extension of the MDH program, effective from October 1, 2012 to
September 30, 2013 (FY 2013). Section 606 of the ATRA also made
conforming amendments to sections 1886(b)(3)(D)(i) and
1886(b)(3)(D)(iv) of the Act. Prior to the enactment of the ATRA, in
the FY 2013 IPPS/LTCH PPS final rule, we discussed the expiration of
the MDH program at the end of FY 2012 (77 FR 53413 through 53414) and
revised the SCH regulation at Sec. 412.92(b) to change the effective
date of SCH status for MDHs that apply for SCH status with the
expiration of the MDH program (77 FR 53404 through 53405).
In a FY 2013 IPPS notice issued in the Federal Register on March 7,
2013 (78 FR 14689), we announced the extension of the MDH program for
FY 2013 in accordance with the provisions of section 606 of the ATRA.
In that notice, we explained that, as a result of section 606 of the
ATRA, the MDH program is now extended for 1 additional year, through
the end of FY 2013 (that is, effective October 1, 2012 through
September 30, 2013). The FY 2013 IPPS notice explained how providers
may be affected by the ATRA extension of the MDH program and described
the steps to reapply for MDH status for FY 2013, as applicable.
Generally, a provider that was classified as an MDH at the end of FY
2012 (that is, as of September 30, 2012) will be reinstated as an MDH
effective October 1, 2012, with no need to reapply for MDH
classification. However, if the MDH had classified as
[[Page 27593]]
a sole community hospital (SCH) or cancelled its rural classification
under Sec. 412.103(g) effective on or after October 1, 2012, the
effective date of MDH status may not be retroactive to October 1, 2012.
In the FY 2013 IPPS notice, we also stated that we intended to make
conforming changes to the regulations at Sec. Sec. 412.108(a)(1) and
(c)(2)(iii) in future rulemaking to reflect the statutory changes made
by section 606 of the ATRA. We refer readers to the FY 2013 IPPS notice
(78 FR 14689 through 14694) for additional information on the extension
of the MDH program through FY 2013 pursuant to section 606 of the ATRA
and for additional information on how and when MDH status will be
determined for hospitals classified as MDHs prior to the September 30,
2012 expiration of the program.
b. Proposed Conforming Regulatory Changes
In this proposed rule, we are proposing to make conforming changes
to the regulations at Sec. Sec. 412.108(a)(1) and (c)(2)(iii) to
reflect the statutory extension of the MDH program through FY 2013 made
by section 606 of the ATRA.
c. Expiration of the MDH Program
Because section 606 of the ATRA extends the MDH program through FY
2013 only, effective FY 2014, the MDH program will no longer be in
effect. Because the MDH program is not authorized by statute beyond FY
2013, beginning in FY 2014, all hospitals that previously qualified for
MDH status will no longer have MDH status and will be paid based on the
Federal rate.
As noted earlier, in the FY 2013 IPPS/LTCH PPS final rule (77 FR
53404 through 53405), we revised our SCH policies to allow MDHs to
apply for SCH status and be paid as such under certain conditions,
following expiration of the MDH program at the end of FY 2012. We
codified these changes in the regulations at Sec. 412.92(b)(2)(i) and
Sec. 412.92(b)(2)(v). For additional information, we refer readers to
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53404 through 53405 and
53674). We note that those same conditions apply to MDHs that intend to
apply for SCH status with the expiration of the MDH program at the end
of FY 2013. Specifically, the existing regulations at Sec.
412.92(b)(2)(i) and (b)(2)(v) allow for an effective date of approval
of SCH status that is the day following the expiration date of the MDH
program. In accordance with these regulations, in order for an MDH to
receive SCH status effective October 1, 2013, it must apply for SCH
status at least 30 days before the end of the MDH program; that is, the
MDH must apply for SCH status by August 31, 2013. The MDH also must
request that, if approved as an SCH, the SCH status be effective with
the expiration of the MDH program provision; that is, the MDH must
request that the SCH status, if approved, be effective October 1, 2013,
immediately after its MDH status expires with the expiration of the MDH
program at the end of FY 2013, on September 30, 2013.
We note that an MDH that applies for SCH status in anticipation of
the expiration of the MDH program would not qualify for the October 1,
2013 effective date upon approval if it does not apply by the August
31, 2013 deadline. The provider would instead be subject to the usual
effective date for SCH classification, that is, 30 days after the date
of CMS' written notification of approval as specified at Sec.
412.92(b)(2)(i).
G. Hospital Readmissions Reduction Program: Proposed Changes
(Sec. Sec. 412.150 Through 412.154)
1. Statutory Basis for the Hospital Readmissions Reduction Program
Section 3025 of the Affordable Care Act, as amended by section
10309 of the Affordable Care Act, added a new subsection (q) to section
1886 of the Act. Section 1886(q) of the Act establishes the ``Hospital
Readmissions Reduction Program,'' effective for discharges from an
``applicable hospital'' beginning on or after October 1, 2012, under
which payments to those applicable hospitals may be reduced to account
for certain excess readmissions.
Section 1886(q)(1) of the Act sets forth the methodology by which
payments to ``applicable hospitals'' will be adjusted to account for
excess readmissions. Pursuant to section 1886(q)(1) of the Act,
payments for discharges from an ``applicable hospital'' will be an
amount equal to the product of the ``base operating DRG payment
amount'' and the adjustment factor for the hospital for the fiscal
year. That is, ``base operating DRG payments'' are reduced by a
hospital-specific adjustment factor that accounts for the hospital's
excess readmissions. Section 1886(q)(2) of the Act defines the base
operating DRG payment amount as ``the payment amount that would
otherwise be made under subsection (d) (determined without regard to
subsection (o) [the Hospital VBP Program]) for a discharge if this
subsection did not apply; reduced by . . . any portion of such payment
amount that is attributable to payments under paragraphs (5)(A),
(5)(B), (5)(F), and (12) of subsection (d).'' Paragraphs (5)(A),
(5)(B), (5)(F), and (12) of subsection(d) refer to outlier payments,
IME payments, DSH adjustment payments, and add-on payments for low
volume hospitals, respectively.
Furthermore, section 1886(q)(2)(B) of the Act specifies special
rules for defining ``the payment amount that would otherwise be made
under subsection (d)'' for certain hospitals. Specifically, section
1886(q)(2)(B) of the Act states that ``[i]n the case of a Medicare-
dependent, small rural hospital (with respect to discharges occurring
during fiscal years 2012 and 2013) or a sole community hospital . . .
the payment amount that would otherwise be made under subsection (d)
shall be determined without regard to subparagraphs (I) and (L) of
subsection (b)(3) and subparagraphs (D) and (G) of subsection (d)(5).''
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53374), we finalized
policies to implement the statutory provisions related to the
definition of ``base operating DRG payment amount''.
Section 1886(q)(3)(A) of the Act defines the ``adjustment factor''
for an applicable hospital for a fiscal year as equal to the greater of
``(i) the ratio described in subparagraph (B) for the hospital for the
applicable period (as defined in paragraph (5)(D)) for such fiscal
year; or (ii) the floor adjustment factor specified in subparagraph
(C).'' Section 1886(q)(3)(B) of the Act, in turn, describes the ratio
used to calculate the adjustment factor. It states that the ratio is
``equal to 1 minus the ratio of--(i) the aggregate payments for excess
readmissions . . . ; and (ii) the aggregate payments for all
discharges. . . .'' Section 1886(q)(3)(C) of the Act describes the
floor adjustment factor, which is set at 0.99 for FY 2013, 0.98 for FY
2014, and 0.97 for FY 2015 and subsequent fiscal years.
Section 1886(q)(4) of the Act sets forth the definitions of the
terms ``aggregate payments for excess readmissions'' and ``aggregate
payments for all discharges'' for an applicable hospital for the
applicable period. The term ``aggregate payments for excess
readmissions'' is defined in section 1886(q)(4)(A) of the Act as ``the
sum, for applicable conditions . . . of the product, for each
applicable condition, of (i) the base operating DRG payment amount for
such hospital for such applicable period for such condition; (ii) the
number of admissions for such condition for such hospital for such
applicable period; and (iii) the ``Excess Readmission Ratio . . . for
such hospital for such applicable period minus 1.'' The ``excess
readmission ratio is a hospital-specific ratio based on each applicable
condition. Specifically, section
[[Page 27594]]
1886(q)(4)(C) of the Act defines the excess readmission ratio as the
ratio of ``risk-adjusted readmissions based on actual readmissions''
for an applicable hospital for each applicable condition, to the
``risk-adjusted expected readmissions'' for the applicable hospital for
the applicable condition.
