[Federal Register Volume 80, Number 84 (Friday, May 1, 2015)]
[Proposed Rules]
[Pages 25012-25065]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-09880]



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Vol. 80

Friday,

No. 84

May 1, 2015

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





Medicare Program; Inpatient Psychiatric Facilities Prospective Payment 
System--Update for Fiscal Year Beginning October 1, 2015 (FY 2016); 
Proposed Rule

  Federal Register / Vol. 80 , No. 84 / Friday, May 1, 2015 / Proposed 
Rules  

[[Page 25012]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 412

[CMS-1627-P]
RIN 0938-AS47


Medicare Program; Inpatient Psychiatric Facilities Prospective 
Payment System--Update for Fiscal Year Beginning October 1, 2015 (FY 
2016)

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would update the prospective payment rates 
for Medicare inpatient hospital services provided by inpatient 
psychiatric facilities (IPFs) (which are freestanding IPFs and 
psychiatric units of an acute care hospital or critical access 
hospital). These changes would be applicable to IPF discharges 
occurring during the fiscal year (FY) beginning October 1, 2015 through 
September 30, 2016 (FY 2016). This proposed rule also proposes: A new 
IPF-specific market basket; to update the IPF labor-related share; a 
transition to new Core Based Statistical Area (CBSA) designations in 
the FY 2016 IPF Prospective Payment System (PPS) wage index; to phase 
out the rural adjustment for IPF providers whose status changes from 
rural to urban as a result of the proposed wage index CBSA changes; and 
new quality measures and reporting requirements under the IPF quality 
reporting program. This proposed rule also reminds IPFs of the October 
1, 2015 implementation of the International Classification of Diseases, 
10th Revision, Clinical Modification (ICD-10-CM), and updates providers 
on the status of IPF PPS refinements.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on June 23, 2015.

ADDRESSES: In commenting, please refer to file code CMS-1627-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 to http://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-1627-P, P.O. Box 8010, 
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 to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-1627-P, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. Alternatively, you may deliver (by hand or 
courier) your written comments ONLY to the following addresses prior to 
the close of the comment period:
    a. For delivery in Washington, DC--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Room 445-G, Hubert 
H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 
20201.

    (Because access to the interior of the Hubert H. Humphrey 
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. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
call telephone number (410) 786-4492 in advance to schedule your 
arrival with one of our staff members.
    Comments erroneously 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: 
    Katherine Lucas or Jana Lindquist, (410) 786-7723, for general 
information.
    Hudson Osgood, (410) 786-7897 or Bridget Dickensheets, (410) 786-
8670, for information regarding the market basket and labor-related 
share.
    Theresa Bean, (410) 786-2287, for information regarding the 
regulatory impact analysis.
    Rebecca Kliman, (410) 786-9723, or Jeffrey Buck, (410) 786-0407, 
for information regarding the inpatient psychiatric facility quality 
reporting program.

SUPPLEMENTARY INFORMATION: 

Availability of Certain Tables Exclusively Through the Internet on the 
CMS Web Site

    In the past, tables setting forth the Wage Index for Urban Areas 
Based on CBSA Labor Market Areas and the Wage Index Based on CBSA Labor 
Market Areas for Rural Areas were published in the Federal Register as 
an Addendum to the annual PPS rulemaking (that is, the PPS proposed and 
final rules or, when applicable, the current update notice). However, 
beginning in FY 2015, these wage index tables are no longer published 
in the Federal Register. Instead, these tables will be available 
exclusively through the Internet. The wage index tables for this 
proposed rule are available exclusively through the Internet on the CMS 
Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/IPFPPS/WageIndex.html.
    To assist readers in referencing sections contained in this 
document, we are providing the following table of contents.

I. Executive Summary
    A. Purpose
    B. Summary of the Major Provisions
    C. Summary of Impacts
II. Background
    A. Overview of the Legislative Requirements of the IPF PPS
    B. Overview of the IPF PPS
    C. Annual Requirements for Updating the IPF PPS
III. Provisions of the Proposed Rule
    A. Proposed Market Basket for the IPF PPS
    1. Background
    2. Overview of the Proposed 2012-Based IPF Market Basket
    3. Creating an IPF-Specific Market Basket
    a. Development of Cost Categories and Weights
    i. Medicare Cost Reports
    ii. Final Major Cost Category Computation
    iii. Derivation of the Detailed Operating Cost Weights
    iv. Derivation of the Detailed Capital Cost Weights
    v. Proposed 2012-Based IPF Market Basket Cost Categories and 
Weights
    b. Selection of Price Proxies
    i. Price Proxies for the Operating Portion of the Proposed 2012-
Based IPF Market Basket
    ii. Price Proxies for the Capital Portion of the Proposed 2012-
Based IPF Market Basket
    iii. Summary of All Price Proxies of the Proposed 2012-Based IPF 
Market Basket
    4. Proposed FY 2016 Market Basket Update
    5. Proposed Productivity Adjustment
    6. Proposed Labor-Related Share
    B. Proposed Updates to the IPF PPS Rates for FY Beginning 
October 1, 2016
    1. Determining the Standardized Budget-Neutral Federal Per Diem 
Base Rate

[[Page 25013]]

    2. Proposed Update of the Federal Per Diem Base Rate and 
Electroconvulsive Therapy Rate
    C. Proposed Updates to the IPF PPS Patient-Level Adjustment 
Factors
    1. Overview of the IPF PPS Adjustment Factors
    2. IPF-PPS Patient-Level Adjustments
    a. MS-DRG Assignment
    b. Payment for Comorbid Conditions
    3. Patient Age Adjustments
    4. Variable Per Diem Adjustments
    D. Proposed Updates to the IPF PPS Facility-Level Adjustments
    1. Proposed Wage Index Adjustment
    a. Background
    b. Proposed Wage Index for FY 2016
    c. OMB Bulletins and Proposed Transitional Wage Index
    d. Adjustment for Rural Location and Proposal To Phase Out the 
Rural Adjustment for IPFs Losing Their Rural Adjustment Due to CBSA 
Changes
    e. Budget Neutrality Adjustment
    2. Teaching Adjustment
    3. Cost of Living Adjustment for IPFs Located in Alaska and 
Hawaii
    4. Adjustment for IPFs With a Qualifying Emergency Department 
(ED)
    E. Other Payment Adjustments and Policies
    1. Outlier Payment Overview
    2. Proposed Update to the Outlier Fixed Dollar Loss Threshold 
Amount
    3. Proposed Update to IPF Cost-to-Charge Ratio Ceilings
IV. Updates on Other Payment Policy Issues
    A. Implementation of ICD-10-CM and ICD-10-PCS
    B. Update on IPF PPS Refinements
V. Inpatient Psychiatric Facilities Quality Reporting (IPFQR) 
Program
    A. Background
    1. Statutory Authority
    2. Covered Entities
    3. Considerations in Selecting Quality Measures
    B. Retention of IPFQR Program Measures Adopted in Previous 
Payment Determinations
    C. Proposed Removal of Quality Measure From the IPFQR Program 
Measure Set
    D. New Quality Measures Proposed for the FY 2018 Payment 
Determination and Subsequent Years
    1. TOB-3 Tobacco Use Treatment Provided or Offered at Discharge 
and the Subset Measure TOB-3a Tobacco Use Treatment at Discharge
    2. SUB-2 Alcohol Use Brief Intervention Provided or Offered and 
SUB-2a Alcohol Use Brief Intervention
    3. Transition Record With Specified Elements Received by 
Discharged Patients (Discharges From an Inpatient Facility to Home/
Self Care or Any Other Site of Care)
    4. Timely Transmission of Transition Record (Discharges From an 
Inpatient Facility to Home/Self Care or Any Other Site of Care)
    5. Screening for Metabolic Disorders
    6. Summary of Measures Proposed for Adoption and Removal for FY 
2018 and Subsequent Years
    E. Possible IPFQR Program Measures and Topics for Future 
Consideration
    F. Changes to Reporting Requirements
    1. Proposed Changes to Reporting by Age and Quarter
    2. Proposed Changes to Aggregate Population Count Reporting
    3. Proposed Changes to Sampling Requirements for FY 2018 Payment 
Determination and Subsequent Years
    G. Public Display and Review Requirements
    H. Form, Manner, and Timing of Quality Data Submission
    1. Procedural and Submission Requirements
    2. Proposed Change to the Reporting Periods and Submission 
Timeframes
    3. Population, Sampling, and Minimum Case Threshold
    4. Data Accuracy and Completeness Acknowledgement (DACA) 
Requirements
    I. Reconsideration and Appeals Procedures
    J. Exceptions to Quality Reporting Requirements
VI. Collection of Information Requirements
    A. Wage Estimates
    B. ICRs Regarding the Inpatient Psychiatric Quality Reporting 
(IPFQR) Program
    1. Changes in Time Required to Chart-Abstract Data Based on 
Proposed Reporting Requirements
    2. Estimated Burden of IPFQR Program Proposals
    C. Summary of Annual Burden Estimates for Proposed Requirements
    D. ICRs Regarding the Hospital and Health Care Complex Cost 
Report
    E. Submission of PRA-Related Comments
VII. Regulatory Impact Analysis
    A. Statement of Need
    B. Overall Impact
    C. Anticipated Effects
    1. Budgetary Impact
    2. Impact on Providers
    3. Results
    4. Effects of Updates to the IPFQR Program
    5. Effect on Beneficiaries
    D. Alternatives Considered
    E. Accounting Statement
    Regulations Text
    Addendum--FY 2016 Proposed Rates and Adjustment Factors

Acronyms

    Because of the many terms to which we refer by acronym in this 
proposed rule, we are listing the acronyms used and their corresponding 
meanings in alphabetical order below:

ADC Average Daily Census
AHA American Hospital Association
AHE Average Hourly Earning
BBRA Medicare, Medicaid and SCHIP [State Children's Health Insurance 
Program] Balanced Budget Refinement Act of 1999 (Pub. L. 106-113)
BEA Bureau of Economic Analysis
BLS Bureau of Labor Statistics
CAH Critical Access Hospital
CBSA Core-Based Statistical Area
CCR Cost-to-Charge Ratio
CPI Consumer Price Index
CPI-U Consumer Price Index for all Urban Consumers
DRGs Diagnosis-Related Groups
ECI Employment Cost Index
ESRD End State Renal Disease
FR Federal Register
FTE Full-time equivalent
FY Federal Fiscal Year (October 1 through September 30)
GDP Gross Domestic Product
GME Graduate Medical Education
HHA Home Health Agency
HBIPS Hospital Based Inpatient Psychiatric Services
ICD-9-CM International Classification of Diseases, 9th Revision, 
Clinical Modification
ICD-10-CM International Classification of Diseases, 10th Revision, 
Clinical Modification
ICD-10-PCS International Classification of Diseases, 10th Revision, 
Procedure Coding System
IGI IHS Global Insight, Inc.
I-O Input--Output
IPFs Inpatient Psychiatric Facilities
IPFQR Inpatient Psychiatric Facilities Quality Reporting
IRFs Inpatient Rehabilitation Facilities
LOS Length of Stay
LTCHs Long-Term Care Hospitals
MAC Medicare Administrative Contractor
MedPAR Medicare Provider Analysis and Review File
MFP Multifactor Productivity
MMA Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003
MSA Metropolitan Statistical Area
NAICS North American Industry Classification System
NQF National Quality Forum
OES Occupational Employment Statistics
OMB Office of Management and Budget
OPPS Outpatient Prospective Payment System
PLI Professional Liability Insurance
PPI Producer Price Index
PPS Prospective Payment System
RPL Rehabilitation, Psychiatric, and Long-Term Care
RY Rate Year (July 1 through June 30)
SCHIP State Children's Health Insurance Program
SNF Skilled Nursing Facility
SOC Standard Occupational Classification
TEFRA Tax Equity and Fiscal Responsibility Act of 1982 (Pub. L. 97-
248)

I. Executive Summary

A. Purpose

    This proposed rule would update the prospective payment rates for 
Medicare inpatient hospital services provided by inpatient psychiatric 
facilities (IPFs) for discharges occurring during the fiscal year (FY) 
beginning October 1, 2015 through September 30, 2016. For the Inpatient 
Psychiatric Facility Quality Reporting (IPFQR) Program, it also would 
change the measures collected under the program and modify reporting 
requirements for all program measures.

B. Summary of the Major Provisions

    In this proposed rule, we would update the IPF Prospective Payment

[[Page 25014]]

System (PPS), as specified in 42 CFR 412.428. The updates include the 
following:
     Effective for FY 2016 IPF PPS update, we are proposing to 
adopt a FY 2012-based IPF-specific market basket. We propose to adjust 
the FY 2012-based IPF market basket update (currently estimated to be 
2.7 percent) by a reduction for economy-wide productivity (currently 
estimated to be 0.6 percentage point) as required by section 
1886(s)(2)(A)(i) of the Social Security Act (the Act), and further 
reduced by 0.2 percentage point as required by section 
1886(s)(2)(A)(ii) of the Act, resulting in an estimated market basket 
update of 1.9 percent.
     We propose to update the IPF per diem rate from $728.31 to 
$745.19. Providers that failed to report quality data for FY 2016 
payment would receive a proposed FY 2016 per diem rate of $730.56.
     We propose to update the electroconvulsive therapy (ECT) 
payment from $313.55 to $320.82. Providers that failed to report 
quality data for FY 2016 payment would receive a proposed FY 2016 ECT 
rate of $314.52.
     We propose to adopt new Office of Management and Budget 
(OMB) Core-Based Statistical Area (CBSA) delineations for the FY 2016 
IPF PPS wage index and future IPF PPS wage indices. We propose to 
implement these CBSA changes using a 1-year transition with a blended 
wage index for all providers, consisting of a blend of fifty percent of 
the FY 2016 IPF wage index using the current OMB delineations and fifty 
percent of the FY 2016 IPF wage index using the revised OMB 
delineations.
     We propose to phase out the rural adjustment for the 37 
rural IPFs that would be re-designated as urban IPFs due to the OMB 
CBSA changes. Specifically, we propose to phase out the 17 percent 
rural adjustment for these 37 providers over 3 years (2-thirds of the 
adjustment given in FY 2016, one-third of the adjustment given in FY 
2017, and no rural adjustment thereafter).
     We propose to use the updated Labor Related Share of 74.9 
percent and CBSA rural and urban wage indices for FY 2016, and 
establish a wage index budget-neutrality adjustment of 1.0041.
     We propose to update the fixed dollar loss threshold 
amount from $8,755 to $9,825 in order to maintain outlier payments that 
are 2 percent of total IPF PPS payments.
     We propose that the national urban and rural cost-to-
charge ratio (CCR) ceilings for FY 2016 would be 1.6881 and 1.9041, 
respectively, and the national median CCR would be 0.4675 for urban 
IPFs and 0.6210 for rural IPFs. The national median CCR is applied to 
new IPFs that have not yet submitted their first Medicare cost report, 
to IPFs for which the CCR calculation data are inaccurate or 
incomplete, or to IPFs whose overall CCR exceeds 3 standard deviations 
above the national geometric mean. These amounts are used in the 
outlier calculation to determine if an IPF's CCR is statistically 
accurate and for new providers without an established CCR.
     We note that IPF PPS patient-level and facility-level 
adjustments, other than those mentioned above, would remain the same as 
in FY 2015.

In addition:

     We remind providers that International Classification of 
Diseases, 10th Revision, Clinical Modification/Procedure Coding System 
(ICD-10-CM/PCS) will be implemented on October 1, 2015.
     As we continue our analysis for future IPF PPS 
refinements, we find, from preliminary analysis of 2012 to 2013 data, 
that over 20 percent of IPF stays reported no ancillary costs, such as 
laboratory and drug costs, in their cost reports, or laboratory or drug 
charges on their claims. Because we expect that most patients requiring 
hospitalization for active psychiatric treatment would need drugs and 
laboratory services, we remind providers that the IPF per diem payment 
rate includes the cost of all ancillary services, including drugs and 
laboratory services. CMS pays only the inpatient psychiatric facility 
for services furnished to a Medicare beneficiary who is an inpatient of 
that inpatient psychiatric facility, except for certain professional 
services, and payments are considered to be payments in full for all 
inpatient hospital services provided directly or under arrangement (see 
42 CFR 412.404(d)), as specified in 42 CFR 409.10.
    For the Inpatient Psychiatric Facility Quality Reporting (IPFQR) 
Program, we are making several proposals related to measures and 
several proposals related to data submission for the IPFQR Program 
measures. We are proposing to adopt five new measures beginning with 
the fiscal year (FY) 2018 payment determination:
     TOB-3--Tobacco Use Treatment Provided or Offered at 
Discharge and the subset measure TOB-3a Tobacco Use Treatment at 
Discharge (National Quality Forum (NQF) #1656);
     SUB-2--Alcohol Use Brief Intervention Provided or Offered 
and the subset measure SUB-2a (NQF #1663);
     Transition Record with Specified Elements Received by 
Discharged Patients (Discharges from an Inpatient Facility to Home/Self 
Care or Any Other Site of Care) (NQF) #0647);
     Timely Transmission of Transition Record (Discharges from 
an Inpatient Facility to Home/Self Care or Any Other Site of Care) (NQF 
#0648); and
     Screening for Metabolic Disorders.

If Transition Record with Specified Elements Received by Discharged 
Patients (Discharges from an Inpatient Facility to Home/Self Care or 
Any Other Site of Care) is adopted, we are proposing to remove Hospital 
Based Inpatient Psychiatric Services (HBIPS)-6 Post-Discharge 
Continuing Care Plan (NQF #0557). Likewise, if Timely Transmission of 
Transition Record (Discharges from an Inpatient Facility to Home/Self 
Care or Any Other Site of Care) (NQF #0648) is adopted, we are 
proposing to remove HBIPS-7 Post-Discharge Continuing Care Plan 
Transmitted to the Next Level of Care Provider Upon Discharge (NQF 
#0558). We are also proposing to remove one measure, HBIPS-4 Patients 
Discharged on Multiple Antipsychotic Medications, beginning with the FY 
2017 payment determination.
    We are also making several proposals regarding how facilities 
should report data for IPFQR Program measures:
     We are proposing to require that measures be reported as a 
single yearly count rather than by quarter and age beginning with the 
FY 2017 payment determination;
     We are proposing to require that aggregate population 
counts be reported as a single yearly number rather than by quarter 
beginning with the FY 2017 payment determination; and
     We are proposing to allow uniform sampling for certain 
measures beginning with the FY 2018 payment determination.

C. Summary of Impacts

[[Page 25015]]



------------------------------------------------------------------------
         Provision description                   Total transfers
------------------------------------------------------------------------
FY 2016 IPF PPS payment rate update....  The overall economic impact of
                                          this proposed rule is an
                                          estimated $80 million in
                                          increased payments to IPFs
                                          during FY 2016.
------------------------------------------------------------------------
         Provision description                        Costs
------------------------------------------------------------------------
New quality reporting program            The total costs beginning in FY
 requirements.                            2016 for IPFs as a result of
                                          the proposed new quality
                                          reporting requirements are
                                          estimated to be $6.31 million.
------------------------------------------------------------------------

II. Background

A. Overview of the Legislative Requirements for the IPF PPS

    Section 124 of the Medicare, Medicaid, and SCHIP (State Children's 
Health Insurance Program) Balanced Budget Refinement Act of 1999 (BBRA) 
(Pub. L. 106-113) required the establishment and implementation of an 
IPF PPS. Specifically, section 124 of the BBRA mandated that the 
Secretary of the Department Health and Human Services (the Secretary) 
develop a per diem PPS for inpatient hospital services furnished in 
psychiatric hospitals and psychiatric units including an adequate 
patient classification system that reflects the differences in patient 
resource use and costs among psychiatric hospitals and psychiatric 
units.
    Section 405(g)(2) of the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003 (MMA) (Pub. L. 108-173) extended the IPF 
PPS to distinct part psychiatric units of critical access hospitals 
(CAHs).
    Section 3401(f) of the Patient Protection and Affordable Care Act 
(Pub. L. 111-148) as amended by section 10319(e) of that Act and by 
section 1105(d) of the Health Care and Education Reconciliation Act of 
2010 (Pub. L. 111-152) (hereafter referred to as ``the Affordable Care 
Act'') added subsection (s) to section 1886 of the Act.
    Section 1886(s)(1) of the Act titled ``Reference to Establishment 
and Implementation of System'' refers to section 124 of the BBRA, which 
relates to the establishment of the IPF PPS.
    Section 1886(s)(2)(A)(i) of the Act requires the application of the 
productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of 
the Act to the IPF PPS for the Rate Year (RY) beginning in 2012 (that 
is, a RY that coincides with a FY) and each subsequent RY. For the RY 
beginning in 2015 (that is, FY 2016), the current estimate of the 
productivity adjustment would be equal to 0.6 percentage point, which 
we are proposing in this FY 2016 proposed rule.
    Section 1886(s)(2)(A)(ii) of the Act requires the application of an 
``other adjustment'' that reduces any update to an IPF PPS base rate by 
percentages specified in section 1886(s)(3) of the Act for the RY 
beginning in 2010 through the RY beginning in 2019. For the RY 
beginning in 2015 (that is, FY 2016), section 1886(s)(3)(D) of the Act 
requires the reduction to be 0.2 percentage point. We are proposing 
that reduction in this FY 2016 IPF PPS proposed rule.
    Section 1886(s)(4) of the Act requires the establishment of a 
quality data reporting program for the IPF PPS beginning in RY 2014.
    To implement and periodically update these provisions, we have 
published various proposed and final rules in the Federal Register. For 
more information regarding these rules, see the CMS Web site at http://www.cms.hhs.gov/InpatientPsychFacilPPS/.

B. Overview of the IPF PPS

    The November 2004 IPF PPS final rule (69 FR 66922) established the 
IPF PPS, as required by section 124 of the BBRA and codified at subpart 
N of part 412 of the Medicare regulations. The November 2004 IPF PPS 
final rule set forth the per diem Federal rates for the implementation 
year (the 18-month period from January 1, 2005 through June 30, 2006), 
and provided payment for the inpatient operating and capital costs to 
IPFs for covered psychiatric services they furnish (that is, routine, 
ancillary, and capital costs, but not costs of approved educational 
activities, bad debts, and other services or items that are outside the 
scope of the IPF PPS). Covered psychiatric services include services 
for which benefits are provided under the fee-for-service Part A 
(Hospital Insurance Program) of the Medicare program.
    The IPF PPS established the Federal per diem base rate for each 
patient day in an IPF derived from the national average daily routine 
operating, ancillary, and capital costs in IPFs in FY 2002. The average 
per diem cost was updated to the midpoint of the first year under the 
IPF PPS, standardized to account for the overall positive effects of 
the IPF PPS payment adjustments, and adjusted for budget-neutrality.
    The Federal per diem payment under the IPF PPS is comprised of the 
Federal per diem base rate described above and certain patient- and 
facility-level payment adjustments that were found in the regression 
analysis to be associated with statistically significant per diem cost 
differences.
    The patient-level adjustments include age, Diagnosis-Related Group 
(DRG) assignment, comorbidities, and variable per diem adjustments to 
reflect higher per diem costs in the early days of an IPF stay. 
Facility-level adjustments include adjustments for the IPF's wage 
index, rural location, teaching status, a cost-of-living adjustment for 
IPFs located in Alaska and Hawaii, and the presence of a qualifying 
emergency department (ED).
    The IPF PPS provides additional payment policies for: Outlier 
cases; interrupted stays; and a per treatment adjustment for patients 
who undergo electroconvulsive therapy (ECT). During the IPF PPS 
mandatory 3-year transition period, stop-loss payments were also 
provided; however, since the transition ended in 2008, these payments 
are no longer available.
    A complete discussion of the regression analysis that established 
the IPF PPS adjustment factors appears in the November 2004 IPF PPS 
final rule (69 FR 66933 through 66936).
    Section 124 of the BBRA did not specify an annual rate update 
strategy for the IPF PPS and was broadly written to give the Secretary 
discretion in establishing an update methodology. Therefore, in the 
November 2004 IPF PPS final rule, we implemented the IPF PPS using the 
following update strategy:
     Calculate the final Federal per diem base rate to be 
budget-neutral for the 18-month period of January 1, 2005 through June 
30, 2006.
     Use a July 1 through June 30 annual update cycle.
     Allow the IPF PPS first update to be effective for 
discharges on or after July 1, 2006 through June 30, 2007.
    In RY 2012, we proposed and finalized switching the IPF PPS payment 
rate update from a rate year that begins on July 1 and ends on June 30 
to one that coincides with the Federal fiscal year that begins October 
1 and ends on September 30. In order to

[[Page 25016]]

transition from one timeframe to another, the RY 2012 IPF PPS covered a 
15-month period from July 1, 2011 through September 30, 2012. 
Therefore, the update cycle for FY 2016 will be October 1, 2015 through 
September 30, 2016. For further discussion of the 15-month market 
basket update for RY 2012 and changing the payment rate update period 
to coincide with a FY period, we refer readers to the RY 2012 IPF PPS 
proposed rule (76 FR 4998) and the RY 2012 IPF PPS final rule (76 FR 
26432).

C. Annual Requirements for Updating the IPF PPS

    In November 2004, we implemented the IPF PPS in a final rule that 
appeared in the November 15, 2004 Federal Register (69 FR 66922). In 
developing the IPF PPS, to ensure that the IPF PPS is able to account 
adequately for each IPF's case-mix, we performed an extensive 
regression analysis of the relationship between the per diem costs and 
certain patient and facility characteristics to determine those 
characteristics associated with statistically significant cost 
differences on a per diem basis. For characteristics with statistically 
significant cost differences, we used the regression coefficients of 
those variables to determine the size of the corresponding payment 
adjustments.
    In that final rule, we explained that we believe it is important to 
delay updating the adjustment factors derived from the regression 
analysis until we have IPF PPS data that include as much information as 
possible regarding the patient-level characteristics of the population 
that each IPF serves. Therefore, we indicated that we did not intend to 
update the regression analysis and the patient- and facility-level 
adjustments until we complete that analysis. Until that analysis is 
complete, we stated our intention to publish a notice in the Federal 
Register each spring to update the IPF PPS (71 FR 27041). We have begun 
the necessary analysis to make refinements to the IPF PPS using more 
current data to set the adjustment factors; however, we are not 
proposing any refinements in this proposed rule. Rather, as explained 
in section IV.B. of this proposed rule, we expect that in future 
rulemaking we will be ready to propose potential refinements.
    In the May 6, 2011 IPF PPS final rule (76 FR 26432), we changed the 
payment rate update period to a RY that coincides with a FY update. 
Therefore, update notices are now published in the Federal Register in 
the summer to be effective on October 1. When proposing changes in IPF 
payment policy, a proposed rule would be issued in the spring and the 
final rule in the summer in order to be effective on October 1. For 
further discussion on changing the IPF PPS payment rate update period 
to a RY that coincides with a FY, see the IPF PPS final rule published 
in the Federal Register on May 6, 2011 (76 FR 26434 through 26435). For 
a detailed list of updates to the IPF PPS, see 42 CFR 412.428.
    Our most recent IPF PPS annual update occurred in an August 6, 
2014, Federal Register final rule (79 FR 45938) (hereinafter referred 
to as the August 2014 IPF PPS final rule) that set forth updates to the 
IPF PPS payment rates for FY 2015. That rule updated the IPF PPS per 
diem payment rates that were published in the August 2013 IPF PPS 
notice (78 FR 46734) in accordance with our established policies.

III. Provisions of the Proposed Rule

A. Proposed Market Basket for the IPF PPS

1. Background
    The input price index that was used to develop the IPF PPS was the 
Excluded Hospital with Capital market basket. This market basket was 
based on 1997 Medicare cost reports for Medicare participating IRFs, 
IPFs, LTCHs, cancer hospitals, and children's hospitals. Although 
``market basket'' technically describes the mix of goods and services 
used in providing health care at a given point in time, this term is 
also commonly used to denote the input price index (that is, cost 
category weights and price proxies) derived from that market basket. 
Accordingly, the term ``market basket,'' as used in this document, 
refers to an input price index.
    Beginning with the May 2006 IPF PPS final rule (71 FR 27046 through 
27054), IPF PPS payments were updated using a 2002-based RPL market 
basket reflecting the operating and capital cost structures for 
freestanding IRFs, freestanding IPFs, and LTCHs. Cancer and children's 
hospitals were excluded from the RPL market basket because their 
payments are based entirely on reasonable costs subject to rate-of-
increase limits established under the authority of section 1886(b) of 
the Act and not through a PPS. Also, the 2002 cost structures for 
cancer and children's hospitals are noticeably different than the cost 
structures of freestanding IRFs, freestanding IPFs, and LTCHs. See the 
May 2006 IPF PPS final rule (71 FR 27046 through 27054) for a complete 
discussion of the 2002-based RPL market basket.
    In the May 1, 2009 IPF PPS notice (74 FR 20376), we expressed our 
interest in exploring the possibility of creating a stand-alone IPF 
market basket that reflects the cost structures of only IPF providers. 
One available option was to combine the Medicare cost report data from 
freestanding IPF providers with Medicare cost report data from 
hospital-based IPF providers. We indicated that an examination of the 
Medicare cost report data comparing freestanding IPFs and hospital-
based IPFs showed differences between cost levels and cost structures. 
At that time, we were unable to fully understand these differences even 
after reviewing explanatory variables such as geographic variation, 
case mix (including DRG, comorbidity, and age), urban or rural status, 
teaching status, and presence of a qualifying emergency department. As 
a result, we continued to research ways to reconcile the differences 
and solicited public comment for additional information that might help 
us to better understand the reasons for the variations in costs and 
cost structures, as indicated by the Medicare cost report data (74 FR 
20376). We summarized the public comments we received and our responses 
in the April 2010 IPF PPS notice (75 FR 23111 through 23113). Despite 
receiving comments from the public on this issue, we were still unable 
to sufficiently reconcile the observed differences in costs and cost 
structures between hospital-based and freestanding IPFs, and, 
therefore, we did not believe it to be appropriate at that time to 
incorporate data from hospital-based IPFs with those of freestanding 
IPFs to create a stand-alone IPF market basket.
    Beginning with the RY 2012 IPF PPS final rule (76 FR 26432), IPF 
PPS payments were updated using a 2008-based RPL market basket 
reflecting the operating and capital cost structures for freestanding 
IRFs, freestanding IPFs, and LTCHs. The major changes for RY 2012 
included: Updating the base year from FY 2002 to FY 2008; using a more 
specific composite chemical price proxy; breaking the professional fees 
cost category into 2 separate categories (Labor-related and Nonlabor-
related); and adding 2 additional cost categories (Administrative and 
Facilities Support Services and Financial Services), which were 
previously included in the residual All Other Services cost categories. 
The RY 2012 IPF PPS proposed rule (76 FR 4998) and RY 2012 final rule 
(76 FR 26432) contain a complete discussion of the development of the 
2008-based RPL market basket.
    For FY 2016, we are proposing to create a 2012-based IPF market 
basket, using Medicare cost report data for both

[[Page 25017]]

freestanding and hospital-based IPFs. In the following discussion, we 
provide an overview of the proposed market basket and describe the 
methodologies used to determine the operating and capital portions of 
the proposed 2012-based IPF market basket.
2. Overview of the Proposed 2012-Based IPF Market Basket
    The proposed 2012-based IPF market basket is a fixed-weight, 
Laspeyres-type price index. A Laspeyres price index measures the change 
in price, over time, of the same mix of goods and services purchased in 
the base period. Any changes in the quantity or mix of goods and 
services (that is, intensity) purchased over time relative to a base 
period are not measured.
    The index itself is constructed in 3 steps. First, a base period is 
selected (in this proposed rule, the base period is FY 2012) 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 or expenditure weights. Second, each expenditure category 
is matched to an appropriate price or wage variable, referred to as a 
price proxy. In nearly every instance, these price proxies are derived 
from publicly available statistical series that are published on a 
consistent schedule (preferably at least on a quarterly basis). 
Finally, the expenditure weight for each cost category is multiplied by 
the level of its respective price proxy. The sum of these products 
(that is, the expenditure weights multiplied by their price levels) for 
all cost categories yields the composite index level of the market 
basket in a given period. Repeating this step for other periods 
produces a series of market basket levels over time. Dividing an index 
level for a given period by an index level for an earlier period 
produces a rate of growth in the input price index over that timeframe.
    As noted above, the market basket is described as a fixed-weight 
index because it represents the change in price over time of a constant 
mix (quantity and intensity) of goods and services needed to furnish 
IPF 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, an IPF hiring more nurses to 
accommodate the needs of patients would increase the volume of goods 
and services purchased by the IPF, but would not be factored into the 
price change measured by a fixed-weight IPF 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 
IPFs purchase (facility inputs) to furnish inpatient care between base 
periods.
3. Creating an IPF-Specific Market Basket
    As discussed in section III.A.1, over the last several years we 
have been exploring the possibility of creating a stand-alone, or IPF-
specific, market basket that reflects the cost structures of only IPF 
providers. The major cost weights for the 2008-based RPL market basket 
were calculated using Medicare cost report data for freestanding 
facilities only. We used freestanding facilities due to concerns 
regarding our ability to incorporate Medicare cost report data for 
hospital-based providers. In the FY 2015 IPF PPS final rule (79 FR 
45941), we presented several of these concerns (as stated below) but 
explained that we would continue to research the possibility of 
creating an IPF-specific market basket to update IPF PPS payments.
    Since the FY 2015 IPF PPS final rule, we have performed additional 
research on the Medicare cost report data available for hospital-based 
IPFs and evaluated these concerns. We subsequently concluded from this 
research that Medicare cost report data for both hospital-based IPFs 
and freestanding IPFs can be used to calculate the major market basket 
cost weights for a stand-alone IPF market basket. We have developed a 
detailed methodology to derive market basket cost weights that are 
representative of the universe of IPF providers. We believe the use of 
this proposed IPF market basket is a technical improvement over the RPL 
market basket that is currently used to update IPF PPS payments. As a 
result, in this FY 2016 IPF PPS proposed rule, we are proposing a 2012-
based IPF market basket that reflects data for both freestanding and 
hospital-based IPFs. Below we discuss our prior concerns and provide 
reasons for why we now feel it is appropriate to create a stand-alone 
IPF market basket using Medicare cost report data for both hospital-
based and freestanding IPFs.
    One concern we discussed in the FY 2015 IPF PPS final rule (79 FR 
45941) about using the hospital-based IPF Medicare cost report data was 
the cost level differences for hospital-based IPFs relative to 
freestanding IPFs were not readily explained by the specific 
characteristics of the individual providers and the patients that they 
serve (for example, characteristics related to case mix, urban/rural 
status, teaching status, or presence of a qualified emergency 
department). To address this concern, we used regression analysis to 
evaluate the effect of including hospital-based IPF Medicare cost 
report data in the calculation of cost distributions. A more detailed 
description of these regression models can be found in the FY 2015 IPF 
final rule (79 FR 45941). Based on this analysis, we concluded that the 
inclusion of those IPF providers with unexplained variability in costs 
did not significantly impact the cost weights and, therefore, should 
not be a major cause of concern.
    Another concern regarding the incorporation of hospital-based IPF 
data into the calculation of the market basket cost weights was the 
complexity of the Medicare cost report data for these providers. The 
freestanding IPFs independently submit a Medicare cost report for their 
facilities, making it relatively straightforward to obtain the cost 
categories necessary to determine the major market basket cost weights. 
However, Medicare cost report data submitted for a hospital-based IPF 
are embedded in the Medicare cost report submitted for the entire 
hospital facility in which the IPF is located. In order to use Medicare 
cost report data from these providers, we needed to determine the 
appropriate adjustments to apply to the data to ensure that the cost 
weights we obtained would represent only the hospital-based IPF (not 
the hospital as a whole). Over the past year, we worked to develop 
detailed methodologies to calculate the major cost weights for both 
freestanding and hospital-based IPFs. We believe that our proposed 
methodologies and the resulting cost weights, described in section 
III.A.3.a.i below, are reasonable and appropriate. We welcome public 
comments on these proposals.
    We also evaluated the differences in cost weights for hospital-
based and freestanding IPFs and found the most significant differences 
occurred for salaries and pharmaceutical costs. Specifically, the 
hospital-based IPF salary cost weights tend to be lower than those of 
freestanding IPFs while hospital-based IPF pharmaceutical cost weights 
tend to be higher than those of freestanding IPFs. Our proposed 
methodology for deriving costs for each of these categories can be 
found in section III.A.3.a.i below. We will continue to research and 
monitor these