Section 1886(q)(5) of the Act provides definitions of ``applicable
condition,'' ``expansion of applicable conditions,'' ``applicable
hospital,'' ``applicable period,'' and ``readmission.'' The term
``applicable condition'' (which is addressed in detail in section
IV.C.3.a. of the FY 2012 IPPS/LTCH PPS final rule (76 FR 51665 through
51666)) is defined as a ``condition or procedure selected by the
Secretary among conditions and procedures for which: (i) readmissions .
. . represent conditions or procedures that are high volume or high
expenditures . . . and (ii) measures of such readmissions . . . have
been endorsed by the entity with a contract under section 1890(a) . . .
and such endorsed measures have exclusions for readmissions that are
unrelated to the prior discharge (such as a planned readmission or
transfer to another applicable hospital).'' Section 1886(q)(5)(B) of
the Act also requires the Secretary, beginning in FY 2015, ``to the
extent practicable, [to] expand the applicable conditions beyond the 3
conditions for which measures have been endorsed . . . to the
additional 4 conditions that have been identified by the Medicare
Payment Advisory Commission in its report to Congress in 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
We have been implementing the requirements of the Hospital
Readmissions Reduction Program in rulemakings, and will continue to do
so. The payment adjustment factor set forth in section 1886(q) of the
Act did not apply to discharges until FY 2013. In the FY 2012 IPPS/LTCH
PPS final rule, we addressed the issues of the selection of readmission
measures and the calculation of the excess readmission ratio, which
will be used, in part, to calculate the readmission adjustment factor.
Specifically, in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51660
through 51676), we addressed the portions of section 1886(q) of the Act
related to the following provisions:
Selection of applicable conditions;
Definition of ``readmission'';
Measures for the applicable conditions chosen for
readmission;
Methodology for calculating the excess readmission ratio;
and
Definition of ``applicable period'';
With respect to the topics of ``measures for readmission'' for the
applicable conditions, and ``methodology for calculating the excess
readmission ratio,'' we specifically addressed the following:
Index hospitalizations;
Risk adjustment;
Risk standardized readmission rate;
Data sources; and
Exclusion of certain readmissions.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53374 through
53401), we finalized our policies that relate to the calculation of the
hospital readmission payment adjustment factor and the process by which
hospitals can review and correct their data. Specifically, in the final
rule, we addressed the portions of section 1886(q) of the Act related
to the following provisions:
Base operating DRG payment amount, including policies for
SCHs and MDHs and hospitals paid under section 1814(b) of the Act;
Adjustment factor (both the ratio and floor adjustment
factor);
Aggregate payments for excess readmissions and aggregate
payments for all discharges;
Applicable hospital;
Limitations on review;
Reporting of hospital-specific information, including the
process for hospitals to review readmission information and submit
corrections.
In the FY 2013 IPPS/LTCH PPS final rule, we established a new
Subpart I under 42 CFR Part 412 (Sec. Sec. 412.150 through 412.154) to
codify rules for implementing the Hospital Readmissions Reduction
Program.
3. FY 2014 Proposals for the Hospital Readmissions Reduction Program
a. Overview
In this proposed rule, for FY 2014 and beyond, we are proposing
to--
Refine the readmissions measures and related methodology
for the current applicable conditions (section V.G.3.b. of this
preamble);
Expand the ``applicable conditions'' for FY 2015 (section
V.G.3.c. of this preamble);
Specify additional policies for hospitals paid under
section 1814(b)(3) of the Act (Sec. 412.154(d)), including the process
to be exempted from the Hospital Readmissions Reduction Program and the
definition of ``base operating DRG payment amount'' (section V.G.3.d.
of this preamble);
Specify the proposed adjustment factor floor for FY 2014
(section V.G.3.e. of this preamble);
Specify the proposed applicable period for FY 2014
(section V.G.3.f. of this preamble);
Refine the methodology to calculate the aggregate payments
for excess readmissions (section V.G.3.g. of this preamble); and
Clarify the process for reporting hospital-specific
information, including the opportunity to review and submit corrections
(section V.G.3.h. of this preamble).
b. Proposed Refinement of the Readmission Measures and Related
Methodology for FY 2014 and Subsequent Years Payment Determinations
(1) Overview of the Inclusion of Planned Readmissions for the
Calculation of the FY 2014 Readmissions Adjustment Factors
In the FY 2012 IPPS/LTCH PPS final rule, we adopted acute
myocardial infarction (AMI), heart failure (HF), and pneumonia (PN)
readmission measures for the Hospital Readmissions Reduction Program
payment determinations beginning with FY 2013. During development of
the three readmission measures for AMI, HF, and PN, we consulted with
medical experts to identify readmissions that are typically scheduled
as followup care for each specific condition within 30 days of
discharge. We categorized these readmissions as planned followup care
and excluded them from being counted
[[Page 27595]]
as a readmission. The AMI measure finalized for the Hospital
Readmissions Reduction Program included two revascularization
procedures (coronary artery bypass graft surgery (CABG) and
percutaneous coronary intervention (PCI) (76 FR 51667)). We considered
these procedures planned readmissions and excluded them from the
readmission calculation as long as the readmissions were not for one of
five acute conditions (HF, AMI, other acute/subacute forms of ischemic
heart disease, arrhythmia, and cardiac arrest).
During development of the HF and PN readmission measures, we did
not identify any readmissions that were typically planned as followup
care at the time of the patient's discharge. Therefore, the readmission
measures finalized for the Hospital Readmissions Reduction Program for
these two conditions did not exclude any planned readmissions from the
readmission calculation.
(2) Proposed Refinement of the Readmission Measures and Related
Methodology for the FY 2014 and Subsequent Years Payment Determinations
Since the development and implementation of the initial three
readmission measures adopted under the Hospital Readmissions Reduction
Program, we have received comments from the medical community, other
stakeholders, and the general public encouraging us to identify and not
count as readmissions a broader range of planned readmissions.
Stakeholders also made recommendations for expanding the number and
types of planned readmissions during the public comment period for FY
2013 IPPS/LTCH PPS proposed rule (as discussed in the FY 2013 IPPS/LTCH
PPS final rule (77 FR 53382 through 53398)).
Stakeholders commented that readmission measures are intended to
capture unplanned readmissions that arise from acute clinical events
requiring urgent rehospitalization within 30 days of discharge. In
addition, stakeholders commented that planned readmissions do not
generally signal poor quality of care. In response to stakeholders'
concerns, we have worked with experts in the medical community, other
stakeholders, and the public to broadly identify planned readmissions
for procedures and treatments for exclusion from the readmission
measures. Specifically, we developed an expanded ``planned readmission
algorithm'' in the CMS Planned Readmission Algorithm Version 2.1 Report
to identify planned readmissions across our readmission measures, and
are proposing to apply the algorithm to the AMI, HF, and PN measures
for FY 2014. The CMS Planned Readmission Algorithm Version 2.1 Report
is available on the CMS Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Hospital_QualityInits/Measure-Methodology.html.
We developed the algorithm based on a hospital-wide (not condition-
specific) cohort of patients. We began the development by using the
Agency for Healthcare Research and Quality's (AHRQ's) Clinical
Classification Software (CCS) codes to group thousands of individual
procedures and diagnoses codes into clinically coherent, mutually
exclusive procedure and diagnosis categories (PROC-CCS categories and
Diagnosis-CCS categories, respectively). A panel of independent, non-
CMS clinicians then reviewed the procedure categories and identified
those that are commonly planned and require admission. Clinicians also
reviewed the diagnosis categories and identified those that were acute
diagnoses likely requiring hospitalization. Using these procedure and
diagnosis categories and some individual ICD-9-CM procedure and
diagnoses codes in the categories, we developed an initial algorithm
for identifying planned readmissions for a hospital-wide cohort of
patients.
The algorithm underwent several reviews by stakeholders. We
initially posted the detailed algorithm for informal public comment
during the measurement development process in August 2011. The National
Quality Forum (NQF) reviewed and made the algorithm available for
public comment during its endorsement review of the Hospital-Wide All-
Cause Unplanned Readmission Measure (NQF 1789). We also
recruited 27 surgical subspecialists nominated by their specialty
societies to review the algorithm and suggest refinements, which
resulted in Version 2.1 of the Planned Readmission Algorithm. We are
proposing to use this algorithm in the readmission measures under the
Hospital Readmissions Reduction Program beginning with FY 2014. A
detailed description of this algorithm is included later in this
section.
As required by section 1886(q)(5)(A)(ii) of the Act, the first
three applicable conditions of AMI, HF and PN, must use readmission
measures that have been endorsed by the entity with a contract under
section 1890(a) of the Act; and such endorsed measures must have
exclusions for readmissions that are unrelated to the prior discharge
(such as planned readmission or transfer to another applicable
hospital). Because the statute requires that the readmission measures
for the three current applicable conditions (AMI, HF and PN) be NQF-
endorsed, we sought NQF's endorsement of the measures that were revised
to include the CMS Planned Readmission Algorithm Version 2.1. NQF
reviewed these revised measures through its ad hoc review process,
which reviews previously endorsed measures that undergo material
changes. Following ad hoc review, NQF endorsed the revised AMI (NQF
0505) and HF (NQF 0330) measures in January 2013 and
the PN measure (NQF 0506) in (March 2013)).
(a) Description of CMS Planned Readmission Algorithm Version 2.1
This algorithm is a set of criteria for classifying readmissions as
``planned'' using Medicare claims. The algorithm identifies typical
planned admissions that may occur within 30 days of discharge from the
hospital.
We based the CMS Planned Readmission Algorithm on three principles:
A few specific, limited types of care are always
considered planned (obstetrical delivery, transplant surgery,
maintenance chemotherapy, rehabilitation);
Otherwise, a planned readmission is defined as a nonacute
readmission for a scheduled procedure; and
Admissions for acute illness or for complications of care
are never planned.
The Planned Readmission Algorithm uses a flow chart and four tables
of procedures and conditions to implement these principles and to
classify readmissions as planned or unplanned. The flow chart and
tables are available in a report, CMS Planned Readmission Algorithm
Version 2.1, which is available on the CMS Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Hospital_QualityInits/Measure-Methodology.html.
We incorporated the algorithm into each condition-specific and
procedure-specific readmission measure. For most readmission measures,
including the AMI, HF, and PN measures, we used one standard version of
the algorithm--the CMS Planned Readmission Algorithm Version 2.1.
However, for a subset of readmission measures, we revised the list of
potentially planned procedures or acute primary diagnosis after
applying the standard algorithm version because it was clinically
indicated. For example, for the Total Hip Arthroplasty (THA) and Total
Knee Arthroplasty (TKA) readmission measure that we are proposing for
FY 2015, we removed diagnostic cardiac
[[Page 27596]]
catheterization from the potentially planned procedure list because
patients in the hip/knee measure are typically well enough to undergo
elective surgery and would not be expected to need a catheterization
within 30 days of discharge. The details of these adaptations are
available in the CMS Planned Readmission Algorithm Version 2.1 report
(http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Hospital_QualityInits/Measure-Methodology.html).
(b) Proposed Counting of Readmissions that Occur After a Planned
Readmission
In this proposed rule, we are proposing a related change to the
AMI, HF, and PN measures to address unplanned readmissions that occur
after a planned readmission but within 30 days of the patient's initial
index discharge. The AMI measure finalized in the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51666) counted unplanned readmissions for the index
admission if they occurred within 30 days of discharge from the index
admission, even if they occurred following planned readmissions
(because the two other measures did not have any planned readmissions,
this method of counting only applied to the AMI measure).
For the proposed revised AMI, HF, and PN measures, all of which now
account for planned readmissions by incorporating the CMS Planned
Readmission Algorithm Version 2.1, we are proposing the following
additional change: If the first readmission is planned, it will not
count as a readmission, nor will any subsequent unplanned readmission
within 30 days of the index readmission. In other words, unplanned
readmissions that occur after a planned readmission and fall within the
30-day post discharge timeframe would no longer be counted as outcomes
for the index admission. The rationale for this proposed change is
that, in this case, either the index or the planned readmission could
have contributed to the patient's unplanned readmission. Therefore, it
is unclear whether the unplanned readmission should be attributed back
to the index admission. This proposed change in counting practice would
affect a very small percentage of readmissions (approximately 0.3
percent of index admissions nationally for AMI, 0.2 percent for HF, and
less than 0.1 percent for PN).). However, we intend to monitor trends
in the proportion of planned readmissions for evidence of misuse or
misapplication, and other unintended consequences.
(c) Anticipated Effect of the Proposed Changes of CMS Planned
Readmission Algorithm Version 2.1 and Counting of Readmissions on the
Readmission Measures
The proposed changes to the measures in this proposed rule would
have had the following effects on the measures based on our analyses of
discharges between July 2008 and June 2011, if these changes had been
applied for FY 2013. We note that these statistics are for illustrative
purposes only, and we are not proposing to revise the measure
calculations for the FY 2013 payment determination. Rather, we are
proposing to apply these changes to the readmissions measures for the
FY 2014 payment determination and subsequent years.
Among hospitals that were subject to the Hospital Readmissions
Reduction Program in FY 2013 (Table V.G.1), the number of eligible
discharges based on the July 2008 through June 2011 data were 501,765
discharges for AMI; 1,195,967 discharges for HF; and 957,854 discharges
for PN):
The proposed 30-day readmission rate (excluding the
planned readmissions) would decrease by 1 percentage point for AMI; 1.5
percentage points for HF; and 0.7 percentage point for PN.
The new national measure (unplanned) rate for each
condition would have been 18.2 percent for AMI; 23.1 percent for HF;
and 17.8 percent for PN.
The number of readmissions considered planned (and,
therefore, not counted as a readmission) would increase by 4,942 for
AMI; 17,512 for HF; and 7,084 for PN.
Table V.G.1--Comparison of Original AMI/HF/PN Measures Finalized in FY 2013 Relative to Proposed Revised AMI/HF/
PN Measures for FY 2014
[Based on July 2008 through June 2011 discharges from 3,025 hospitals]
----------------------------------------------------------------------------------------------------------------
AMI PN HF
-----------------------------------------------------------------------------
Proposed Proposed Proposed
revised Original revised Original revised Original
measure measure measure measure measure measure
----------------------------------------------------------------------------------------------------------------
Number of Admissions.............. 501,765 501,765 957,854 957,854 1,195,967 1,195,967
Number of Unplanned Readmissions.. 91,360 96,302 170,396 177,480 276,748 294,260
Readmission Rate.................. 18.2% 19.2% 17.8% 18.5% 23.1% 24.6%
Number of Planned Readmissions.... 12,811 7,869 7,084 0 17,512 0
Planned Readmission Rate.......... 2.6% 1.6% 0.7% 0.0% 1.5% 0.0%
Percent of Readmissions that are 12.3% 7.6% 4.0% 0.0% 6.0% 0.0%
Planned..........................
----------------------------------------------------------------------------------------------------------------
In summary, we are proposing to use the proposed revised versions
of the AMI, HF, and PN measures to calculate the payment adjustments
for the Hospital Readmissions Reduction Program in FY 2014. We believe
that the proposed revised measures will address stakeholder suggestions
to broaden the number of planned readmissions and will result in a more
accurate readmission calculation for purposes of the payment
adjustment. We are proposing to update the measures to: (1) Incorporate
the CMS Planned Readmission Algorithm Version 2.1 to identify planned
readmissions; and (2) not count unplanned readmissions that follow
planned readmissions. We are inviting public comments on this proposal.
c. Proposed Expansion of the Applicable Conditions for FY 2015
(1) Background
Under section 1886(q)(5)(B) of the Act, beginning with FY 2015, the
Secretary shall, to the extent practicable, expand the applicable
conditions beyond the three conditions for which measures have been
endorsed as described in subparagraph (A)(ii)(I) . . . to the
additional 4 conditions that have been identified by the Medicare
[[Page 27597]]
Payment Commission in its report to Congress in June 2007, and to other
conditions and procedures as determined appropriate by the Secretary.''