[[Page 25018]]

cost shares to ensure that the differences are explainable.
    In summary, our research over the past year allowed us to evaluate 
the appropriateness of including hospital-based IPF data in the 
calculation of the major cost weights for an IPF market basket. We 
believe that the proposed methodologies for deriving the cost weights 
give us the ability to create a stand-alone IPF market basket that 
reflects the cost structure of the universe of IPF providers. 
Therefore, we believe that the use of this proposed 2012-based IPF 
market basket to update IPF PPS payments is an improvement over the 
current 2008-based RPL market basket.
a. Development of Cost Categories and Weights
i. Medicare Cost Reports
    The proposed 2012-based IPF market basket consists of seven major 
cost categories derived from the FY 2012 Medicare cost reports (CMS 
Form 2552-10) for freestanding and hospital-based IPFs, including Wages 
and Salaries, Employee Benefits, Contract Labor, Pharmaceuticals, 
Professional Liability Insurance (PLI), Capital, and a residual. The 
residual reflects all remaining costs that are not captured in the 
other six cost categories. The FY 2012 cost reports include providers 
whose cost report begin date is on or between October 1, 2011, and 
September 30, 2012. We choose to use FY 2012 as the base year because 
we believe that the Medicare cost reports for this year represent the 
most recent, complete set of Medicare cost report data available for 
IPFs at the time of rulemaking.
    Prior Medicare cost report data used to develop the RPL market 
basket showed large differences between some providers' Medicare length 
of stay (LOS) and total facility LOS. Since our goal is to measure cost 
weights that are reflective of case mix and practice patterns 
associated with providing services to Medicare beneficiaries, we 
limited our selection of Medicare cost reports used in the RPL market 
basket to those facilities that had a Medicare LOS that was within a 
comparable range of their total facility average LOS. For the 2008-
based RPL market basket, we used those IPF Medicare cost reports whose 
average Medicare LOS was within 30 percent of the average facility LOS 
if the facility LOS was greater than or equal to 15 days. For those 
IPFs whose average facility LOS was less than 15 days, the Medicare LOS 
had to be within 50 percent of the average facility LOS. When applying 
the LOS trim to derive the 2008-based RPL market basket, we found that 
those providers that were excluded (of which seventy percent were IPFs) 
had an average facility LOS (40 days) that was 2 times larger than the 
Medicare LOS (20 days).
    To create the proposed 2012-based IPF market basket, we reevaluated 
the LOS trim based on FY 2012 Medicare cost report data and the 
inclusion of hospital-based providers. Based on our analysis of the 
data, we are proposing to apply a less restrictive LOS trim to derive 
the 2012-based IPF market basket than was applied to derive the RPL 
market basket. For freestanding IPFs, we propose to define the Medicare 
and facility LOS as those reported on line 14 of Worksheet S-3, Part I 
(consistent with the RPL market basket method). For hospital-based 
IPFs, we are proposing to use line 16 of Worksheet S-3, Part I to 
determine the Medicare and facility LOS. To derive the proposed 2012-
based IPF market basket, for those IPFs with an average facility LOS of 
greater than or equal to 15 days, we are proposing to include IPFs 
where the Medicare LOS is within 50 percent (higher or lower) of the 
average facility LOS. For those IPFs whose average facility LOS is less 
than 15 days, we are proposing to include IPFs where the Medicare LOS 
is within 95 percent (higher or lower) of the facility LOS.
    This less restrictive trim increases the number of IPFs included in 
the derivation of the market basket, particularly for those providers 
where the Medicare LOS and facility LOS is within 5 days. Applying the 
proposed trim results in IPF Medicare cost reports with an average 
Medicare LOS of 12 days, average facility LOS of 10 days, and Medicare 
utilization (as measured by Medicare inpatient IPF days as a percentage 
of total facility days) of 30 percent. If we were to apply the same 
trim as was applied for the 2008-based RPL market basket, it would 
result in IPF Medicare cost reports with an average Medicare LOS of 12 
days, average facility LOS of 9 days, and Medicare utilization of 31 
percent. Those providers that were excluded from the proposed 2012-
based IPF market basket have an average Medicare LOS of 22 days, 
average facility LOS of 49 days, and a Medicare utilization of 5 
percent. Of those Medicare cost reports excluded from the proposed 
2012-based IPF market basket, about 70 percent of these were 
freestanding providers whereas freestanding providers represent about 
30 percent of all IPFs. We believe the proposed trim is a technical 
improvement as data from more IPFs is used while still being reflective 
of case mix and practice patterns associated with providing services to 
Medicare beneficiaries.
    We applied this LOS trim to first obtain a set of cost reports for 
facilities that have a Medicare LOS within a comparable range of their 
total facility LOS. Using the resulting set of FY 2012 Medicare cost 
reports for freestanding IPFs and hospital-based IPFs, we are proposing 
to calculate costs for the six major cost categories (Wages and 
Salaries, Employee Benefits, Contract Labor, Professional Liability 
Insurance, Pharmaceuticals, and Capital).
    Similar to the 2008-based RPL market basket major cost weights, the 
proposed 2012-based IPF market basket cost weights reflect Medicare 
allowable costs (routine, ancillary and capital costs) that are 
eligible for inclusion under the IPF PPS payments. We define Medicare 
allowable costs for freestanding facilities as cost centers (CMS Form 
2552-10): 30 through 35, 50 through 76 (excluding 52 and 75), 90 
through 91, and 93. We define Medicare allowable costs for hospital-
based facilities as cost centers (CMS Form 2552-10): 40, 50 through 76 
(excluding 52 and 75), 90 through 91, and 93. For freestanding IPFs, 
total Medicare allowable costs are equal to the total costs as reported 
on Worksheet B, part I, column 26. For hospital-based IPFs, total 
Medicare allowable costs are equal to total costs for the IPF inpatient 
unit after the allocation of overhead costs (Worksheet B, part I, 
column 26, line 40) and a portion of total ancillary costs. We 
calculate the portion of ancillary costs attributable to the hospital-
based IPF for a given ancillary cost center by multiplying total 
facility ancillary costs for the specific cost center (as reported on 
Worksheet B, Part I, column 26) by the ratio of IPF Medicare ancillary 
costs for the cost center (as reported on Worksheet D-3, column 3 for 
IPF subproviders) to total Medicare ancillary costs for the cost center 
(equal to the sum of Worksheet D-3, column 3 for all relevant PPS (that 
is, IPPS, IRF, IPF and Skilled Nursing Facility (SNF))).
    Below we provide a description of the proposed methodologies used 
to derive costs for the six major cost categories.
Wages and Salaries Costs
    For freestanding IPFs, Wages and Salaries costs are derived as the 
sum of routine inpatient salaries, ancillary salaries, and a proportion 
of overhead (or general service cost center) salaries as reported on 
Worksheet A, column 1. Since overhead salary costs are attributable to 
the entire IPF, we only include the proportion attributable to the 
Medicare allowable cost centers. We

[[Page 25019]]

estimate the proportion of overhead salaries that are attributed to 
Medicare allowable costs centers by multiplying the ratio of Medicare 
allowable salaries to total salaries (Worksheet A, column 1, line 200) 
times total overhead salaries. A similar methodology was used to derive 
Wages and Salaries costs in the 2008-based RPL market basket.
    For hospital-based IPFs, Wages and Salaries costs are derived as 
the sum of inpatient unit wages and salaries (Worksheet A, column 1, 
line 40) and a portion of salary costs attributable to total facility 
ancillary and overhead cost centers as these cost centers are shared 
with the entire facility. We calculate the portion of ancillary 
salaries attributable to the hospital-based IPF for a given ancillary 
cost center by multiplying total facility ancillary salary costs for 
the specific cost center (as reported on Worksheet A, column 1) by the 
ratio of IPF Medicare ancillary costs for the cost center (as reported 
on Worksheet D-3, column 3 for IPF subproviders) to total Medicare 
ancillary costs for the cost center (equal to the sum of Worksheet D-3, 
column 3 for all relevant PPS units (that is, IPPS, IRF, IPF and SNF)). 
For example, if hospital-based IPF Medicare laboratory costs represent 
10 percent of the total Medicare laboratory costs for the entire 
facility, then 10 percent of total facility laboratory salaries (as 
reported in Worksheet A, column 1, line 60) would be attributable to 
the hospital-based IPF. We believe it is appropriate to use only a 
portion of the ancillary costs in the market basket cost weight 
calculations since the hospital-based IPF only utilizes a portion of 
the facility's ancillary services. We believe the ratio of reported IPF 
Medicare costs to reported total Medicare costs provides a reasonable 
estimate of the ancillary services utilized, and costs incurred, by the 
hospital-based IPF.
    We calculate the portion of overhead salary costs attributable to 
hospital-based IPFs by multiplying the total overhead costs 
attributable to the hospital-based IPF (sum of columns 4 through18 on 
Worksheet B, part I, line 40) by the ratio of total facility overhead 
salaries (as reported on Worksheet A, column 1, lines 4 through18) to 
total facility overhead costs (as reported on Worksheet A, column 7, 
lines 4 through18). This methodology assumes the proportion of total 
costs related to salaries for the overhead cost centers is similar for 
all inpatient units (that is, acute inpatient or inpatient 
psychiatric). Since the 2008-based RPL market basket did not include 
hospital-based providers, this proposed methodology cannot be compared 
to the derivation of Wages and Salaries costs in the 2008-based RPL 
market basket.
Employee Benefits Costs
    Effective with our implementation of CMS Form 2552-10, CMS began 
collecting Employee Benefits and Contract Labor data on Worksheet S-3, 
Part V. Previously, with CMS Form 2540-96, Employee Benefits and 
Contract Labor data were reported on Worksheet S-3, part II, which was 
applicable to only IPPS providers and, therefore, these data were not 
available for the derivation of the RPL market basket. Due to the lack 
of such data, the Employee Benefits cost weight for the 2008-based RPL 
market basket was derived by multiplying the 2008-based RPL market 
basket Wages and Salaries cost weight by the ratio of the IPPS hospital 
market basket Employee Benefits cost weight to the IPPS hospital market 
basket Wages and Salaries cost weight. Similarly, the Contract Labor 
cost weight for the 2008-based RPL market basket was derived by 
multiplying the 2008-based RPL market basket Wages and Salaries cost 
weight by the ratio of the IPPS hospital market basket Contract Labor 
cost weight to the IPPS hospital market basket Wages and Salaries cost 
weight.
    For FY 2012 Medicare cost report data, while there were providers 
that did report data on Worksheet S-3, part V, many providers did not 
complete this worksheet. However, we believe we had a large enough 
sample to enable us to produce reasonable Employee Benefits cost 
weights. We continue to encourage all providers to report these data on 
the Medicare cost report.
    For freestanding IPFs, Employee Benefits costs are equal to the 
data reported on Worksheet S-3, Part V, line 2, column 2.
    For hospital-based IPFs, we calculate total benefits as the sum of 
benefit costs reported on Worksheet S-3 Part V, line 3, column 2, and a 
portion of ancillary benefits and overhead benefits for the total 
facility. Ancillary benefits attributable to the hospital-based IPF are 
calculated by multiplying ancillary salaries for the hospital-based IPF 
as determined in the derivation of Wages and Salaries for the hospital-
based IPF by the ratio of total facility benefits to total facility 
salaries. Similarly, overhead benefits attributable to the hospital-
based IPF are calculated by multiplying overhead salaries for the 
hospital-based IPF as determined in the derivation of Wages and 
Salaries for the hospital-based IPF by the ratio of total facility 
benefits to total facility salaries.
Contract Labor Costs
    Similar to the RPL and IPPS market baskets, Contract Labor costs 
are primarily associated with direct patient care services. Contract 
labor costs for other services such as accounting, billing, and legal 
are calculated separately using other government data sources as 
described in section III.A.3.a.ii. As discussed above in the Employee 
Benefits section, we now have data reported on Worksheet S-3, Part V 
that we can use to derive the Contract Labor cost weight for the 2012-
based IPF market basket. For freestanding IPFs, Contract Labor costs 
are based on data reported on Worksheet S-3, part V, column 1, line 2 
and for hospital-based IPFs Contract Labor costs are based on line 3 of 
this same worksheet. As previously noted, for FY 2012 Medicare cost 
report data, while there were providers that did report data on 
Worksheet S-3, part V, many providers did not complete this worksheet. 
However, we believe we had a large enough sample to enable us to 
produce a reasonable Contract Labor cost weight. We continue to 
encourage all providers to report these data on the Medicare cost 
report.
Pharmaceuticals Costs
    For freestanding IPFs, pharmaceuticals costs are based on non-
salary costs reported on Worksheet A, column 7 less Worksheet A, column 
1 for the pharmacy cost center (line 15) and drugs charged to patients 
cost center (line 73).
    For hospital-based IPFs, pharmaceuticals costs are based on a 
portion of the non-salary pharmacy costs and a portion of the non-
salary drugs charged to patient costs reported for the total facility. 
Non-salary pharmacy costs attributable to the hospital-based IPF are 
calculated by multiplying total pharmacy costs attributable to the 
hospital-based IPF (as reported on Worksheet B, column 15, line 40) by 
the ratio of total non-salary pharmacy costs (Worksheet A, column 2, 
line 15) to total pharmacy costs (sum of Worksheet A, column 1 and 2 
for line 15) for the total facility. Non-salary drugs charged to 
patient costs attributable to the hospital-based IPF are calculated by 
multiplying total non-salary drugs charged to patient costs (Worksheet 
B, part I, column 0, line 73 plus Worksheet B, part I, column 15, line 
73 less Worksheet A, column 1, line 73) for the total facility by the 
ratio of Medicare drugs charged to patient ancillary costs for the IPF 
unit (as reported on Worksheet D-3 for IPF subproviders, line 73, 
column 3) to total

[[Page 25020]]

Medicare drugs charged to patients ancillary costs for the total 
facility (equal to the sum of Worksheet D-3, line 73, column 3, for all 
relevant PPS (i.e. IPPS, IRF, IPF and SNF)).
Professional Liability Insurance (PLI) Costs
    For freestanding IPFs, PLI costs (often referred to as malpractice 
costs) are equal to premiums, paid losses and self-insurance costs 
reported on Worksheet S-2, line 118, columns 1 through 3.
    For hospital-based IPFs, we assume that the PLI weight for the 
total facility is similar to the hospital-based IPF unit since the only 
data reported on this worksheet is for the entire facility. Therefore, 
hospital-based IPF PLI costs are equal to total facility PLI (as 
reported on Worksheet S-2, line 118, columns 1 through 3) divided by 
total facility costs (as reported on Worksheet A, line 200) times 
hospital-based IPF Medicare allowable total costs.
Capital Costs
    For freestanding IPFs, capital costs are equal to Medicare 
allowable capital costs as reported on Worksheet B, Part II, column 26.
    For hospital-based IPFs, capital costs are equal to IPF inpatient 
capital costs (as reported on Worksheet B, part II, column 26, line 40) 
and a portion of IPF ancillary capital costs. We calculate the portion 
of ancillary capital costs attributable to the hospital-based IPF for a 
given cost center by multiplying total facility ancillary capital costs 
for the specific ancillary cost center (as reported on Worksheet B, 
Part II, column 26) by the ratio of IPF Medicare ancillary costs for 
the cost center (as reported on Worksheet D-3, column 3 for IPF 
subproviders) to total Medicare ancillary costs for the cost center 
(equal to the sum of Worksheet D-3, column 3 for all relevant PPS (that 
is, IPPS, IRF, IPF and SNF)).
i. Final Major Cost Category Computation
    After we derive costs for the six major cost categories for each 
provider using the Medicare cost report data as described above, we 
trim the data for outliers based on the following steps. First, we 
divide the costs for each of the six categories by total Medicare 
allowable costs calculated for the provider to obtain cost weights for 
the universe of IPF providers. Next, we apply a mutually exclusive top 
and bottom 5 percent trim for each cost weight to remove outliers. 
After the outliers have been removed, we sum the costs for each 
category across all remaining providers. We then divide this by the sum 
of total Medicare allowable costs across all remaining providers to 
obtain a cost weight for the proposed 2012-based IPF market basket for 
the given category. Finally, we calculate the residual ``All Other'' 
cost weight that reflects all remaining costs that are not captured in 
the six cost categories listed above. See Table 1 below for the 
resulting cost weights for these major cost categories that we obtain 
from the Medicare cost reports.

  Table 1--Major Cost Categories as Derived From Medicare Cost Reports
------------------------------------------------------------------------
                                          2012-Based IPF  2008-Based RPL
          Major cost categories              (percent)       (percent)
------------------------------------------------------------------------
Wages and Salaries......................            50.8            47.4
Employee Benefits \1\...................            13.0            12.3
Contract Labor \1\......................             1.4             2.6
Professional Liability Insurance                     1.1             0.8
 (Malpractice)..........................
Pharmaceuticals.........................             4.8             6.5
Capital.................................             7.0             8.4
All Other...............................            22.0            22.0
------------------------------------------------------------------------
* Total may not sum to 100 due to rounding.
\1\ Due to the lack of Medicare cost report data, the Employee Benefits
  and Contract Labor cost weights in the 2008-based RPL market basket
  were based on the IPPS market basket.

    The Wages and Salaries cost weight obtained directly from the 
Medicare cost reports for the proposed 2012-based IPF market basket is 
approximately 3 percentage points higher than the Wages and Salaries 
cost weight for the 2008-based RPL market basket. This is the result of 
freestanding IPFs having a larger percentage of costs attributable to 
labor than freestanding Inpatient Rehabilitation Facilities (IRF) and 
Long-term care hospitals. These latter facilities were included in the 
2008-based RPL market basket.
    As we did for the 2008-based RPL market basket, we propose to 
allocate the Contract Labor cost weight to the Wages and Salaries and 
Employee Benefits cost weights based on their relative proportions 
under the assumption that contract labor costs are comprised of both 
wages and salaries and employee benefits. The Contract Labor allocation 
proportion for Wages and Salaries is equal to the Wages and Salaries 
cost weight as a percent of the sum of the Wages and Salaries cost 
weight and the Employee Benefits cost weight. This rounded percentage 
is 80 percent; therefore, we propose to allocate 80 percent of the 
Contract Labor cost weight to the Wages and Salaries cost weight and 20 
percent to the Employee Benefits cost weight. Table 2 shows the Wages 
and Salaries and Employee Benefit cost weights after Contract Labor 
cost weight allocation for both the proposed 2012-based IPF market 
basket and 2008-based RPL market basket.

  Table 2--Wages and Salaries and Employee Benefits Cost Weights After
                        Contract Labor Allocation
------------------------------------------------------------------------
          Major cost categories           2012-Based IPF  2008-Based RPL
------------------------------------------------------------------------
Wages and Salaries......................            51.9            49.4
Employee Benefits.......................            13.3            12.8
------------------------------------------------------------------------


[[Page 25021]]

i. Derivation of the Detailed Operating Cost Weights
    To further divide the ``All Other'' residual cost weight estimated 
from the FY 2012 Medicare Cost Report data into more detailed cost 
categories, we propose to use the 2007 Benchmark Input-Output (I-O) 
``Use Tables/Before Redefinitions/Purchaser Value'' for North American 
Industry Classification System (NAICS) 622000 Hospitals, published by 
the Bureau of Economic Analysis (BEA). These data are publicly 
available at the following Web site: http://www.bea.gov/industry/io_annual.htm.
    The BEA Benchmark I-O data are scheduled for publication every five 
years with the most recent data available for 2007. The 2007 Benchmark 
I-O data are derived from the 2007 Economic Census and are the building 
blocks for BEA's economic accounts. Thus, they represent the most 
comprehensive and complete set of data on the economic processes or 
mechanisms by which output is produced and distributed.\1\ BEA also 
produces Annual I-O estimates; however, while based on a similar 
methodology, these estimates reflect less comprehensive and less 
detailed data sources and are subject to revision when benchmark data 
becomes available. Instead of using the less detailed Annual I-O data, 
we inflate the 2007 Benchmark I-O data forward to 2012 by applying the 
annual price changes from the respective price proxies to the 
appropriate market basket cost categories that are obtained from the 
2007 Benchmark I-O data. We repeat this practice for each year. We then 
calculate the cost shares that each cost category represents of the 
inflated 2012 data. These resulting 2012 cost shares are applied to the 
All Other residual cost weight to obtain the detailed cost weights for 
the proposed 2012-based IPF market basket. For example, the cost for 
Food: Direct Purchases represents 6.5 percent of the sum of the ``All 
Other'' 2007 Benchmark I-O Hospital Expenditures inflated to 2012; 
therefore, the Food: Direct Purchases cost weight represents 6.5 
percent of the 2012-based IPF market basket's ``All Other'' cost 
category (22.0 percent), yielding a ``final'' Food: Direct Purchases 
cost weight of 1.4 percent in the proposed 2012-based IPF market basket 
(0.065 * 22.0 percent = 1.4 percent).
---------------------------------------------------------------------------

    \1\ http://www.bea.gov/papers/pdf/IOmanual_092906.pdf.
---------------------------------------------------------------------------

    Using this methodology, we derive eighteen detailed IPF market 
basket cost category weights from the proposed 2012-based IPF market 
basket residual cost weight (22.0 percent). These categories are: (1) 
Electricity, (2) Fuel, Oil, and Gasoline (3) Water & Sewerage (4) Food: 
Direct Purchases, (5) Food: Contract Services, (6) Chemicals, (7) 
Medical Instruments, (8) Rubber & Plastics, (9) Paper and Printing 
Products, (10) Miscellaneous Products, (11) Professional Fees: Labor-
related, (12) Administrative and Facilities Support Services, (13) 
Installation, Maintenance, and Repair, (14) All Other Labor-related 
Services, (15) Professional Fees: Nonlabor-related, (16) Financial 
Services, (17) Telephone Services, and (18) All Other Nonlabor-related 
Services.
iii. Derivation of the Detailed Capital Cost Weights
    As described in section III.A.3.a.i of this preamble, we are 
proposing a Capital-Related cost weight of 7.0 percent as obtained from 
the FY 2012 Medicare cost reports for freestanding and hospital-based 
IPF providers. We are proposing to then separate this total Capital-
Related cost weight into more detailed cost categories.
    Using FY 2012 Medicare cost reports, we are able to group Capital-
Related costs into the following categories: Depreciation, Interest, 
Lease, and Other Capital-Related costs. For each of these categories, 
we are proposing to determine separately for hospital-based IPFs and 
freestanding IPFs what proportion of total capital-related costs the 
category represent.
    For freestanding IPFs, we are proposing to derive the proportions 
for Depreciation, Interest, Lease, and Other Capital-related costs 
using the data reported by the IPF on Worksheet A-7, which is similar 
to the methodology used for the 2008-based RPL market basket.
    For hospital-based IPFs, data for these four categories are not 
reported separately for the subprovider; therefore, we are proposing to 
derive these proportions using data reported on Worksheet A-7 for the 
total facility. We are assuming the cost shares for the overall 
hospital are representative for the hospital-based subprovider IPF 
unit. For example, if depreciation costs make up 60 percent of total 
capital costs for the entire facility, we believe it is reasonable to 
assume that the hospital-based IPF would also have a 60 percent 
proportion because it is a subprovider unit contained within the total 
facility.
    In order to combine each detailed capital cost weight for 
freestanding and hospital-based IPFs into a single capital cost weight 
for the proposed 2012-based IPF market basket, we are proposing to 
weight together the shares for each of the categories (Depreciation, 
Interest, Lease, and Other Capital-related costs) based on the share of 
total capital costs each provider type represents of the total capital 
costs for all IPFs for 2012. Applying this methodology results in 
proportions of total capital-related costs for Depreciation, Interest, 
Lease and Other Capital-related costs that are representative of the 
universe of IPF providers.
    We next are proposing to allocate lease costs across each of the 
remaining detailed capital-related cost categories as was done in the 
2008-based RPL market basket. This would result in 3 primary capital-
related cost categories in the proposed 2012-based IPF market basket: 
Depreciation, Interest, and Other Capital-Related costs. Lease costs 
are unique in that they are not broken out as a separate cost category 
in the proposed 2012-based IPF market basket, but rather we are 
proposing to proportionally distribute these costs among the cost 
categories of Depreciation, Interest, and Other Capital-Related, 
reflecting the assumption that the underlying cost structure of leases 
is similar to that of capital-related costs in general. As was done 
under the 2008-based RPL market basket, we are proposing to assume that 
10 percent of the lease costs as a proportion of total capital-related 
costs represents overhead and assign those costs to the Other Capital-
Related cost category accordingly. We propose to distribute the 
remaining lease costs proportionally across the 3 cost categories 
(Depreciation, Interest, and Other Capital-Related) based on the 
proportion that these categories comprise of the sum of the 
Depreciation, Interest, and Other Capital-related cost categories 
(excluding lease expenses). This is the same methodology used for the 
2008-based RPL market basket. The allocation of these lease expenses 
are shown in Table 3 below.
    Finally, we are proposing to further divide the Depreciation and 
Interest cost categories. We are proposing to separate Depreciation 
into the following 2 categories: (1) Building and Fixed Equipment; and 
(2) Movable Equipment; and proposing to separate Interest into the 
following 2 categories: (1) Government/Nonprofit; and (2) For-profit.
    To disaggregate the Depreciation cost weight, we need to determine 
the percent of total Depreciation costs for IPFs that is attributable 
to Building and Fixed Equipment, which we hereafter refer to as the 
``fixed percentage.'' For the proposed 2012-based IPF market basket, we 
are proposing to use slightly different methods to obtain the fixed

[[Page 25022]]

percentages for hospital-based IPFs compared to freestanding IPFs.
    For freestanding IPFs, we are proposing to use depreciation data 
from Worksheet A-7 of the FY 2012 Medicare cost reports, similar to the 
methodology used for the 2008-based RPL market basket. However, for 
hospital-based IPFs, we determined that the fixed percentage for the 
entire facility may not be representative of the IPF subprovider unit 
due to the entire facility likely employing more sophisticated movable 
assets that are not utilized by the hospital-based IPF. Therefore, for 
hospital-based IPFs, we are proposing to calculate a fixed percentage 
using: (1) Building and fixture capital costs allocated to the 
subprovider unit as reported on Worksheet B, part I line 40; and (2) 
building and fixture capital costs for the top five ancillary cost 
centers utilized by hospital-based IPFs. We propose to weight these 2 
fixed percentages (inpatient and ancillary) using the proportion that 
each capital cost type represents of total capital costs in the 
proposed 2012-based IPF market basket. We are proposing to then weight 
the fixed percentages for hospital-based and freestanding IPFs together 
using the proportion of total capital costs each provider type 
represents.
    To disaggregate the Interest cost weight, we need to determine the 
percent of total interest costs for IPFs that are attributable to 
government and nonprofit facilities, which we hereafter refer to as the 
``nonprofit percentage.'' For the IPF market basket, we are proposing 
to use interest costs data from Worksheet A-7 of the FY 2012 Medicare 
cost reports for both freestanding and hospital-based IPFs, similar to 
the methodology used for the 2008-based RPL market basket. We are 
proposing to determine the percent of total interest costs that are 
attributed to government and nonprofit IPFs separately for hospital-
based and freestanding IPFs. We then are proposing to weight the 
nonprofit percentages for hospital-based and freestanding IPFs together 
using the proportion of total capital costs each provider type 
represents.
    Table 3 below provides the detailed capital cost shares obtained 
from the Medicare cost reports. Ultimately, these detailed capital cost 
shares are applied to the total Capital-Related cost weight determined 
in section III.A.3.a.i to split out the total weight of 7.0 percent 
into more detailed cost categories and weights.

 Table 3--Detailed Capital Cost Weights for the Proposed 2012-Based IPF
                              Market Basket
------------------------------------------------------------------------
                                                             Proposed
                                            Cost shares      detailed
                                           obtained from   capital cost
                                           medicare cost   shares after
                                              reports      allocation of
                                              percent     lease expenses
                                                              percent
------------------------------------------------------------------------
Depreciation............................              64              75
Building and Fixed Equipment............              46              53
Movable Equipment.......................              19              22
Interest................................              15              17
Government/Nonprofit....................              12              14
For Profit..............................               2               3
Lease...................................              15             n/a
Other...................................               6               8
------------------------------------------------------------------------

v. Proposed 2012-Based IPF Market Basket Cost Categories and Weights
    Table 4 below shows the cost categories and weights for the 
proposed 2012-based IPF market basket compared to the 2008-based RPL 
market basket.

Table 4--Proposed 2012-Based IPF Cost Weights Compared to 2008-Based RPL
                              Cost Weights
------------------------------------------------------------------------
                                          Proposed 2012-
              Cost category               Based IPF cost  2008-Based RPL
                                              weight        cost weight
------------------------------------------------------------------------
Total...................................           100.0           100.0
    Compensation........................            65.2            62.3
            Wages and Salaries..........            51.9            49.4
            Employee Benefits...........            13.3            12.8
    Utilities...........................             1.8             1.6
            Electricity.................             0.8             1.1
            Fuel, Oil, and Gasoline.....             0.9             0.4
            Water & Sewerage............             0.1             0.1
    Professional Liability Insurance....             1.1             0.8
            Malpractice.................             1.1             0.8
    All Other Products and Services.....            25.0            27.0
        All Other Products..............            11.7            15.6
            Pharmaceuticals.............             4.8             6.5
            Food: Direct Purchases......             1.4             3.0
            Food: Contract Services.....             0.9             0.4
            Chemicals...................             0.6             1.1
            Medical Instruments.........             1.9             1.8
            Rubber & Plastics...........             0.5             1.1

[[Page 25023]]

 
            Paper and Printing Products.             1.0             1.0
            Apparel.....................  ..............             0.2
            Machinery and Equipment.....  ..............             0.1
            Miscellaneous Products......             0.7             0.3
    All Other Services..................            13.3            11.4
        Labor-Related Services..........             6.7             4.7
            Professional Fees: Labor-                2.9             2.1
             related....................
            Administrative and                       0.7             0.4
             Facilities Support Services
            Installation, Maintenance,               1.6  ..............
             and Repair.................
            All Other: Labor-related                 1.5             2.1
             Services...................
        Nonlabor-Related Services.......             6.6             6.7
            Professional Fees: Nonlabor-             2.6             4.2
             related....................
            Financial services..........             2.3             0.9
            Telephone Services..........             0.6             0.4
            Postage.....................  ..............             0.6
            All Other: Nonlabor-related              1.1             0.6
             Services...................
    Capital-Related Costs...............             7.0             8.4
        Depreciation....................             5.2             5.5
            Fixed Assets................             3.7             3.3
            Movable Equipment...........             1.5             2.2
        Interest Costs..................             1.2             2.0
            Government/Nonprofit........             1.0             0.7
            For Profit..................             0.2             1.3
        Other Capital-Related Costs.....             0.6             0.9
            Other Capital-Related Costs.             0.6             0.9
------------------------------------------------------------------------

    The proposed 2012-based IPF market basket does not include separate 
cost categories for Apparel, Machinery & Equipment, and Postage. Due to 
the small weights associated with these detailed categories and 
relatively stable price growth in the applicable price proxy, we are 
proposing to include Apparel and Machinery & Equipment in the 
Miscellaneous Products cost category and Postage in the All-Other 
Nonlabor-related Services. We note that these Machinery & Equipment 
expenses are for equipment that is paid for in a given year and not 
depreciated over the assets' useful life. Depreciation expenses for 
movable equipment are reflected in the Capital-related costs of the 
proposed 2012-based IPF market basket. For the proposed 2012-based IPF 
market basket, we are also proposing to include a separate cost 
category for Installation, Maintenance, and Repair.
b. Selection of Price Proxies
    After developing the cost weights for the proposed 2012-based IPF 
market basket, we selected the most appropriate wage and price proxies 
currently available to represent the rate of price change for each 
expenditure category. For the majority of the cost weights, we base the 
price proxies on Bureau of Labor Statistics (BLS) data and group them 
into one of the following BLS categories:
     Employment Cost Indexes. Employment Cost Indexes (ECIs) 
measure the rate of change in employment wage rates and employer costs 
for employee benefits per hour worked. These indexes are fixed-weight 
indexes and strictly measure the change in wage rates and employee 
benefits per hour. ECIs are superior to Average Hourly Earnings (AHE) 
as price proxies for input price indexes because they are not affected 
by shifts in occupation or industry mix, and because they measure pure 
price change and are available by both occupational group and by 
industry. The industry ECIs are based on the North American 
Classification System (NAICS) and the occupational ECIs are based on 
the Standard Occupational Classification System (SOC).
     Producer Price Indexes. Producer Price Indexes (PPIs) 
measure price changes for goods sold in other than retail markets. PPIs 
are used when the purchases of goods or services are made at the 
wholesale level.
     Consumer Price Indexes. Consumer Price Indexes (CPIs) 
measure change in the prices of final goods and services bought by 
consumers. CPIs are only used when the purchases are similar to those 
of retail consumers rather than purchases at the wholesale level, or if 
no appropriate PPIs are available.
    We evaluated the price proxies using the criteria of reliability, 
timeliness, availability, and relevance:
     Reliability. Reliability indicates that the index is based 
on valid statistical methods and has low sampling variability. Widely 
accepted statistical methods ensure that the data were collected and 
aggregated in a way that can be replicated. Low sampling variability is 
desirable because it indicates that the sample reflects the typical 
members of the population. (Sampling variability is variation that 
occurs by chance because only a sample was surveyed rather than the 
entire population.)
     Timeliness. Timeliness implies that the proxy is published 
regularly, preferably at least once a quarter. The market baskets are 
updated quarterly and, therefore, it is important for the underlying 
price proxies to be up-to-date, reflecting the most recent data 
available. We believe that using proxies that are published regularly 
(at least quarterly, whenever possible) helps to ensure that we are 
using the most recent data available to update the market basket. We 
strive to use publications that are disseminated frequently, because we 
believe that this is an optimal way to stay abreast of the most current 
data available.
     Availability. Availability means that the proxy is 
publicly available. We prefer that our proxies are publicly

[[Page 25024]]

available because this will help ensure that our market basket updates 
are as transparent to the public as possible. In addition, this enables 
the public to be able to obtain the price proxy data on a regular 
basis.
     Relevance. Relevance means that the proxy is applicable 
and representative of the cost category weight to which it is applied. 
The CPIs, PPIs, and ECIs that we have selected to propose in this 
regulation meet these criteria. Therefore, we believe that they 
continue to be the best measure of price changes for the cost 
categories to which they would be applied.
    Table 6 lists all price proxies for the proposed 2012-based IPF 
market basket. Below is a detailed explanation of the price proxies we 
are proposing for each cost category weight.
i. Price Proxies for the Operating Portion of the Proposed 2012-Based 
IPF Market Basket
Wages and Salaries
    To measure wage price growth in the proposed 2012-based IPF market 
basket, we are proposing to apply a proxy blend based on six 
occupational subcategories within the Wages and Salaries category, 
which would reflect the IPF occupational mix. There is not a published 
wage proxy for IPF workers. The 2008-based RPL market basket uses the 
ECI for Wages and Salaries for All Civilian workers in Hospitals (BLS 
series code #CIU1026220000000I) to proxy these expenses.
    We propose to use the National Industry-Specific Occupational 
Employment and Wage estimates for North American Industrial 
Classification System (NAICS) 622200, Psychiatric & Substance Abuse 
Hospitals, published by the BLS Office of Occupational Employment 
Statistics (OES), as the data source for the wage cost shares in the 
wage proxy blend. We propose to use OES' May 2012 data. Detailed 
information on the methodology for the national industry-specific 
occupational employment and wage estimates survey can be found at 
http://www.bls.gov/oes/current/oes_tec.htm.
    Based on the OES data, there are six wage subcategories: 
Management; NonHealth Professional and Technical; Health Professional 
and Technical; Health Service; NonHealth Service; and Clerical. Table 5 
lists the proposed 2012 occupational assignments for the six wage 
subcategories.