The four conditions and procedures recommended by MedPAC are: (1)
Coronary artery bypass graft (CABG) surgery; (2) chronic obstructive
pulmonary disease (COPD); (3) percutaneous coronary intervention (PCI);
and (4) other vascular conditions. Section 1886(q)(5)(A)(i) of the Act
directs the Secretary, in selecting an ``applicable condition,'' to
choose from among conditions and procedures ``that represent conditions
or procedures that are high volume or high expenditures under this
title (or other criteria specified by the Secretary).''
In accordance with section 1886(q)(5)(A) of the Act, effective for
the calculation of the readmissions payment adjustment factors in FY
2015, we are proposing to expand the applicable conditions and
procedures to include: (1) Patients admitted for an acute exacerbation
of COPD; and (2) patients admitted for elective total hip arthroplasty
(THA) and total knee arthroplasty (TKA). At this point, it is not
feasible for CMS to add readmission measures for three of the
conditions identified by MedPAC in its 2007 Report to Congress (CABG,
PCI, and other vascular conditions). We note that inpatient admissions
for PCI and other vascular conditions seem to be decreasing, and these
procedures are being performed more in hospital outpatient departments.
This shift in setting for these procedures may make their future
inclusion in the Hospital Readmssion Reduction Program more difficult
and impracticable.
We are also exploring how we may address CABG in this program at a
future time.
We are proposing inclusion of patients admitted for an acute
exacerbation of COPD based on MedPAC's recommendations and may consider
other recommendations in future rulemaking. While MedPAC did not
recommend inclusion of patients admitted for elective THA and TKA, we
consider this category appropriate for the Hospital Readmissions
Reduction Program because it is a high-volume and high-expenditure
procedure.
For example, in 2003, 202,500 primary hip arthroplasties and
402,100 primary total knee arthroplasties were performed.\30\ The
number of procedures performed has increased steadily over the past
decade.\31\ Although these procedures can dramatically improve patient
health-related quality-of-life, they are costly. In 2005, annual
hospital charges totaled $3.95 billion and $7.42 billion for primary
THA and TKA, respectively.\32\ The aggregate costs for THA are
projected to increase by 340 percent over a 10-year period, to $17.4
billion per fiscal year by FY 2015, and for TKA, by 450 percent to
$40.8 billion per fiscal year by 2015.\33\ Medicare is the single
largest payer for these procedures, covering approximately two-thirds
of all THAs and TKAs performed in the United States.\34\ THA and TKA
procedures combined account for the largest procedural cost in the
Medicare budget.\35\ Therefore, as explained in detail below, we
believe that it is appropriate to include THA/TKA as an applicable
condition.
---------------------------------------------------------------------------
\30\ Kurtz S, Ong K, Lau E, Mowat F, Halpern M.: Projections of
primary and revision hip and knee arthroplasty in the United States
from 2005 to 2030. J Bone Joint Surg Am. Apr 2007;89(4):780-785.
\31\ Ong KL, Mowat FS, Chan N, Lau E, Halpern MT, Kurtz SM.
Economic burden of revision hip and knee arthroplasty in Medicare
enrollees. Clin Orthop Relat Res. May 2006;446:22-28.
\32\ Kurtz SM, Ong KL, Schmier J, et al.: Future clinical and
economic impact of revision total hip and knee arthroplasty. J Bone
Joint Surg Am. Oct 2007;89 Suppl 3:144-151.
\33\ Ibid.
\34\ Ong KL, Mowat FS, Chan N, Lau E, Halpern MT, Kurtz SM.
Economic burden of revision hip and knee arthroplasty in Medicare
enrollees. Clin Orthop Relat Res. May 2006;446:22-28.
\35\ Bozic KJ, Rubash HE, Sculco TP, Berry DJ. An analysis of
medicare payment policy for total joint arthroplasty. Journal of
Arthroplasty. 2008;23(6 Suppl 1):133-138.
---------------------------------------------------------------------------
We developed a hospital-level, 30-day, all-cause, risk-standardized
readmission measure for THA/TKA. NQF endorsed the measure (NQF
1551) in January of 2012. The measure incorporated the Planned
Readmission Version 2.1 algorithm and excludes transfers. Accordingly,
we believe that the THA/TKA measure met the criteria of applicable
condition and are proposing it for the Hospital Readmissions Reduction
Program.
The rationale for expanding the applicable conditions and the
measures used to estimate the Excess Readmission Ratios are described
in detail below.
(2) Proposed COPD Readmission Measure
COPD is a leading cause of readmissions to hospitals.\36\ In 2007,
the MedPAC published a report to Congress in which it identified the
seven conditions associated with the most costly potentially
preventable readmissions. Among these seven conditions, COPD ranked
fourth.\37\ Evidence also shows variation in readmissions for patients
with COPD, supporting the finding that opportunities exist for
improving care. The median, 30-day, risk-standardized readmission rate
among Medicare fee-for-service patients aged 65 or older hospitalized
for COPD in 2008 was 22.0 percent, and ranged from 18.33 percent to
25.03 percent across 4,546 hospitals.\38\ Clinical trials and
observational studies suggest that several aspects of care provided to
patients hospitalized for exacerbations of COPD can have significant
effects on readmission.39 40 41 42 In addition, inclusion of
this measure in the Hospital Readmissions Reduction Program aligns with
CMS' priority objectives to promote successful transitions of care for
patients from the acute care setting to the outpatient setting, and
reduces short-term readmission rates. Therefore, we believe the COPD
measure warrants inclusion in the Hospital Readmissions Reduction
Program for FY 2015. We are inviting public comments on this proposal.
---------------------------------------------------------------------------
\36\ Jencks SF, Williams MV, Coleman EA. Rehospitalizations
among patients in the Medicare fee-for-service program. N Engl J
Med. April 2 2009;360(14):1478-1428.
\37\ Committee MPA. Report to the Congress: Promoting Greater
Efficiency in Medicare. 2007.
\38\ Grosso L.M., Lindenauer P., Wang C., et al.: Hospital-level
30-day Readmission Following Admission for an Acute Exacerbation of
Chronic Obstructive Pulmonary Disease: Report prepared for the
Centers for Medicare & Medicaid Services. 2011; Available at: http://www.qualitynet.org/.
\39\ Global Strategy for Diagnosis M, and Prevention of COPD.
2009; Available at: http://www.goldcopd.org/.
\40\ National Institute for Health and Clinical Excellence.
Chronic Obstructive Pulmonary Disease: Management of Chronic
Obstructive Pulmonary Disease in Adults in Primary and Secondary
Care (Partial Update):. National Collaborating Centre for Acute and
Chronic Conditions. Available at: http://www.nice.org.uk/nicemedia/live/13029/49397/49397.pdf.
\41\ Walters JA, PG Gibson, R Wood-Baker, M Hannay, EH Walters.
Systemic corticosteroids for acute exacerbations of chronic
obstructive pulmonary disease. Cochrane Database Syst Rev.
2009;CD001288(1).
\42\ Lightowler JV, Wedzicha JA, Elliott MW, Ram FS. Non-
invasive positive pressure ventilation to treat respiratory Failure
resulting from exacerbations of chronic obstructive pulmonary
disease: Cochrane systematic review and meta-analysis. Bmj.
2003;326(7382).
---------------------------------------------------------------------------
(3) Overview of COPD Measure: Hospital-Level, 30-Day, All-Cause, Risk-
Standardized Readmission Rate (RSRR) Following Chronic Obstructive
Pulmonary Disease (COPD) Hospitalization (NQF 1891)
The COPD readmission measure assesses hospitals' 30-day, all-cause
risk-standardized rate of readmission for an acute exacerbation of COPD
(AECOPD). In general, the measure uses the same approach to risk-
adjustment and hierarchical logistic modeling (HLM) methodology that is
specified for CMS' AMI, HF, and PN readmission measures previously
adopted for this
[[Page 27598]]
program. Information on how the measure employs HLM can be found in the
2011 COPD Readmission Measure Methodology Report (available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. This
approach appropriately accounts for the types of patients a hospital
treats (that is, hospital case-mix), the number of patients it treats,
and the quality of care it provides. The HLM methodology is an
appropriate statistical approach to measuring quality based on patient
outcomes when the patients are clustered within hospitals (and,
therefore, the patients' outcomes are not statistically independent)
and sample sizes vary across hospitals. The measure methodology defines
hospital case-mix based on the clinical diagnoses provided in the
hospitals' claims for the hospitals' patient inpatient and outpatient
visits for the 12 months prior to the hospitalization for COPD, as well
as those present in the claims for care at admission. However, the
methodology specifically does not account for diagnoses present in the
index admission that may indicate complications rather than patient
comorbidities.