   Table 5--Proposed 2012 Occupational Assignments for IPF Wage Blend
                  2012 Proposed Occupational Groupings
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                Group 1                             Management
------------------------------------------------------------------------
11-0000................................  Management Occupations.
------------------------------------------------------------------------
                Group 2                      NonHealth Professional &
                                                     Technical
------------------------------------------------------------------------
13-0000................................  Business and Financial
                                          Operations Occupations.
15-0000................................  Computer and Mathematical
                                          Science Occupations.
17-0000................................  Architecture and Engineering
                                          Occupations.
19-0000................................  Life, Physical, and Social
                                          Science Occupations.
23-0000................................  Legal Occupations.
25-0000................................  Education, Training, and
                                          Library Occupations.
27-0000................................  Arts, Design, Entertainment,
                                          Sports, and Media Occupations.
------------------------------------------------------------------------
                Group 3                  Health Professional & Technical
------------------------------------------------------------------------
29-1021................................  Dentists, General.
29-1031................................  Dietitians and Nutritionists.
29-1051................................  Pharmacists.
29-1062................................  Family and General
                                          Practitioners.
29-1063................................  Internists, General.
29-1069................................  Physicians and Surgeons, All
                                          Other.
29-1071................................  Physician Assistants.
29-1111................................  Registered Nurses.
29-1122................................  Occupational Therapists.
29-1123................................  Physical Therapists.
29-1125................................  Recreational Therapists.
29-1126................................  Respiratory Therapists.
29-1127................................  Speech-Language Pathologists.
29-1129................................  Therapists, All Other.
29-1199................................  Health Diagnosing and Treating
                                          Practitioners, All Other.
------------------------------------------------------------------------
                Group 4                           Health Service
------------------------------------------------------------------------
21-0000................................  Community and Social Services
                                          Occupations.
29-2011................................  Medical and Clinical Laboratory
                                          Technologists.
29-2012................................  Medical and Clinical Laboratory
                                          Technicians.
29-2021................................  Dental Hygienists.
29-2032................................  Diagnostic Medical
                                          Sonographers.
29-2034................................  Radiologic Technologists and
                                          Technicians.
29-2041................................  Emergency Medical Technicians
                                          and Paramedics.
29-2051................................  Dietetic Technicians.
29-2052................................  Pharmacy Technicians.
29-2054................................  Respiratory Therapy
                                          Technicians.
29-2061................................  Licensed Practical and Licensed
                                          Vocational Nurses.
29-2071................................  Medical Records and Health
                                          Information Technicians.
29-2099................................  Health Technologists and
                                          Technicians, All Other.
29-9012................................  Occupational Health and Safety
                                          Technicians.

[[Page 25025]]

 
29-9099................................  Healthcare Practitioner and
                                          Technical Workers, All Other.
31-0000................................  Healthcare Support Occupations.
------------------------------------------------------------------------
                Group 5                         NonHealth Service
------------------------------------------------------------------------
33-0000................................  Protective Service Occupations.
35-0000................................  Food Preparation and Serving
                                          Related Occupations.
37-0000................................  Building and Grounds Cleaning
                                          and Maintenance Occupations.
39-0000................................  Personal Care and Service
                                          Occupations.
41-0000................................  Sales and Related Occupations.
47-0000................................  Construction and Extraction
                                          Occupations.
49-0000................................  Installation, Maintenance, and
                                          Repair Occupations.
51-0000................................  Production Occupations.
53-0000................................  Transportation and Material
                                          Moving Occupations.
------------------------------------------------------------------------
                Group 6                              Clerical
------------------------------------------------------------------------
43-0000................................  Office and Administrative
                                          Support Occupations.
------------------------------------------------------------------------

    Total expenditures by occupation (i.e., occupational assignment) 
were calculated by taking the OES number of employees multiplied by the 
OES annual average salary. These expenditures were aggregated based on 
the six groups in Table 6. We next calculated the proportion of each 
group's expenditures relative to the total expenditures of all six 
groups. These proportions, listed in Table 5, represent the weights 
used in the wage proxy blend. We propose using the published wage 
proxies in Table 6 for each of the six groups (that is, wage 
subcategories) as we believe these six price proxies are the most 
technically appropriate indices available to measure the price growth 
of the Wages and Salaries cost category in the proposed 2012-based IPF 
market basket.

                         Table 6--Proposed 2012-Based IPF Market Basket Wage Proxy Blend
----------------------------------------------------------------------------------------------------------------
                                       Wage blend
          Wage subcategory               weight              Price proxy                  BLS Series ID
----------------------------------------------------------------------------------------------------------------
Health Service.....................            36.2  ECI for Wages and Salaries  CIU1026200000000I
                                                      for All Civilian workers
                                                      in Healthcare and Social
                                                      Assistance.
Health Professional and Technical..            33.5  ECI for Wages and Salaries  CIU1026220000000I
                                                      for All Civilian workers
                                                      in Hospitals.
NonHealth Service..................             9.2  ECI for Wages and Salaries  CIU2020000300000I
                                                      for Private Industry
                                                      workers in Service
                                                      Occupations.
NonHealth Professional and                      7.3  ECI for Wages and Salaries  CIU2025400000000I
 Technical.                                           for Private Industry
                                                      workers in Professional,
                                                      Scientific, and Technical
                                                      Services.
Management.........................             7.1  ECI for Wages and Salaries  CIU2020000110000I
                                                      for Private Industry
                                                      workers in Management,
                                                      Business, and Financial.
Clerical...........................             6.7  ECI for Wages and Salaries  CIU2020000220000I
                                                      for Private Industry
                                                      workers in Office and
                                                      Administrative Support.
                                    ----------------
----------------------------------------------------------------------------------------------------------------

    A comparison of the yearly changes from FY 2012 to FY 2015 for the 
proposed 2012-based IPF wage blend and the 2008-based RPL wage proxy is 
shown in Table 7. The average annual increase in the 2 price proxies is 
similar, and in no year is the difference greater than 0.2 percentage 
point.

    Table 7--Fiscal Year Growth in the Proposed 2012-Based IPF Wage Proxy Blend and 2008-Based RPL Wage Proxy
----------------------------------------------------------------------------------------------------------------
                                                                                                   Average 2012-
                                       2012            2013            2014            2015            2015
----------------------------------------------------------------------------------------------------------------
2012-based IPF Proposed Wage                 1.6             1.6             1.6             2.2             1.8
 Proxy Blend....................
2008-based RPL Wage Proxy.......             1.5             1.5             1.5             2.0             1.6
----------------------------------------------------------------------------------------------------------------
** Source: IHS Global Insight, Inc., 1st Quarter 2015 forecast with historical data through 4th Quarter 2014.

Benefits
    For measuring benefits price growth in the proposed 2012-based IPF 
market basket, we are proposing to apply a benefits proxy blend based 
on the same six subcategories and the same six blend weights proposed 
for the wage proxy blend. These subcategories and blend weights are 
listed in Table 8.
    Applicable benefit ECIs, that are identical in industry definition 
to the wage blend ECIs, were selected for each of the six 
subcategories. These proposed benefit ECIs, listed in Table 8, are not 
publically available. Therefore, we calculated ``ECIs for Total 
Benefits'' using publically available ``ECIs for

[[Page 25026]]

Total Compensation'' for each subcategory and the relative importance 
of wages within that subcategory's total compensation. This is the same 
benefits ECI methodology we implemented in our IPPS, SNF, HHA, RPL, 
LTCH, and ESRD market baskets. We believe the six price proxies listed 
in Table 8 are the most technically appropriate indices to measure the 
price growth of the Benefits cost category in the proposed 2012-based 
IPF market basket.
    The current 2008-based RPL market basket uses the ECI for Benefits 
for All Civilian Workers in Hospitals to proxy Benefit expenses.

   Table 8--Proposed 2012-Based IPF Market Basket Benefits Proxy Blend
------------------------------------------------------------------------
                                   Wage blend
        Wage subcategory             weight            Price proxy
------------------------------------------------------------------------
Health Service.................            36.2  ECI for Total Benefits
                                                  for All Civilian
                                                  workers in Healthcare
                                                  and Social Assistance.
Health Professional and                    33.5  ECI for Total Benefits
 Technical.                                       for All Civilian
                                                  workers in Hospitals.
NonHealth Service..............             9.2  ECI for Total Benefits
                                                  for Private Industry
                                                  workers in Service
                                                  Occupations.
NonHealth Professional and                  7.3  ECI for Total Benefits
 Technical.                                       for Private Industry
                                                  workers in
                                                  Professional,
                                                  Scientific, and
                                                  Technical Services.
Management.....................             7.1  ECI for Total Benefits
                                                  for Private Industry
                                                  workers in Management,
                                                  Business, and
                                                  Financial.
Clerical.......................             6.7  ECI for Total Benefits
                                                  for Private Industry
                                                  workers in Office and
                                                  Administrative
                                                  Support.
                                ----------------
    Total......................           100.0
------------------------------------------------------------------------

    A comparison of the yearly changes from FY 2012 to FY 2015 for the 
proposed 2012-based IPF benefit proxy blend and the 2008-based RPL 
benefit proxy is shown in Table 9. The average annual increase in the 2 
price proxies is similar, and in no year is the difference greater than 
0.4 percentage point.

 Table 9--Fiscal Year Growth in the Proposed 2012-Based IPF Benefit Proxy Blend and 2008-Based RPL Benefit Proxy
----------------------------------------------------------------------------------------------------------------
                                                                                                   Average 2012-
                                       2012            2013            2014            2015            2015
----------------------------------------------------------------------------------------------------------------
2012-based IPF Proposed Benefit              2.5             1.9             2.0             2.2             2.2
 Proxy Blend....................
2008-based RPL Benefit Proxy....             2.1             1.8             2.1             2.1             2.0
----------------------------------------------------------------------------------------------------------------
Source: IHS Global Insight, Inc., 1st Quarter 2015 forecast with historical data through 4th Quarter 2014.

Electricity
    We are proposing to continue to use the PPI for Commercial Electric 
Power (BLS series code #WPU0542) to measure the price growth of this 
cost category. This is the same price proxy used in the 2008-based RPL 
market basket.
Fuel, Oil, and Gasoline
    We are proposing to change the proxy used for the Fuel, Oil, and 
Gasoline cost category. The 2008-based RPL market basket uses the PPI 
for Petroleum Refineries (BLS series code #PCU32411-32411) to proxy 
these expenses.
    For the proposed 2012-based IPF market basket, we are proposing to 
use a blend of the PPI for Petroleum Refineries and the PPI Commodity 
for Natural Gas (BLS series code #WPU0531). Our analysis of the Bureau 
of Economic Analysis' 2007 Benchmark Input-Output data (use table 
before redefinitions, purchaser's value for NAICS 622000 [Hospitals]), 
shows that Petroleum Refineries expenses accounts for approximately 70 
percent and Natural Gas accounts for approximately 30 percent of the 
Fuel, Oil, and Gasoline expenses. Therefore, we propose a blend using 
70 percent of the PPI for Petroleum Refineries (BLS series code 
#PCU32411-32411) and 30 percent of the PPI Commodity for Natural Gas 
(BLS series code #WPU0531). We believe that these 2 price proxies are 
the most technically appropriate indices available to measure the price 
growth of the Fuel, Oil, and Gasoline cost category in the proposed 
2012-based IPF market basket.
Water and Sewerage
    We are proposing to continue to use the CPI for Water and Sewerage 
Maintenance (BLS series code #CUUR0000SEHG01) to measure the price 
growth of this cost category. This is the same proxy used in the 2008-
based RPL market basket.
Professional Liability Insurance
    We are proposing to continue to use the CMS Hospital Professional 
Liability Index to measure changes in professional liability insurance 
(PLI) premiums. To generate this index, we collect commercial insurance 
premiums for a fixed level of coverage while holding non-price factors 
constant (such as a change in the level of coverage). This is the same 
proxy used in the 2008-based RPL market basket.
Pharmaceuticals
    We are proposing to continue 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 used in the 
2008-based RPL market basket.
Food: Direct Purchases
    We are proposing to continue to use the PPI for Processed Foods and 
Feeds (BLS series code #WPU02) to measure the price growth of this cost 
category. This is the same proxy used in the 2008-based RPL market 
basket.
Food: Contract Purchases
    We are proposing to continue to use the CPI for Food Away From Home 
(BLS series code #CUUR0000SEFV) to measure the price growth of this 
cost category. This is the same proxy used in the 2008-based RPL market 
basket.

[[Page 25027]]

Chemicals
    We are proposing to continue to use a four part blended PPI 
composed of the PPI for Industrial Gas Manufacturing (BLS series code 
PCU325120325120P), the PPI for Other Basic Inorganic Chemical 
Manufacturing (BLS series code #PCU32518-32518), the PPI for Other 
Basic Organic Chemical Manufacturing (BLS series code #PCU32519-32519), 
and the PPI for Soap and Cleaning Compound Manufacturing (BLS series 
code #PCU32561-32561). We propose updating the blend weights using 2007 
Benchmark I-O data which, compared to 2002 Benchmark I-O data, is 
weighted more toward organic chemical products and weighted less toward 
inorganic chemical products.
    Table 10 below shows the proposed weights for each of the four PPIs 
used to create the blended PPI. These are the same four proxies used in 
the 2008-based RPL market basket; however, the blended PPI weights in 
the 2008-based RPL market baskets were based on 2002 Benchmark I-O 
data.

                                     Table 10--Blended Chemical PPI Weights
----------------------------------------------------------------------------------------------------------------
                                                                  Proposed 2012-
                                                                     Based IPF    2008-Based RPL
                              Name                                    weights         weights          NAICS
                                                                     (percent)       (percent)
----------------------------------------------------------------------------------------------------------------
PPI for Industrial Gas Manufacturing............................              32              35          325120
PPI for Other Basic Inorganic Chemical Manufacturing............              17              25          325180
PPI for Other Basic Organic Chemical Manufacturing..............              45              30          325190
PPI for Soap and Cleaning Compound Manufacturing................               6              10          325610
----------------------------------------------------------------------------------------------------------------

Medical Instruments
    We are proposing to use a blend for the Medical Instruments cost 
category. The 2007 Benchmark Input-Output data shows an approximate 50/
50 split between Surgical and Medical Instruments and Medical and 
Surgical Appliances and Supplies for this cost category. Therefore, we 
propose a blend composed of 50 percent of the commodity-based PPI for 
Surgical and Medical Instruments (BLS code #WPU1562) and 50 percent of 
the commodity-based PPI for Medical and Surgical Appliances and 
Supplies (BLS code #WPU1563). The 2008-based RPL market basket uses the 
single, higher level PPI for Medical, Surgical, and Personal Aid 
Devices (BLS series code #WPU156).
Rubber and Plastics
    We are proposing to continue to use the PPI for Rubber and Plastic 
Products (BLS series code #WPU07) to measure price growth of this cost 
category. This is the same proxy used in the 2008-based RPL market 
basket.
Paper and Printing Products
    We are proposing to continue to use the PPI for Converted Paper and 
Paperboard Products (BLS series code #WPU0915) to measure the price 
growth of this cost category. This is the same proxy used in the 2008-
based RPL market basket.
Miscellaneous Products
    We are proposing to continue to use the PPI for Finished Goods Less 
Food and Energy (BLS series code #WPUSOP3500) to measure the price 
growth of this cost category. This is the same proxy used in the 2008-
based RPL market basket.
Professional Fees: Labor-Related
    We are proposing to continue to use the ECI for Total Compensation 
for Private Industry workers in Professional and Related (BLS series 
code #CIU2010000120000I) to measure the price growth of this category. 
This is the same proxy used in the 2008-based RPL market basket.
Administrative and Facilities Support Services
    We are proposing to continue to use the ECI for Total Compensation 
for Private Industry workers in Office and Administrative Support (BLS 
series code #CIU2010000220000I) to measure the price growth of this 
category. This is the same proxy used in the 2008-based RPL market 
basket.
Installation, Maintenance, and Repair
    We are proposing to use the ECI for Total Compensation for Civilian 
workers in Installation, Maintenance, and Repair (BLS series code 
#CIU1010000430000I) to measure the price growth of this new cost 
category. Previously these costs were included in the All Other: Labor-
related Services category and were proxied by the ECI for Total 
Compensation for Private Industry workers in Service Occupations (BLS 
series code #CIU2010000300000I). We believe that this index better 
reflects the price changes of labor associated with maintenance-related 
services and its incorporation represents a technical improvement to 
the market basket.
All Other: Labor-Related Services
    We are proposing to continue to use the ECI for Total Compensation 
for Private Industry workers in Service Occupations (BLS series code 
#CIU2010000300000I) to measure the price growth of this cost category. 
This is the same proxy used in the 2008-based RPL market basket.
Professional Fees: Nonlabor-Related
    We are proposing to continue to use the ECI for Total Compensation 
for Private Industry workers in Professional and Related (BLS series 
code #CIU2010000120000I) to measure the price growth of this category. 
This is the same proxy used in the 2008-based RPL market basket.
Financial Services
    We are proposing to continue to use the ECI for Total Compensation 
for Private Industry workers in Financial Activities (BLS series code 
#CIU201520A000000I) to measure the price growth of this cost category. 
This is the same proxy used in the 2008-based RPL market basket.
Telephone Services
    We are proposing to continue to use the CPI for Telephone Services 
(BLS series code #CUUR0000SEED) to measure the price growth of this 
cost category. This is the same proxy used in the 2008-based RPL market 
basket.
All Other: Nonlabor-Related Services
    We are proposing to continue to use the CPI for All Items Less Food 
and Energy (BLS series code #CUUR0000SA0L1E) to measure the price 
growth of this cost category. This is the same proxy used in the 2008-
based RPL market basket.

[[Page 25028]]

ii. Price Proxies for the Capital Portion of the Proposed 2012-Based 
IPF Market Basket
Capital Price Proxies Prior to Vintage Weighting
    We are proposing to apply the same price proxies to the detailed 
capital-related cost categories as were applied in the 2008-based RPL 
market basket, which are provided in Table 12 and described below. We 
are also proposing to continue to vintage weight the capital price 
proxies for Depreciation and Interest in order to capture the long-term 
consumption of capital. This vintage weighting method is similar to the 
method used for the 2008-based RPL market basket and is described 
below.
    We are proposing to proxy the Depreciation: Building and Fixed 
Equipment cost category by BEA's Chained Price Index for Nonresidential 
Construction for Hospitals and Special Care Facilities (BEA Table 
5.4.4. Price Indexes for Private Fixed Investment in Structures by 
Type). We are proposing to proxy the Depreciation: Movable Equipment 
cost category by the PPI for Machinery and Equipment (BLS series code 
#WPU11). We are proposing to proxy the Nonprofit Interest cost category 
by the average yield on domestic municipal bonds (Bond Buyer 20-bond 
index). We are proposing to proxy the For-profit Interest cost category 
by the average yield on Moody's Aaa bonds (Federal Reserve). We are 
proposing to proxy the Other Capital-Related cost category by the CPI-U 
for Rent of Primary Residence (BLS series code #CUUS0000SEHA). We 
believe these are the most appropriate proxies for IPF capital-related 
costs that meet our selection criteria of relevance, timeliness, 
availability, and reliability.
Vintage Weights for Price Proxies
    Because capital is acquired and paid for over time, capital-related 
expenses in any given year are determined by both past and present 
purchases of physical and financial capital. The vintage-weighted 
capital-related portion of the proposed 2012-based IPF market basket is 
intended to capture the long-term consumption of capital, using vintage 
weights for depreciation (physical capital) and interest (financial 
capital). These vintage weights reflect the proportion of capital-
related purchases attributable to each year of the expected life of 
building and fixed equipment, movable equipment, and interest. We are 
proposing to use vintage weights to compute vintage-weighted price 
changes associated with depreciation and interest expenses.
    Capital-related costs are inherently complicated and are determined 
by complex capital-related purchasing decisions, over time, based on 
such factors as interest rates and debt financing. In addition, capital 
is depreciated over time instead of being consumed in the same period 
it is purchased. By accounting for the vintage nature of capital, we 
are able to provide an accurate and stable annual measure of price 
changes. Annual non-vintage 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 IPF capital-related costs. 
The capital-related component of the proposed 2012-based IPF market 
basket reflects the underlying stability of the capital-related 
acquisition process.
    To calculate the vintage weights for depreciation and interest 
expenses, we first need a time series of capital-related purchases for 
building and fixed equipment and movable equipment. We found no single 
source that provides an appropriate time series of capital-related 
purchases by hospitals for all of the above components of capital 
purchases. The early Medicare cost reports did not have sufficient 
capital-related data to meet this need. Data we obtained from the 
American Hospital Association (AHA) do not include annual capital-
related purchases. However, the AHA does provide a consistent database 
of total expenses back to 1963. Consequently, we are proposing to use 
data from the AHA Panel Survey and the AHA Annual Survey to obtain a 
time series of total expenses for hospitals. We are then proposing to 
use data from the AHA Panel Survey supplemented with the ratio of 
depreciation to total hospital expenses obtained from the Medicare cost 
reports to derive a trend of annual depreciation expenses for 1963 
through 2012. We propose to separate these depreciation expenses into 
annual amounts of building and fixed equipment depreciation and movable 
equipment depreciation as determined above. From these annual 
depreciation amounts we derive annual end-of-year book values for 
building and fixed equipment and movable equipment using the expected 
life for each type of asset category. While data are not available that 
are specific to IPFs, we believe this information for all hospitals 
serves as a reasonable alternative for the pattern of depreciation for 
IPFs.
    To continue to calculate the vintage weights for depreciation and 
interest expenses, we also need the expected lives for Building and 
Fixed Equipment, Movable Equipment, and Interest for the proposed 2012-
based IPF market basket. We are proposing to calculate the expected 
lives using Medicare cost report data from freestanding and hospital-
based IPFs. The expected life of any asset can be determined by 
dividing the value of the asset (excluding fully depreciated assets) by 
its current year depreciation amount. This calculation yields the 
estimated expected life of an asset if the rates of depreciation were 
to continue at current year levels, assuming straight-line 
depreciation. We are proposing to determine the expected life of 
building and fixed equipment separately for hospital-based IPFs and 
freestanding IPFs and weight these expected lives using the percent of 
total capital costs each provider type represents. We are proposing to 
apply a similar method for movable equipment. Using these proposed 
methods, we determined the average expected life of building and fixed 
equipment to be equal to 23 years, and the average expected life of 
movable equipment to be equal to 11 years. For the expected life of 
interest, we believe vintage weights for interest should represent the 
average expected life of building and fixed equipment because, based on 
previous research described in the FY 1997 IPPS final rule (61 FR 
46198), the expected life of hospital debt instruments and the expected 
life of buildings and fixed equipment are similar. We note that for the 
2008-based RPL market basket, we used FY 2008 Medicare cost reports for 
IPPS hospitals to determine the expected life of building and fixed 
equipment and movable equipment (76 FR 51763). The 2008-based RPL 
market basket was based on an expected average life of building and 
fixed equipment of 26 years and an expected average life of movable 
equipment of 11 years, which were both calculated using data for IPPS 
hospitals.
    Multiplying these expected lives by the annual depreciation amounts 
results in annual year-end asset costs for building and fixed equipment 
and movable equipment. We then calculate a time series, beginning in 
1964, of annual capital purchases by subtracting the previous year's 
asset costs from the current year's asset costs.
    For the building and fixed equipment and movable equipment vintage 
weights, we are proposing to use the real annual capital-related 
purchase amounts for each asset type to capture the actual amount of 
the physical acquisition, net of the effect of price inflation. These 
real annual capital-related purchase amounts are produced by deflating 
the nominal annual purchase amount by the associated price

[[Page 25029]]

proxy as provided above. For the interest vintage weights, we are 
proposing to use the total nominal annual capital-related purchase 
amounts to capture the value of the debt instrument (including, but not 
limited to, mortgages and bonds). Using these capital-related purchase 
time series specific to each asset type, we are proposing to calculate 
the vintage weights for building and fixed equipment, for movable 
equipment, and for interest.
    The vintage weights for each asset type are deemed to represent the 
average purchase pattern of the asset over its expected life (in the 
case of building and fixed equipment and interest, 23 years, and in the 
case of movable equipment, 11 years). For each asset type, we used the 
time series of annual capital-related purchase amounts available from 
2012 back to 1964. These data allow us to derive twenty-seven 23-year 
periods of capital-related purchases for building and fixed equipment 
and interest, and thirty-nine 11-year periods of capital-related 
purchases for movable equipment. For each 23-year period for building 
and fixed equipment and interest, or 11-year period for movable 
equipment, we calculate annual vintage weights by dividing the capital-
related purchase amount in any given year by the total amount of 
purchases over the entire 23-year or 11-year period. This calculation 
is done for each year in the 23-year or 11-year period and for each of 
the periods for which we have data. We then calculate the average 
vintage weight for a given year of the expected life by taking the 
average of these vintage weights across the multiple periods of data. 
The vintage weights for the capital-related portion of the 2008-based 
RPL market basket and the proposed 2012-based IPF market basket are 
presented in Table 11 below.

           Table 11--2008-Based RPL Market Basket and Proposed 2012-Based IPF Market Basket Vintage Weights for Capital-Related Price Proxies
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                            Building and fixed equipment                Movable equipment                         Interest
                                       -----------------------------------------------------------------------------------------------------------------
                 Year                     2012-based 23      2008-based 26      2012-based 11      2008-based 11      2012-based 23      2008-based 26
                                              years              years              years              years              years              years
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.....................................              0.029              0.021              0.069              0.071              0.017              0.010
2.....................................              0.031              0.023              0.073              0.075              0.019              0.012
3.....................................              0.034              0.025              0.077              0.080              0.022              0.014
4.....................................              0.036              0.027              0.083              0.083              0.024              0.016
5.....................................              0.037              0.028              0.087              0.085              0.026              0.018
6.....................................              0.039              0.030              0.091              0.089              0.028              0.020
7.....................................              0.040              0.031              0.096              0.092              0.030              0.021
8.....................................              0.041              0.033              0.100              0.098              0.032              0.024
9.....................................              0.042              0.035              0.103              0.103              0.035              0.026
10....................................              0.044              0.037              0.107              0.109              0.038              0.029
11....................................              0.045              0.039              0.114              0.116              0.040              0.033
12....................................              0.045              0.041  .................  .................              0.042              0.035
13....................................              0.045              0.042  .................  .................              0.044              0.038
14....................................              0.046              0.043  .................  .................              0.046              0.041
15....................................              0.046              0.044  .................  .................              0.048              0.043
16....................................              0.048              0.045  .................  .................              0.053              0.046
17....................................              0.049              0.046  .................  .................              0.057              0.049
18....................................              0.050              0.047  .................  .................              0.060              0.052
19....................................              0.051              0.047  .................  .................              0.063              0.053
20....................................              0.051              0.045  .................  .................              0.066              0.053
21....................................              0.051              0.045  .................  .................              0.067              0.055
22....................................              0.050              0.045  .................  .................              0.069              0.056
23....................................              0.052              0.046  .................  .................              0.073              0.060
24....................................  .................              0.046  .................  .................  .................              0.063
25....................................  .................              0.045  .................  .................  .................              0.064
26....................................  .................              0.046  .................  .................  .................              0.068
                                       -----------------------------------------------------------------------------------------------------------------
    Total.............................              1.000              1.000              1.000              1.000              1.000              1.000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Numbers may not add to total due to rounding.

    The process of creating vintage-weighted price proxies requires 
applying the vintage weights to the price proxy index where the last 
applied vintage weight in Table 11 is applied to the most recent data 
point. We have provided on the CMS Web site an example of how the 
vintage weighting price proxies are calculated, using example vintage 
weights and example price indices. The example can be found at the 
following link: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html in the zip file titled ``Weight Calculations 
as described in the IPPS FY 2010 Proposed Rule.''
iii. Summary of Price Proxies of the Proposed 2012-Based IPF Market 
Basket
    Table 12 shows both the operating and capital price proxies for the 
proposed 2012-based IPF Market Basket.

  Table 12--Price Proxies for the Proposed 2012-Based IPF Market Basket
------------------------------------------------------------------------
                                                              Weight
        Cost description              Price proxies          (percent)
------------------------------------------------------------------------
Total..........................  .......................           100.0

[[Page 25030]]

 
    Compensation...............  .......................            65.2
        Wages and Salaries.....  Blended Wages and                  51.9
                                  Salaries Price Proxy.
        Employee Benefits......  Blended Benefits Price             13.3
                                  Proxy.
    Utilities..................  .......................             1.8
        Electricity............  PPI for Commercial                  0.8
                                  Electric Power.
        Fuel, Oil, and Gasoline  Blend of the PPI for                0.9
                                  Petroleum Refineries
                                  and PPI for Natural
                                  Gas.
        Water & Sewerage.......  CPI-U for Water and                 0.1
                                  Sewerage Maintenance.
    Professional Liability       .......................             1.1
     Insurance.
        Malpractice............  CMS Hospital                        1.1
                                  Professional Liability
                                  Insurance Premium
                                  Index.
    All Other Products and       .......................            25.0
     Services.
    All Other Products.........  .......................            11.7
        Pharmaceuticals........  PPI for Pharmaceuticals             4.8
                                  for human use,
                                  prescription.
        Food: Direct Purchases.  PPI for Processed Foods             1.4
                                  and Feeds.
        Food: Contract Services  CPI-U for Food Away                 0.9
                                  From Home.
        Chemicals..............  Blend of Chemical PPIs.             0.6
        Medical Instruments....  Blend of the PPI for                1.9
                                  Surgical and medical
                                  instruments and PPI
                                  for Medical and
                                  surgical appliances
                                  and supplies.
        Rubber & Plastics......  PPI for Rubber and                  0.5
                                  Plastic Products.
        Paper and Printing       PPI for Converted Paper             1.0
         Products.                and Paperboard
                                  Products.
        Miscellaneous Products.  PPI for Finished Goods              0.7
                                  Less Food and Energy.
    All Other Services.........  .......................            13.3
    Labor-Related Services.....  .......................             6.7
        Professional Fees:       ECI for Total                       2.9
         Labor-related.           compensation for
                                  Private industry
                                  workers in
                                  Professional and
                                  related.
        Administrative and       ECI for Total                       0.7
         Facilities Support       compensation for
         Services.                Private industry
                                  workers in Office and
                                  administrative support.
        Installation,            ECI for Total                       1.6
         Maintenance, and         compensation for
         Repair.                  Civilian workers in
                                  Installation,
                                  maintenance, and
                                  repair.
        All Other: Labor-        ECI for Total                       1.5
         related Services.        compensation for
                                  Private industry
                                  workers in Service
                                  occupations.
    Nonlabor-Related Services..  .......................             6.6
        Professional Fees:       ECI for Total                       2.6
         Nonlabor-related.        compensation for
                                  Private industry
                                  workers in
                                  Professional and
                                  related.
        Financial services.....  ECI for Total                       2.3
                                  compensation for
                                  Private industry
                                  workers in Financial
                                  activities.
        Telephone Services.....  CPI-U for Telephone                 0.6
                                  Services.
        All Other: Nonlabor-     CPI-U for All Items                 1.1
         related Services.        Less Food and Energy.
    Capital-Related Costs......  .......................             7.0
    Depreciation...............  .......................             5.2
        Fixed Assets...........  BEA chained price index             3.7
                                  for nonresidential
                                  construction for
                                  hospitals and special
                                  care facilities--
                                  vintage weighted (23
                                  years).
        Movable Equipment......  PPI for machinery and               1.5
                                  equipment--vintage
                                  weighted (11 years).
    Interest Costs.............  .......................             1.2
        Government/Nonprofit...  Average yield on                    1.0
                                  domestic municipal
                                  bonds (Bond Buyer 20
                                  bonds)--vintage
                                  weighted (23 years).
        For Profit.............  Average yield on                    0.2
                                  Moody's Aaa bonds--
                                  vintage weighted (23
                                  years).
    Other Capital-Related Costs  CPI-U for Rent of                   0.6
                                  primary residence.
------------------------------------------------------------------------
Note: Totals may not sum to 100.0 percent due to rounding.

4. Proposed FY 2016 Market Basket Update
    For FY 2016 (that is, beginning October 1, 2015 and ending 
September 30, 2016), we are proposing to use an estimate of the 
proposed 2012-based IPF market basket increase factor to update the IPF 
PPS base payment rate. Consistent with historical practice, we estimate 
the market basket update for the IPF PPS based on IHS Global Insight's 
forecast using the most recent available data. IHS Global Insight 
(IGI), Inc. is a nationally recognized economic and financial 
forecasting firm that contracts with CMS to forecast the components of 
the market baskets and multifactor productivity (MFP).
    Based on IGI's first quarter 2015 forecast with historical data 
through the fourth quarter of 2014, the projected proposed 2012-based 
IPF market basket increase factor for FY 2016 is 2.7 percent. 
Therefore, consistent with our historical practice of estimating market 
basket increases based on the best available data, we are proposing a 
market basket increase factor of 2.7 percent for FY 2016. We are also 
proposing that if more recent data are subsequently available (for 
example, a more recent estimate of the market basket) we would use such 
data, to determine the FY 2016 update in the final rule.
    For comparison, the current 2008-based RPL market basket is 
projected to increase by 2.8 percent in FY 2016 based on IGI's first 
quarter 2015 forecast. Table 13 compares the proposed 2012-based IPF 
market basket and the 2008-based RPL market basket percent changes.

[[Page 25031]]



   Table 13--Proposed 2012-Based IPF Market Basket and 2008-Based RPL
         Market Basket Percent Changes, FY 2010 through FY 2018
------------------------------------------------------------------------
                                          Proposed 2012-
                                             Based IPF    2008-Based RPL
            Fiscal Year (FY)               market basket   market basket
                                           index percent   index percent
                                              change          change
------------------------------------------------------------------------
Historical data:
    FY 2010.............................             2.0             2.2
    FY 2011.............................             2.2             2.5
    FY 2012.............................             1.9             2.2
    FY 2013.............................             2.0             2.1
    FY 2014.............................             1.9             1.8
    Average 2010-2014...................             2.0             2.2
Forecast:
    FY 2015.............................             2.0             2.2
    FY 2016.............................             2.7             2.8
    FY 2017.............................             3.0             3.0
    FY 2018.............................             3.0             3.1
    Average 2015-2018...................             2.7             2.8
------------------------------------------------------------------------
Note: These market basket percent changes do not include any further
  adjustments as may be statutorily required. Source: IHS Global
  Insight, Inc. 1st quarter 2015 forecast.