We are providing a summary of the measure methodology below. For
further details on the risk-adjustment statistical model, we refer
readers to the 2011 COPD Readmission Measure Methodology Report that we
have posted on the CMS Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. NQF endorsed the measure
(NQF 1891) in March 2013 (http://www.qualityforum.org/QPS/1891).
Data Sources. The proposed COPD measure is claims-based.
It uses Medicare administrative data from hospitalizations for fee-for-
service Medicare beneficiaries hospitalized with an acute exacerbation
of COPD (AECOPD).
Outcome. The outcome for the COPD measure is 30-day, all-
cause readmission, defined as an unplanned subsequent inpatient
admission to any applicable acute care facility from any cause within
30 days of the date of discharge from the index hospitalization. A
number of studies demonstrate that improvements in care at the time of
discharge can reduce 30[hyphen]day readmission rates.43 44
It is a timeframe that a readmission may reasonably be attributed to
the hospital care and transitional period to a nonacute care setting.
---------------------------------------------------------------------------
\43\ Gulshan Sharma, Kou Yong-Fang, Freeman Jean L, Zhang Dong
D, Goodwin James S.: Outpatient Follow-up Visit and 30-Day Emergency
Department Visit and Readmission in Patients Hospitalized for
Chronic Obstructive Pulmonary Disease. Arch Intern Med. Oct.
2010;170:1664-1670.
\44\ Nelson EA, Maruish ME, Axler JL.: Effects of Discharge
Planning and Compliance with Outpatient Appointments on Readmission
Rates. Psychiatr Serv. July 1 2000;51(7):885-889.
---------------------------------------------------------------------------
The COPD readmissions measure assesses all-cause unplanned
readmissions (excluding planned readmissions) rather than readmissions
for acute exacerbations of COPD only. We are proposing this measure for
several reasons. First, from the patient perspective, a readmission for
any reason is likely to be an undesirable outcome of care, even though
not all readmissions are preventable. Second, limiting the measure to
COPD[hyphen]related readmissions may limit the effort focus too
narrowly rather than encouraging broader initiatives aimed at improving
the overall care within the hospital and transitions from the hospital
setting. Moreover, it is often hard to exclude quality issues and
accountability based on the documented cause of readmission. For
example, a patient with COPD who develops a hospital-acquired infection
may ultimately be readmitted for sepsis. It would be inappropriate to
consider such a readmission to be unrelated to the care the patient
received for COPD. Finally, while the measure does not presume that
each readmission is preventable, interventions generally have shown
reductions in all types of readmissions.
The measure does not count planned readmissions as readmissions.
Planned readmissions are identified in claims data using the CMS
Planned Readmission Algorithm Version 2.1 that detects planned
readmissions that may occur within 30 days of discharge from the
hospital. This algorithm is described briefly in section V.G.3.b.(2)(a)
of the preamble of this proposed rule and more detailed information can
be found on the CMS Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. For the COPD measures, unplanned readmissions
that fall within the 30-day post discharge timeframe from the index
admission would not be counted as readmissions for the index admission
if they were preceded by a planned readmission (we refer readers to
section V.G.3.b.(2)(b) of the preamble of this proposed rule on the
proposed counting of readmissions that occur after a planned
readmission).
Cohort of Patients. COPD is a group of lung diseases
characterized by airway obstruction. Patients hospitalized for an acute
exacerbation of COPD (AECOPD) present with varying degrees of severity
ranging from a worsening of baseline symptoms (dyspnea, cough, and/or
sputum) to respiratory failure. To capture the full spectrum of
severity of patients hospitalized for an AECOPD, the measure includes
patients with a principal diagnosis of COPD, as well as those with a
principal diagnosis of respiratory failure with a secondary diagnosis
of an AECOPD. Requiring AECOPD as a secondary diagnosis helps to
identify respiratory failure due to COPD exacerbation versus another
condition (for example, heart failure). For detailed information on the
cohort definition, we refer readers to the 2013 COPD Readmission
Measure Updates and Specifications Report on the CMS Web site at:
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
Inclusion and Exclusion Criteria. The COPD measure
includes hospitalizations for patients who are 65 years of age or older
at the time of index admission and for whom there was a complete 12
months of Medicare fee-for-service (FFS) enrollment to allow for
adequate risk-adjustment. The measure excludes the following admissions
from the measure cohort: (1) Admissions for patients who die during the
initial hospitalization (these patients are not eligible for
readmission); (2) admissions for patients having a principal diagnosis
of COPD during the index hospitalization and subsequently transferred
to another acute care facility (these are excluded because the measure
focuses on discharges to a nonacute care setting such as the home or a
SNF); (3) admissions for patients that are discharged against medical
advice (AMA) (excluded because providers do not have the opportunity to
deliver full care and prepare the patient for discharge); (4)
admissions for patients without at least a 30-day post-discharge
enrollment in Medicare FFS (excluded because the 30-day readmission
outcome cannot be assessed in this group); and (5) additional COPD
admissions for patients within 30 days of discharge from an index COPD
admission will be considered readmissions and not additional index
admissions.
Risk-Adjustment. The COPD measure adjusts for differences
across hospitals in how at risk their patients
[[Page 27599]]
are for readmission relative to patients cared for by other hospitals.
The measure uses claims data to identify patient clinical conditions
and comorbidites to adjust patient risk for readmission across
hospitals, but does not adjust for potential complications of care.
Consistent with NQF guidelines, the model does not adjust for
socioeconomic status or race because risk-adjusting for these
characteristics would hold hospitals with a large proportion of
patients of minority race or low socioeconomic status to a different
standard of care than other hospitals. Rather, this measure seeks to
illuminate quality differences, and risk-adjustment for socioeconomic
status or race would obscure such quality differences.
Calculating the Excess Readmission Ratio. The COPD
readmission measure uses the same methodology and statistical modeling
approach as the AMI, HF, and PN measures. We published a detailed
description of how the readmission measures estimate the Excess
Readmission Ratio used in the Hospital Readmissions Reduction Program
in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53380 through 53381).
(4) Proposed Adoption of the COPD Measure for the Hospital Readmissions
Reduction Program
We are proposing to adopt the COPD measure in the Hospital
Readmissions Reduction Program beginning in FY 2015. We also are
proposing the COPD measure for use in the Hospital IQR Program for FY
2014 (discussed in section IX.A. of this preamble). We note that the
set of hospitals for which this measure is calculated for the Hospital
Readmissions Reduction Program differs from those used in calculations
for the Hospital IQR Program. The Hospital Readmissions Reduction
Program includes only subsection (d) hospitals as defined in
1886(d)(1)(B) of the Act and hospitals paid under section 1814(b)(3) of
the Act (that is, Maryland hospitals), while the Hospital IQR Program
calculations include non-IPPS hospitals such as CAHs, cancer hospitals,
and hospitals located in the Territories of the United States. However,
we believe that the COPD measure is appropriate for use in both
programs. We are inviting public comments on this proposal.
(5) Total Hip Arthroplasty (THA) and Total Knee Arthroplasty (TKA)
Measure
THA and TKA are commonly performed procedures that improve quality
of life. Between 2008 and 2010, over 1.4 million THA and TKA procedures
were performed on Medicare FFS patients aged 65 years and older.\45\
However, the costs of these procedures, especially to Medicare, are
very high. Combined, THA and TKA procedures account for the largest
procedural cost in the Medicare budget.\46\ Evidence also shows
variation in readmissions of patients with THA/TKA procedures,
supporting the finding that opportunities exist for improving care. The
median 30-day risk-standardized readmission rate among Medicare FFS
patients aged 65 or older undergoing THA/TKA procedures between 2008
and 2010 was 5.7 percent, and ranged from 3.2 percent to 9.9 percent
across 3,497 hospitals.\47\ In addition, inclusion of a THA/TKA measure
in the Hospital Readmissions Reduction Program aligns with CMS'
priority objectives to promote successful transitions of care for
patients from the acute care inpatient setting to the outpatient
setting, and reduces short-term readmission rates. Therefore, we
believe the THA/TKA measure warrants inclusion in the Hospital
Readmissions Reduction Program for FY 2015.
---------------------------------------------------------------------------
\45\ Gross, L.M., Curtis, J.P., Lin, Z., et al.: Hospital-level
30-Day All-Cause Risk-Standardized Readmission Rate Following
Elective Primary total Hip Arthroplasty (THA) and/or Total Knee
Arthroplasty (TKA): Report prepared for the Centers for Medicare &
Medicaid Services, 2012. Available on the Web site at: http://www.qualitynet.org/.
\46\ Bozic KJ, Rubash HE, Sculco TP.: Berry DJ. An analysis of
medicare payment policy for total joint arthroplasty. J
Arthroplasty. Sep 2008;23(6 Suppl 1):133-138.
\47\ Grosso L.M., Curtis J.P., Lin Z., et al.: Hospital-level
30-Day All-Cause Risk-Standardized Readmission Rate Following
Elective Primary Total Hip Arthroplasty (THA) And/Or Total Knee
Arthroplasty (TKA): Report prepared for the Centers for Medicare &
Medicaid Services, 2012. Available on the Web site at: http://www.qualitynet.org/.
---------------------------------------------------------------------------
(6) Overview of the THA/TKA Measure: Hospital-Level 30-Day All-Cause
Risk-Standardized Readmission Rate (RSRR) Following Elective Total Hip
Arthroplasty (THA) and Total Knee Arthroplasty (TKA) (NQF
1551)
To better assess hospital care and care transitions for patients
with elective THA/TKA procedures, we developed a hospital-level
readmission measure for patients undergoing elective primary THA and/or
TKA procedures. We finalized this measure for use in the Hospital IQR
Program in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53519 through
53521). We are proposing to include this measure, updated with the CMS
Planned Readmission Algorithm Version 2.1 adapted for THA/TKA
(discussed in section V.G.3.b.(2) of this preamble) to: (1) expand the
applicable conditions for the Hospital Readmissions Reduction Program;
(2) derive the Excess Readmission Ratio for patients with THA/TKA
procedures; and (3) calculate the readmission payment adjustments in FY
2015. We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR
53519 through 53521) for details of the measure specifications as well
as the 2013 Hip/Knee Readmission Measures Updates and Specifications
Report which is available on the CMS Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. NQF endorsed the measure
in January 2012 (http://www/qualityforum.org/QPS/1551).
(7) Calculating the Excess Readmission Ratio
The THA/TKA readmission measure uses the same methodology and
statistical modeling approach as the AMI, HF, and PN measures. We
published a detailed description of how the readmission measures
estimate the Excess Readmission Rate used in the Hospital Readmissions
Reduction Program in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53380
through 53381).
(8) THA/TKA Measure for the Hospital Readmissions Reduction Program
We are proposing to adopt the THA/TKA measure in the Hospital
Readmissions Reduction Program beginning in FY 2015. We also finalized
this measure for use in the Hospital IQR Program in the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53519 through 53521). We note that the set
of hospitals for which this measure is calculated for the Hospital
Readmissions Reduction Program differs from the set of hospitals used
in calculations for the Hospital IQR Program. The Hospital Readmissions
Reduction Program includes only subsection (d) hospitals as defined in
1886(d)(1)(B) of the Act and hospitals paid under section 1814(b)(3) of
the Act (that is, Maryland hospitals), while the Hospital IQR Program
calculations include non-IPPS hospitals such as CAHs, cancer hospitals,
and hospitals in the Territories. However, we believe that the THA/TKA
measure is appropriate for use in both programs. We are inviting public
comments on this proposal.
[[Page 27600]]
d. Proposals for Hospitals Paid Under Section 1814(b)(3) of the Act,
Including the Process To Be Exempt From the Hospital Readmissions
Reduction Program and Definition of ``Base Operating DRG Payment
Amount'' for Such Hospitals (Sec. 412.152 and Sec. 412.154(d))
As finalized in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53397),
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, acute care Maryland hospitals that would have otherwise
been paid under the IPPS, but for the waiver under section 1814(b)(3)
of the Act). 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 this provision.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53384), we
established criteria for evaluation of an annual report to CMS to
determine whether Maryland should be exempted from the program each
year. We codified this requirement at Sec. 412.154(d) of the
regulations. In addition, we specified that we will evaluate a report
submitted by the State of Maryland documenting how its program meets
those criteria. However, because the Hospital Readmissions Reduction
Program was in its first year and Maryland's program was completing its
first year, we specified that the evaluation of Maryland's program for
measurable health outcomes and cost savings would not begin until FY
2014. In that same final rule, we explained that it would be premature
to evaluate Maryland's readmission program on health outcomes and cost
savings at that time, as we did not have sufficient information on
which to evaluate Maryland's program because FY 2013 was first year of
the Hospital Readmissions Reduction Program.
We noted that our finalized 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.
In this proposed rule, we are proposing to establish a deadline by
which the State must submit its annual report to the Secretary under
proposed revised Sec. 412.154(d)(2) of the regulations. We also are
proposing the criteria that we would use to evaluate the State in order
to determine whether or not the State would be exempted from the
Hospital Readmissions Reduction Program beginning with FY 2014. In
addition, we are proposing to define the ``base operating DRG payment
amount'' for Maryland hospitals under Sec. 412.152 of the regulations
in the event that the State is not exempted from the Hospital
Readmissions Reduction Program.
We are proposing that the State of Maryland must submit this
preliminary report to CMS no later than January 15 of each year for CMS
to consider, through the IPPS/LTCH PPS proposed rule for a Federal
fiscal year, its exemption from the Hospital Readmissions Reduction
Program for the upcoming Federal fiscal year. For example, the State of
Maryland would have to submit the report by January 15, 2014 for
consideration for the FY 2015 (beginning October 1, 2014) program year.
This deadline would provide CMS sufficient time to evaluate the report,
have any discussions with the State regarding its program, and prepare
a presentation of that report for the IPPS/LTCH PPS proposed rule.
Under this proposal, we also would require that the State submit a
final report, with updated information on the State's readmissions
program and updated cost savings and health outcomes information, to
CMS no later than June 1 of each year in order for CMS to determine,
through the IPPS/LTCH PPS final rule for a Federal fiscal year, whether
the State meets the requirements for exemption from the Hospital
Readmissions Reduction Program in that upcoming Federal fiscal year. As
such, for FY 2015, under proposed Sec. 412.154(d)(2)(ii), the State of
Maryland would submit its preliminary report to the Secretary no later
than January 15, 2014, and its final report to the Secretary no later
than June 1, 2014, for consideration of exemption from the Hospital
Readmissions Reduction Program.
For FY 2014, we have received a preliminary report from Maryland
describing its readmissions program. Similar to its report submitted
for FY 2013, Maryland described its current readmissions program, the
Admissions-Readmission Revenue (ARR) Program. Under the voluntary
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). In the report,
Maryland indicated that the reduction in intra-hospital readmission
rates (that is, readmissions to the same hospital as the initial
admission) resulted in approximately $25 million, or 0.27 percent, in
savings to the participating hospitals for 2011 and 2012. In addition,
Maryland reported that its readmission rate per 1,000 Medicare
beneficiaries declined from 17.14 percent (CY 2011, Quarter 2) to 15.21
percent (CY 2012, Quarter 2). The State also acknowledged in that
report that it has begun to track inter-hospital readmissions, where a
patient is admitted to one hospital and readmitted to another hospital,
which is comparable to how readmissions are measured under the Hospital
Readmissions Reduction Program. In the FY 2013 IPPS/LTCH PPS final
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 indicated that, for FY 2013, it would
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.