    For FY 2016, the proposed 2012-based IPF market basket update (2.7 
percent) is one tenth of a percentage point lower than the 2008-based 
RPL market basket (2.8 percent). The 0.1 percentage point difference 
stems from the lower Pharmaceuticals cost weight in the proposed 2012-
based IPF market basket (4.8 percent) compared to the 2008-based RPL 
market basket (6.5 percent) as well as from the use of the blended 
price proxies for the Wages and Salaries and Employee Benefits cost 
categories.
5. Proposed Productivity Adjustment
    Section 1886(s)(2)(A)(i) of the Act requires the application of the 
productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of 
the Act to the IPF PPS for the RY beginning in 2012 (that is, a RY that 
coincides with a FY) and each subsequent RY. The statute defines the 
productivity adjustment to be equal to the 10-year moving average of 
changes in annual economy-wide private nonfarm business multifactor 
productivity (MFP) (as projected by the Secretary for the 10-year 
period ending with the applicable FY, year, cost reporting period, or 
other annual period) (the ``MFP adjustment''). The Bureau of Labor 
Statistics (BLS) publishes the official measure of private non-farm 
business MFP. We refer readers to the BLS Web site at http://www.bls.gov/mfp for the BLS historical published MFP data.
    MFP is derived by subtracting the contribution of labor and capital 
inputs growth from output growth. The projections of the components of 
MFP are currently produced by IGI, a nationally recognized economic 
forecasting firm with which CMS contracts to forecast the components of 
the market baskets and MFP. As described in the FY 2012 IPPS/LTCH final 
rule (76 FR 51690 through 51692), in order to generate a forecast of 
MFP, IGI replicated the MFP measure calculated by the BLS using a 
series of proxy variables derived from IGI's U.S. macroeconomic models. 
In the FY 2012 rule, we identified each of the major MFP component 
series employed by the BLS to measure MFP as well as provided the 
corresponding concepts determined to be the best available proxies for 
the BLS series.
    Beginning with the FY 2016 rulemaking cycle, the MFP adjustment is 
calculated using a revised series developed by IGI to proxy the 
aggregate capital inputs. Specifically, IGI has replaced the Real 
Effective Capital Stock used for Full Employment GDP with a forecast of 
BLS aggregate capital inputs recently developed by IGI using a 
regression model. This series provides a better fit to the BLS capital 
inputs, as measured by the differences between the actual BLS capital 
input growth rates and the estimated model growth rates over the 
historical time period. Therefore, we are using IGI's most recent 
forecast of the BLS capital inputs series in the MFP calculations 
beginning with the FY 2016 rulemaking cycle. A complete description of 
the MFP projection methodology is available on our Web site at http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html. Although 
we discuss the IGI changes to the MFP proxy series in this proposed 
rule, in the future, when IGI makes changes to the MFP methodology, we 
will announce them on our Web site rather than in the annual 
rulemaking.
    Using IGI's first quarter 2015 forecast, the MFP adjustment for FY 
2016 (the 10-year moving average of MFP for the period ending FY 2016) 
is projected to be 0.6 percent. Thus, in accordance with section 
1886(s)(2)(A)(i) of the Act, we propose to base the FY 2016 market 
basket update, which is used to determine the applicable percentage 
increase for the IPF payments, on the most recent estimate of the 
proposed 2012-based IPF market basket (currently estimated to be 2.7 
percent based on IGI's first quarter 2015 forecast). We propose to then 
reduce this percentage increase by the current estimate of the MFP 
adjustment for FY 2016 of 0.6 percentage point (the 10-year moving 
average of MFP for the period ending FY 2016 based on IGI's first 
quarter 2015 forecast). Furthermore, we also propose that if more 
recent data are subsequently available (for example, a more recent 
estimate of the market basket and MFP adjustment), we would use such 
data to determine the FY 2016 market basket update and MFP adjustment 
in the final rule.
    Section 1886(s)(2)(A)(ii) of the Act requires the application of an 
``other adjustment'' that reduces any update to an IPF PPS base rate by 
percentages specified in section 1886(s)(3) of the Act for the RY 
beginning in 2010 through the RY beginning in 2019. For the RY 
beginning in 2015 (that is, FY 2016), section 1886(s)(3)(D) of the Act 
requires the reduction to be 0.2 percentage point. We are proposing to 
implement the productivity adjustment and `other adjustment' in this FY 
2016 IPF PPS

[[Page 25032]]

proposed rule. We invite public comment on these proposals.
6. Proposed Labor-Related Share
    Due to variations in geographic wage levels and other labor-related 
costs, we believe that payment rates under the IPF PPS should continue 
to be adjusted by a geographic wage index, which would apply to the 
labor-related portion of the Federal per diem base rate (hereafter 
referred to as the labor-related share). The labor-related share is 
determined by identifying the national average proportion of total 
costs that are related to, influenced by, or vary with the local labor 
market. We continue to classify a cost category as labor-related if the 
costs are labor-intensive and vary with the local labor market. As 
stated in the FY 2015 IPF PPS final rule (79 FR 45943), the labor-
related share was defined as the sum of the relative importance of 
Wages and Salaries, Employee Benefits, Professional Fees: Labor- 
Related Services, Administrative and Facilities Support Services, All 
Other: Labor-related Services, and a portion of the Capital Costs from 
the 2008-based RPL market basket.
    Based on our definition of the labor-related share and the cost 
categories in the proposed 2012-based IPF market basket, we are 
proposing to include in the labor-related share the sum of the relative 
importance of Wages and Salaries, Employee Benefits, Professional Fees: 
Labor- Related, Administrative and Facilities Support Services, 
Installation, Maintenance, and Repair, All Other: Labor-related 
Services, and a portion of the Capital-Related cost weight from the 
proposed 2012-based IPF market basket. As noted in Section III.A.3.b.i 
of this proposed rule, for the proposed 2012-based IPF market basket, 
we have created a separate cost category for Installation, Maintenance 
and Repair services. These expenses were previously included in the 
``All Other'' Labor-related Services cost category in the 2008-based 
RPL market basket, along with other services, including but not limited 
to janitorial, waste management, security, and dry cleaning/laundry 
services. Because these services tend to be labor-intensive and are 
mostly performed at the facility (and, therefore, unlikely to be 
purchased in the national market), we continue to believe that they 
meet our definition of labor-related services.
    Similar to the 2008-based RPL market basket, the proposed 2012-
based IPF market basket includes 2 cost categories for nonmedical 
Professional fees (including but not limited to, expenses for legal, 
accounting, and engineering services). These are Professional Fees: 
Labor-related and Professional Fees: Nonlabor-related. For the proposed 
2012-based IPF market basket, we propose to estimate the labor-related 
percentage of non-medical professional fees (and assign these expenses 
to the Professional Fees: Labor-related services cost category) based 
on the same method that was used to determine the labor-related 
percentage of professional fees in the 2008-based RPL market basket.
    To summarize, the professional services survey found that hospitals 
purchase the following proportion of these four services outside of 
their local labor market:
     34 percent of accounting and auditing services.
     30 percent of engineering services.
     33 percent of legal services.
     42 percent of management consulting services.
    We applied each of these percentages to the respective Benchmark I-
O cost category underlying the professional fees cost category to 
determine the Professional Fees: Nonlabor-related costs. The 
Professional Fees: Labor-related costs were determined to be the 
difference between the total costs for each Benchmark I-O category and 
the Professional Fees: Nonlabor-related costs. This is the same 
methodology that we used to separate the 2008-based RPL market basket 
professional fees category into Professional Fees: Labor-related and 
Professional Fees: Nonlabor-related cost categories. For more detail 
regarding this methodology see the FY 2012 IPF final rule (76 FR 
26445).
    In addition to the professional services listed above, we also 
classified expenses under NAICS 55, Management of Companies and 
Enterprises, into the Professional Fees cost category as was done in 
the 2008-based RPL market basket. The NAICS 55 data are mostly 
comprised of corporate, subsidiary, and regional managing offices, or 
otherwise referred to as home offices. Since many facilities are not 
located in the same geographic area as their home office, we analyzed 
data from a variety of sources in order to determine what proportion of 
these costs should be appropriately included in the labor-related 
share. For the 2012-based IPF market basket, we are proposing to derive 
the home office percentages using data for both freestanding IPF 
providers and hospital-based IPF providers. In the 2008-based RPL 
market basket, we used the home office percentages based on the data 
reported by freestanding IRFs, IPFs, and LTCHs. Using data primarily 
from the Medicare cost reports and the Home Office Medicare Records 
(HOMER) database that provides the address (including city and state) 
for home offices, we were able to determine that 36 percent of the 
total number of freestanding and hospital-based IPFs that had home 
offices had those home offices located in their respective local labor 
markets--defined as being in the same Metropolitan Statistical Area 
(MSA).
    The Medicare cost report requires hospitals to report their home 
office provider numbers. Using the HOMER database to determine the home 
office location for each home office provider number, we compared the 
location of the provider with the location of the hospital's home 
office. We then placed providers into one of the following 2 groups:
     Group 1--Provider and home office are located in different 
MSAs.
     Group 2--Provider and home office are located in the same 
MSA.
    We found that 64 percent of the providers with home offices were 
classified into Group 1 (that is, different MSA) and, thus, these 
providers were determined to not be located in the same local labor 
market as their home office. We found that 36 percent of all providers 
with home offices were classified into Group 2 (that is, the same MSA). 
Given these results, we are proposing to classify 36 percent of the 
Professional Fees costs into the Professional Fees: Labor-related cost 
category and the remaining 64 percent into the Professional Fees: 
Nonlabor-related Services cost category. This methodology for 
apportioning the Professional Fee expenses between labor-related and 
nonlabor-related categories is similar to the method used in the 2008-
based RPL market basket (see 76 FR 26445).
    Using this proposed method and the IHS Global Insight, Inc. 4th 
quarter 2014 forecast for the proposed 2012-based IPF market basket, 
the proposed IPF labor-related share for FY 2016 is the sum of the FY 
2016 relative importance of each labor-related cost category. The 
relative importance reflects the different rates of price change for 
these cost categories between the base year (FY 2012) and FY 2016. 
Table 14 shows the proposed FY 2016 labor-related share using the 
proposed 2012-based IPF market basket relative importance and the FY 
2015 labor-related share using the 2008-based RPL market basket.
    The sum of the relative importance for FY 2016 operating costs 
(Wages and Salaries, Employee Benefits, Professional Fees: Labor-
related, Administrative and Facilities Support Services, Installation 
Maintenance & Repair Services, and All Other: Labor-related Services) 
is 71.8 percent, as

[[Page 25033]]

shown in Table 14. We are proposing to specify the labor-related share 
to one decimal place, which is consistent with the IPPS labor-related 
share (currently the Labor-related share from the RPL market basket is 
specified to 3 decimal places).
    We are proposing that the portion of Capital that is influenced by 
the local labor market is estimated to be 46 percent, which is the same 
percentage applied to the 2008-based RPL market basket. Since the 
relative importance for Capital-Related Costs is 6.8 percent of the 
proposed 2012-based IPF market basket in FY 2016, we are proposing to 
take 46 percent of 6.8 percent to determine the proposed labor-related 
share of Capital for 2016. The result would be 3.1 percent, which we 
propose to add to 71.8 percent for the operating cost amount to 
determine the total proposed labor-related share for FY 2016.
    The FY 2016 labor-related share using the proposed 2012-based IPF 
market basket is about five percentage points higher than the FY 2015 
labor-related share using the 2008-based RPL market basket. Of the five 
percentage point difference, 3 percentage points is attributable to the 
higher Wages and Salaries and Employee Benefits cost weights in the 
2012-based IPF market basket compared to the 2008-based RPL market 
basket, while 2 percentage points is attributable to the higher weight 
associated with the labor-related services cost categories. We would 
note that the higher Wages and Salaries cost weight in the 2012-based 
IPF market basket relative to the 2008-based RPL market basket is the 
result of freestanding IPFs having a larger percentage of costs 
attributable to labor than freestanding IRFs and Long-term care 
hospitals. These latter facilities were included in the 2008-based RPL 
market basket.

             Table 14--Proposed 2016 IPF Labor-Related Share
------------------------------------------------------------------------
                                      FY 2016 labor-
                                      related share      FY 2015 final
                                    based on proposed    labor- related
                                     2012- based IPF       share \2\
                                    market basket \1\
------------------------------------------------------------------------
Wages and Salaries................               51.7             48.271
Employee Benefits.................               13.4             12.936
Professional Fees: Labor-related..                2.9              2.058
Administrative and Facilities                     0.7              0.415
 Support Services.................
Installation, Maintenance and                     1.6  .................
 Repair...........................
All Other: Labor-related Services.                1.5              2.061
                                   -------------------------------------
    Subtotal......................               71.8             65.741
Labor-related portion of capital                  3.1              3.553
 (46%)............................
                                   -------------------------------------
        Total LRS.................               74.9             69.294
------------------------------------------------------------------------
\1\ IHS Global Insight, Inc. 4th quarter 2014 forecast.
\2\ Federal Register 79-FR-45943.

    In weighing the effects of the change in the LRS, we considered 
whether to recommend a 2-year transitional implementation of the 
increase in the LRS. We recognize that IPFs with wage index values of 
less than one would be adversely affected by an increased LRS, as a 
larger share of the base rate would be adjusted by the wage index 
value. About 69 percent of IPFs would have wage index values of less 
than one using FY2015 CBSA data, and 30 percent of these providers are 
rural. While the LRS would be updated in a budget neutral fashion so 
that the overall impact on payments is zero, there would still be 
distributional effects on specific categories of IPFs. We considered 
the distributional effects of the multiple proposals made in this 
proposed rule, including the proposal to update the full LRS in FY 
2016, and we found that the negative impact of updating the LRS in a 
single year, without a transition, was relatively small, as shown in 
Table 26 in section VII. of this proposed rule. Additionally, we are 
proposing 2 other adjustments to benefit providers: A transitional wage 
index and a phase-out of the 17 percent rural adjustment for the 37 
IPFs that would change from rural to urban status due to the new CBSA 
delineations. As presented in section III.A.6. of this proposed rule, 
we are proposing to use the 2012-based IPF market basket relative 
importance's to determine the FY 2016 IPF LRS. We believe this is 
technically appropriate as it is based on more recent, provider-
specific data for IPFs. For all of these reasons, we propose to 
implement the full LRS in FY 2016, but solicit comments on this issue.

B. Proposed Updates to the IPF PPS for FY 2016 (Beginning October 1, 
2015)

    The IPF PPS is based on a standardized Federal per diem base rate 
calculated from the IPF average per diem costs and adjusted for budget-
neutrality in the implementation year. The Federal per diem base rate 
is used as the standard payment per day under the IPF PPS and is 
adjusted by the patient-level and facility-level adjustments that are 
applicable to the IPF stay. A detailed explanation of how we calculated 
the average per diem cost appears in the November 2004 IPF PPS final 
rule (69 FR 66926).
1. Determining the Standardized Budget-Neutral Federal Per Diem Base 
Rate
    Section 124(a)(1) of the BBRA required that we implement the IPF 
PPS in a budget-neutral manner. In other words, the amount of total 
payments under the IPF PPS, including any payment adjustments, must be 
projected to be equal to the amount of total payments that would have 
been made if the IPF PPS were not implemented. Therefore, we calculated 
the budget-neutrality factor by setting the total estimated IPF PPS 
payments to be equal to the total estimated payments that would have 
been made under the Tax Equity and Fiscal Responsibility Act of 1982 
(TEFRA) (Pub. L. 97-248) methodology had the IPF PPS not been 
implemented. A step-by-step description of the methodology used to 
estimate payments under the TEFRA payment system appears in the 
November 2004 IPF PPS final rule (69 FR 66926).

[[Page 25034]]

    Under the IPF PPS methodology, we calculated the final Federal per 
diem base rate to be budget-neutral during the IPF PPS implementation 
period (that is, the 18-month period from January 1, 2005 through June 
30, 2006) using a July 1 update cycle. We updated the average cost per 
day to the midpoint of the IPF PPS implementation period (that is, 
October 1, 2005), and this amount was used in the payment model to 
establish the budget-neutrality adjustment.
    Next, we standardized the IPF PPS Federal per diem base rate to 
account for the overall positive effects of the IPF PPS payment 
adjustment factors by dividing total estimated payments under the TEFRA 
payment system by estimated payments under the IPF PPS. Additional 
information concerning this standardization can be found in the 
November 2004 IPF PPS final rule (69 FR 66932) and the RY 2006 IPF PPS 
final rule (71 FR 27045). We then reduced the standardized Federal per 
diem base rate to account for the outlier policy, the stop loss 
provision, and anticipated behavioral changes. A complete discussion of 
how we calculated each component of the budget-neutrality adjustment 
appears in the November 2004 IPF PPS final rule (69 FR 66932 through 
66933) and in the May 2006 IPF PPS final rule (71 FR 27044 through 
27046). The final standardized budget-neutral Federal per diem base 
rate established for cost reporting periods beginning on or after 
January 1, 2005 was calculated to be $575.95.
    The Federal per diem base rate has been updated in accordance with 
applicable statutory requirements and Sec.  412.428 through publication 
of annual notices or proposed and final rules. A detailed discussion on 
the standardized budget-neutral Federal per diem base rate and the 
electroconvulsive therapy (ECT) rate appears in the August 2013 IPF PPS 
update notice (78 FR 46738 through 46739). These documents are 
available on the CMS Web site at http://www.cms.hhs.gov/InpatientPsychFacilPPS/.
2. Proposed FY 2016 Update of the Federal Per Diem Base Rate and 
Electroconvulsive Therapy (ECT) Rate
    The current (that is, FY 2015) Federal per diem base rate is 
$728.31 and the ECT rate is $313.55. For FY 2016, we are proposing to 
apply an update of 1.9 percent (that is, the proposed FY 2012-based 
IPF-specific market basket increase for FY 2016 of 2.7 percent less the 
proposed productivity adjustment of 0.6 percentage point, and further 
reduced by the 0.2 percentage point required under section1886(s)(3)(D) 
of the Act), and the wage index budget-neutrality factor of 1.0041 (as 
discussed in section III.D.1.e. of this proposed rule) to the FY 2015 
Federal per diem base rate of $728.31, yielding a proposed Federal per 
diem base rate of $745.19 for FY 2016. Similarly, we are proposing to 
apply the 1.9 percent payment update and the 1.0041 wage index budget-
neutrality factor to the FY 2015 ECT rate, yielding a proposed ECT rate 
of $320.82 for FY 2016.
    As noted above, section 1886(s)(4) of the Act requires the 
establishment of a quality data reporting program for the IPF PPS 
beginning in RY 2015. We refer readers to section V. of this proposed 
rule for a discussion of the IPF Quality Reporting Program. Section 
1886(s)(4)(A)(i) of the Act requires that, for RY 2014 and each 
subsequent rate year, the Secretary shall reduce any annual update to a 
standard Federal rate for discharges occurring during the rate year by 
2.0 percentage points for any IPF that does not comply with the quality 
data submission requirements with respect to an applicable year. 
Therefore, we are proposing to apply a 2.0 percentage point reduction 
to the Federal per diem base rate and the ECT rate as follows:
    For IPFs that failed to submit quality reporting data under the 
IPFQR program, we would apply a -0.1 percent annual update (that is, 
1.9 percent reduced by 2 percentage points, in accordance with section 
1886(s)(4)(A)(ii) of the Act) and the wage index budget-neutrality 
factor of 1.0041 to the FY 2015 Federal per diem base rate of $728.31, 
yielding a Federal per diem base rate of $730.56 for FY 2016.
    Similarly, we would apply the -0.1 percent annual update and the 
1.0041 wage index budget-neutrality factor to the FY 2015 ECT rate of 
$313.55, yielding an ECT rate of $314.52 for FY 2016.

C. Proposed Updates to the IPF PPS Patient-Level Adjustment Factors

1. Overview of the IPF PPS Adjustment Factors
    The IPF PPS payment adjustments were derived from a regression 
analysis of 100 percent of the FY 2002 MedPAR data file, which 
contained 483,038 cases. For a more detailed description of the data 
file used for the regression analysis, see the November 2004 IPF PPS 
final rule (69 FR 66935 through 66936). While we have since used more 
recent claims data to simulate payments to set the fixed dollar loss 
threshold amount for the outlier policy and to assess the impact of the 
IPF PPS updates, we continue to use the regression-derived adjustment 
factors established in 2005 for FY 2016.
2. IPF PPS Patient-Level Adjustments
    The IPF PPS includes payment adjustments for the following patient-
level characteristics: Medicare Severity Diagnosis Related Groups (MS-
DRGs) assignment of the patient's principal diagnosis, selected 
comorbidities, patient age, and the variable per diem adjustments.
a. MS-DRG Assignment
    We believe it is important to maintain the same diagnostic coding 
and DRG classification for IPFs that are used under the IPPS for 
providing psychiatric care. For this reason, when the IPF PPS was 
implemented for cost reporting periods beginning on or after January 1, 
2005, we adopted the same diagnostic code set (ICD-9-CM) and DRG 
patient classification system (that is, the CMS DRGs) that were 
utilized at the time under the IPPS. In the May 2008 IPF PPS notice (73 
FR 25709), we discussed CMS's effort to better recognize resource use 
and the severity of illness among patients. CMS adopted the new MS-DRGs 
for the IPPS in the FY 2008 IPPS final rule with comment period (72 FR 
47130). In the 2008 IPF PPS notice (73 FR 25716), we provided a 
crosswalk to reflect changes that were made under the IPF PPS to adopt 
the new MS-DRGs. For a detailed description of the mapping changes from 
the original DRG adjustment categories to the current MS-DRG adjustment 
categories, we refer readers to the May 2008 IPF PPS notice (73 FR 
25714).
    The IPF PPS includes payment adjustments for designated psychiatric 
DRGs assigned to the claim based on the patient's principal diagnosis. 
The DRG adjustment factors were expressed relative to the most 
frequently reported psychiatric DRG in FY 2002, that is, DRG 430 
(psychoses). The coefficient values and adjustment factors were derived 
from the regression analysis. Mapping the DRGs to the MS-DRGs resulted 
in the current 17 IPF-MS-DRGs, instead of the original 15 DRGs, for 
which the IPF PPS provides an adjustment.
    For the FY 2016 update, we are not proposing any changes to the IPF 
MS-DRG adjustment factors. In FY 2015 rulemaking (79 FR 45945 through 
45947), we proposed and finalized conversions of the ICD-9-CM-based MS-
DRGs to ICD-10-CM/PCS-based MS-DRGs, which will be implemented on 
October 1, 2015. Further information for the ICD-10-CM/PCS MS-DRG 
conversion project can be found on the

[[Page 25035]]

CMS ICD-10-CM Web site at http://www.cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html.
    For FY 2016, we propose to continue to make a payment adjustment 
for psychiatric diagnoses that group to one of the existing 17 MS-IPF-
DRGs listed in the Addendum. Psychiatric principal diagnoses that do 
not group to one of the 17 designated DRGs would still receive the 
Federal per diem base rate and all other applicable adjustments, but 
the payment would not include a DRG adjustment.
    As noted above, the diagnoses for each IPF MS-DRG will be updated 
on October 1, 2015, using the ICD-10-CM/PCS code sets.
b. Payment for Comorbid Conditions
    The intent of the comorbidity adjustments is to recognize the 
increased costs associated with comorbid conditions by providing 
additional payments for certain concurrent medical or psychiatric 
conditions that are expensive to treat. In the May 2011 IPF PPS final 
rule (76 FR 26451 through 26452), we explained that the IPF PPS 
includes 17 comorbidity categories and identified the new, revised, and 
deleted ICD-9-CM diagnosis codes that generate a comorbid condition 
payment adjustment under the IPF PPS for RY 2012 (76 FR 26451).
    Comorbidities are specific patient conditions that are secondary to 
the patient's principal diagnosis and that require treatment during the 
stay. Diagnoses that relate to an earlier episode of care and have no 
bearing on the current hospital stay are excluded and must not be 
reported on IPF claims. Comorbid conditions must exist at the time of 
admission or develop subsequently, and affect the treatment received, 
length of stay (LOS), or both treatment and LOS.
    For each claim, an IPF may receive only one comorbidity adjustment 
within a comorbidity category, but it may receive an adjustment for 
more than one comorbidity category. Current billing instructions for 
claims for discharges on or after October 1, 2015 require IPFs to enter 
the complete ICD-10-CM codes for up to 24 additional diagnoses if they 
co-exist at the time of admission, or develop subsequently and impact 
the treatment provided.
    The comorbidity adjustments were determined based on the regression 
analysis using the diagnoses reported by IPFs in FY 2002. The principal 
diagnoses were used to establish the DRG adjustments and were not 
accounted for in establishing the comorbidity category adjustments, 
except where ICD-9-CM ``code first'' instructions apply. As we 
explained in the May 2011 IPF PPS final rule (76 FR 265451), the ``code 
first'' rule applies when a condition has both an underlying etiology 
and a manifestation due to the underlying etiology. For these 
conditions, ICD-9-CM has a coding convention that requires the 
underlying conditions to be sequenced first followed by the 
manifestation. Whenever a combination exists, there is a ``use 
additional code'' note at the etiology code and a ``code first'' note 
at the manifestation code.
    The same principle holds for ICD-10-CM as for ICD-9-CM. Whenever a 
combination exists, there is a ``use additional code'' note in the ICD-
10-CM codebook pertaining to the etiology code, and a ``code first'' 
code pertaining to the manifestation code. In the FY 2015 IPF PPS final 
rule, we provided a ``code first'' table for reference that highlights 
the same or similar manifestation codes where the ``code first'' 
instructions apply in ICD-10-CM that were present in ICD-9-CM (79 FR 
46009).
    As noted previously, it is our policy to maintain the same 
diagnostic coding set for IPFs that is used under the IPPS for 
providing the same psychiatric care. The 17 comorbidity categories 
formerly defined using ICD-9-CM codes were converted to ICD-10-CM/PCS 
in the FY 2015 IPF PPS final rule (79 FR 45947 to 45955). The goal for 
converting the comorbidity categories is referred to as replication, 
meaning that the payment adjustment for a given patient encounter is 
the same after ICD-10-CM implementation as it would be if the same 
record had been coded in ICD-9-CM and submitted prior to ICD-10-CM/PCS 
implementation on October 1, 2015. All conversion efforts were made 
with the intent of achieving this goal.
    We are not proposing any refinements to the comorbidity adjustments 
at this time, and propose to continue to use the existing adjustments 
in effect in FY 2015. The FY 2016 comorbidity adjustments are found in 
the Addendum to this proposed rule.
3. Patient Age Adjustments
    As explained in the November 2004 IPF PPS final rule (69 FR 66922), 
we analyzed the impact of age on per diem cost by examining the age 
variable (that is, the range of ages) for payment adjustments. In 
general, we found that the cost per day increases with age. The older 
age groups are more costly than the under 45 age group, the differences 
in per diem cost increase for each successive age group, and the 
differences are statistically significant.
    For FY 2016, we are proposing to continue to use the patient age 
adjustments currently in effect in FY 2015, as shown in the Addendum to 
this proposed rule.
4. Variable Per Diem Adjustments
    We explained in the November 2004 IPF PPS final rule (69 FR 66946) 
that the regression analysis indicated that per diem cost declines as 
the LOS increases. The variable per diem adjustments to the Federal per 
diem base rate account for ancillary and administrative costs that 
occur disproportionately in the first days after admission to an IPF.
    We used a regression analysis to estimate the average differences 
in per diem cost among stays of different lengths. As a result of this 
analysis, we established variable per diem adjustments that begin on 
day 1 and decline gradually until day 21 of a patient's stay. For day 
22 and thereafter, the variable per diem adjustment remains the same 
each day for the remainder of the stay. However, the adjustment applied 
to day 1 depends upon whether the IPF has a qualifying emergency 
department (ED). If an IPF has a qualifying ED, it receives a 1.31 
adjustment factor for day 1 of each stay. If an IPF does not have a 
qualifying ED, it receives a 1.19 adjustment factor for day 1 of the 
stay. The ED adjustment is explained in more detail in section III.D.4. 
of this proposed rule.
    For FY 2016, we propose to continue to use the variable per diem 
adjustment factors currently in effect as shown in the Addendum to this 
proposed rule. A complete discussion of the variable per diem 
adjustments appears in the November 2004 IPF PPS final rule (69 FR 
66946).

D. Proposed Updates to the IPF PPS Facility-Level Adjustments

    The IPF PPS includes facility-level adjustments for the wage index, 
IPFs located in rural areas, teaching IPFs, cost of living adjustments 
for IPFs located in Alaska and Hawaii, and IPFs with a qualifying ED.
1. Proposed Wage Index Adjustment
a. Background
    As discussed in the May 2006 IPF PPS final rule (71 FR 27061) and 
in the May 2008 (73 FR 25719) and May 2009 IPF PPS notices (74 FR 
20373), in order to provide an adjustment for geographic wage levels, 
the labor-related portion of an IPF's payment is adjusted using an 
appropriate wage index. Currently, an IPF's geographic wage index value 
is determined based on the actual location

[[Page 25036]]

of the IPF in an urban or rural area as defined in Sec.  
412.64(b)(1)(ii)(A) and (C).
b. Proposed Wage Index for FY 2016
    Since the inception of the IPF PPS, we have used the pre-floor, 
pre-reclassified acute care hospital wage index in developing a wage 
index to be applied to IPFs because there is not an IPF-specific wage 
index available. We believe that IPFs generally compete in the same 
labor markets as acute care hospitals, so the pre-floor, pre-
reclassified hospital wage index should reflect IPF labor costs. As 
discussed in the May 2006 IPF PPS final rule for FY 2007 (71 FR 27061 
through 27067), under the IPF PPS, the wage index is calculated using 
the IPPS wage index for the labor market area in which the IPF is 
located, without taking into account geographic reclassifications, 
floors, and other adjustments made to the wage index under the IPPS. 
For a complete description of these IPPS wage index adjustments, please 
see the CY 2013 IPPS/LTCH PPS final rule (77 FR 53365 through 53374). 
For FY 2016, we are proposing to continue to apply the most recent 
hospital wage index (that is, the FY 2015 pre-floor, pre-reclassified 
hospital wage index, which is the most appropriate index as it best 
reflects the variation in local labor costs of IPFs in the various 
geographic areas) using the most recent hospital wage data (that is, 
data from hospital cost reports for the cost reporting period beginning 
during FY 2011) without any geographic reclassifications, floors, or 
other adjustments. We propose to apply the FY 2016 IPF PPS wage index 
to payments beginning October 1, 2015.
    We apply the wage index adjustment to the labor-related portion of 
the Federal rate, which we are proposing to change from 69.294 percent 
to 74.9 percent in FY 2016. This percentage reflects the labor-related 
relative importance of the FY 2012-based proposed IPF-specific market 
basket for FY 2016 (see section III.A.6. of this proposed rule).
c. OMB Bulletins and Proposed Transitional Wage Index
    OMB publishes bulletins regarding CBSA changes, including changes 
to CBSA numbers and titles. In the May 2006 IPF PPS final rule for RY 
2007 (71 FR 27061 through 27067), we adopted the changes discussed in 
the Office of Management and Budget (OMB) Bulletin No. 03-04 (June 6, 
2003), which announced revised definitions for Metropolitan Statistical 
Areas (MSAs), and the creation of Micropolitan Statistical Areas and 
Combined Statistical Areas. In adopting the OMB CBSA geographic 
designations in RY 2007, we did not provide a separate transition for 
the CBSA-based wage index since the IPF PPS was already in a transition 
period from TEFRA payments to PPS payments.
    In the May 2008 IPF PPS notice, we incorporated the CBSA 
nomenclature changes published in the most recent OMB bulletin that 
applies to the hospital wage index used to determine the current IPF 
PPS wage index and stated that we expect to continue to do the same for 
all the OMB CBSA nomenclature changes in future IPF PPS rules and 
notices, as necessary (73 FR 25721). The OMB bulletins may be accessed 
online at http://www.whitehouse.gov/omb/bulletins_default/.
    In accordance with our established methodology, we have 
historically adopted any CBSA changes that are published in the OMB 
bulletin that corresponds with the hospital wage index used to 
determine the IPF PPS wage index. For the FY 2015 IPF wage index, we 
used the FY 2014 pre-floor, pre-reclassified hospital wage index to 
adjust the IPF PPS payments. On February 28, 2013, OMB issued OMB 
Bulletin No. 13-01, which established revised delineations for 
Metropolitan Statistical Areas, Micropolitan Statistical Areas, and 
Combined Statistical Areas, and provided guidance on the use of the 
delineations of these statistical areas. A copy of this bulletin may be 
obtained at http://www.whitehouse.gov/omb/bulletins_default/. Because 
the FY 2014 pre-floor, pre-reclassified hospital wage index was 
finalized prior to the issuance of this Bulletin, the FY 2015 IPF PPS 
wage index, which was based on the FY 2014 pre-floor, pre-reclassified 
hospital wage index, did not reflect OMB's new area delineations based 
on the 2010 Census. 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 through 37252) and Census Bureau data.'' These 
OMB Bulletin changes are reflected in the FY 2015 pre-floor, pre-
reclassified hospital wage index, upon which the FY 2016 IPPS PPS wage 
index is based. We propose to adopt these new OMB CBSA delineations in 
the FY 2016 proposed IPF PPS wage index.
    We believe that the most current CBSA delineations accurately 
reflect the local economies and wage levels of the areas where IPFs are 
located, and we believe that it is important for the IPF PPS to use the 
latest CBSA delineations available in order to maintain an up-to-date 
payment system that accurately reflects the reality of population 
shifts and labor market conditions.
    In proposing adoption of these changes for the IPF PPS, it is 
necessary to identify the new labor market area delineation for each 
county and facility in the country. For example, there would be new 
CBSAs, urban counties that would become rural, rural counties that 
would become urban, and existing CBSAs that would be split apart. 
Because the wage index of urban areas is typically higher than that of 
rural areas, IPF facilities currently located in rural counties that 
would become urban, beginning October 1, 2015, would generally 
experience an increase in their wage index values. We identified 105 
counties and 37 IPFs that would move from rural to urban status due to 
the new CBSA delineations beginning in FY 2016, shown in Table 15.