Furthermore, in its FY 2014 preliminary report to the Secretary,
the State of Maryland indicated that, for FY 2014, subject to approval
by the Commission, it is proposing a shared savings approach, which
would be applied to all hospitals in the State. Under that shared
savings approach, hospitals in the State would be ranked based on their
performance on readmissions, under which hospitals with high
readmissions above an established standard would experience a reduction
in their revenue and the hospitals below the established standard
[[Page 27601]]
would not experience a reduction in their revenue. For Maryland
hospitals that are in the voluntary ARR program paid under the case-mix
adjusted bundled payment per episode of care that are performing worse
than the established standard for readmissions, their payment per
episode of care would be reduced. In addition, the State proposes that
hospitals that improve in readmissions above a certain standard would
experience no reduction in their payments and those hospitals below the
standard would experience a reduction. Based on this preliminary
information, we believe that the State can achieve savings on
readmissions that are tied to hospitals' performance on readmissions,
which is comparable to the Hospital Readmissions Reduction Program
applied throughout the rest of the country.
For FY 2014, we are proposing to evaluate Maryland based on
whether, under the shared savings approach, it can achieve comparable
health outcomes and cost savings to the Hospital Readmissions Reduction
Program. We note that, for FY 2014, we project that the Hospital
Readmissions Reduction Program will result in a 0.2 percent decrease,
or approximately $175 million, in payments to hospitals. We are
inviting public comments on this proposal.
In this proposed rule, we also are proposing to define ``base
operating DRG payment amount'' for hospitals paid under section
1814(b)(3) of the Act in the event that we do not exempt Maryland
hospitals from the Hospital Readmissions Reduction Program in a given
year. Consistent with section 1886(q)(2) of the Act, in the FY 2013
IPPS/LTCH PPS final rule (77 FR 53382), under the regulations at Sec.
412.152, we defined 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, the 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)(A), (d)(5)(B), (d)(5)(F), 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 at Sec. 412.152, we 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).
Acute care hospitals located in the State of Maryland currently are
not paid under the IPPS but are, instead, paid under a special waiver
as provided by section 1814(b)(3) of the Act. For these applicable
hospitals, we are proposing that the term ``base operating DRG payment
amount'' means the base operating DRG payment amount defined at Sec.
412.152. In other words, we are proposing to revise existing Sec.
412.152, to specify that, for Maryland hospitals, the ``base operating
DRG payment amount'' is an amount equal to the IPPS wage adjusted DRG
payment amount or the 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 plus
new technology payments that would be paid to Maryland hospitals absent
section 1814(b)(3) of the Act. Although Maryland hospitals are
currently paid under this waiver and not under the IPPS, if Maryland is
not exempt from the Hospital Readmissions Reduction Program in a given
year, we are proposing that, to determine the amount by which the
hospitals' payments under section 1814(b)(3) of the Act would be
reduced under the Hospital Readmissions Reduction Program, the
readmission payment adjustment under Sec. 412.154(b) would be
determined using the estimated base operating DRG payment amount that
would have applied had the hospital been paid under the IPPS. To
implement this policy, we are proposing that claims submitted by
Maryland hospitals would be ``priced'' under the IPPS payment
methodology, and if a Maryland hospital has a readmissions payment
adjustment factor, that factor would be applied to that base operating
DRG payment amount to determine the payment adjustment under Sec.
412.154(b) (that is, the amount of the payment reduction). We are
proposing that the amount of the payment reduction, if any, would be
applied to (that is, subtracted from) the payments made to Maryland
hospitals under the waiver. This proposed methodology would result in
Maryland hospitals having the readmissions adjustment factor applied in
a manner similar to that which is applied to hospitals that are paid
under the IPPS.
Furthermore, we are proposing that if Maryland is not exempt from
the Hospital Readmissions Reduction Program in a given year, the
proposed definition of ``base operating DRG payment amount'' for
Maryland hospitals discussed above (that is, the base operating DRG
payment amount calculated as if the hospital were paid under the IPPS),
and not any payment amount made under the waiver under by section
1814(b)(3) of the Act, would be used to calculate both the ``aggregate
payments for excess readmissions'' and ``aggregate payments for all
discharges'' (defined at Sec. 412.152) for purposes of determining the
hospital's readmission adjustment factor that accounts for excess
readmissions under Sec. 412.154(c). We are inviting public comments on
this proposal.
e. Proposed Floor Adjustment Factor for FY 2014 (Sec. 412.154(c)(2))
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 final rule (77
FR 53386), we codified 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 codified the floor adjustment factor at Sec. 412.154(c)(2)
of the regulations.
For FY 2013, under Sec. 412.154(c), we specified that an
applicable hospital will receive an adjustment factor that is either
the greater of the ratio or a floor adjustment factor of 0.99. For FY
2014, we are proposing that the floor adjustment factor be 0.98,
consistent with section 1886(q)(3) of the Act, as codified at Sec.
412.154(c)(2). As finalized in the FY 2013 IPPS/LTCH PPS final rule,
the ratio is rounded to the fourth decimal place. In other words, for
FY 2014, a hospital subject to the Hospital Readmissions Reduction
Program would have an adjustment factor that is
[[Page 27602]]
between 1.0 and 0.9800. We are inviting public comments on this
proposal.
f. Proposed Applicable Period for FY 2014
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 under the Hospital Readmissions Reduction Program. We finalized
our policy to use 3 years of claims data to calculate the readmission
measures in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51671). In the
FY 2013 IPPS/LTCH PPS final rule (77 FR 53390), we codified the
definition of ``applicable period'' in the regulations at 42 CFR
412.152 as the 3-year period from which data are collected in order to
calculate excess readmission ratios and adjustments for the fiscal
year, which includes aggregate payments for excess readmissions and
aggregate payments for all discharges used in the calculation of the
payment adjustment.
For the Hospital Readmissions Reduction Program for FY 2013, we
established an applicable period under Sec. 412.152 as July 1, 2008,
to June 30, 2011. Specifically, to calculate the excess readmission
ratios and to calculate the payment adjustments for FY 2013 (including
aggregate payments for excess readmissions and aggregate payments for
all discharges used in the calculation of the payment adjustment), we
used Medicare claims data from the 3-year time period of July 1, 2008
to June 30, 2011 (76 FR 51671 and 77 FR 53388).
In this proposed rule, consistent with the definition at Sec.
412.152 of the existing regulations, we are proposing that the
applicable period for FY 2014 under the Hospital Readmissions Reduction
Program would be the 3-year period from July 1, 2009, to June 30, 2012.
That is, we would determine the excess readmission ratios and calculate
the payment adjustment (including aggregate payments for excess
readmissions and aggregate payments for all discharges) for FY 2014
using data from the 3-year time period of July 1, 2009 to June 30,
2012, as this is the most recent available 3-year period of data upon
which to base these calculations. As discussed later in this section,
although we are proposing an applicable period of July 1, 2009 through
June 30, 2012 for FY 2014, for purposes of determining the proposed
readmissions payment adjustment factors for this FY 2014 proposed rule,
we are using excess readmission ratios based on older data, that is,
from the FY 2013 applicable period of July 1, 2008 to June 30, 2011
(that includes the application of the proposed planned readmission
algorithm discussed earlier in this section). However, for the FY 2014
final rule, we intend to use excess readmission ratios based on data
from the applicable period of July 1, 2009 to June 30, 2012, if that
period is finalized.
g. Proposed Refinements of the Methodology To Calculate the Aggregate
Payments for Excess Readmissions
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 final rule (77 FR 53387), we defined ``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.'' In
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53387), we included this
definition of ``aggregate payments for excess readmissions'' under the
regulations at Sec. 412.152.
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 FY 2013 IPPS/LTCH PPS final rule
(77 FR 53387), we included this definition of ``aggregate payments for
all discharges'' under the regulations at Sec. 412.152.
We note that we are taking this opportunity to propose to make a
technical change to the definition of ``basing operating DRG payment
amount'' in the existing regulations at Sec. 412.152 to reflect our
policy that the difference between the applicable hospital-specific
payment rate and the Federal payment rate for SCHs and MDHs is excluded
from the base operating DRG amount for these hospitals. We note that
section 1886(q)(2)(B)(i) of the Act provides ``special rules'' for MDHs
with respect to discharges occurring during FYs 2012 and 2013, and not
for subsequent years. Under current law, as discussed in section V.F.
of the preamble of this proposed rule, the MDH program expires at the
end of FY 2013 (that is, the MDH program is in effect through September
30, 2013); therefore, the technical change would reflect that our
policy applies to MDHs for FY 2013 only.
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.''
When determining the base operating DRG payment amount for an
individual hospital for such applicable period for such condition, we
use Medicare inpatient claims from the MedPAR file
[[Page 27603]]
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 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 2014, we are proposing to use MedPAR claims with discharge
dates that are on or after July 1, 2009, and no later than June 30,
2012. As specified in the FY 2013 IPPS/LTCH PPS final rule (77 FR
53387), we use the update of the MedPAR file for each Federal fiscal
year, which is updated 6 months after the end of each Federal fiscal
year within the applicable period, as our data source (that is, the
March updates of the respective Federal fiscal year MedPAR files) for
the final rules. The FY 2009 through FY 2012 MedPAR data files can be
purchased from CMS. Use of these files allows 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:
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.
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.
For this FY 2014 proposed rule, we are proposing to determine
aggregate payments for excess readmissions and aggregate payments for
all discharges using data from MedPAR claims with discharge dates that
are on or after July 1, 2009, and no later than June 30, 2012. However,
we note that, for the purposes of modeling the proposed readmissions
payment adjustment factors in this proposed rule, we used excess
readmission ratios based on an older performance period of July 1, 2008
to June 30, 2011 with the application of the proposed planned
readmission algorithm.
Consistent with the approach taken in the FY 2013 IPPS/LTCH PPS
proposed rule (77 FR 27964), for the purpose of modeling the proposed
FY 2014 readmissions payment adjustment factors, we are using excess
readmission ratios for applicable hospitals from the FY 2013 Hospital
Readmission Reduction Program applicable period. For FY 2014,
applicable hospitals will have had the opportunity to review and
correct data from the proposed FY 2014 applicable period of July 1,
2009 to June 30, 2012 before they are made public under our policy
regarding the reporting of hospital-specific information, which is
discussed later in this section.
In this proposed rule, we are proposing for FY 2014 to use MedPAR
data from July 1, 2009 through June 30, 2012, and we are using the
March 2010 update of the FY 2009 MedPAR file to identify claims within
FY 2009 with discharges dates that are on or after July 1, 2009, the
March 2011 update of the FY 2010 MedPAR file to identify claims within
FY 2010, the March 2012 update of the FY 2011 MedPAR file to identify
claims within FY 2010, and the December 2012 update of the FY 2012
MedPAR file to identify claims within FY 2012 with discharge dates no
later than June 30, 2012. For the FY 2014 IPPS/LTCH PPS final rule, we
intend to use the same MedPAR files as listed above, with the exception
of using the March 2013 update of the FY 2012 MedPAR file.
In order to identify the admissions for each condition for an
individual hospital for calculating the aggregate payments for excess
readmissions, as we did for FY 2013, we are proposing, for FY 2014, 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 posted
on the Web site at: http://www.QualityNet.org > Hospital-Inpatient >
Claims-Based Measures > Readmission Measures > Measure Methodology.
In order to identify the applicable conditions to calculate the
aggregate payments for excess readmissions, as we did for FY 2013, we
are proposing, for FY 2014, 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. Based on
public comments that we received on the FY 2013 IPPS/LTCH PPS proposed
rule, which stated that the index admissions that are not considered
readmissions for the purpose of the readmissions measures, and are 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, we are proposing
to further modify our methodology to identify the admissions included
in the calculation of ``aggregate payments for excess readmissions.''
As we did for FY 2013 in response to public comments (77 FR 53390),
using our MedPAR data source, we identified admissions for the purposes
of calculating aggregate payments for excess readmissions making the
following exclusions: (1) Hospitalizations for patients discharged with
an in hospital death; (2) hospitalization for patients discharged
against medical advice; (3) transfers; (4) hospitalizations for
patients under 65; (5) hospitalizations for patients enrolled in
Medicare Part C; and (6) same day discharges for AMI cases. These
admissions were excluded based on how they were identified in the
MedPAR file.
For FY 2014, we are proposing to make the same exclusions as we did
in FY 2013, but, for some of the exclusions, to identify them using a
different methodology which is more consistent with the manner in which
exclusions are made to the admissions used to calculate the excess
readmission ratio. For FY 2014, in order to have the same types of
admissions to calculate aggregate payments for excess readmissions, as
is used to calculate the excess readmission ratio, we are proposing to
identify admissions for the purposes of calculating aggregate payments
for excess readmissions as follows; we note where our proposed
methodology for exclusions for FY 2014 differs from our methodology in
FY 2013:
We would exclude admissions that are identified as an
applicable condition based on the ICD-9-CM code listed as the primary
diagnosis if the patient died in the hospital, as identified by the
discharge status code on the MedPAR claim. This is consistent with how
we identified patients who died in the
[[Page 27604]]
hospital in the FY 2013 IPPS/LTCH PPS final rule.
We would exclude admissions identified as an applicable
condition based on the ICD-9-CM code listed as the primary diagnosis
for which the patient was transferred to another acute care hospital
(that is, a CAH or an IPPS hospital), as identified through examination
of contiguous stays in MedPAR at other hospitals. (We note that this
proposed step differs from the methodology we used in the FY 2013 IPPS/
LTCH PPS final rule to identify transfers based on discharge
destination codes in the MedPAR file.)
We would 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 by linking the
claim information to the information provided in the Medicare
Enrollment Database. (We note that this proposed step differs from the
methodology we used in the FY 2013 IPPS/LTCH PPS Rule in that we
previously used claims in the MedPAR file to identify a patient's age.)
For conditions identified as AMI, we would exclude claims
that are same day discharges, as identified by the admission date and
discharge date on the MedPAR claim. (This is consistent with how we
identified patients with same day discharges for AMI in the FY 2013
IPPS/LTCH PPS final rule. In addition, it is consistent with the
calculation of the excess readmission ratio for AMI where same day
discharges for AMI are not included as an index admission.)
Furthermore, we are proposing to only identify Medicare FFS claims
that meet the criteria (that is, claims paid for under Medicare Part C
(Medicare Advantage) would not be included in this calculation),
consistent with the methodology to calculate excess readmission ratios
based solely on admissions and readmissions for Medicare FFS patients.
For FY 2013, we had excluded admissions for Medicare Advantage patients
based on whether the claim was identified as a Medicare Advantage claim
in the MedPAR file or whether the FFS payment amount on the claim was
for an IME payment only, also indicative of an admission for a Medicare
Advantage patient. For FY 2014, we would exclude admissions for
patients enrolled in Medicare Advantage as identified in the Enrollment
Database, which is consistent with how admissions for Medicare
Advantage patients are identified in the calculation of the excess
readmission ratios.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53390), we noted
that there were additional exclusions to the admissions used to
calculate the excess readmission ratio that we could not apply to the
calculation of aggregate payments for excess readmissions at the time
of rulemaking. However, we stated our intention to modify our systems
to identify the additional exclusions in order to calculate the
aggregate payments for excess readmissions in a manner that would be
more consistent with the calculation of the excess readmission ratio.
Thus, in addition to the exclusions to the admissions we finalized in
the FY 2013, we are proposing additional exclusions so that the
criteria used to identify admissions for the purposes of calculating
aggregate payments for excess readmissions would be the same as the
criteria used to identify admissions for the purposes of calculating
the excess readmission ratios. We are proposing to link our MedPAR
claims data with the Medicare Enrollment Database to make additional
exclusions to the admissions used to calculate aggregate payments for
excess readmissions, which is consistent with our established
methodology for calculating of the excess readmission ratios. The
Medicare Enrollment Database contains information on all individuals
entitled to Medicare, including demographic information, enrollment
dates, third party buy-in information, and Medicare managed care
enrollment. For FY 2014, we are proposing to include the following
additional steps to identify admissions for the purposes of calculating
aggregate payments for excess readmissions:
We are proposing to exclude admissions for patients who
did not have Medicare Parts A and B FFS enrollment in the 12 months
prior to the index admission, based on the information provided in the
Medicare Enrollment Database.
We are proposing to exclude admissions for patients
without at least 30 days post-discharge enrollment in Medicare Parts A
and B FFS, based on the information provided in the Medicare Enrollment
Database.