                                                     Table 15--FY 2016 Rural To Urban CBSA Crosswalk
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                              FY 2014 CBSA Delineations/FY 2015 data            FY 2015 CBSA Delineations/FY 2015 data        Change in
              County name              -----------------------------------------------------------------------------------------------------    value
                                            CBSA           Urban/Rural         Wage index      CBSA           Urban/Rural        Wage index   (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baldwin County, Alabama...............            1  RURAL..................       0.6963        19300  URBAN.................       0.7248         4.09
Pickens County, Alabama...............            1  RURAL..................       0.6963        46220  URBAN.................       0.8337        19.73
Cochise County, Arizona...............            3  RURAL..................       0.9125        43420  URBAN.................       0.8937        -2.06
Little River County, Arkansas.........            4  RURAL..................       0.7311        45500  URBAN.................       0.7362         0.70
Windham County, Connecticut...........            7  RURAL..................       1.1251        49340  URBAN.................       1.1493         2.15
Sussex County, Delaware...............            8  RURAL..................       1.0261        41540  URBAN.................       0.9289        -9.47

[[Page 25037]]

 
Citrus County, Florida................           10  RURAL..................       0.8006        26140  URBAN.................       0.7625        -4.76
Gulf County, Florida..................           10  RURAL..................       0.8006        37460  URBAN.................       0.7906        -1.25
Highlands County, Florida.............           10  RURAL..................       0.8006        42700  URBAN.................       0.7982        -0.30
Sumter County, Florida................           10  RURAL..................       0.8006        45540  URBAN.................       0.8095         1.11
Walton County, Florida................           10  RURAL..................       0.8006        18880  URBAN.................       0.8156         1.87
Lincoln County, Georgia...............           11  RURAL..................       0.7425        12260  URBAN.................       0.9225        24.24
Morgan County, Georgia................           11  RURAL..................       0.7425        12060  URBAN.................       0.9369        26.18
Peach County, Georgia.................           11  RURAL..................       0.7425        47580  URBAN.................       0.7542         1.58
Pulaski County, Georgia...............           11  RURAL..................       0.7425        47580  URBAN.................       0.7542         1.58
Kalawao County, Hawaii................           12  RURAL..................       1.0741        27980  URBAN.................       1.0561        -1.68
Maui County, Hawaii...................           12  RURAL..................       1.0741        27980  URBAN.................       1.0561        -1.68
Butte County, Idaho...................           13  RURAL..................       0.7398        26820  URBAN.................       0.8933        20.75
De Witt County, Illinois..............           14  RURAL..................       0.8362        14010  URBAN.................       0.9165         9.60
Jackson County, Illinois..............           14  RURAL..................       0.8362        16060  URBAN.................       0.8324        -0.45
Williamson County, Illinois...........           14  RURAL..................       0.8362        16060  URBAN.................       0.8324        -0.45
Scott County, Indiana.................           15  RURAL..................       0.8416        31140  URBAN.................       0.8605         2.25
Union County, Indiana.................           15  RURAL..................       0.8416        17140  URBAN.................       0.9473        12.56
Plymouth County, Iowa.................           16  RURAL..................       0.8451        43580  URBAN.................       0.8915         5.49
Kingman County, Kansas................           17  RURAL..................       0.7806        48620  URBAN.................       0.8472         8.53
Allen County, Kentucky................           18  RURAL..................       0.7744        14540  URBAN.................       0.8410         8.60
Butler County, Kentucky...............           18  RURAL..................       0.7744        14540  URBAN.................       0.8410         8.60
Acadia Parish, Louisiana..............           19  RURAL..................       0.7580        29180  URBAN.................       0.7869         3.81
Iberia Parish, Louisiana..............           19  RURAL..................       0.7580        29180  URBAN.................       0.7869         3.81
St. James Parish, Louisiana...........           19  RURAL..................       0.7580        35380  URBAN.................       0.8821        16.37
Tangipahoa Parish, Louisiana..........           19  RURAL..................       0.7580        25220  URBAN.................       0.9452        24.70
Vermilion Parish, Louisiana...........           19  RURAL..................       0.7580        29180  URBAN.................       0.7869         3.81
Webster Parish, Louisiana.............           19  RURAL..................       0.7580        43340  URBAN.................       0.8325         9.83
St. Marys County, Maryland............           21  RURAL..................       0.8554        15680  URBAN.................       0.8593         0.46
Worcester County, Maryland............           21  RURAL..................       0.8554        41540  URBAN.................       0.9289         8.59
Midland County, Michigan..............           23  RURAL..................       0.8207        33220  URBAN.................       0.7935        -3.31
Montcalm County, Michigan.............           23  RURAL..................       0.8207        24340  URBAN.................       0.8799         7.21
Fillmore County, Minnesota............           24  RURAL..................       0.9124        40340  URBAN.................       1.1398        24.92
Le Sueur County, Minnesota............           24  RURAL..................       0.9124        33460  URBAN.................       1.1196        22.71
Mille Lacs County, Minnesota..........           24  RURAL..................       0.9124        33460  URBAN.................       1.1196        22.71
Sibley County, Minnesota..............           24  RURAL..................       0.9124        33460  URBAN.................       1.1196        22.71
Benton County, Mississippi............           25  RURAL..................       0.7589        32820  URBAN.................       0.8991        18.47
Yazoo County, Mississippi.............           25  RURAL..................       0.7589        27140  URBAN.................       0.7891         3.98
Golden Valley County, Montana.........           27  RURAL..................       0.9024        13740  URBAN.................       0.8686        -3.75
Hall County, Nebraska.................           28  RURAL..................       0.8924        24260  URBAN.................       0.9219         3.31
Hamilton County, Nebraska.............           28  RURAL..................       0.8924        24260  URBAN.................       0.9219         3.31
Howard County, Nebraska...............           28  RURAL..................       0.8924        24260  URBAN.................       0.9219         3.31
Merrick County, Nebraska..............           28  RURAL..................       0.8924        24260  URBAN.................       0.9219         3.31
Jefferson County, New York............           33  RURAL..................       0.8208        48060  URBAN.................       0.8386         2.17
Yates County, New York................           33  RURAL..................       0.8208        40380  URBAN.................       0.8750         6.60
Craven County, North Carolina.........           34  RURAL..................       0.7995        35100  URBAN.................       0.8994        12.50
Davidson County, North Carolina.......           34  RURAL..................       0.7995        49180  URBAN.................       0.8679         8.56
Gates County, North Carolina..........           34  RURAL..................       0.7995        47260  URBAN.................       0.9223        15.36
Iredell County, North Carolina........           34  RURAL..................       0.7995        16740  URBAN.................       0.9073        13.48
Jones County, North Carolina..........           34  RURAL..................       0.7995        35100  URBAN.................       0.8994        12.50
Lincoln County, North Carolina........           34  RURAL..................       0.7995        16740  URBAN.................       0.9073        13.48
Pamlico County, North Carolina........           34  RURAL..................       0.7995        35100  URBAN.................       0.8994        12.50
Rowan County, North Carolina..........           34  RURAL..................       0.7995        16740  URBAN.................       0.9073        13.48
Oliver County, North Dakota...........           35  RURAL..................       0.7099        13900  URBAN.................       0.7216         1.65
Sioux County, North Dakota............           35  RURAL..................       0.7099        13900  URBAN.................       0.7216         1.65
Hocking County, Ohio..................           36  RURAL..................       0.8329        18140  URBAN.................       0.9539        14.53
Perry County, Ohio....................           36  RURAL..................       0.8329        18140  URBAN.................       0.9539        14.53
Cotton County, Oklahoma...............           37  RURAL..................       0.7799        30020  URBAN.................       0.7918         1.53
Josephine County, Oregon..............           38  RURAL..................       1.0083        24420  URBAN.................       1.0086         0.03
Linn County, Oregon...................           38  RURAL..................       1.0083        10540  URBAN.................       1.0879         7.89
Adams County, Pennsylvania............           39  RURAL..................       0.8719        23900  URBAN.................       1.0104        15.88
Columbia County, Pennsylvania.........           39  RURAL..................       0.8719        14100  URBAN.................       0.9347         7.20
Franklin County, Pennsylvania.........           39  RURAL..................       0.8719        16540  URBAN.................       1.0957        25.67
Monroe County, Pennsylvania...........           39  RURAL..................       0.8719        20700  URBAN.................       0.9372         7.49
Montour County, Pennsylvania..........           39  RURAL..................       0.8719        14100  URBAN.................       0.9347         7.20
Utuado Municipio, Puerto Rico.........           40  RURAL..................       0.4047        10380  URBAN.................       0.3586       -11.39
Beaufort County, South Carolina.......           42  RURAL..................       0.8374        25940  URBAN.................       0.8708         3.99
Chester County, South Carolina........           42  RURAL..................       0.8374        16740  URBAN.................       0.9073         8.35
Jasper County, South Carolina.........           42  RURAL..................       0.8374        25940  URBAN.................       0.8708         3.99

[[Page 25038]]

 
Lancaster County, South Carolina......           42  RURAL..................       0.8374        16740  URBAN.................       0.9073         8.35
Union County, South Carolina..........           42  RURAL..................       0.8374        43900  URBAN.................       0.8277        -1.16
Custer County, South Dakota...........           43  RURAL..................       0.8312        39660  URBAN.................       0.8989         8.14
Campbell County, Tennessee............           44  RURAL..................       0.7365        28940  URBAN.................       0.7015        -4.75
Crockett County, Tennessee............           44  RURAL..................       0.7365        27180  URBAN.................       0.7747         5.19
Maury County, Tennessee...............           44  RURAL..................       0.7365        34980  URBAN.................       0.8969        21.78
Morgan County, Tennessee..............           44  RURAL..................       0.7365        28940  URBAN.................       0.7015        -4.75
Roane County, Tennessee...............           44  RURAL..................       0.7365        28940  URBAN.................       0.7015        -4.75
Falls County, Texas...................           45  RURAL..................       0.7855        47380  URBAN.................       0.8137         3.59
Hood County, Texas....................           45  RURAL..................       0.7855        23104  URBAN.................       0.9386        19.49
Hudspeth County, Texas................           45  RURAL..................       0.7855        21340  URBAN.................       0.8139         3.62
Lynn County, Texas....................           45  RURAL..................       0.7855        31180  URBAN.................       0.8830        12.41
Martin County, Texas..................           45  RURAL..................       0.7855        33260  URBAN.................       0.8940        13.81
Newton County, Texas..................           45  RURAL..................       0.7855        13140  URBAN.................       0.8508         8.31
Oldham County, Texas..................           45  RURAL..................       0.7855        11100  URBAN.................       0.8277         5.37
Somervell County, Texas...............           45  RURAL..................       0.7855        23104  URBAN.................       0.9386        19.49
Box Elder County, Utah................           46  RURAL..................       0.8891        36260  URBAN.................       0.9225         3.76
Augusta County, Virginia..............           49  RURAL..................       0.7674        44420  URBAN.................       0.8326         8.50
Buckingham County, Virginia...........           49  RURAL..................       0.7674        16820  URBAN.................       0.9053        17.97
Culpeper County, Virginia.............           49  RURAL..................       0.7674        47894  URBAN.................       1.0403        35.56
Floyd County, Virginia................           49  RURAL..................       0.7674        13980  URBAN.................       0.8473        10.41
Rappahannock County, Virginia.........           49  RURAL..................       0.7674        47894  URBAN.................       1.0403        35.56
Staunton City County, Virginia........           49  RURAL..................       0.7674        44420  URBAN.................       0.8326         8.50
Waynesboro City County, Virginia......           49  RURAL..................       0.7674        44420  URBAN.................       0.8326         8.50
Columbia County, Washington...........           50  RURAL..................       1.0892        47460  URBAN.................       1.0934         0.39
Pend Oreille County, Washington.......           50  RURAL..................       1.0892        44060  URBAN.................       1.1425         4.89
Stevens County, Washington............           50  RURAL..................       1.0892        44060  URBAN.................       1.1425         4.89
Walla Walla County, Washington........           50  RURAL..................       1.0892        47460  URBAN.................       1.0934         0.39
Fayette County, West Virginia.........           51  RURAL..................       0.7410        13220  URBAN.................       0.8024         8.29
Raleigh County, West Virginia.........           51  RURAL..................       0.7410        13220  URBAN.................       0.8024         8.29
Green County, Wisconsin...............           52  RURAL..................       0.9041        31540  URBAN.................       1.1130        23.11
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The wage index values of rural areas are typically lower than that 
of urban areas. Therefore, IPFs located in a county that is currently 
designated as urban under the IPF PPS wage index that would become 
rural when we would adopt the new CBSA delineations may experience a 
decrease in their wage index values. We identified 37 counties and 3 
IPFs that would move from urban to rural status due to the new CBSA 
delineations beginning in FY 2016. Table 16 shows the CBSA delineations 
and the urban wage index values for FY 2015 based on existing CBSA 
delineations, compared with the proposed CBSA delineations and wage 
index values for FY 2016 based on the new OMB CBSA delineations. Table 
16 also shows the percentage change in these values for those counties 
that would change from urban to rural, beginning in FY 2016, when we 
would adopt the new CBSA delineations.

                                                     Table 16--FY 2016 Urban to Rural CBSA Crosswalk
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                              FY 2014 CBSA Delineations/FY 2015 data            FY 2015 CBSA Delineations/FY 2015 data        Change in
              County name              -----------------------------------------------------------------------------------------------------    value
                                            CBSA           Urban/Rural         Wage index      CBSA           Urban/Rural        Wage index   (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Greene County, Alabama................        46220  URBAN..................       0.8387            1  RURAL.................       0.6914       -17.56
Franklin County, Arkansas.............        22900  URBAN..................       0.7593            4  RURAL.................       0.7311        -3.71
Power County, Idaho...................        38540  URBAN..................       0.9672           13  RURAL.................       0.7398       -23.51
Franklin County, Indiana..............        17140  URBAN..................       0.9473           15  RURAL.................       0.8416       -11.16
Gibson County, Indiana................        21780  URBAN..................       0.8537           15  RURAL.................       0.8416        -1.42
Greene County, Indiana................        14020  URBAN..................       0.9062           15  RURAL.................       0.8416        -7.13
Tipton County, Indiana................        29020  URBAN..................       0.8990           15  RURAL.................       0.8416        -6.38
Franklin County, Kansas...............        28140  URBAN..................       0.9419           17  RURAL.................       0.7779       -17.41
Geary County, Kansas..................        31740  URBAN..................       0.8406           17  RURAL.................       0.7779        -7.46
Nelson County, Kentucky...............        31140  URBAN..................       0.8593           18  RURAL.................       0.7748        -9.83
Webster County, Kentucky..............        21780  URBAN..................       0.8537           18  RURAL.................       0.7748        -9.24
Franklin County, Massachusetts........        44140  URBAN..................       1.0271           22  RURAL.................       1.1553        12.48
Ionia County, Michigan................        24340  URBAN..................       0.8965           23  RURAL.................       0.8288        -7.55
Newaygo County, Michigan..............        24340  URBAN..................       0.8965           23  RURAL.................       0.8288        -7.55
George County, Mississippi............        37700  URBAN..................       0.7396           25  RURAL.................       0.7570         2.35
Stone County, Mississippi.............        25060  URBAN..................       0.8179           25  RURAL.................       0.7570        -7.45

[[Page 25039]]

 
Crawford County, Missouri.............        41180  URBAN..................       0.9366           26  RURAL.................       0.7725       -17.52
Howard County, Missouri...............        17860  URBAN..................       0.8319           26  RURAL.................       0.7725        -7.14
Washington County, Missouri...........        41180  URBAN..................       0.9366           26  RURAL.................       0.7725       -17.52
Anson County, North Carolina..........        16740  URBAN..................       0.9230           34  RURAL.................       0.7899       -14.42
Greene County, North Carolina.........        24780  URBAN..................       0.9371           34  RURAL.................       0.7899       -15.71
Erie County, Ohio.....................        41780  URBAN..................       0.7784           36  RURAL.................       0.8348         7.25
Ottawa County, Ohio...................        45780  URBAN..................       0.9129           36  RURAL.................       0.8348        -8.56
Preble County, Ohio...................        19380  URBAN..................       0.8938           36  RURAL.................       0.8348        -6.60
Washington County, Ohio...............        37620  URBAN..................       0.8186           36  RURAL.................       0.8348         1.98
Stewart County, Tennessee.............        17300  URBAN..................       0.7526           44  RURAL.................       0.7277        -3.31
Calhoun County, Texas.................        47020  URBAN..................       0.8473           45  RURAL.................       0.7847        -7.39
Delta County, Texas...................        19124  URBAN..................       0.9703           45  RURAL.................       0.7847       -19.13
San Jacinto County, Texas.............        26420  URBAN..................       0.9734           45  RURAL.................       0.7847       -19.39
Summit County, Utah...................        41620  URBAN..................       0.9512           46  RURAL.................       0.9005        -5.33
Cumberland County, Virginia...........        40060  URBAN..................       0.9625           49  RURAL.................       0.7554       -21.52
Danville City County, Virginia........        19260  URBAN..................       0.7963           49  RURAL.................       0.7554        -5.14
King And Queen County, Virginia.......        40060  URBAN..................       0.9625           49  RURAL.................       0.7554       -21.52
Louisa County, Virginia...............        40060  URBAN..................       0.9625           49  RURAL.................       0.7554       -21.52
Pittsylvania County, Virginia.........        19260  URBAN..................       0.7963           49  RURAL.................       0.7554        -5.14
Surry County, Virginia................        47260  URBAN..................       0.9223           49  RURAL.................       0.7554       -18.10
Morgan County, West Virginia..........        25180  URBAN..................       0.9080           51  RURAL.................       0.7274       -19.89
Pleasants County, West Virginia.......        37620  URBAN..................       0.8186           51  RURAL.................       0.7274       -11.14
--------------------------------------------------------------------------------------------------------------------------------------------------------

    We note that IPFs in some urban CBSAs would experience a change in 
their wage index values even though they remain urban because an urban 
CBSA's boundaries and/or the counties included in that CBSA could 
change. Table 17 shows those counties that would experience a change in 
their wage index value in FY 2016 due to the new OMB CBSAs. Table 17 
shows the urban CBSA delineations and wage index values for FY 2015 
based on existing CBSA delineations, compared with the urban CBSA 
delineations and wage index values for FY 2016 based on the new OMB 
delineations, and the percentage change in these values, for counties 
that would remain urban even though the CBSA boundaries and/or counties 
included in that CBSA would change.

                                           Table 17--FY 2015 Urban to a Different FY 2016 Urban CBSA Crosswalk
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                              FY 2014 CBSA Delineations/FY 2015 data            FY 2015 CBSA Delineations/FY 2015 data        Change in
              County name              -----------------------------------------------------------------------------------------------------    value
                                            CBSA           Urban/Rural         Wage index      CBSA           Urban/Rural        Wage index   (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Flagler County, Florida...............        37380  URBAN..................       0.8462        19660  URBAN.................       0.8376        -1.02
De Kalb County, Illinois..............        16974  URBAN..................       1.0412        20994  URBAN.................       1.0299        -1.09
Kane County, Illinois.................        16974  URBAN..................       1.0412        20994  URBAN.................       1.0299        -1.09
Madison County, Indiana...............        11300  URBAN..................       1.0078        26900  URBAN.................       1.0133         0.55
Meade County, Kentucky................        31140  URBAN..................       0.8593        21060  URBAN.................       0.7701       -10.38
Essex County, Massachusetts...........        37764  URBAN..................       1.0769        15764  URBAN.................       1.1159         3.62
Ottawa County, Michigan...............        26100  URBAN..................       0.8136        24340  URBAN.................       0.8799         8.15
Jackson County, Mississippi...........        37700  URBAN..................       0.7396        25060  URBAN.................       0.7896         6.76
Bergen County, New Jersey.............        35644  URBAN..................       1.3110        35614  URBAN.................       1.2837        -2.08
Hudson County, New Jersey.............        35644  URBAN..................       1.3110        35614  URBAN.................       1.2837        -2.08
Middlesex County, New Jersey..........        20764  URBAN..................       1.0989        35614  URBAN.................       1.2837        16.82
Monmouth County, New Jersey...........        20764  URBAN..................       1.0989        35614  URBAN.................       1.2837        16.82
Ocean County, New Jersey..............        20764  URBAN..................       1.0989        35614  URBAN.................       1.2837        16.82
Passaic County, New Jersey............        35644  URBAN..................       1.3110        35614  URBAN.................       1.2837        -2.08
Somerset County, New Jersey...........        20764  URBAN..................       1.0989        35084  URBAN.................       1.1233         2.22
Bronx County, New York................        35644  URBAN..................       1.3110        35614  URBAN.................       1.2837        -2.08
Dutchess County, New York.............        39100  URBAN..................       1.1533        20524  URBAN.................       1.1345        -1.63
Kings County, New York................        35644  URBAN..................       1.3110        35614  URBAN.................       1.2837        -2.08
New York County, New York.............        35644  URBAN..................       1.3110        35614  URBAN.................       1.2837        -2.08
Orange County, New York...............        39100  URBAN..................       1.1533        35614  URBAN.................       1.2837        11.31
Putnam County, New York...............        35644  URBAN..................       1.3110        20524  URBAN.................       1.1345       -13.46
Queens County, New York...............        35644  URBAN..................       1.3110        35614  URBAN.................       1.2837        -2.08
Richmond County, New York.............        35644  URBAN..................       1.3110        35614  URBAN.................       1.2837        -2.08
Rockland County, New York.............        35644  URBAN..................       1.3110        35614  URBAN.................       1.2837        -2.08
Westchester County, New York..........        35644  URBAN..................       1.3110        35614  URBAN.................       1.2837        -2.08
Brunswick County, North Carolina......        48900  URBAN..................       0.8867        34820  URBAN.................       0.8620        -2.79
Bucks County, Pennsylvania............        37964  URBAN..................       1.0837        33874  URBAN.................       1.0157        -6.27

[[Page 25040]]

 
Chester County, Pennsylvania..........        37964  URBAN..................       1.0837        33874  URBAN.................       1.0157        -6.27
Montgomery County, Pennsylvania.......        37964  URBAN..................       1.0837        33874  URBAN.................       1.0157        -6.27
Arecibo Municipio, Puerto Rico........        41980  URBAN..................       0.4449        11640  URBAN.................       0.4213        -5.30
Camuy Municipio, Puerto Rico..........        41980  URBAN..................       0.4449        11640  URBAN.................       0.4213        -5.30
Ceiba Municipio, Puerto Rico..........        21940  URBAN..................       0.3669        41980  URBAN.................       0.4438        20.96
Fajardo Municipio, Puerto Rico........        21940  URBAN..................       0.3669        41980  URBAN.................       0.4438        20.96
Guanica Municipio, Puerto Rico........        49500  URBAN..................       0.3375        38660  URBAN.................       0.4154        23.08
Guayanilla Municipio, Puerto Rico.....        49500  URBAN..................       0.3375        38660  URBAN.................       0.4154        23.08
Hatillo Municipio, Puerto Rico........        41980  URBAN..................       0.4449        11640  URBAN.................       0.4213        -5.30
Luquillo Municipio, Puerto Rico.......        21940  URBAN..................       0.3669        41980  URBAN.................       0.4438        20.96
Penuelas Municipio, Puerto Rico.......        49500  URBAN..................       0.3375        38660  URBAN.................       0.4154        23.08
Quebradillas Municipio, Puerto Rico...        41980  URBAN..................       0.4449        11640  URBAN.................       0.4213        -5.30
Yauco Municipio, Puerto Rico..........        49500  URBAN..................       0.3375        38660  URBAN.................       0.4154        23.08
Anderson County, South Carolina.......        11340  URBAN..................       0.8744        24860  URBAN.................       0.9161         4.77
Grainger County, Tennessee............        34100  URBAN..................       0.6983        28940  URBAN.................       0.7015         0.46
Lincoln County, West Virginia.........        16620  URBAN..................       0.7988        26580  URBAN.................       0.8846        10.74
Putnam County, West Virginia..........        16620  URBAN..................       0.7988        26580  URBAN.................       0.8846        10.74
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Likewise, IPFs currently located in a rural area may remain rural 
under the new CBSA delineations but experience a change in their rural 
wage index value due to implementation of the new CBSA delineations. 
Table 18 shows the FY 2015 CBSA delineations and rural statewide wage 
index values, compared with the FY 2016 CBSA delineations and rural 
statewide wage index values, and the percentage change in these values, 
for those rural areas that would change.

                                          Table 18--FY 2016 Changes to the Statewide Rural Wage Index Crosswalk
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             FY 2014 CBSA Delineations/ FY 2015 data            FY 2015 CBSA Delineations/ FY 2015 data       Change in
              County name              -----------------------------------------------------------------------------------------------------    value
                                            CBSA           Urban/Rural         Wage index      CBSA           Urban/Rural        Wage index   (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
ALABAMA...............................            1  RURAL..................       0.6963            1  RURAL.................       0.6914        -0.70
ARIZONA...............................            3  RURAL..................       0.9125            3  RURAL.................       0.9219         1.03
CONNECTICUT...........................            7  RURAL..................       1.1251            7  RURAL.................       1.1295         0.39
FLORIDA...............................           10  RURAL..................       0.8006           10  RURAL.................       0.8371         4.56
GEORGIA...............................           11  RURAL..................       0.7425           11  RURAL.................       0.7439         0.19
HAWAII................................           12  RURAL..................       1.0741           12  RURAL.................       1.0872         1.22
ILLINOIS..............................           14  RURAL..................       0.8362           14  RURAL.................       0.8369         0.08
KANSAS................................           17  RURAL..................       0.7806           17  RURAL.................       0.7779        -0.35
KENTUCKY..............................           18  RURAL..................       0.7744           18  RURAL.................       0.7748         0.05
LOUISIANA.............................           19  RURAL..................       0.7580           19  RURAL.................       0.7108        -6.23
MARYLAND..............................           21  RURAL..................       0.8554           21  RURAL.................       0.8746         2.24
MASSACHUSETTS.........................           22  RURAL..................       1.3920           22  RURAL.................       1.1553       -17.00
MICHIGAN..............................           23  RURAL..................       0.8207           23  RURAL.................       0.8288         0.99
MISSISSIPPI...........................           25  RURAL..................       0.7589           25  RURAL.................       0.7570        -0.25
NEBRASKA..............................           28  RURAL..................       0.8924           28  RURAL.................       0.8877        -0.53
NEW YORK..............................           33  RURAL..................       0.8208           33  RURAL.................       0.8192        -0.19
NORTH CAROLINA........................           34  RURAL..................       0.7995           34  RURAL.................       0.7899        -1.20
OHIO..................................           36  RURAL..................       0.8329           36  RURAL.................       0.8348         0.23
OREGON................................           38  RURAL..................       1.0083           38  RURAL.................       0.9949        -1.33
PENNSYLVANIA..........................           39  RURAL..................       0.8719           39  RURAL.................       0.8083        -7.29
SOUTH CAROLINA........................           42  RURAL..................       0.8374           42  RURAL.................       0.8370        -0.05
TENNESSEE.............................           44  RURAL..................       0.7365           44  RURAL.................       0.7277        -1.19
TEXAS.................................           45  RURAL..................       0.7855           45  RURAL.................       0.7847        -0.10
UTAH..................................           46  RURAL..................       0.8891           46  RURAL.................       0.9005         1.28
VIRGINIA..............................           49  RURAL..................       0.7674           49  RURAL.................       0.7554        -1.56
WASHINGTON............................           50  RURAL..................       1.0892           50  RURAL.................       1.0877        -0.14
WEST VIRGINIA.........................           51  RURAL..................       0.7410           51  RURAL.................       0.7274        -1.84
WISCONSIN.............................           52  RURAL..................       0.9041           52  RURAL.................       0.9087         0.51
--------------------------------------------------------------------------------------------------------------------------------------------------------

    While we believe that the new CBSA delineations would result in 
wage index values that are more representative of the actual costs of 
labor in a given area, we also recognize that use of the new CBSA 
delineations would result in reduced payments to some IPFs and 
increased payments to other IPFs, due to changes in wage index values.

[[Page 25041]]

Approximately 23.4 percent of IPFs would experience a decrease in wage 
index values due to CBSA changes, while 12.4 percent of IPFs would 
experience an increase in wage index values due to CBSA changes. The 
remaining 64.1 percent of IPFs would experience no change in their wage 
index values (these percentages do not sum to 100.0 percent due to 
rounding). While the wage index CBSA changes would be implemented in a 
budget-neutral fashion, the distributional effects of these CBSA 
changes appear to affect rural IPFs in particular; column 5 in Table 26 
in section VII. of this proposed rule shows that rural providers 
overall are anticipated to experience payment reductions of 0.2 
percent, with for-profit rural psychiatric hospitals anticipated to 
experience the greatest reduction of 0.6 percent. We believe that it 
would be appropriate to provide for a transition period to mitigate any 
negative impacts on facilities that experience reduced payments as a 
result of our adopting the new OMB CBSA delineations. Therefore, we 
propose to implement these CBSA changes using a 1-year transition with 
a blended wage index for all providers. For FY 2016, the wage index for 
each provider would consist of a blend of 50 percent of the FY 2016 IPF 
wage index using the current OMB delineations and 50 percent of the FY 
2016 IPF wage index using the new OMB delineations. This results in an 
average of the 2 values. We propose that the FY 2017 IPF PPS wage index 
and subsequent IPF PPS wage indices would be based solely on the new 
OMB CBSA delineations. We believe a 1-year transition strikes an 
appropriate balance between ensuring that IPF PPS payments are as 
accurate and stable as possible while giving IPFs time to adjust to the 
new CBSA delineations. The proposed FY 2016 IPF PPS Transitional wage 
index is located on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/IPFPPS/WageIndex.html.
d. Adjustment for Rural Location and Proposal to Phase Out the Rural 
Adjustment for IPFs Losing Their Rural Adjustment Due to CBSA Changes
    In the November 2004 IPF PPS final rule, we provided a 17 percent 
payment adjustment for IPFs located in a rural area. This adjustment 
was based on the regression analysis, which indicated that the per diem 
cost of rural facilities was 17 percent higher than that of urban 
facilities after accounting for the influence of the other variables 
included in the regression. For FY 2016, we propose to continue to 
apply a 17 percent payment adjustment for IPFs located in a rural area 
as defined at Sec.  412.64(b)(1)(ii)(C). A complete discussion of the 
adjustment for rural locations appears in the November 2004 IPF PPS 
final rule (69 FR 66954).
    As noted in section III.D.1.c. of this proposed rule, we are 
proposing to adopt OMB updates to CBSA delineations. Adoption of the 
updated CBSAs would change the status of 37 IPF providers currently 
designated as ``rural'' to ``urban'' for FY 2016 and subsequent fiscal 
years. As such, these 37 newly-urban providers would no longer receive 
the 17 percent rural adjustment.
    While 34 of these 37 rural IPFs that would be designated as urban 
under the new CBSA delineations would experience an increase in their 
wage index value, all 37 of these IPFs would lose the 17 percent rural 
adjustment. Consistent with the transition policy adopted for Inpatient 
Rehabilitation Facilities (IRFs) in FY 2006 (70 FR 47923 through 
47927), we considered the appropriateness of applying a 3-year phase-
out of the rural adjustment for IPFs located in rural counties that 
would become urban under the new OMB delineations, given the 
potentially significant payment impacts for these IPFs. We believe that 
a phase-out of the rural adjustment transition period for these 37 IPFs 
specifically is appropriate because we expect these IPFs would 
experience a steeper and more abrupt reduction in their payments 
compared to other IPFs.
    Therefore, in addition to the 2-year wage index transition policy 
noted above, we are proposing a budget-neutral 3-year phase-out of the 
rural adjustment for existing FY 2015 rural IPFs that would become 
urban in FY 2016 and that experience a loss in payments due to changes 
from the new CBSA delineations. Accordingly, the incremental steps 
needed to reduce the impact of the loss of the FY 2015 rural adjustment 
of 17 percent would be taken over FYs 2016, 2017 and 2018. This policy 
would allow rural IPFs that would be classified as urban in FY 2016 to 
receive two-thirds of the 2015 rural adjustment for FY 2016, as well as 
the blended wage index. For FY 2017, these IPFs would receive the full 
FY 2017 wage index and one-third of the FY 2015 rural adjustment. For 
FY 2018, these IPFs would receive the full FY 2018 wage index without a 
rural adjustment. We believe a 3-year budget-neutral phase-out of the 
rural adjustment for IPFs that transition from rural to urban status 
under the new CBSA delineations would best accomplish the goals of 
mitigating the loss of the rural adjustment for existing FY 2015 rural 
IPFs. The purpose of the gradual phase-out of the rural adjustment for 
these providers is to alleviate the significant payment implications 
for existing rural IPFs that may need time to adjust to the loss of 
their FY 2015 rural payment adjustment or that experience a reduction 
in payments solely because of this re-designation. As stated, this 
policy is specifically for rural IPFs that become urban in FY 2016. We 
are not implementing a transition policy for urban IPFs that become 
rural in FY 2016 because these IPFs will receive the full rural 
adjustment of 17 percent beginning October 1, 2015.
    For the reasons discussed, we are proposing to implement a 3-year 
budget-neutral phase-out of the rural adjustment for the IPFs that 
during FY 2015 were designated as rural and for FY 2016 are designated 
as urban under the new CBSA system. This is in addition to our proposed 
implementation of a 2-year blended wage index for all IPFs. We believe 
that the incremental reduction of the FY 2015 rural adjustment would be 
appropriate to mitigate a significant reduction in payment. We 
considered alternative timeframes for phasing out the rural adjustment 
for IPFs which would transition from rural to urban status in FY 2016, 
but believe that a 3-year budget-neutral phase-out of the rural 
adjustment would appropriately mitigate the adverse payment impacts for 
existing FY 2015 rural IPFs that will be designated as urban IPFs in FY 
2016, while also ensuring that payment rates for these providers are 
set accurately and appropriately. We invite public comment on this 
proposed policy.
e. Budget Neutrality Adjustment
    Changes to the wage index are made in a budget-neutral manner so 
that updates do not increase expenditures. Therefore, for FY 2016, we 
propose to continue to apply a budget-neutrality adjustment in 
accordance with our existing budget-neutrality policy. This policy 
requires us to estimate the total amount of IPF PPS payments for FY 
2016 using the labor-related share and the wage indices from FY 2015 
divided by the total estimated IPF PPS payments for FY 2016 using the 
labor-related share and wage indices from FY 2016. The estimated 
payments are based on FY 2014 IPF claims, inflated to the appropriate 
FY. This quotient is the wage index budget-neutrality factor, and it is 
applied in the update of the Federal per diem base rate for FY 2016 in 
addition to the market basket described in section III.A. of this 
proposed rule.

[[Page 25042]]

The proposed wage index budget-neutrality factor for FY 2016 is 1.0041.
2. Teaching Adjustment
    In the November 2004 IPF PPS final rule, we implemented regulations 
at Sec.  412.424(d)(1)(iii) to establish a facility-level adjustment 
for IPFs that are, or are part of, teaching hospitals. The teaching 
adjustment accounts for the higher indirect operating costs experienced 
by hospitals that participate in graduate medical education (GME) 
programs. The payment adjustments are made based on the ratio of the 
number of full-time equivalent (FTE) interns and residents training in 
the IPF and the IPF's average daily census (ADC).
    Medicare makes direct GME payments (for direct costs such as 
resident and teaching physician salaries, and other direct teaching 
costs) to all teaching hospitals including those paid under a PPS, and 
those paid under the TEFRA rate-of-increase limits. These direct GME 
payments are made separately from payments for hospital operating costs 
and are not part of the IPF PPS. The direct GME payments do not address 
the estimated higher indirect operating costs teaching hospitals may 
face.
    The results of the regression analysis of FY 2002 IPF data 
established the basis for the payment adjustments included in the 
November 2004 IPF PPS final rule. The results showed that the indirect 
teaching cost variable is significant in explaining the higher costs of 
IPFs that have teaching programs. We calculated the teaching adjustment 
based on the IPF's ``teaching variable,'' which is one plus the ratio 
of the number of FTE residents training in the IPF (subject to 
limitations described below) to the IPF's ADC.
    We established the teaching adjustment in a manner that limited the 
incentives for IPFs to add FTE residents for the purpose of increasing 
their teaching adjustment. We imposed a cap on the number of FTE 
residents that may be counted for purposes of calculating the teaching 
adjustment. The cap limits the number of FTE residents that teaching 
IPFs may count for the purpose of calculating the IPF PPS teaching 
adjustment, not the number of residents teaching institutions can hire 
or train. We calculated the number of FTE residents that trained in the 
IPF during a ``base year'' and used that FTE resident number as the 
cap. An IPF's FTE resident cap is ultimately determined based on the 
final settlement of the IPF's most recent cost report filed before 
November 15, 2004 (that is, the publication date of the IPF PPS final 
rule). A complete discussion on the temporary adjustment to the FTE cap 
to reflect residents added due to hospital closure and by residency 
program appears in the January 27, 2011 IPF PPS proposed rule (76 FR 
5018 through 5020) and the May 6, 2011 IPF PPS final rule (76 R 26453 
through 26456).
    In the regression analysis, the logarithm of the teaching variable 
had a coefficient value of 0.5150. We converted this cost effect to a 
teaching payment adjustment by treating the regression coefficient as 
an exponent and raising the teaching variable to a power equal to the 
coefficient value. We note that the coefficient value of 0.5150 was 
based on the regression analysis holding all other components of the 
payment system constant. A complete discussion of how the teaching 
adjustment was calculated appears in the November 2004 IPF PPS final 
rule (69 FR 66954 through 66957) and the May 2008 IPF PPS notice (73 FR 
25721). As with other adjustment factors derived through the regression 
analysis, we do not plan to rerun the teaching adjustment factors in 
the regression analysis until we more fully analyze IPF PPS data. 
Therefore, in this proposed rule, for FY 2016, we propose to continue 
to retain the coefficient value of 0.5150 for the teaching adjustment 
to the Federal per diem base rate.
3. Cost of Living Adjustment for IPFs Located in Alaska and Hawaii
    The IPF PPS includes a payment adjustment for IPFs located in 
Alaska and Hawaii based upon the county in which the IPF is located. As 
we explained in the November 2004 IPF PPS final rule, the FY 2002 data 
demonstrated that IPFs in Alaska and Hawaii had per diem costs that 
were disproportionately higher than other IPFs. Other Medicare PPSs 
(for example, the IPPS and LTCH PPS) adopted a cost of living 
adjustment (COLA) to account for the cost differential of care 
furnished in Alaska and Hawaii.
    We analyzed the effect of applying a COLA to payments for IPFs 
located in Alaska and Hawaii. The results of our analysis demonstrated 
that a COLA for IPFs located in Alaska and Hawaii would improve payment 
equity for these facilities. As a result of this analysis, we provided 
a COLA in the November 2004 IPF PPS final rule.
    A COLA for IPFs located in Alaska and Hawaii is made by multiplying 
the nonlabor-related portion of the Federal per diem base rate by the 
applicable COLA factor based on the COLA area in which the IPF is 
located.
    The COLA factors are published on the Office of Personnel 
Management (OPM) Web site (http://www.opm.gov/oca/cola/rates.asp).
    We note that the COLA areas for Alaska are not defined by county as 
are the COLA areas for Hawaii. In 5 CFR 591.207, the OPM established 
the following COLA areas:
     City of Anchorage, and 80-kilometer (50-mile) radius by 
road, as measured from the Federal courthouse;
     City of Fairbanks, and 80-kilometer (50-mile) radius by 
road, as measured from the Federal courthouse;
     City of Juneau, and 80-kilometer (50-mile) radius by road, 
as measured from the Federal courthouse;
     Rest of the State of Alaska.
    As stated in the November 2004 IPF PPS final rule, we update the 
COLA factors according to updates established by the OPM. However, 
sections 1911 through 1919 of the Nonforeign Area Retirement Equity 
Assurance Act, as contained in subtitle B of title XIX of the National 
Defense Authorization Act (NDAA) for Fiscal Year 2010 (Pub. L. 111-84, 
October 28, 2009), transitions the Alaska and Hawaii COLAs to locality 
pay. Under section 1914 of Pub. L. 111-84, locality pay is being phased 
in over a 3-year period beginning in January 2010, with COLA rates 
frozen as of the date of enactment, October 28, 2009, and then 
proportionately reduced to reflect the phase-in of locality pay.
    When we published the proposed COLA factors in the January 2011 IPF 
PPS proposed rule (76 FR 4998), we inadvertently selected the FY 2010 
COLA rates which had been reduced to account for the phase-in of 
locality pay. We did not intend to propose the reduced COLA rates 
because that would have understated the adjustment. Since the 2009 COLA 
rates did not reflect the phase-in of locality pay, we finalized the FY 
2009 COLA rates for RY 2010 through RY 2014.
    In the FY 2013 IPPS/LTCH final rule (77 FR 53700 through 53701), 
CMS established a methodology for FY 2014 to update the COLA factors 
for Alaska and Hawaii. Under that methodology, we use a comparison of 
the growth in the Consumer Price Indices (CPIs) in Anchorage, Alaska 
and Honolulu, Hawaii relative to the growth in the overall CPI as 
published by the Bureau of Labor Statistics (BLS) to update the COLA 
factors for all areas in Alaska and Hawaii, respectively. As discussed 
in the FY 2013 IPPS/LTCH proposed rule (77 FR 28145), because BLS 
publishes CPI data for only Anchorage, Alaska and Honolulu, Hawaii, our 
methodology for updating the COLA factors uses a comparison of the 
growth in the CPIs for those cities relative to the growth in the 
overall CPI to update the COLA factors

[[Page 25043]]

for all areas in Alaska and Hawaii, respectively. We believe that the 
relative price differences between these cities and the United States 
(as measured by the CPIs mentioned above) are generally appropriate 
proxies for the relative price differences between the ``other areas'' 
of Alaska and Hawaii and the United States.
    The CPIs for ``All Items'' that BLS publishes for Anchorage, 
Alaska, Honolulu, Hawaii, and for the average U.S. city are based on a 
different mix of commodities and services than is reflected in the 
nonlabor-related share of the IPPS market basket. As such, under the 
methodology we established to update the COLA factors, we calculated a 
``reweighted CPI'' using the CPI for commodities and the CPI for 
services for each of the geographic areas to mirror the composition of 
the IPPS market basket nonlabor-related share. The current composition 
of BLS' CPI for ``All Items'' for all of the respective areas is 
approximately 40 percent commodities and 60 percent services. However, 
the nonlabor-related share of the IPPS market basket is comprised of 60 
percent commodities and 40 percent services. Therefore, under the 
methodology established for FY 2014 in the FY 2013 IPPS/LTCH PPS final 
rule, we created reweighted indexes for Anchorage, Alaska, Honolulu, 
Hawaii, and the average U.S. city using the respective CPI commodities 
index and CPI services index and applying the approximate 60/40 weights 
from the IPPS market basket. This approach is appropriate because we 
would continue to make a COLA for hospitals located in Alaska and 
Hawaii by multiplying the nonlabor-related portion of the standardized 
amount by a COLA factor.
    Under the COLA factor update methodology established in the FY 2014 
IPPS/LTCH final rule, we adjust payments made to hospitals located in 
Alaska and Hawaii by incorporating a 25-percent cap on the CPI-updated 
COLA factors. We note that OPM's COLA factors were calculated with a 
statutorily mandated cap of 25 percent, and since at least 1984, we 
have exercised our discretionary authority to adjust Alaska and Hawaii 
payments by incorporating this cap. In keeping with this historical 
policy, we would continue to use such a cap, as our proposal is based 
on OPM's COLA factors. We believe this approach is appropriate because 
our CPI-updated COLA factors use the 2009 OPM COLA factors as a basis.
    In FY 2015 IPF PPS rulemaking, we adopted the same methodology for 
the COLA factors applied under the IPPS because IPFs are hospitals with 
a similar mix of commodities and services. We think it is appropriate 
to have a consistent policy approach with that of other hospitals in 
Alaska and Hawaii. Therefore, in the FY 2015 IPF PPS final rule, we 
adopted the cost of living adjustment factors shown in the Addendum for 
IPFs located in Alaska and Hawaii. Under IPPS COLA policy, the COLA 
updates are determined every four years, when the IPPS market basket is 
rebased. Since the IPPS COLA factors were last updated in FY 2014, they 
are not scheduled to be updated again until FY 2018. As such, we 
propose to continue using the existing IPF PPS COLA factors in effect 
in FY 2015 for FY 2016. The IPF PPS COLA factors for FY 2016 are shown 
in the Addendum of this proposed rule.
4. Proposed Adjustment for IPFs With a Qualifying Emergency Department 
(ED)
    The IPF PPS includes a facility-level adjustment for IPFs with 
qualifying EDs. We provide an adjustment to the Federal per diem base 
rate to account for the costs associated with maintaining a full-
service ED. The adjustment is intended to account for ED costs incurred 
by a freestanding psychiatric hospital with a qualifying ED or a 
distinct part psychiatric unit of an acute care hospital or a CAH, for 
preadmission services otherwise payable under the Medicare Outpatient 
Prospective Payment System (OPPS), furnished to a beneficiary on the 
date of the beneficiary's admission to the hospital and during the day 
immediately preceding the date of admission to the IPF (see Sec.  
413.40(c)(2)), and the overhead cost of maintaining the ED. This 
payment is a facility-level adjustment that applies to all IPF 
admissions (with one exception described below), regardless of whether 
a particular patient receives preadmission services in the hospital's 
ED.
    The ED adjustment is incorporated into the variable per diem 
adjustment for the first day of each stay for IPFs with a qualifying 
ED. That is, IPFs with a qualifying ED receive an adjustment factor of 
1.31 as the variable per diem adjustment for day 1 of each stay. If an 
IPF does not have a qualifying ED, it receives an adjustment factor of 
1.19 as the variable per diem adjustment for day 1 of each patient 
stay.
    The ED adjustment is made on every qualifying claim except as 
described below. As specified in Sec.  412.424(d)(1)(v)(B), the ED 
adjustment is not made when a patient is discharged from an acute care 
hospital or CAH and admitted to the same hospital's or CAH's 
psychiatric unit. We clarified in the November 2004 IPF PPS final rule 
(69 FR 66960) that an ED adjustment is not made in this case because 
the costs associated with ED services are reflected in the DRG payment 
to the acute care hospital or through the reasonable cost payment made 
to the CAH.
    Therefore, when patients are discharged from an acute care hospital 
or CAH and admitted to the same hospital or CAH's psychiatric unit, the 
IPF receives the 1.19 adjustment factor as the variable per diem 
adjustment for the first day of the patient's stay in the IPF.
    For FY 2016, we are proposing to continue to retain the 1.31 
adjustment factor for IPFs with qualifying EDs. A complete discussion 
of the steps involved in the calculation of the ED adjustment factor 
appears in the November 2004 IPF PPS final rule (69 FR 66959 through 
66960) and the May 2006 IPF PPS final rule (71 FR 27070 through 27072).

E. Other Proposed Payment Adjustments and Policies

1. Outlier Payment Overview
    The IPF PPS includes an outlier adjustment to promote access to IPF 
care for those patients who require expensive care and to limit the 
financial risk of IPFs treating unusually costly patients. In the 
November 2004 IPF PPS final rule, we implemented regulations at Sec.  
412.424(d)(3)(i) to provide a per-case payment for IPF stays that are 
extraordinarily costly. Providing additional payments to IPFs for 
extremely costly cases strongly improves the accuracy of the IPF PPS in 
determining resource costs at the patient and facility level. These 
additional payments reduce the financial losses that would otherwise be 
incurred in treating patients who require more costly care and, 
therefore, reduce the incentives for IPFs to under-serve these 
patients.
    We make outlier payments for discharges in which an IPF's estimated 
total cost for a case exceeds a fixed dollar loss threshold amount 
(multiplied by the IPF's facility-level adjustments) plus the Federal 
per diem payment amount for the case.
    In instances when the case qualifies for an outlier payment, we pay 
80 percent of the difference between the estimated cost for the case 
and the adjusted threshold amount for days 1 through 9 of the stay 
(consistent with the median LOS for IPFs in FY 2002), and 60 percent of 
the difference for day 10 and thereafter. We established the 80 percent 
and 60 percent loss sharing

[[Page 25044]]

ratios because we were concerned that a single ratio established at 80 
percent (like other Medicare PPSs) might provide an incentive under the 
IPF per diem payment system to increase LOS in order to receive 
additional payments.
    After establishing the loss sharing ratios, we determined the 
current FY 2015 fixed dollar loss threshold amount through payment 
simulations designed to compute a dollar loss beyond which payments are 
estimated to meet the 2 percent outlier spending target. Each year when 
we update the IPF PPS, we simulate payments using the latest available 
data to compute the fixed dollar loss threshold so that outlier 
payments represent 2 percent of total projected IPF PPS payments.
2. Proposed Update to the Outlier Fixed Dollar Loss Threshold Amount
    In accordance with the update methodology described in Sec.  
412.428(d), we propose to update the fixed dollar loss threshold amount 
used under the IPF PPS outlier policy. Based on the regression analysis 
and payment simulations used to develop the IPF PPS, we established a 2 
percent outlier policy which strikes an appropriate balance between 
protecting IPFs from extraordinarily costly cases while ensuring the 
adequacy of the Federal per diem base rate for all other cases that are 
not outlier cases.
    Based on an analysis of the latest available data (that is, FY 2014 
IPF claims) and rate increases, we believe it is necessary to update 
the fixed dollar loss threshold amount in order to maintain an outlier 
percentage that equals 2 percent of total estimated IPF PPS payments. 
To update the IPF outlier threshold amount for FY 2016, we propose to 
use FY 2014 claims data and the same methodology that we used to set 
the initial outlier threshold amount in the May 2006 IPF PPS final rule 
(71 FR 27072 and 27073), which is also the same methodology that we 
used to update the outlier threshold amounts for years 2008 through 
2015. Based on an analysis of this updated data, we estimate that IPF 
outlier payments as a percentage of total estimated payments are 
approximately 2.3 percent in FY 2015. Therefore, we propose to update 
the outlier threshold amount to $9,825 to maintain estimated outlier 
payments at approximately 2 percent of total estimated aggregate IPF 
payments for FY 2016.
3. Proposed Update to IPF Cost-to-Charge Ratio Ceilings
    Under the IPF PPS, an outlier payment is made if an IPF's cost for 
a stay exceeds a fixed dollar loss threshold amount plus the IPF PPS 
amount. In order to establish an IPF's cost for a particular case, we 
multiply the IPF's reported charges on the discharge bill by its 
overall cost-to-charge ratio (CCR). This approach to determining an 
IPF's cost is consistent with the approach used under the IPPS and 
other PPSs. In the June 2003 IPPS final rule (68 FR 34494), we 
implemented changes to the IPPS policy used to determine CCRs for acute 
care hospitals because we became aware that payment vulnerabilities 
resulted in inappropriate outlier payments. Under the IPPS, we 
established a statistical measure of accuracy for CCRs in order to 
ensure that aberrant CCR data did not result in inappropriate outlier 
payments.
    As we indicated in the November 2004 IPF PPS final rule (69 FR 
66961), because we believe that the IPF outlier policy is susceptible 
to the same payment vulnerabilities as the IPPS, we adopted a method to 
ensure the statistical accuracy of CCRs under the IPF PPS. 
Specifically, we adopted the following procedure in the November 2004 
IPF PPS final rule: We calculated 2 national ceilings, one for IPFs 
located in rural areas and one for IPFs located in urban areas. We 
computed the ceilings by first calculating the national average and the 
standard deviation of the CCR for both urban and rural IPFs using the 
most recent CCRs entered in the CY 2015 Provider Specific File.
    To determine the rural and urban ceilings, we multiplied each of 
the standard deviations by 3 and added the result to the appropriate 
national CCR average (either rural or urban). The upper threshold CCR 
for IPFs in FY 2016 is 1.9041 for rural IPFs, and 1.6881 for urban 
IPFs, based on CBSA-based geographic designations. If an IPF's CCR is 
above the applicable ceiling, the ratio is considered statistically 
inaccurate, and we assign the appropriate national (either rural or 
urban) median CCR to the IPF.
    We apply the national CCRs to the following situations:
     New IPFs that have not yet submitted their first Medicare 
cost report. We continue to use these national CCRs until the 
facility's actual CCR can be computed using the first tentatively or 
final settled cost report.
     IPFs whose overall CCR is in excess of 3 standard 
deviations above the corresponding national geometric mean (that is, 
above the ceiling).
     Other IPFs for which the MAC obtains inaccurate or 
incomplete data with which to calculate a CCR.
    We are not proposing to make any changes to the application of the 
national CCRs or to the procedures for updating the CCR ceilings in FY 
2016. However, we are proposing to update the FY 2016 national median 
and ceiling CCRs for urban and rural IPFs based on the CCRs entered in 
the latest available IPF PPS Provider Specific File. Specifically, for 
FY 2016, and to be used in each of the 3 situations listed above, using 
the most recent CCRs entered in the CY 2015 Provider Specific File we 
estimate the national median CCR of 0.6210 for rural IPFs and the 
national median CCR of 0.4675 for urban IPFs. These calculations are 
based on the IPF's location (either urban or rural) using the CBSA-
based geographic designations.
    A complete discussion regarding the national median CCRs appears in 
the November 2004 IPF PPS final rule (69 FR 66961 through 66964).

IV. Other Payment Policy Issues

A. ICD-10-CM and ICD-10-PCS Implementation

    We remind IPF providers that CMS is implementing the International 
Classification of Diseases, 10th Revision, Clinical Modification (ICD-
10-CM) as the HIPAA designated code set for reporting diseases, 
injuries, impairments, other health related problems, their 
manifestations, and causes of injury as of October 1, 2015. Below is a 
brief history of key activities leading to the October 1, 2015 
implementation date.
    In the Standards for Electronic Transactions final rule, published 
in the Federal Register on August 17, 2000 (65 FR 50312), the 
Department adopted the International Classification of Diseases, 9th 
Revision, Clinical Modification (ICD-9-CM) as the HIPAA designated code 
set for reporting diseases, injuries, impairments, other health related 
problems, their manifestations, and causes of injury. Therefore, on 
January 1, 2005 when the IPF PPS began, we used ICD-9-CM as the 
designated code set for the IPF PPS. IPF claims with a principal 
diagnosis included in Chapter Five of the ICD-9-CM are paid the Federal 
per diem base rate and all other applicable adjustments, including any 
applicable DRG adjustment.
    Together with the rest of the healthcare industry, CMS was 
scheduled to implement the 10th revision of the ICD coding scheme, that 
is, ICD-10-CM, on October 1, 2014. Hence, in the FY 2014 IPF PPS final 
rule (78 FR 46741-46742), we finalized a policy that ICD-10-CM codes 
will be used in IPF PPS.
    On April 1, 2014, the Protecting Access to Medicare Act of 2014 
(PAMA)

[[Page 25045]]

(Pub. L. 113-93) was enacted. Section 212 of PAMA, titled ``Delay in 
Transition from ICD-9 to ICD-10 Code Sets,'' provided that ``[t]he 
Secretary of Health and Human Services may not, prior to October 1, 
2015, adopt ICD-10 code sets as the standard for code sets under 
section 1173(c) of the Social Security Act (42 U.S.C. 1320d-2(c)) and 
section 162.1002 of title 45, Code of Federal Regulations.'' On May 1, 
2014, the Secretary announced that HHS expected to issue an interim 
final rule that would require use of ICD-10-CM beginning October 1, 
2015 and would continue to require use of ICD-9-CM through September 
30, 2015. This announcement is available on the CMS Web site at http://cms.gov/Medicare/Coding/ICD10/index.html. HHS finalized the new 
compliance date of October 1, 2015 for ICD-10-CM and ICD-10-PCS in an 
August 4, 2014 final rule titled ``Administrative Simplification: 
Change to the Compliance Date for the International Classification of 
Diseases, 10th Revision (ICD-10-CM and ICD-10-PCS)'' (79 FR 45128). 
This rule also requires HIPAA covered entities to continue to use the 
ICD-9-CM code set through September 30, 2015. Therefore, beginning 
October 1, 2015, we require use of the ICD-10-CM and ICD-10-PCS codes 
for reporting the MS-DRG and comorbidity adjustment factors for IPF 
services.
    Every year, changes to the ICD-10-CM and the ICD-10-PCS coding 
system will be addressed in the IPPS proposed and final rules. The 
changes to the codes are effective October 1 of each year and must be 
used by acute care hospitals as well as other providers to report 
diagnostic and procedure information. The IPF PPS has always 
incorporated ICD-9-CM coding changes made in the annual IPPS update and 
will continue to do so for the ICD-10-CM and ICD-10-PCS coding changes. 
We will continue to publish coding changes in a Transmittal/Change 
Request, similar to how coding changes are announced by the IPPS and 
LTCH PPS. The coding changes relevant to the IPF PPS are also published 
in the IPF PPS proposed and final rules, or in IPF PPS update notices. 
In Sec.  412.428(e), we indicate that CMS will publish information 
pertaining to the annual update for the IPF PPS, which includes 
describing the ICD-9-CM coding changes and DRG classification changes 
discussed in the annual update to the hospital IPPS regulations. 
Because ICD-10-CM will be implemented on October 1, 2015, we need to 
update the regulation language at Sec.  412.428(e) to refer to ICD-10-
CM, rather than ICD-9-CM. Therefore, we propose to revise Sec.  
412.428(e) to state that the information we will publish annually in 
the Federal Register to describe IPF PPS updates would describe the 
ICD-10-CM coding changes and DRG classification changes discussed in 
the annual update to the hospital inpatient prospective payment system 
regulations. In the FY 2015 IPF PPS final rule (79 FR 45945 through 
46946), the MS-DRGs were converted so that the MS-DRG assignment logic 
uses ICD-10-CM/PCS codes directly. When an IPF submits a claim for 
discharges, the ICD-10-CM/PCS diagnosis and procedure codes will be 
assigned to the correct MS-DRG. In the FY 2015 IPF PPS final rule, we 
also identified the ICD-10-CM/PCS codes that are eligible for 
comorbidity payment adjustments under the IPF PPS (79 FR 45947 through 
45955).
    The ICD-10-CM guidelines are updated each year along with the ICD-
10-CM code set. To find the annual coding guidelines, go to CDC's Web 
site at http://www.cdc.gov/nchs/icd/icd10cm.htm or the annual ICD-10-CM 
updates posted on the CMS ICD-10 Web site at http://www.cms.gov/Medicare/Coding/ICD10/index.html.

B. Status of Future Refinements

    For RY 2012, we identified several areas of concern for future 
refinement, and we invited comments on these issues in our RY 2012 
proposed and final rules. For further discussion of these issues and to 
review the public comments, we refer readers to the RY 2012 IPF PPS 
proposed rule (76 FR 4998) and final rule (76 FR 26432).
    We have delayed making refinements to the IPF PPS until we have 
completed a thorough analysis of IPF PPS data on which to base those 
refinements. Specifically, we will delay updating the adjustment 
factors derived from the regression analysis until we have IPF PPS data 
that include as much information as possible regarding the patient-
level characteristics of the population that each IPF serves. We have 
begun the necessary analysis to better understand IPF industry 
practices so that we may refine the IPF PPS in the future, as 
appropriate.
IPF Covered Services
    The IPF PPS established the Federal per diem base rate for each 
patient day in an IPF from the national average routine operating, 
ancillary, and capital costs. Preliminary analysis reveals that in 2012 
to 2013, over 20 percent of IPF stays show no reported ancillary costs, 
such as laboratory and drug costs, in cost reports or charges on 
claims. The majority of these stays with zero ancillary costs or 
charges were in for-profit, free-standing IPF hospitals. We would 
expect that patients admitted to an IPF would undergo laboratory 
testing as part of the admission history and physical. We would also 
expect that most patients requiring hospitalization for active 
psychiatric treatment would need drugs. Therefore, we were surprised 
when the analysis showed such a large number of stays reporting no 
laboratory services and no drugs were provided throughout the 
hospitalization. Until further analysis is completed, we can only 
surmise that the stays did not require ancillaries and therefore, were 
not provided, or that the ancillary services were separately billed.
    We remind the industry that CMS pays only the inpatient psychiatric 
facility for services furnished to a Medicare beneficiary who is an 
inpatient of that inpatient psychiatric facility, except for certain 
professional services, and that payments made under this subpart are 
payments in full for all inpatient hospital services, provided directly 
or under arrangement (see 42 CFR 412.404(d)), as specified in 42 CFR 
409.10.
    The covered services specified in Sec.  409.10(a), which apply to 
IPFs, include the following: Bed and board; nursing services and other 
related services; use of hospital or CAH facilities; medical social 
services; drugs, biologicals, supplies, appliances, and equipment; 
certain other diagnostic or therapeutic services; medical or surgical 
services provided by certain interns or residents-in-training; and 
transportation services, including transport by ambulance.
    Only the professional services listed in Sec.  409.10(b) can be 
separately billed for a Medicare beneficiary who is an inpatient at an 
IPF, including services of physicians, physician assistants, nurse 
practitioners, clinical nurse specialists, certified nurse mid-wives, 
anesthetists, and qualified psychologists. (see Sec.  409.10(b) for 
specifics on how these professions and services are defined. These 
regulations are available online at the electronic Code of Federal 
Regulations, at http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&tpl=%2Findex.tpl.)
    Ancillary costs such as laboratory costs and drugs are already 
included in the Medicare IPF PPS per diem payment and should not be 
unbundled and billed separately to Medicare. We expect that the IPF 
would be recording the cost of all drugs provided to its Medicare 
patients on its Medicare cost reports, and reporting charges for those 
drugs on its Medicare claims. We expect that when an IPF contracts with 
an outside laboratory to provide services to its

[[Page 25046]]

Medicare inpatients, the IPF would instruct the laboratory to bill the 
IPF and not to bill Medicare. Similarly, drugs provided to IPF Medicare 
inpatients where Medicare is the primary payer should not be billed to 
Part D or to other insurers.
    We are continuing to analyze claims and cost report data that do 
not include ancillary charges or costs, and will be sharing our 
findings with the Center for Program Integrity and the Office of 
Financial Management for further investigation, as the results warrant. 
Our refinement analysis is dependent on recent precise data for costs, 
including ancillary costs. We will continue to collect these data until 
an accurate refinement analysis can be performed. Therefore, we are not 
proposing refinements in this proposed rule. Once we have gathered 
timely and accurate data, we will analyze that data with the 
expectation of a refinement update in future rulemaking. We invite 
comments on this issue of zero ancillary costs to better understand 
industry practices.

V. Inpatient Psychiatric Facilities Quality Reporting (IPFQR) Program

A. Background

1. Statutory Authority
    Section 1886(s)(4) of the Act, as added and amended by sections 
3401(f) and 10322(a) of the Affordable Care Act, requires the Secretary 
to implement a quality reporting program for inpatient psychiatric 
hospitals and psychiatric units. Section 1886(s)(4)(A)(i) of the Act 
requires that, for FY 2014 \2\ and each subsequent fiscal year, the 
Secretary must reduce any annual update to a standard Federal rate for 
discharges occurring during the rate year by 2.0 percentage points for 
any inpatient psychiatric hospital or psychiatric unit that does not 
comply with quality data submission requirements with respect to an 
applicable fiscal year.
---------------------------------------------------------------------------

    \2\ The statute uses the term ``rate year'' (RY). However, 
beginning with the annual update of the inpatient psychiatric 
facility prospective payment system (IPF PPS) that took effect on 
July 1, 2011 (RY 2012), we aligned the IPF PPS update with the 
annual update of the ICD-9-CM codes, effective on October 1 of each 
year. This change allowed for annual payment updates and the ICD-9-
CM coding update to occur on the same schedule and appear in the 
same Federal Register document, promoting administrative efficiency. 
To reflect the change to the annual payment rate update cycle, we 
revised the regulations at 42 CFR 412.402 to specify that, beginning 
October 1, 2012, the RY update period would be the 12-month period 
from October 1 through September 30, which we refer to as a ``fiscal 
year'' (FY) (76 FR 26435). Therefore, with respect to the IPFQR 
Program, the terms ``rate year'', as used in the statute, and 
``fiscal year'' as used in the regulation, both refer to the period 
from October 1 through September 30. For more information regarding 
this terminology change, we refer readers to section III. of the RY 
2012 IPF PPS final rule (76 FR 26434 through 26435).
---------------------------------------------------------------------------

    As provided in section 1886(s)(4)(A)(ii) of the Act, the 
application of the reduction for failure to report under section 
1886(s)(4)(A)(i) of the Act may result in an annual update of less than 
0.0 percent for a fiscal year, and may result in payment rates under 
section 1886(s)(1) of the Act being less than the payment rates for the 
preceding year. In addition, section 1886(s)(4)(B) of the Act requires 
that the application of the reduction to a standard Federal rate update 
be noncumulative across fiscal years. Thus, any reduction applied under 
section 1886(s)(4)(A) of the Act will apply only with respect to the 
fiscal year rate involved and the Secretary may not take into account 
the reduction in computing the payment amount under the system 
described in section 1886(s)(1) of the Act for subsequent years.
    Section 1886(s)(4)(C) of the Act requires that, for FY 2014 
(October 1, 2013, through September 30, 2014) and each subsequent year, 
each psychiatric hospital and psychiatric unit must submit to the 
Secretary data on quality measures as specified by the Secretary. The 
data must be submitted in a form and manner and at a time specified by 
the Secretary. Under section 1886(s)(4)(D)(i) of the Act, measures 
selected for the quality reporting program must have been endorsed by 
the entity with a contract under section 1890(a) of the Act. The 
National Quality Forum (NQF) currently holds this contract.
    Section 1886(s)(4)(D)(ii) of the Act provides that, in the case of 
a specified area or medical topic determined appropriate by the 
Secretary for which a feasible and practical measure has not been 
endorsed by the entity with a contract under section 1890(a) of the 
Act, the Secretary may specify a measure that is not so endorsed as 
long as due consideration is given to measures that have been endorsed 
or adopted by a consensus organization identified by the Secretary. 
Pursuant to section 1886(s)(4)(D)(iii) of the Act, the Secretary must 
publish the measures applicable to the FY 2014 IPFQR Program no later 
than October 1, 2012.
    Section 1886(s)(4)(E) of the Act requires the Secretary to 
establish procedures for making public the data submitted by inpatient 
psychiatric hospitals and psychiatric units under the IPFQR Program. 
These procedures must ensure that a facility has the opportunity to 
review its data prior to the data being made public. The Secretary must 
report quality measures that relate to services furnished by the 
psychiatric hospitals and units on the CMS Web site.
2. Covered Entities
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53645), we 
established that the IPFQR Program's quality reporting requirements 
cover those psychiatric hospitals and psychiatric units paid under 
Medicare's IPF PPS (42 CFR 412.404(b)). Generally, psychiatric 
hospitals and psychiatric units within acute care and critical access 
hospitals that treat Medicare patients are paid under the IPF PPS. 
Consistent with prior rules, we continue to use the term ``inpatient 
psychiatric facility'' (IPF) to refer to both inpatient psychiatric 
hospitals and psychiatric units. This usage follows the terminology in 
our IPF PPS regulations at Sec.  412.402. For more information on 
covered entities, we refer readers to the FY 2013 IPPS/LTCH PPS final 
rule (77 FR 53645).
3. Considerations in Selecting Quality Measures
    Our objective in selecting quality measures is to balance the need 
for information on the full spectrum of care delivery and the need to 
minimize the burden of data collection and reporting. We have focused 
on measures that evaluate critical processes of care that have 
significant impact on patient outcomes and support CMS and HHS 
priorities for improved quality and efficiency of care provided by 
IPFs. We refer readers to the FY 2013 IPPS/LTCH PPS final rule Section 
4.a. (77 FR 53645 through 53646) for a detailed discussion of the 
considerations taken into account in selecting quality measures.
    Before being proposed for inclusion in the IPFQR Program, measures 
are placed on a list of measures under consideration, which is 
published annually by December 1 on behalf of CMS by the NQF. In 
compliance with section 1890A(a)(2) of the Act, measures proposed for 
the IPFQR Program were included in 2 publicly available documents: 
``List of Measures under Consideration for December 1, 2013,'' and 
``List of Measures under Consideration for December 1, 2014'' (http://www.qualityforum.org/Setting_Priorities/Partnership/Measure_Applications_Partnership.aspx). The Measure Applications 
Partnership (MAP), a multi-stakeholder group convened by the NQF, 
reviews the measures under consideration for the IPFQR Program, among 
other Federal programs, and provides input on those measures to the 
Secretary. The MAP's 2014 and 2015 recommendations for quality measures 
under consideration are captured in the following

[[Page 25047]]

documents: ``MAP Pre-Rulemaking Report: 2014 Recommendations on 
Measures for More than 20 Federal Programs'' (http://www.qualityforum.org/Publications/2014/01/MAP_Pre-Rulemaking_Report__2014_Recommendations_on_Measures_for_More_than_20_Federal_Programs.aspx) and ``Process and Approach for MAP Pre-Rulemaking 
Deliberations 2015'' (http://www.qualityforum.org/Publications/2015/01/Process_and_Approach_for_MAP_Pre-Rulemaking_Deliberations_2015.aspx). 
We considered the input and recommendations provided by the MAP in 
selecting all measures for the Program, including those discussed 
below.

B. Retention of IPFQR Program Measures Adopted in Previous Payment 
Determinations

    Since the inception of the IPFQR Program in FY 2013, we have 
adopted a total of 14 mandatory measures. In the FY 2013 IPPS/LTCH PPS 
final rule (77 FR 53646 through 53652), we adopted six chart-abstracted 
IPF quality measures for the FY 2014 payment determination and 
subsequent years. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50889 
through 50895), we added 2 measures for the FY 2016 payment 
determination and subsequent years. In the FY 2015 IPF PPS final rule 
(79 FR 45963 through 45974), we finalized the addition of 2 new 
measures to the IPFQR Program to those already adopted for the FY 2016 
payment determination and subsequent years, and finalized four quality 
measures for the FY 2017 payment determination and subsequent years.

C. Proposed Removal of HBIPS-4 From the IPFQR Program Measure Set for 
the FY 2017 Payment Determination and Subsequent Years

    We first adopted HBIPS-4 Patients Discharged on Multiple 
Antipsychotic Medications in the FY 2013 IPPS/LTCH PPS final rule (77 
FR 53649 through 53650). We refer readers to that rule for a detailed 
discussion of the measure. At the time that we adopted the measure, it 
was NQF-endorsed and intended for use in conjunction with HBIPS-5 
Patients Discharged on Multiple Antipsychotic Medications with 
Appropriate Justification. However, NQF removed its endorsement of 
HBIPS-4 in January 2014. The NQF's Behavioral Health Steering 
Committee, in its May 2014 Technical Expert Panel Report, found that 
current evidence indicated that HBIPS-4 ``does not allow for the 
distinction of differences in providers . . . .'' \3\ Moreover, the 
Steering Committee noted that HBIPS-4 ``is not a measure of quality of 
patient care . . . and there is insufficient evidence to warrant the 
endorsement of this measure given the use of HBIPS-5, which addresses 
patients discharged on multiple antipsychotic medications with 
appropriate justification.'' \4\ For these reasons, the Steering 
Committee did not re-endorse HBIPS-4.
---------------------------------------------------------------------------

    \3\ Behavioral Health Endorsement Maintenance 2014, Phase 2, 
Technical Report, 67, (May 9, 2014). Available at http://www.qualityforum.org/Publications/2014/05/Behavioral_Health_Endorsement_Maintenance_2014_-_Phase_II.aspx.
    \4\ Ibid.
---------------------------------------------------------------------------

    As we stated in the FY 2013 IPPS/LTCH PPS final rule, we originally 
proposed HBIPS-4, in part, because HBIPS-4 and HBIPS-5 were intended to 
be reported as a set (77 FR 53649). However, as discussed above, NQF no 
longer believes HBIPS-4 is necessary in that set, and we agree. We have 
the authority to maintain measures that are not NQF-endorsed under 
section 1886(s)(4)(D)(ii) of the Act. However, based on the loss of NQF 
endorsement and because providers must still submit data for HBIPS-5, 
which we believe sufficiently includes the information HBIPS-4 was 
intended to collect, we believe removal of HBIPS-4 from the IPFQR 
Program is warranted. We note that the data collection period for FY 
2016 has ended and providers are required to submit this data before 
this rule will be finalized. Therefore, FY 2017 is the first year that 
we would be able to remove this measure from the program.
    In summary, Table 19, below, identifies the measure that we are 
proposing to remove beginning with the FY 2017 payment determination. 
We request comment on this proposal.

 Table 19--IPFQR Program Measure Proposed To Be Removed for the FY 2017
               Payment Determination and Subsequent Years
------------------------------------------------------------------------
            NQF No.                 Measure ID            Measure
------------------------------------------------------------------------
N/A...........................  HBIPS-4..........  Patients Discharged
                                                    on Multiple
                                                    Antipsychotic
                                                    Medications
------------------------------------------------------------------------

D. New Quality Measures Proposed for the FY 2018 Payment Determination 
and Subsequent Years

    For the FY 2018 payment determination and subsequent years, we are 
proposing five new measures. The sections below outline our rationale 
for proposing these measures.
1. TOB-3 Tobacco Use Treatment Provided or Offered at Discharge and the 
Subset Measure TOB-3a Tobacco Use Treatment at Discharge (NQF #1656)
    Tobacco use is one of the greatest contributors of morbidity and 
mortality in the United States, accounting for more than 435,000 deaths 
annually.\5\ Smoking is a known cause of multiple cancers, heart 
disease, stroke, complications of pregnancy, chronic obstructive 
pulmonary disease, other respiratory problems, poorer wound healing, 
and many other diseases.\6\ This health issue has significant 
implications for persons with mental illness and substance use 
disorders. Tobacco use is much higher among people with co-existing 
mental health conditions than for the general population.\7\ One study 
has estimated that these individuals are twice as likely to smoke as 
the rest of the population.\8\ Tobacco use also creates a heavy 
financial cost to both individuals and society. Smoking-

[[Page 25048]]

attributable health care expenditures are estimated at $96 billion per 
year in direct medical expenses and $97 billion in lost 
productivity.\9\
---------------------------------------------------------------------------

    \5\ Centers for Disease Control and Prevention. Annual Smoking-
Attributable Mortality, Years of Potential Life Lost, and 
Productivity Losses--United States, 2000-2004.'' Morb Mortal Wkly 
Rep. 2008. 57(45): 1226-1228. Available at: http://www.cdc.gov/mmwr/preview/mmwrhtml/mm5745a3.htm.
    \6\ U.S. Department of Health and Human Services. ``The health 
consequences of smoking: a report of the Surgeon General.'' Atlanta, 
GA, U.S. Department of Health and Human Services, Centers for 
Disease Control and Prevention, National Center for Chronic Disease 
Prevention and Health Promotion, Office on Smoking and Health, 2004.
    \7\ Fiore, Michael C., Goplerud, Eric, Shroeder, Steven A. 
(2010). The Joint Commission's New Tobacco Cessation Measures--Will 
Hospitals Do the Right Thing? N Engl J Med 2012; 366:1172-1174. 
Available at http://www.nejm.org/doi/full/10.1056/nejmp1115176.
    \8\ Lasser K, Boyd JW, Woolhandler S, Himmelstein, DU, McCormick 
D, Bor DH. Smoking and mental illness: A population-based prevalence 
study. JAMA. 2000;284(20):2606-2610.
    \9\ Centers for Disease Control and Prevention. ``Best Practices 
for Comprehensive Tobacco Control Programs--2007.'' Atlanta, GA, 
Department of Health and Human Services, Centers for Disease Control 
and Prevention, National Center for Chronic Disease Prevention and 
Health Promotion, Office on Smoking and Health, 2007.
---------------------------------------------------------------------------

    Strong and consistent evidence demonstrates that timely tobacco 
dependence interventions for patients using tobacco can significantly 
reduce the risk of developing a tobacco-related disease, as well as 
provide improved health outcomes for those already suffering from a 
tobacco-related disease.\10\ Even a minimal intervention has been shown 
to result in cessation.\11\ Research discloses that tobacco users 
hospitalized with psychiatric illnesses who enter into smoking-
cessation treatment can successfully overcome their tobacco dependence; 
\12\ however, ``studies show that many hospitals do not consistently 
provide cessation services to their patients.'' \13\ Evidence also 
suggests that tobacco cessation treatment does not increase, and may 
even decrease, the risk of re-hospitalization for tobacco users 
hospitalized with psychiatric illnesses.\14\ Research further 
demonstrates that effective tobacco cessation support across the care 
continuum can be provided with only minimal additional provider effort 
and without harm to the mental health recovery process.\15\
---------------------------------------------------------------------------

    \10\ U.S. Department of Health and Human Services. ``The health 
consequences of smoking: a report of the Surgeon General.'' Atlanta, 
GA, U.S. Department of Health and Human Services, Centers for 
Disease Control and Prevention, National Center for Chronic Disease 
Prevention and Health Promotion, Office on Smoking and Health, 2004.
    \11\ Fiore MC, Ja[eacute]n CR, Baker TB, et al. Treating Tobacco 
Use and Dependence: 2008 Update. Clinical Practice Guideline. 
Rockville, MD: U.S. Department of Health and Human Services. Public 
Health Service. May 2008, available at http://www.ncbi.nlm.nih.gov/books/NBK63952.
    \12\ Prochaska, JJ, et al. ``Efficacy of Initiating Tobacco 
Dependence Treatment in Inpatient Psychiatry: A Randomized 
Controlled Trial.'' Am. J. Pub. Health. 2013 August 15; e1-e9.
    \13\ Fiore, Michael C., Goplerud, Eric, Shroeder, Steven A. 
(2010). The Joint Commission's New Tobacco Cessation Measures--Will 
Hospitals Do the Right Thing? N Engl J Med 2012; 366:1172-1174, 
available at http://www.nejm.org/doi/full/10.1056/nejmp1115176.
    \14\ Prochaska, JJ, et al. ``Efficacy of Initiating Tobacco 
Dependence Treatment in Inpatient Psychiatry: A Randomized 
Controlled Trial.'' Am. J. Pub. Health. 2013 August 15; e1-e9.
    \15\ Ibid.
---------------------------------------------------------------------------

    TOB-3 (NQF #1656) is a chart-abstracted measure that identifies 
those patients 18 years of age and older who have used tobacco products 
within 30 days of admission and who ``were referred to or refused 
evidence-based outpatient counseling AND received or refused a 
prescription for FDA-approved cessation medication upon discharge.'' 
\16\ TOB-3a is a subset of TOB-3 and identifies those IPF ``patients 
who were referred to evidence-based outpatient counseling AND received 
a prescription for FDA-approved cessation medication upon discharge as 
well as those who were referred to outpatient counseling and had reason 
for not receiving a prescription for medication.'' \17\ Providers must 
report this measure set as ``an overall rate which includes all 
patients to whom tobacco treatment was provided, or offered and 
refused, at the time of hospital discharge (TOB-3), and a second rate, 
a subset of the first, which includes only those patients who received 
tobacco use treatment at discharge. (TOB-3a).'' \18\ For more 
information on the measure specifications, we refer readers to the 
Specifications Manual for National Hospital Inpatient Quality Measures 
at https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1228773989482. Providing counseling and recommending cessation medication are 
core strategies of the Treating Tobacco Use and Dependence 
Guidelines.\19\ For the reasons stated above, we believe that adoption 
of the TOB-3/TOB-3a measure set, which assesses IPFs' offering of these 
tobacco use cessation treatments to IPF patients, would result in 
better overall health outcomes for IPF patients.
---------------------------------------------------------------------------

    \16\ TOB-3 and TOB-3a Measure Specifications, available at 
http://www.jointcommission.org/assets/1/6/HIQR_Jan2015_v4_4a_1_EXE.zip
    \17\ Ibid.
    \18\ TOB-3 and TOB-3a Measure Specifications, available at 
https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1228773989482.
    \19\ See Fiore MC, Ja[eacute]n CR, Baker TB, et al. Treating 
Tobacco Use and Dependence: 2008 Update. Clinical Practice 
Guideline. Rockville, MD: U.S. Department of Health and Human 
Services. Public Health Service. May 2008. Available at http://www.ncbi.nlm.nih.gov/books/NBK63952. The specific strategy is 
further specified in Strategy 4A.
---------------------------------------------------------------------------

    Furthermore, the adoption of this measure set would strengthen 
related measures already in place in the IPFQR Program. Currently, the 
IPFQR Program includes 2 other tobacco cessation measures: (1) Tobacco 
Use Screening (TOB-1), a chart-abstracted measure that assesses 
hospitalized patients who are screened within the first 3 days of 
admission for tobacco use (cigarettes, smokeless tobacco, pipe, and 
cigar) within the previous 30 days; and (2) The Tobacco Use Treatment 
Provided or Offered (TOB-2), which includes the subset, Tobacco Use 
Treatment (TOB-2a). TOB-2/TOB-2a is a chart-abstracted measure set 
reported as an overall rate that includes all patients to whom tobacco 
use treatment was provided, or offered and refused, and a second rate, 
a subset of the first, which includes only those patients who received 
tobacco use treatment. TOB-1 and TOB-2/TOB-2a provide a picture of care 
given during the hospital stay. In contrast, TOB-3/TOB-3a present the 
care given at discharge. Together, these 3 measures/measure sets 
present a broader picture of the entire episode of care. If the TOB-3/
TOB-3a measure set is adopted, the IPFQR Program's measure set would 
showcase both the facility's practice of screening patients for tobacco 
use and the outcomes of a facility's practice of offering opportunities 
to stop during the course of the stay and upon discharge. Further, the 
adoption of TOB-3/TOB-3a could alert IPFs to gaps in treatment for 
smoking cessation intervention at discharge if rates for these measures 
are low. This knowledge would support the development of quality 
improvement plans and better engage patients in treatment.
    We believe that public reporting of this information would provide 
consumers and other stakeholders with useful information in choosing 
among different facilities for patients who use tobacco products. In 
addition, this measure set promotes the National Quality Strategy 
priority of Effective Prevention and Treatment, particularly with 
respect to the leading causes of mortality, starting with 
cardiovascular disease. As noted above, tobacco use is one of the 
greatest contributors of morbidity and mortality in the United 
States,\20\ contributing to various forms of cardiovascular disease, 
among many other conditions.\21\ ``Tobacco use remains the chief 
preventable cause of illness and death in our society.'' \22\ Cessation 
interventions can significantly

[[Page 25049]]

reduce the risk of developing tobacco-related disease,\23\ leading to 
decreases in cardiovascular disease, among other diseases, and, 
ultimately, mortality. Encouraging intervention would promote effective 
treatment of tobacco use, and may contribute to prevention of the many 
diseases that are associated with tobacco use.
---------------------------------------------------------------------------

    \20\ Centers for Disease Control and Prevention. Annual Smoking-
Attributable Mortality, Years of Potential Life Lost, and 
Productivity Losses--United States, 2000-2004.'' Morb Mortal Wkly 
Rep. 2008. 57(45): 1226-1228. Available at: http://www.cdc.gov/mmwr/preview/mmwrhtml/mm5745a3.htm.
    \21\ U.S. Department of Health and Human Services. ``The health 
consequences of smoking: a report of the Surgeon General.'' Atlanta, 
GA, U.S. Department of Health and Human Services, Centers for 
Disease Control and Prevention, National Center for Chronic Disease 
Prevention and Health Promotion, Office on Smoking and Health, 2004.
    \22\ Fiore, Michael C., Goplerud, Eric, Shroeder, Steven A. 
(2010). The Joint Commission's New Tobacco Cessation Measures--Will 
Hospitals Do the Right Thing? N Engl J Med 2012; 366:1172-1174 
Available at: http://www.nejm.org/doi/full/10.1056/nejmp1115176.
    \23\ U.S. Department of Health and Human Services. ``The health 
consequences of smoking: a report of the Surgeon General.'' Atlanta, 
GA, U.S. Department of Health and Human Services, Centers for 
Disease Control and Prevention, National Center for Chronic Disease 
Prevention and Health Promotion, Office on Smoking and Health, 2004.
---------------------------------------------------------------------------

    For these reasons, we included TOB-3/TOB-3a in our ``List of 
Measures under Consideration for December 1, 2014.'' The MAP provided 
input on the measure set and supported its inclusion in the IPFQR 
Program in its report ``Process and Approach for MAP Pre-Rulemaking 
Deliberations 2015'' available at http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=78711. Moreover, this measure set 
is NQF-endorsed for the IPF setting in conformity with the statutory 
criteria for measure selection under section 1886(s)(4)(D)(i) of the 
Act.
    We invite public comments on our proposal to adopt the TOB-3 and 
TOB-3a measure set for the FY 2018 payment determination and subsequent 
years.
2. SUB-2 Alcohol Use Brief Intervention Provided or Offered and SUB-2a 
Alcohol Use Brief Intervention (NQF #1663)
    Individuals with mental health conditions experience substance use 
disorders (SUDs) at a much higher rate than the general population. 
Individuals with the most serious mental illnesses have the highest 
rates of SUDs. Co-occurring SUDs often go undiagnosed and, without 
treatment, contribute to a longer persistence of disorders, poorer 
treatment outcomes, lower rates of medication adherence, and greater 
impairments to functioning.
    Substance abuse, particularly alcohol abuse, is a significant 
problem in the elderly. Alcohol use disorders are the most prevalent 
type of addictive disorder in individuals ages 65 and over.\24\ Roughly 
6 percent of the elderly are considered to be heavy users of 
alcohol.\25\ Alcohol abuse is often associated with depression and 
contributes to the etiology of many serious medical conditions, 
including liver disease and cardiovascular disease. For these reasons, 
it is important to assess IPFs' efforts to offer alcohol abuse 
treatment to those patients who screen positive for alcohol abuse.
---------------------------------------------------------------------------

    \24\ Ross, S. (2005). Alcohol Use Disorders in the Elderly. 
Primary Psychiatry, 12(1):32-40.
    \25\ AL Mirand and JW Welte. Alcohol consumption among the 
elderly in a general population, Erie County, New York. Am J Public 
Health. 1996 July; 86(7): 978-984.
---------------------------------------------------------------------------

    SUB-2 includes ``[p]atients 18 years of age and older who screened 
positive for unhealthy alcohol use who received or refused a brief 
intervention during the hospital \26\ stay.'' \27\ SUB-2a includes 
``[p]atients who received the brief intervention during the hospital 
stay.'' \28\ The measure set is chart-abstracted and ``is reported as 
an overall rate which includes all patients to whom a brief 
intervention was provided, or offered and refused, and a second rate, a 
subset of the first, which includes only those patients who received a 
brief intervention.'' \29\ For more information on the measure 
specifications, we refer readers to the Specifications Manual for 
National Hospital Inpatient Quality Measures at https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1228773989482.
---------------------------------------------------------------------------

    \26\ Although the measure refers to ``hospitals,'' the measure 
is specified for all in-patient settings. https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1228773989482.
    \27\ SUB-2 and SUB-2a Measure Specifications, available at 
https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1228773989482.
    \28\ Ibid.
    \29\ SUB-2 and SUB-2a Measure Specifications, available at 
https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1228773989482.
---------------------------------------------------------------------------

    We believe that the addition of the SUB-2/SUB-2a measure set to the 
related existing substance abuse measure in the IPFQR Program would 
improve the overall quality of care that patients receive in IPF 
settings, as well as overall patient health outcomes. We previously 
adopted the SUB-1 measure (Alcohol Use Screening (SUB-1) (NQF #1661)) 
(78 FR 50890 through 50892). SUB-1 assesses ``hospitalized patients 18 
years of age and older who are screened during the hospital stay using 
a validated screening questionnaire for unhealthy alcohol use.'' SUB-1 
alone does not provide a full picture of an IPF's response to this 
screening. However, when linked to SUB-2/SUB-2a, the IPF measure set 
depicts the rate at which patients are screened for potential alcohol 
abuse and the rate at which those who screen positive accept the 
offered interventions. Further, the adoption of SUB-2/SUB 2a could 
alert IPFs to gaps in treatment for interventions if rates are low, 
which supports the development of quality improvement plans and better 
patient engagement in treatment. In addition, data for the SUB-2/SUB-2a 
measure set, in combination with the SUB-1 measure, would afford 
consumers useful information in choosing among different facilities, 
particularly for patients who may require assistance with unhealthy 
alcohol use.
    Additionally, we believe that this measure set promotes the 
National Quality Strategy priority of Effective Prevention and 
Treatment for the leading causes of mortality, starting with 
cardiovascular disease. As noted above, alcohol use disorders are the 
most prevalent type of addictive disorder in individuals ages 65 and 
over \30\ and contribute to serious medical conditions, including 
cardiovascular disease and liver disease. Encouraging interventions 
would promote treatment of unhealthy alcohol use and may contribute to 
prevention of the many diseases that are associated with alcohol abuse, 
including cardiovascular disease.
---------------------------------------------------------------------------

    \30\ Stephen Ross. Alcohol Use Disorders in the Elderly. 
Psychiatry Weekly (no date). Available at: http://www.psychweekly.com/aspx/article/ArticleDetail.aspx?articleid=19.
---------------------------------------------------------------------------

    For these reasons, we included the SUB-2/SUB-2a measure set in our 
``List of Measures under Consideration for December 1, 2014.'' The MAP 
provided input on the measure set and supported its inclusion in the 
IPFQR Program in its report ``Process and Approach for MAP Pre-
Rulemaking Deliberations 2015'' available at http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=78711. Moreover, this measure set 
is NQF-endorsed for the IPF setting, in conformity with the statutory 
criteria for measure selection under section 1886(s)(4)(D)(i) of the 
Act.
    We invite public comments on our proposal to adopt the SUB-2/SUB-2a 
measure set for the FY 2018 payment determination and subsequent years.
3. Transition Record With Specified Elements Received by Discharged 
Patients (Discharges from an Inpatient Facility to Home/Self Care or 
Any Other Site of Care) (NQF #0647) and Removal of HBIPS-6
    Effective and timely communication of a patient's clinical status 
and other relevant information at the time of discharge from an 
inpatient facility is essential for supporting appropriate continuity 
of care. Establishment of an effective transition from one treatment 
setting to another is enhanced by providing patients and their 
caregivers with sufficient information regarding treatment during 
hospitalization. Receiving discharge instructions can assist the 
patient in understanding how

[[Page 25050]]

to maintain and enhance his/her care when discharged to home or any 
other site, and studies have shown that readmissions can be prevented 
by providing detailed, personalized information to patients pre-
discharge.\31\
---------------------------------------------------------------------------

    \31\ Jack BW, Chetty VK, Anthony D, et al. A reengineered 
hospital discharge program to decrease rehospitalization. Ann Intern 
Med 2009; 150:178-187.
---------------------------------------------------------------------------

    The Transition Record with Specified Elements Received by 
Discharged Patients (Discharges from on Inpatient Facility to Home/Self 
Care or Any other Site of Care) measure is a chart-abstracted measure 
that captures the ``[p]ercentage of patients, regardless of age, 
discharged from an inpatient facility to home or other site of care, or 
their caregiver(s), who received a transition record (and with whom a 
review of all included information was documented) at the time of 
discharge.'' \32\ At a minimum, the transition record should include:
---------------------------------------------------------------------------

    \32\ Transition Record with Specified Elements Received by 
Discharged Patients (Discharges from an Inpatient Facility to Home/
Self Care or Any Other Site of Care) Measure Specifications. 
Available at http://www.qualityforum.org/Qps/0647.
---------------------------------------------------------------------------

     Reason for inpatient admission;
     Major procedures and tests performed during inpatient stay 
and summary of results;
     Principal diagnosis at discharge;
     Current medication list;
     Studies pending at discharge;
     Patient instructions;
     Advance directive or surrogate decision maker documented 
or reason for not providing advance care plan;
     24-hour/7-day contact information, including physician for 
emergencies related to inpatient stay;
     Contact information for obtaining results of studies 
pending at discharge;
     Plan for follow-up care; and
     Primary physician, other health care professional, or site 
designated for follow-up care.\33\
---------------------------------------------------------------------------

    \33\ Ibid.
---------------------------------------------------------------------------

    The measure was developed by the American Medical Association--
convened Physician Consortium for Performance Improvement (AMA-convened 
PCPI), ``a national, physician-led initiative dedicated to improving 
patient health and safety.'' \34\ For more information on this measure, 
including its specifications, we refer the readers to the AMA-convened 
PCPI list of measures at http://www.qualityforum.org/Qps/0647.
---------------------------------------------------------------------------

    \34\ See http://www.ama-assn.org/ama/pub/physician-resources/physician-consortium-performance-improvement/about-pcpi.page? The 
AMA-PCPI ``is nationally recognized for measure development, 
specification and testing of measures, and enabling use of measures 
in electronic health records (EHRs) . . . [the organization] 
develops, tests, implements and disseminates evidence-based measures 
that reflect the best practices and best interest of medicine . . 
.''
---------------------------------------------------------------------------

    The Transition Record with Specified Elements Received by 
Discharged Patients (Discharges from an Inpatient Facility to Home/Self 
Care or Any other Site of Care) measure seeks to prevent gaps in care 
transitions caused by the patient receiving inadequate or insufficient 
information that lead to avoidable adverse events and cost CMS 
approximately $15 billion due to avoidable patient readmissions.\35\
---------------------------------------------------------------------------

    \35\ Medicare Payment Advisory Commission. Promoting Greater 
Efficiency in Medicare. June 2007. Available at: http://www.medpac.gov/documents/reports/Jun07_EntireReport.pdf.
---------------------------------------------------------------------------

    We believe that public reporting of this measure would afford 
patients and their families or caregivers useful information in 
choosing among different facilities and would promote the National 
Quality Strategy priority of Communication and Care Coordination. As 
articulated by HHS, ``Care coordination is a conscious effort to ensure 
that all key information needed to make clinical decisions is available 
to patients and providers. It is defined as the deliberate organization 
of patient care activities between 2 or more participants involved in a 
patient's care to facilitate appropriate delivery of health care 
services.'' \36\ This proposed measure would promote appropriate care 
coordination by specifying that patients discharged from an inpatient 
facility receive relevant and meaningful transition information. This 
measure also would promote Person and Family Engagement, ``a set of 
behaviors by patients, family members, and health professionals and a 
set of organizational policies and procedures that foster both the 
inclusion of patients and family members as active members of the 
health care team and collaborative partnerships with providers and 
provider organizations.'' \37\ This proposed measure would inform 
patients of their status at discharge, empowering them to become active 
members in their care. Additionally, the inclusion in this measure of 
an advance care plan would support open communication of the patient's, 
and his/her caregiver's/surrogate's, wishes, resulting in improved 
patient-provider communication.
---------------------------------------------------------------------------

    \36\ US DHHS. ``National Healthcare Disparities Report 2013.'' 
Available at: http://www.ahrq.gov/research/findings/nhqrdr/nhdr13/chap7.html.
    \37\ Guide to Patient and Family Engagement: Environmental Scan 
Report. May 2012. Agency for Healthcare Research and Quality. 
Rockville, MD. Available at: http://www.ahrq.gov/research/findings/final-reports/ptfamilyscan/ptfamily1.html.
---------------------------------------------------------------------------

    For these reasons, we included this measure in our ``List of 
Measures under Consideration for December 1, 2014.'' The MAP provided 
input on the measure and supported its inclusion in the IPFQR Program 
in its report ``Process and Approach for MAP Pre-Rulemaking 
Deliberations 2015'' available at http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=78711. In addition, the MAP had 
previously suggested this measure as one that could fill a gap in 
communication between the provider and patient at discharge \38\ and 
recommended that the measure be used for dual eligible patients (that 
is, patients with both Medicare and Medicaid coverage), who comprise a 
significant beneficiary population served within IPFs.\39\ Moreover, 
this measure set is NQF-endorsed for the IPF setting, in conformity 
with the statutory criteria for measure selection under section 
1886(s)(4)(D)(i) of the Act.
---------------------------------------------------------------------------

    \38\ http://www.qualityforum.org/Publications/2012/10/MAP_Families_of_Measures.aspx.
    \39\ http://www.qualityforum.org/Publications/2014/08/2014_Input_on_Quality_Measures_for_Dual_Eligible_Beneficiaries.aspx.
---------------------------------------------------------------------------

    If finalized, we propose that this measure would replace the 
existing HBIPS-6 Post-Discharge Continuing Care Plan measure.\40\ We 
believe that the Transition Record with Specified Elements Received by 
Discharged Patients (Discharges from an Inpatient Facility to Home/Self 
Care or Any Other Site of Care) measure is a more effective and robust 
measure than HBIPS-6 for use in the IPF setting. Specifically, HBIPS-6 
requires discharge plans to only have 4 components:
---------------------------------------------------------------------------

    \40\ In the FY 2013 IPPS/LTCH PPS final rule, we adopted HBIPS-
6, beginning with the FY 2014 payment determination (77 FR 53650-
53651). We refer readers to that rule for a detailed discussion of 
this measure.
---------------------------------------------------------------------------

     Reason for hospitalization;
     Principal diagnosis;
     Discharge medications; and
     Next level of care recommendations.\41\
---------------------------------------------------------------------------

    \41\ See https://manual.jointcommission.org/releases/TJC2014A1/.
---------------------------------------------------------------------------

    In contrast, the Transition Record with Specified Elements Received 
by Discharged Patients (Discharges from an Inpatient Facility to Home/
Self Care or Any Other Site of Care) measure requires additional 
elements, including those described below, which are intended to 
improve quality of care, decrease costs, and increase beneficiary 
engagement.
    First, the proposed measure requires the provider to communicate 
both studies pending at discharge as well as contact information so 
that patients or their families can obtain the results of those 
studies. Approximately 40 percent of discharged patients have test 
results

[[Page 25051]]

that are pending and about a quarter of such test results require 
further action that, if not taken in a timely manner, could result in 
potentially avoidable negative outcomes.\42\ HBIPS-6 does not require 
providers to specify studies pending at discharge.
---------------------------------------------------------------------------

    \42\ Kripalani S, LeFevre F, Phillips CO, et al. Deficits in 
communication and information transfer between hospital based and 
primary care physicians: implications for patient safety and 
continuity of care. JAMA2007;297(8):831-841.
---------------------------------------------------------------------------

    Second, the transition record is also required to contain a list of 
major procedures and tests that were performed during the 
hospitalization and summary results. HBIPS-6 does not include this 
requirement. We believe it is important for a patient to understand 
which tests were performed on him/her and for what purpose, 
understanding the outcome and consequences of these tests. This 
knowledge may serve to empower patients to seek additional care or 
follow-up when necessary, reducing the risk of avoidable consequences 
and readmissions.
    Third, the transition record in the proposed measure is required to 
include patient instructions while HBIPS-6 has no such requirement. 
Without instructions, the patient may not take the necessary steps for 
recovery, leading to complications and/or readmissions.
    Fourth, the proposed measure requires both of the following: (1) 
24-hour/7-day contact information including physicians for emergencies 
related to inpatient stay; and (2) the primary physician, other health 
care professional, or sites designated for follow-up care. HBIPS-6 does 
not have these requirements. Again, this information can lead to 
reduced complications and an increased likelihood of appropriate 
follow-up care, resulting in reduced readmissions.
    Finally, the elements required for the proposed transition record 
measure are far better aligned than HBIPS-6 with the elements required 
in the Summary of Care record required by the Electronic Health Record 
(EHR) Incentive Program for eligible hospitals and critical access 
hospitals and with the guidance on discharge planning provided by the 
Medicare Learning Network available at https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/Downloads/Discharge-Planning-Booklet-ICN908184.pdf.
    In summary, we believe that the Transition Record with Specified 
Elements Received by Discharged Patients (Discharges from an Inpatient 
Facility to Home/Self Care or Any Other Site of Care) measure is more 
robust than HBIPS-6 because it includes these and other elements that 
are currently absent from HBIPS-6. Therefore, we propose to adopt the 
Transition Record with Specified Elements Received by Discharged 
Patients (Discharges from an Inpatient Facility to Home/Self Care or 
Any Other Site of Care) measure for the FY 2018 payment determination 
and subsequent years, and, if adopted, to remove HBIPS-6. We invite 
public comments on these proposals.
4. Timely Transmission of Transition Record (Discharges From an 
Inpatient Facility to Home/Self Care or Any Other Site of Care) (NQF 
#0648) and Removal of HBIPS-7
    The literature shows infrequent communication between hospital 
physicians and primary care practitioners and that the availability of 
discharge summaries at the patient's first post-discharge visit with 
the primary care practitioner is low, which affects the quality of care 
provided to patients.\43\ The Timely Transmission of Transition Record 
(Discharges from an Inpatient Facility to Home/Self Care or Any Other 
Site of Care) measure (NQF #0648) is a chart-abstracted measure 
developed by AMA-convened PCPI to narrow gaps in care transition that 
result in adverse health outcomes for patients and cost CMS about $15 
billion due to readmissions,\44\ as discussed above. This measure 
captures the ``[p]ercentage of patients, regardless of age, discharged 
from an inpatient facility to home or any other site of care for whom a 
transition record was transmitted to the facility or primary physician 
or other health care professional designated for follow-up care within 
24 hours of discharge.'' \45\ For more information on this measure, 
including its specifications, we refer the readers to http://www.qualityforum.org/Qps/0648.
---------------------------------------------------------------------------

    \43\ Kripalani S, LeFevre F, Phillips CO, et al. Deficits in 
communication and information transfer between hospital based and 
primary care physicians: implications for patient safety and 
continuity of care. JAMA 2007;297(8):831-841.
    \44\ Medicare Payment Advisory Commission. Promoting Greater 
Efficiency in Medicare. June 2007. Available at: http://www.medpac.gov/documents/reports/Jun07_EntireReport.pdf.
    \45\ Timely Transmission of Transition Record (Discharged from 
Inpatient Facility to Home/Self Care or Any Other Site of Care), 
available at http://www.ama-assn.sorg/apps/listserv/x-check/qmeasure.cgi?submit=PCPI.
---------------------------------------------------------------------------

    We believe that public reporting of this measure will afford 
consumers, and their families or caregivers, useful information in 
choosing among different facilities because it communicates how quickly 
a summary of the patient's record will be transmitted to his or her 
other treating facilities and physicians, improving care, as outlined 
above. We further believe that this measure will promote the National 
Quality Strategy priority of Communication and Care Coordination. As 
discussed above, according to HHS, ``Care coordination is a conscious 
effort to ensure that all key information needed to make clinical 
decisions is available to patients and providers. It is defined as the 
deliberate organization of patient care activities between 2 or more 
participants involved in a patient's care to facilitate appropriate 
delivery of health care services.'' \46\ This proposed measure enables 
a patient's primary care physician or other healthcare practitioner to 
timely receive a transition record of the inpatient hospitalization.
---------------------------------------------------------------------------

    \46\ US DHHS. ``National Healthcare Disparities Report 2013.'' 
Available at: http://www.ahrq.gov/research/findings/nhqrdr/nhdr13/chap7.html.
---------------------------------------------------------------------------

    For these reasons, we included this measure in our ``List of 
Measures under Consideration for December 1, 2014.'' The MAP provided 
input on the measure and supported its inclusion in the IPFQR Program 
(http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=78711). In addition, the MAP had 
previously suggested this measure as one that could fill a gap in 
communication \47\ and recommended that the measure be used for dual 
eligible patients (that is, patients with both Medicare and Medicaid 
coverage), who comprise a significant beneficiary population served 
within IPFs.\48\ Moreover, this measure set is NQF-endorsed for the IPF 
setting, in conformity with the statutory criteria for measure 
selection under section 1886(s)(4)(D)(i) of the Act.
---------------------------------------------------------------------------

    \47\ http://www.qualityforum.org/Publications/2012/10/MAP_Families_of_Measures.aspx.
    \48\ http://www.qualityforum.org/Publications/2014/08/2014_Input_on_Quality_Measures_for_Dual_Eligible_Beneficiaries.aspx.
---------------------------------------------------------------------------

    If finalized, we propose that this measure would replace the 
existing HBIPS-7 Post Discharge Continuing Care Plan Transmitted to the 
Next Level of Care Provider Upon Discharge measure.\49\ HBIPS-7 
requires that the continuing care plan be transmitted to the next care 
provider no later than the fifth day post discharge.\50\ The Timely 
Transmission of Transition Record (Discharges from an Inpatient 
Facility to Home/Self Care or Any Other Site of Care) measure requires 
transmission to the next level of care within 24 hours

[[Page 25052]]

of discharge. More timely communication of vital information regarding 
the inpatient hospitalization results in better care, reduction of 
systemic medical errors, and improved patient outcomes. Studies show 
that the risks of re-hospitalization are lower when primary care 
providers have access to patients' post-discharge records at the first 
post-discharge visit,51 52 which may be within a 
day (or days) of discharge. Critically, the availability of the 
discharge record to the next level provider within 24 hours after 
discharge supports more effective care coordination and patient safety, 
since a delay in communication can result in medication or treatment 
errors. Thus, we believe that replacing HBIPS-7 with the Timely 
Transmission of Transition Record (Discharges from an Inpatient 
Facility to Home/Self Care or Any Other Site of Care) measure would 
increase the quality of care provided to patients, reduce avoidable 
readmissions, and increase patient safety.
---------------------------------------------------------------------------

    \49\ In the FY 2013 IPPS/LTCH PPS final rule, we adopted HBIPS-7 
Post Discharge Continuing Care Plan Transmitted to the Next Level of 
Care Provider Upon Discharge, beginning with the FY 2014 payment 
determination (77 FR 53651-53652). We refer readers to that rule for 
a detailed discussion of this measure.
    \50\ https://manual.jointcommission.org/releases/TJC2014A1/.
    \51\ van Walraven C, Seth R, Austin PC, Laupacis A. (2002). 
Effect of discharge summary availability during postdischarge visits 
on hospital readmission. Journal of General Internal Medicine 
17:186-192.
    \52\ Jack BW, Chetty VK, Anthony D, et al. (2009). A 
reengineered hospital discharge program to decrease 
rehospitalization. Ann Intern Med.150 (3),178-187.
---------------------------------------------------------------------------

    We invite public comments on our proposals to adopt the Timely 
Transmission of Transition Record (Discharges from an Inpatient 
Facility to Home/Self Care or Any Other Site of Care) measure for the 
FY 2018 payment determination and subsequent years and, if adopted, our 
removal of HBIPS-7.
5. Screening for Metabolic Disorders
    Studies show that both second generation antipsychotics (SGAs) and 
antipsychotics increase the risk of metabolic syndrome.\53\ Metabolic 
syndrome involves a cluster of conditions that occur together, 
including excess body fat around the waist, high blood sugar, high 
cholesterol, and high blood pressure, and increases the risk of 
coronary artery disease, stroke, and type 2 diabetes. Recognizing this 
problem, in February 2004, the American Diabetes Association (ADA), the 
American Psychiatric Association (APA), the American Association of 
Clinical Endocrinologists, and the North American Association for the 
Study of Obesity released a consensus statement finding that the use of 
SGAs ``have been associated with reports of dramatic weight gain, 
diabetes (even acute metabolic decompensation, for example, diabetic 
ketoacidosis [DKA]), and an atherogenic lipid profile (increased LDL 
cholesterol and triglyceride levels and decreased HDL cholesterol) . . 
. [and] [s]ubsequent drug surveillance and retrospective database 
analyses suggest that there is an association between specific SGAs and 
both diabetes and obesity.'' \54\ SGAs also have an effect on serum 
lipids and could result in dyslipidemia.\55\ Given these concerns, the 
group recommended that ``baseline screening measures be obtained 
before, or as soon as clinically feasible after, the initiation of any 
antipsychotic medication,'' including body mass index (BMI), blood 
pressure, fasting plasma glucose, and fasting lipid profile.\56\ 
Although the consensus statement specifically discussed the issues with 
SGAs, the ADA also emphasized that ``all patients receiving 
antipsychotic medications [should] be screened'' \57\ and subsequent 
studies have found that ``[i]n schizophrenic patients, the level of 
lipid profile had been increased in both atypical and conventional 
antipsychotic users'' \58\
---------------------------------------------------------------------------

    \53\ The American Diabetes Association, APA, the American 
Association of Clinical Endocrinologists, and the North American 
Association for the Study of Obesity (2004). Consensus development 
conference on antipsychotic drugs and obesity and diabetes. Diabetes 
Care, 27, 596-601. Marder, Stephen R., M.D., et al. Physical Health 
Monitoring of Patients with Schizophrenia. Am J Psychiatry. 2004 
Aug;161(8):1334-49.
    \54\ The American Diabetes Association, APA, the American 
Association of Clinical Endocrinologists, and the North American 
Association for the Study of Obesity (2004). Consensus development 
conference on antipsychotic drugs and obesity and diabetes. Diabetes 
Care, 27, 596-601.
    \55\ Ibid.
    \56\ Ibid.
    \57\ The American Diabetes Association (2006). Antipsychotic 
Medications and the Risk of Diabetes and Cardiovascular Disease. 
Available at: http://professional.diabetes.org/admin/UserFiles/file/CE/AntiPsych%20Meds/Professional%20Tool%20%231(1).pdf (emphasis 
added).
    \58\ Roohafsza, H, Khani, A, Afshar, H, Garakyaraghi, A, Ghodsi, 
B. Lipid profile in antipsychotic drug users: A comparative study. 
ARYA Atheroscler. May 2013; 9(3): 198-202 (emphasis added).
---------------------------------------------------------------------------

    Numerous other organizations have also made similar 
recommendations.\59\ For example, the National Association of State 
Mental Health Program Directors Medical Directors Council notes, ``the 
second generation antipsychotic medications have become more highly 
associated with weight gain, diabetes, dyslipidemia, insulin 
resistance, and the metabolic syndrome.'' They recommend the same 
screening as the consensus statement (BMI, blood pressure, fasting 
plasma glucose, and fasting lipid profile) and emphasize that this 
screening is ``the standard of care for the general population.'' \60\ 
Likewise, the Mount Sinai Conference,\61\ convened in 2002, recommended 
that, for every patient with schizophrenia, ``regardless of the 
antipsychotic prescribed,'' mental health providers should, among other 
things: (1) Monitor and chart BMI; (2) measure plasma glucose levels 
(fasting or HbA1c); and (3) obtain a lipid profile.\62\
---------------------------------------------------------------------------

    \59\ De Hert, M., Dekker, J.M. & Wood, D. (2009). Cardiovascular 
disease and diabetes in people with severe mental illness. Position 
statement from the European Psychiatric Association (EPA), supported 
by the European Association for the Study of Diabetes (EASD) and the 
European Society of Cardiology (ESC). Eur Psychiatry, 24, 412-424; 
Zolnierek, C.D. (2009). Non-psychiatric hospitalization of people 
with mental illnesses: A systematic review. Journal of Advanced 
Nursing, 65(8), 1570-1583.
    \60\ National Association of State Mental Health Program 
Directors Medical Directors Council (2006). Morbidity and mortality 
in people with serious mental illness. Available at: http://www.nasmhpd.org/docs/publications/MDCdocs/Mortality%20and%20Morbidity%20Final%20Report%208.18.08.pdf.
    \61\ The Mount Sinai Conference was conferred to ``focus on 
specific questions regarding the pharmacotherapy of schizophrenia . 
. . Participants in the conference were selected based on their 
knowledge of and contributions to the literature in this area . . . 
Also in attendance [were] various groups concerned with improving 
psychopharmacology in routine practice settings.'' Marder, Stephen 
R., M.D., et al. Physical Health Monitoring of Patients with 
Schizophrenia. Am J Psychiatry. 2004 Aug;161(8):1334-49.
    \62\ Marder, Stephen R., M.D., et al. Physical Health Monitoring 
of Patients with Schizophrenia. Am J Psychiatry. 2004 
Aug;161(8):1334-49.
---------------------------------------------------------------------------

    Despite these consensus statements and guidelines, many of which 
are over a decade old, screening for metabolic syndrome remains low and 
there appears to be disagreement regarding where the responsibility for 
this screening lies.\63\ Studies show a systematic lack of metabolic 
risk monitoring of patients who have been prescribed 
antipsychotics.\64\ Screening for metabolic syndrome may reduce the 
risk of preventable adverse events and improve the physical health 
status of the patient. Therefore, we believe it is necessary to include 
a measure of metabolic syndrome screening in the IPFQR Program.
---------------------------------------------------------------------------

    \63\ See e.g., Brooks, Megan. ``Metabolic Screening in 
Antipsychotic Users: Whose Job Is It?'' Medscape Medical News. 8 May 
2012. Available at http://www.medscape.com/viewarticle/763468. 
Mittal D, Li C, Viverito K, Williams JS, Landes RD, Thapa PB, Owen 
R. Monitoring for metabolic side effects among outpatients with 
dementia receiving antipsychotics. Psychiatr Serv. 2014 Sep 
1;65(9):1147-53.
    \64\ Nasrallah, H. A, MD (2012). There is no excuse for failing 
to provide metabolic monitoring for patients receiving 
antipsychotics. Current Psychiatry, 4 (citing Mitchell AJ, Delaffon 
V, Vancampfort D, et al. Guideline concordant monitoring of 
metabolic risk in people treated with antipsychotic medication: 
systematic review and meta-analysis of screening practices. Psychol 
Med. 2012;42(1):125-147.)
---------------------------------------------------------------------------

    The Screening for Metabolic Disorders measure is a chart-abstracted 
measure

[[Page 25053]]

developed by CMS and defined as a percentage of discharges from an IPF 
for which a structured metabolic screening for 4 elements was completed 
in the past year. The denominator includes IPF patients discharged with 
one or more routinely scheduled antipsychotic medications during the 
measurement period. The numerator is the total number of patients who 
received a metabolic screening either prior to, or during, the index 
IPF stay. The screening must contain four tests: (1) BMI; (2) blood 
pressure; (3) glucose or HbA1c; and (4) a lipid panel--which includes 
total cholesterol (TC), triglycerides (TG), high density lipoprotein 
(HDL), and low density lipoprotein (LDL-C) levels. The screening must 
have been completed at least once in the 12 months prior to the 
patient's date of discharge. Screenings can be conducted either at the 
reporting facility or another facility for which records are available 
to the reporting facility. The following patients are excluded from the 
measure: (1) Patients for whom a screening could not be completed 
within the stay due to the patient's enduring unstable medical or 
psychological condition; and (2) patients with a length of stay equal 
to or greater than 365 days, or less than 3 days. In section F.3. 
below, we propose a sampling methodology for this and certain other 
measures.
    Testing of this measure demonstrated that performance on the 
metabolic screening measure was low, on average, across the tested 
IPFs. The measure's average performance rate of 42 percent signals a 
strong opportunity for improvement. During testing, the metabolic 
screening measure also demonstrated nontrivial variation in performance 
among IPFs (6.2-98.6 percent). In addition, it demonstrated near-
perfect agreement between chart abstractors (kappa of 0.93 for the 
measure numerator).\65\
---------------------------------------------------------------------------

    \65\ Development of Quality Measures for Inpatient Psychiatric 
Facilities. February 2015. U.S. Department of Health and Human 
Services, Assistant Secretary for Planning and Evaluation, Office of 
Disability, Aging, and Long-term Care Policy. Page xi, at http://aspe.hhs.gov/daltcp/reports/2015/ipf.cfm.
---------------------------------------------------------------------------

    We included the Screening for Metabolic Disorders measure (then 
titled ``IPF Metabolic Screening'') in our ``Measures Under 
Consideration List'' in December 2013. The MAP did not recommend this 
measure, noting, ``a different NQF-endorsed measure better addresses 
the needs of the program.'' \66\ However, the different NQF-endorsed 
measure was not identified by the MAP, and we are unaware of any 
screening measures for metabolic syndrome that are NQF-endorsed. We 
note that, when presented to the MAP, the denominator for this measure 
was the ``total number of psychiatric inpatients admitted during the 
measurement period.'' Based on testing and further feedback on the 
measure, we revised the measure by reducing its application to only 
those patients on antipsychotic medication; the denominator for the 
measure is now ``IPF patients discharged with one or more routinely 
scheduled antipsychotic medications during the measurement period.'' We 
believe that this change was appropriate because, as discussed above, 
the patients most at risk for metabolic syndrome are those receiving 
antipsychotics and the APA and other consensus organizations recommend 
this screening for patients on antipsychotics. Furthermore, by limiting 
the application of the measure only to those receiving antipsychotics, 
we believe that we have reduced provider burden, both in terms of 
possible changes in practice that might result from the measure, as 
well as the direct burden resulting from its collection and reporting.
---------------------------------------------------------------------------

    \66\ MAP 2014 Recommendations on Measures for More than 20 
Federal Programs, 179, at http://www.qualityforum.org/Publications/2014/01/MAP_Pre-Rulemaking_Report__2014_Recommendations_on_Measures_for_More_than_20_Federal_Programs.aspx.
---------------------------------------------------------------------------

    We believe that this measure promotes the National Quality Strategy 
priority of Making Care Safer, which seeks to reduce risk that is 
caused by the delivery of healthcare. As discussed above, 
antipsychotics have been shown to be related to metabolic syndrome. The 
Screening for Metabolic Disorders measure is aimed at the prevention 
and treatment of serious side effects of these drugs.
    Section 1886(s)(4)(D)(ii) of the Act authorizes the Secretary to 
specify a measure that is not endorsed by NQF as long as due 
consideration is given to measures that have been endorsed or adopted 
by a consensus organization identified by the Secretary. We have been 
unable to identify any measures addressing screening for metabolic 
syndrome for the IPF setting that have been endorsed by the NQF or 
adopted by any other consensus organization. We believe the proposed 
measure for the Screening for Metabolic Disorders meets the measure 
selection exception requirement under section 1886(s)(4)(D)(ii) of the 
Act.
    We invite public comments on our proposal to adopt this measure for 
the FY 2018 payment determination and subsequent years.
6. Summary of Measures Proposed for Adoption and Removal for FY 2018 
and Subsequent Years
    The measures that we are proposing to add to the IPFQR Program for 
the FY 2018 payment determination and subsequent years are set forth in 
Table 20, below.

      Table 20--IPFQR Program Measures Proposed for the FY 2018 Payment Determination and Subsequent Years
----------------------------------------------------------------------------------------------------------------
  National Quality Strategy priority        NQF No.             Measure ID                    Measure
----------------------------------------------------------------------------------------------------------------
Effective Prevention and Treatment....            1656  TOB-3 and TOB-3a.........  Tobacco Use Treatment
                                                                                    Provided or Offered at
                                                                                    Discharge and the subset
                                                                                    measure Tobacco Use
                                                                                    Treatment at Discharge.
Effective Prevention and Treatment....            1663  SUB-2 and SUB-2a.........  Alcohol Use Brief
                                                                                    Intervention Provided or
                                                                                    Offered and SUB-2a Alcohol
                                                                                    Use Brief Intervention.
Communication and Care Coordination;              0647  N/A......................  Transition Record with
 Person and Family Engagement.                                                      Specified Elements Received
                                                                                    by Discharged
                                                                                   Patients (Discharges from an
                                                                                    Inpatient Facility to Home/
                                                                                    Self Care or
                                                                                   Any Other Site of Care).
Communication and Care Coordination...            0648  N/A......................  Timely Transmission of
                                                                                    Transition Record
                                                                                    (Discharges from an
                                                                                   Inpatient Facility to Home/
                                                                                    Self Care or Any Other Site
                                                                                    of Care).

[[Page 25054]]

 
Making Care Safer.....................             N/A  N/A......................  Screening for Metabolic
                                                                                    Disorders.
----------------------------------------------------------------------------------------------------------------

    The measures that we are proposing to remove beginning with the FY 
2018 payment determination are set forth in Table 21, below.

 Table 21--IPFQR Program Measures Proposed To Be Removed for the FY 2018
               Payment Determination and Subsequent Years
------------------------------------------------------------------------
         NQF No.                Measure ID               Measure
------------------------------------------------------------------------
0557.....................  HBIPS-6............  Post-Discharge
                                                 Continuing Care Plan
                                                (Removal of measure
                                                 contingent upon
                                                 adoption of proposed
                                                 measure, Transition
                                                 Record with Specified
                                                 Elements Received by
                                                 Discharged Patients
                                                 (Discharges from an
                                                 Inpatient Facility to
                                                 Home/Self Care or
                                                Any Other Site of
                                                 Care)).
0558.....................  HBIPS-7............  Post Discharge
                                                 Continuing Care Plan
                                                 Transmitted to the Next
                                                 Level of Care Provider
                                                 Upon Discharge (Removal
                                                 of measure contingent
                                                 upon adoption of
                                                 proposed measure,
                                                 Timely Transmission of
                                                 Transition Record
                                                 (Discharges from an
                                                 Inpatient Facility to
                                                 Home/Self Care or Any
                                                 Other Site of Care)).
------------------------------------------------------------------------

    If these proposals are adopted, the number of measures for the FY 
2018 IPFQR Program would total 16, as set forth in Table 22, below.

   Table 22--Previously Adopted and Proposed Measures for FY 2018 and
                            Subsequent Years
------------------------------------------------------------------------
         NQF No.                Measure ID               Measure
------------------------------------------------------------------------
0640.....................  HBIPS-2............  Hours of Physical
                                                 Restraint Use.
0641.....................  HBIPS-3............  Hours of Seclusion Use.
0560.....................  HBIPS-5............  Patients Discharged on
                                                 Multiple Antipsychotic
                                                 Medications with
                                                 Appropriate
                                                 Justification.
0576.....................  FUH................  Follow-up After
                                                 Hospitalization for
                                                 Mental Illness.
1661.....................  SUB-1..............  Alcohol Use Screening.
1663.....................  SUB-2 and SUB-2a...  Alcohol Use Brief
                                                 Intervention Provided
                                                 or Offered and SUB-2a
                                                 Alcohol Use Brief
                                                 Intervention.*
1651.....................  TOB-1..............  Tobacco Use Screening.
1654.....................  TOB-2..............  Tobacco Use Treatment
                                                 Provided or Offered and
                           TOB-2a.............  Tobacco Use Treatment.
1656.....................  TOB-3 and TOB-3a...  Tobacco Use Treatment
                                                 Provided or Offered at
                                                 Discharge and the
                                                 subset measure Tobacco
                                                 Use Treatment at
                                                 Discharge.*
1659.....................  IMM-2..............  Influenza Immunization.
0647.....................  N/A................  Transition Record with
                                                 Specified Elements
                                                 Received by Discharged
                                                 Patients (Discharges
                                                 from an Inpatient
                                                 Facility to Home/Self
                                                 Care or Any Other Site
                                                 of Care).*
0648.....................  N/A................  Timely Transmission of
                                                 Transition Record
                                                 (Discharges from an
                                                 Inpatient Facility to
                                                 Home/Self Care or Any
                                                 Other Site of Care).*
N/A......................  N/A................  Screening for Metabolic
                                                 Disorders.*
N/A......................  N/A................  Influenza Vaccination
                                                 Coverage Among
                                                 Healthcare Personnel.
N/A......................  N/A................  Assessment of Patient
                                                 Experience of Care.
N/A......................  N/A................  Use of an Electronic
                                                 Health Record.
------------------------------------------------------------------------
* Measures proposed for the FY 2018 payment determination and future
  years.

E. Possible IPFQR Program Measures and Topics for Future Consideration

    As we have previously indicated (79 FR 45974 through 45975), we 
seek to develop a comprehensive set of quality measures to be available 
for widespread use for informed decision-making and quality improvement 
in the IPF setting. Therefore, through future rulemaking, we intend to 
propose new measures that will help further our goals of achieving 
better health care and improved health for Medicare beneficiaries who 
obtain inpatient psychiatric services through the widespread 
dissemination and use of quality information.
    We are developing a 30-day psychiatric readmission measure that is 
similar to the readmission measures currently in use for other CMS 
quality reporting programs, such as the Hospital Inpatient Quality 
Reporting Program. We anticipate that we will recommend additional 
measures for development or adoption in the future. We intend to 
develop a measure set that effectively assesses IPF quality across the 
range of services and diagnoses, encompasses all of the goals of the 
CMS quality strategy, addresses measure gaps identified by the MAP and 
others, and minimizes collection and reporting burden. We may also 
propose the removal of some measures in the future.
    We invite public comment on measures that we should consider.

F. Changes to Reporting Requirements

    We are proposing to make the following changes to our reporting 
requirements for FY 2017 and subsequent years:

[[Page 25055]]

     Requiring that measures be reported as a single yearly 
count rather than by quarter and age; and
     Requiring that aggregate population counts be reported as 
a single yearly number rather than by quarter.
    For FY 2018 and subsequent years we are also proposing to make one 
change, allowing uniform sampling requirements for certain measures.
1. Proposed Changes to Reporting by Age and Quarter for FY 2017 Payment 
Determination and Subsequent Years
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53655 through 
53656), we finalized our policy that IPFs must submit data for chart-
abstracted measures to the Web-Based Measures Tool on an annual basis 
aggregated by quarter. We also finalized our policy that IPFs must 
submit data as required by The Joint Commission, which calls for IPFs 
to submit data for measures by age group. Since then, we have learned 
that obtaining data for each quarter and by age is burdensome to 
providers and the resultant number of cases is often too small to allow 
public reporting. That is, we do not report data on Hospital Compare 
for measures with fewer than 11 cases; reporting by age and quarter 
often causes the number of cases to fall below 11. For example, for 
HBIPS-5, in Quarter 2 of 2013, only 5.75 percent of the data were 
reportable. Likewise, in Quarter 3 and Quarter 4 of 2013, for HBIPS-5, 
only 5.5 percent of the data were reportable.
    Therefore, beginning with FY 2017, we propose to require facilities 
to report data for chart-abstracted measures to the Web-Based Measures 
Tool on an aggregate basis by year, rather than by quarter, and to 
discontinue the requirement for reporting by age group. If adopted, we 
would require IPFs to report a single aggregate measure rate for each 
measure annually for each payment determination.
    We believe that this change would reduce provider burden because 
IPFs would report a single rate for each measure. In addition, we do 
not believe that quarterly data or data stratified by age are necessary 
for quality improvement activities. We are able to differentiate, and 
the public is able to view on Hospital Compare, those IPFs that perform 
well on measures from those for which quality improvement activities 
may be necessary based on an annual aggregate rate submission. We note, 
however, that in the future, if our evolving measures set, quality 
improvement goals, and experience with the program indicate a change is 
needed, we may reevaluate and reinstate the requirement for quarterly 
reporting.
    In Table 23, below, we set forth the proposed quality reporting and 
submission timelines for the FY 2017 payment determination and 
subsequent years for all the measures except FUH and the Influenza 
Vaccination Coverage among Healthcare Personnel measures. We note that 
FUH is claims-based, and therefore does not require additional data 
submission. The Influenza Vaccination Coverage among Healthcare 
Personnel measure is reported to the Centers for Disease Control and 
Prevention, and we refer readers to the FY 2015 IPF PPS final rule for 
more information on the reporting timeline for this measure (79 FR 
45969).

 Table 23--Proposed Quality Reporting Periods and Timeframes for the FY
             2017 Payment Determination and Subsequent Years
------------------------------------------------------------------------
                              Reporting period for     Data submission
 Payment determination (FY)     services provided         timeframe
------------------------------------------------------------------------
2017........................  January 1, 2015-      July 1, 2016-August
                               December 31, 2015.    15, 2016.
------------------------------------------------------------------------

    We invite public comment on this proposal.
2. Proposed Changes To Aggregate Population Count Reporting for FY 2017 
Payment Determination and Subsequent Years
    In the FY 2015 IPF PPS final rule (79 FR 45973), we finalized our 
policy that IPFs must submit aggregate population counts for Medicare 
and non-Medicare discharges by age group, diagnostic group, and 
quarter, and sample size counts for measures for which sampling is 
performed. In section V.F.1. of this proposed rule, we are proposing to 
only require measure reporting as an annual aggregate rate, rather than 
by quarter. Likewise, beginning with the FY 2017 payment determination, 
we propose to require non-measure data to be reported as an aggregate, 
yearly count rather. We invite public comment on this proposal.
3. Proposed Changes to Sampling Requirements for FY 2018 Payment 
Determination and Subsequent Years
    Measure specifications for the measures that we have adopted and 
propose to adopt allow sampling for some measures; however, for other 
measures, IPFs must report data for all discharges/patients. In 
addition, the sampling requirements sometimes vary by measure. In 
response to these policies, in the FY 2014 IPPS/LTCH PPS final rule, 
some commenters noted that different sampling requirements in the 
measures could increase burden on facilities because these differences 
would require IPFs to have varying policies and procedures in place for 
each measure (78 FR 50901). Although we stated our belief that the 
importance of these measures and of gathering information for all 
discharges/patients outweighs the burden of various sampling 
requirements, we now believe that the additional measures proposed in 
this proposed rule tip the balance of benefit and burden. Therefore, 
and for the reasons provided below, we are proposing to allow a uniform 
sampling methodology both for measures that require sampling and for 
certain other measures. Specifically, we propose to allow The Joint 
Commission/CMS Global Initial Patient Population sampling in Section 
2.9_Global Initial Patient Population found at https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1228773989482. If this proposal is finalized, it will allow IPFs to take one, 
global sample for all measures specified in Table 24, thereby 
decreasing burden on these facilities and streamlining policies and 
procedures.
    In our current and proposed measure set, the measures for which we 
propose to allow The Joint Commission/CMS Global sampling would include 
those outlined in Table 24, below.

         Table 24--Measures to Which Proposed Sampling Applies *
------------------------------------------------------------------------
         NQF No.                Measure ID               Measure
------------------------------------------------------------------------
0560.....................  HBIPS-5............  Patients Discharged on
                                                 Multiple Antipsychotic
                                                 Medications with
                                                 Appropriate
                                                 Justification.

[[Page 25056]]

 
1661.....................  SUB-1..............  Alcohol Use Screening.
1663.....................  SUB-2 and SUB-2a...  Alcohol Use Brief
                                                 Intervention Provided
                                                 or Offered and SUB-2a
                                                 Alcohol Use Brief
                                                 Intervention.**
1651.....................  TOB-1..............  Tobacco Use Screening.
1654.....................  TOB-2..............  Tobacco Use Treatment
                           TOB-2a.............   Provided or Offered and
                                                 Tobacco Use Treatment.
1656.....................  TOB-3 and TOB-3a...  Tobacco Use Treatment
                                                 Provided or Offered at
                                                 Discharge and the
                                                 subset measure Tobacco
                                                 Use Treatment at
                                                 Discharge.**
1659.....................  IMM-2..............  Influenza Immunization.
0647.....................  N/A................  Transition Record with
                                                 Specified Elements
                                                 Received by Discharged
                                                 Patients (Discharges
                                                 from an Inpatient
                                                 Facility to Home/Self
                                                 Care or Any Other Site
                                                 of Care).**
0648.....................  N/A................  Timely Transmission of
                                                 Transition Record
                                                 (Discharges from an
                                                 Inpatient Facility to
                                                 Home/Self Care or Any
                                                 Other Site of Care).**
N/A......................  N/A................  Screening for Metabolic
                                                 Disorders.**
------------------------------------------------------------------------
* Measures proposed for removal have not been included in this table. If
  these measures (HBIPS-4, HBIPS-6, and HBIPS-7) are not removed, the
  sampling methodology would also apply to their collection and
  submission.
** Measures proposed for the FY 2018 payment determination and future
  years.

    In section F.1. of this proposed rule, we are proposing to require 
reporting on measures as a yearly count rather than by quarter. Because 
The Joint Commission/CMS Global sampling guidelines specify sampling by 
quarter, we propose to modify their sampling guidelines by multiplying 
the ``number of cases in the initial patient population'' and the 
``number of cases to be sampled'' by 4. In addition, since we require 
all IPFs to report data on all chart-abstracted measures even when the 
population size for a given measure is small or zero (78 FR 50901), we 
have modified the table to require reporting regardless of the number 
of cases. Thus, we propose the following sampling guidelines for the 
measures above:

------------------------------------------------------------------------
  Number of cases in initial patient
              population                Number of records to be sampled
------------------------------------------------------------------------
[gteqt] 6,117........................  1,224.
3,057-6,116..........................  20% of initial patient
                                        population.
609-3,056............................  609.
0-608................................  All cases.
------------------------------------------------------------------------

    As stated above, we believe this proposal will simplify processes 
and procedures for IPFs because uniform requirements will promote 
streamlined procedures and reporting. We also believe the proposal will 
decrease burden by allowing IPFs to identify a single, initial patient 
population for all of the measures specified in Table 24 from which to 
calculate the sample size. Furthermore, we do not believe this approach 
will reduce quality improvement. Sampling calculations ensure that 
enough data are represented in the sample to determine accurate measure 
rates. Therefore, even with sampling, we believe that CMS, IPFs, and 
the public would be able to differentiate those IPFs who perform well 
on measures from those who do not.
    We invite public comment on this proposal, which would begin with 
the FY 2018 payment determination.

G. Public Display and Review Requirements

    We are not proposing any changes to the public display and review 
requirements for the FY 2018 payment determination and subsequent years 
and refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50897 
through 50898) for more information.

H. Form, Manner, and Timing of Quality Data Submission

1. Procedural and Submission Requirements
    We are not proposing any changes to the procedural and submission 
requirements for the FY 2018 payment determination and subsequent years 
and refer readers to the FY 2014 IPPS/LTCH PPS final rule (77 FR 50898 
through 50899) for more information on these previously finalized 
requirements.
2. Proposed Change to the Reporting Periods and Submission Timeframes
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50901), we finalized 
requirements for reporting periods and submission timeframes for the 
IPFQR Program measures. We are proposing one change to these 
requirements, as discussed above in section V.F.1. of this proposed 
rule. Specifically, we are proposing to no longer require that measure 
rates be reported quarterly and by age, but to only require an 
aggregate, yearly count.
3. Population and Sampling
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53657 through 53658) 
and FY 2014 IPPS/LTCH PPS final rule (78 FR 58901 through 58902), we 
finalized policies for population, sampling, and minimum case 
thresholds. We are proposing one change to these policies, as discussed 
above in section V.F.3. of this proposed rule. Specifically, we are 
proposing to allow uniform sampling on certain measures.
4. Data Accuracy and Completeness Acknowledgement (DACA) Requirements
    We are not proposing any changes to the DACA requirements and refer 
readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53658) for more 
information on these requirements.

I. Reconsideration and Appeals Procedures

    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53658 through 
53660), we adopted a reconsideration process, later codified at Sec.  
412.434, whereby IPFs can request a reconsideration of their payment 
update reduction in the event that an IPF believes that its annual 
payment update has been incorrectly reduced for failure to meet all 
IPFQR Program requirements. We are not proposing any changes to the 
Reconsideration and Appeals Procedure and refer readers to the FY 2013 
IPPS/LTCH PPS final rule (77 FR 53658 through 53660) and the FY 2014 
IPPS/LTCH PPS final rule (78 FR 50953) for further details on the 
reconsideration process.

J. Exceptions to Quality Reporting Requirements

    We are not proposing any changes to the exceptions to quality 
reporting requirements and refer readers to the FY 2013 IPPS/LTCH PPS 
final rule (77 FR 53659 through 53660), where we initially finalized 
the policy as ``Waivers

[[Page 25057]]

from Quality Reporting,'' and the FY 2015 IPF PPS final rule (79 FR 
45978), where we re-named the policy as ``Exceptions to Quality 
Reporting Requirements'' for more information.

VI. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995 (PRA), we are required to 
publish a 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval.
    To fairly evaluate whether an information collection should be 
approved by OMB, PRA section 3506(c)(2)(A) requires that we solicit 
comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our burden estimates.
     The quality, utility, and clarity of the information to be 
collected.
     Our effort to minimize the information collection burden 
on the affected public, including the use of automated collection 
techniques.
    We are soliciting public comment on each of the section 
3506(c)(2)(A)-required issues for the following information collection 
requirements (ICRs).

A. Wage Estimates

    We estimate that reporting data for the IPFQR Program measures can 
be accomplished by staff with a mean hourly wage of $16.42 per 
hour.\67\ Under OMB Circular A-76, in calculating direct labor, 
agencies should not only include salaries and wages, but also ``other 
entitlements'' such as fringe benefits.\68\ This Circular provides that 
the civilian position full fringe benefit cost factor is 36.25 percent. 
Therefore, using these assumptions, we estimate an hourly labor cost of 
$22.37 ($16.42 base salary + $5.95 fringe). The following table 
presents the mean hourly wage, the cost of fringe benefits (calculated 
at 36.25 percent of salary), and the adjusted hourly wage.
---------------------------------------------------------------------------

    \67\ http://www.bls.gov/ooh/healthcare/medical-records-and-health-information-technicians.html.
    \68\ http://www.whitehouse.gov/omb/circulars_a076_a76_incl_tech_correction.

----------------------------------------------------------------------------------------------------------------
                                                                                 Fringe benefit
              Occupation title                Occupation code    Mean hourly    (at 36.25% in $/ Adjusted hourly
                                                                 wage  ($/hr)         hr)          wage  ($/hr)
----------------------------------------------------------------------------------------------------------------
Medical Records and Health Information               29-2071            16.42             5.95           $22.37
 Technician.................................
----------------------------------------------------------------------------------------------------------------

    The BLS is ``the principal Federal agency responsible for measuring 
labor market activity, working conditions, and price changes in the 
economy.'' \69\ Acting as an independent agency, the Bureau provides 
objective information for not only the government, but also for the 
public. The Bureau's National Occupational Employment and Wage 
Estimates describes Medical Records and Health Information Technicians 
as those responsible for organizing and managing health information 
data. Therefore, we believe it is reasonable to assume that these 
individuals would be tasked with abstracting clinical data for these 
measures. In addition, the Hospital IQR Program uses this wage to 
calculate its burden estimates.
---------------------------------------------------------------------------

    \69\ http://www.bls.gov/bls/infohome.htm.
---------------------------------------------------------------------------

B. ICRs Regarding the Inpatient Psychiatric Facility Quality Reporting 
(IPFQR) Program

    We refer readers to the FY 2015 IPF PPS final rule (79 FR 45978 
through 45980) for a detailed discussion of the burden for the program 
requirements that we have previously adopted. Below, we discuss only 
the changes in burden resulting from the provisions in this proposed 
rule. Although we propose provisions that impact both the FY 2017 and 
FY 2018 payment determinations, all of our proposals begin to apply to 
facilities in FY 2016. For example, data collection for the proposed 
measures begins in FY 2016, and the changes to the reporting 
requirements take effect beginning with reporting that is required in 
the summer of FY 2016. For purposes of calculating burden, we will 
attribute the costs associated with the proposals to the year in which 
these costs begin; for the purposes of all of the provisions in this 
proposed rule, that year is FY 2016.
1. Changes in Time Required To Chart-Abstract Data Based on Proposed 
Reporting Requirements
    As discussed in section V.F. of this preamble, we are proposing the 
following 3 changes regarding how facilities should report data for 
IPFQR Program measures: (1) Measures must be reported as a single 
yearly count rather than by quarter and age; (2) aggregate population 
counts must be reported as a single yearly number rather than by 
quarter; and (3) uniform sampling would be allowed for certain 
measures.
    We believe that these changes will lead to a decrease in burden 
since facilities would only be required to enter one aggregate number 
for both the numerator and denominator for each measure and will be 
allowed to pull one sample used to calculate the measures specified in 
Table 24 of this preamble. Consequently, we believe that the time 
required to chart-abstract data for these measures would be reduced by 
20 percent. Previously, we estimated 15 minutes to chart-abstract data 
for each case (79 FR 45979). Because of our proposed changes to 
sampling and reporting data, we are revising the figure and now 
estimate 12 minutes (0.20 x 15 minutes), a change of -3 min or -0.05 
hr.
2. Estimated Burden of IPFQR Program Proposals
    In section V. of this preamble, we are proposing to adopt the 
following five measures:
     TOB-3--Tobacco Use Treatment Provided or Offered at 
Discharge and the subset measure TOB-3a Tobacco Use Treatment at 
Discharge (National Quality Forum (NQF) #1656);
     SUB-2--Alcohol Use Brief Intervention Provided or Offered 
and the subset measure SUB-2a (NQF #1663);
     Transition Record with Specified Elements Received by 
Discharged Patients (Discharges from an Inpatient Facility to Home/Self 
Care or Any Other Site of Care) (NQF #0647);
     Timely Transmission of Transition Record (Discharges from 
an Inpatient Facility to Home/Self Care or Any Other Site of Care) (NQF 
#0648); and
     Screening for Metabolic Disorders.
    In the same section, we are also proposing to remove the following 
3 measures:
     HBIPS-4 Patients Discharged on Multiple Antipsychotic 
Medications;
     Hospital Based Inpatient Psychiatric Services (HBIPS)-6 
Post-Discharge Continuing Care Plan (NQF #0557), if Transition Record 
with Specified Elements Received by Discharged Patients (Discharges 
from an

[[Page 25058]]

Inpatient Facility to Home/Self Care or Any Other Site of Care) is 
adopted; and
     HBIPS-7 Post-Discharge Continuing Care Plan Transmitted to 
the Next Level of Care Provider Upon Discharge (NQF #0558), if Timely 
Transmission of Transition Record (Discharges from an Inpatient 
Facility to Home/Self Care or Any Other Site of Care) (NQF #0648) is 
adopted.
    We believe that approximately 1,617 \70\ IPFs will participate in 
the IPFQR Program for requirements occurring in FY 2016 and subsequent 
years. Based on data from CY 2013, we believe that each facility will 
submit measure data on approximately 431 \71\ cases per year. 
Therefore, we estimate that adopting five measures and removing 3 
measures (for a net result of 2 measures) will result in an increase in 
burden of 172.4 hours per facility (2 measures x (431 cases/measure x 
0.20 hours/case)) or 278,770.80 hours across all IPFs (172.4 hours/
facility x 1,617 facilities). The increase in costs is approximately 
$3,856.59 per IPF ($22.37/hour x 172.4 hours) or $6,236,102.80 across 
all IPFs (278,770.80 hours x $22.37/hour).
---------------------------------------------------------------------------

    \70\ In the FY 2015 IPF PPS final rule we estimated 1,626 IPFs 
and are adjusting that estimate by -9 to account for more recent 
data.
    \71\ In the FY 2015 IPF PPS final rule we estimated 556 cases 
per year and are adjusting that estimate by -125 to account for more 
recent data.
---------------------------------------------------------------------------

    Consistent with our estimates in the FY 2015 IPF PPS final rule (79 
FR 45979), we believe the estimated burden for training personnel on 
our proposals for data collection and submission is 2 hours per 
facility or 3,234 hours (2 hours/facility x 1,617 facilities) across 
all IPFs. Therefore, the cost for this training is $44.74 ($22.37/hour 
x 2 hours) for each IPF or $72,344.58 ($22.37/hour x 3,234 hours) for 
all facilities.
    Finally, IPFs must submit to CMS aggregate population counts for 
Medicare and non-Medicare discharges by age group, and diagnostic 
group, and sample size counts for measures for which sampling is 
performed. As noted above, we are proposing five new measures beginning 
with the FY 2018 payment determination. However, because, as further 
described above, we are eliminating reporting this non-measure data by 
quarter for all measures, we believe that the addition of five measures 
leads to a net negligible change in burden associated with non-measure 
data collection.

C. Summary of Annual Burden Estimates for Proposed Requirements

                    Table 25--Proposed Annual Recordkeeping and Reporting Requirements Under OMB Control Number 0938-1171 (CMS-10432)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                   Total      Labor cost
                                                                             Responses  (per        Burden per     annual         of
     Preamble section(s)            Proposed action       Respondents          respondent)           response      burden     reporting   Total cost ($)
                                                                                                     (hours)*     (hours)       ($/hr)
--------------------------------------------------------------------------------------------------------------------------------------------------------
V.C.........................  Remove HBIPS-4............        1,617  862 (431 cases/yr x 2              0.20   278,770.80        22.37    6,236,102.80
                                                                        measures).
V...........................  Remove HBIPS-6 and HBIPS-7
V...........................  Add NQF # 1656, # 1663, #
                               0647, # 0648, and
                               Screening for Metabolic
                               Disorders.
                                                         -------------                            ------------------------------------------------------
                              Training..................  ...........  1.........................            2        3,234  ...........       72,344.58
    Total...................  ..........................        1,617  863.......................          2.2    282,004.8        22.37    6,308,447.38
--------------------------------------------------------------------------------------------------------------------------------------------------------

D. ICRs Regarding the Hospital and Health Care Complex Cost Report 
(CMS-2552-10)

    This rule would not impose any new or revised collection of 
information requirements associated with CMS-2552-10 (as discussed 
under preamble section III.A.3.a.i.). Consequently, the cost report 
does not require additional OMB review under the authority of the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.). The report's 
information collection requirements and burden estimates are approved 
by OMB under control number 0938-0052.

E. Submission of PRA-Related Comments

    We submitted a copy of this proposed rule to OMB for its review of 
the rule's information collection and recordkeeping requirements. The 
requirements are not effective until they have been approved by the 
OMB.
    To obtain copies of the supporting statement and any related forms 
for the proposed collections discussed above, please visit CMS' Web 
site at www.cms.hhs.gov/[email protected]">www.cms.hhs.gov/[email protected], or call the Reports 
Clearance Office at 410-786-1326.
    We invite public comment on these potential information collection 
requirements. If you wish to comment, please submit your comments 
electronically as specified under the ADDRESSES caption of this 
proposed rule and identify the rule (CMS-1627-P).
    PRA-related comments must be received on/by June 23, 2015.

VII. Regulatory Impact Analysis

A. Statement of Need

    This proposed rule would update the prospective payment rates for 
Medicare inpatient hospital services provided by IPFs for discharges 
occurring during the FY beginning October 1, 2015, through September 
30, 2016. We are applying the proposed FY 2012-based IPF-specific 
market basket increase of 2.7 percent, less the productivity adjustment 
of 0.6 percentage point as required by 1886(s)(2)(A)(i) of the Act, and 
further reduced by 0.2 percentage point as required by sections 
1886(s)(2)(A)(ii) and 1886(s)(3)(D) of the Act. In this proposed rule, 
we propose to adopt an IPF-specific market basket and to update the IPF 
labor-related share; to adopt new OMB CBSA delineations for the FY 2016 
IPF Wage Index; and to phase out the rural adjustment for 37 rural 
providers which would become urban providers as a result of the new 
CBSA delineations. Additionally, this rule reminds providers of the 
October 1, 2015 implementation of the International Classification of 
Diseases, 10th Revision, Clinical Modification (ICD-

[[Page 25059]]

10-CM/PCS) for the IPF prospective payment system, updates providers on 
the status of IPF PPS refinements, and proposes new quality reporting 
requirements for the IPFQR Program.

B. Overall Impact

    We have examined the impact of this proposed rule as required by 
Executive Order 12866 on Regulatory Planning and Review (September 30, 
1993), Executive Order 13563 on Improving Regulation and Regulatory 
Review (January 18, 2011), the Regulatory Flexibility Act (RFA) 
(September 19, 1980, Pub. L. 96-354), section 1102(b) of the Social 
Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 
(March 22, 1995; Pub. L. 104-4), Executive Order 13132 on Federalism 
(August 4, 1999) and the Congressional Review Act (5 U.S.C. 804(2)).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). A 
regulatory impact analysis (RIA) must be prepared for a major rules 
with economically significant effects ($100 million or more in any 1 
year). This proposed rule is not designated as economically 
``significant'' under section 3(f)(1) of Executive Order 12866.
    We estimate that the total impact of these changes for FY 2016 
payments compared to FY 2015 payments will be a net increase of 
approximately $80 million. This reflects a $95 million increase from 
the update to the payment rates, as well as a $15 million decrease as a 
result of the update to the outlier threshold amount. Outlier payments 
are estimated to decrease from 2.3 percent in FY 2015 to 2.0 percent of 
total IPF payments in FY 2016.
    The RFA requires agencies to analyze options for regulatory relief 
of small entities if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, small entities 
include small businesses, nonprofit organizations, and small 
governmental jurisdictions. Most IPFs and most other providers and 
suppliers are small entities, either by nonprofit status or having 
revenues of $7.5 million to $38.5 million or less in any 1 year, 
depending on industry classification (for details, refer to the SBA 
Small Business Size Standards found at http://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf), or being nonprofit 
organizations that are not dominant in their markets.
    Because we lack data on individual hospital receipts, we cannot 
determine the number of small proprietary IPFs or the proportion of 
IPFs' revenue derived from Medicare payments. Therefore, we assume that 
all IPFs are considered small entities. The Department of Health and 
Human Services generally uses a revenue impact of 3 to 5 percent as a 
significance threshold under the RFA.
    As shown in Table 26, we estimate that the overall revenue impact 
of this proposed rule on all IPFs is to increase Medicare payments by 
approximately 1.6 percent. As a result, since the estimated impact of 
this proposed rule is a net increase in revenue across almost all 
categories of IPFs, the Secretary has determined that this proposed 
rule would have a positive revenue impact on a substantial number of 
small entities. MACs are not considered to be small entities. 
Individuals and States are not included in the definition of a small 
entity.
    In addition, section 1102(b) of the Social Security Act requires us 
to prepare a regulatory impact analysis if a rule may have a 
significant impact on the operations of a substantial number of small 
rural hospitals. This analysis must conform to the provisions of 
section 603 of the RFA. For purposes of section 1102(b) of the Act, we 
define a small rural hospital as a hospital that is located outside of 
a metropolitan statistical area and has fewer than 100 beds. As 
discussed in detail below, the rates and policies set forth in this 
proposed rule would not have an adverse impact on the rural hospitals 
based on the data of the 275 rural units and 68 rural hospitals in our 
database of 1,617 IPFs for which data were available. Therefore, the 
Secretary has determined that this proposed rule would not have a 
significant impact on the operations of a substantial number of small 
rural hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2015, that 
threshold is approximately $144 million. This proposed rule will not 
impose spending costs on state, local, or tribal governments in the 
aggregate, or by the private sector, of $144 million or more.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on state 
and local governments, preempts state law, or otherwise has Federalism 
implications. As stated above, this proposed rule would not have a 
substantial effect on state and local governments.

C. Anticipated Effects

    We discuss the historical background of the IPF PPS and the impact 
of this proposed rule on the Federal Medicare budget and on IPFs.
1. Budgetary Impact
    As discussed in the November 2004 and May 2006 IPF PPS final rules, 
we applied a budget neutrality factor to the Federal per diem base rate 
and ECT rate to ensure that total estimated payments under the IPF PPS 
in the implementation period would equal the amount that would have 
been paid if the IPF PPS had not been implemented. The budget 
neutrality factor includes the following components: outlier 
adjustment, stop-loss adjustment, and the behavioral offset. As 
discussed in the May 2008 IPF PPS notice (73 FR 25711), the stop-loss 
adjustment is no longer applicable under the IPF PPS.
    As discussed in section III.D.1.e. of this proposed rule, we are 
using the wage index and labor-related share in a budget neutral manner 
by applying a wage index budget neutrality factor to the Federal per 
diem base rate and ECT rate. Therefore, the budgetary impact to the 
Medicare program of this proposed rule will be due to the estimated 
market basket update for FY 2016 of 2.7 percent (see section III.A.4. 
of this proposed rule) less the productivity adjustment of 0.6 
percentage point required by section 1886 (s)(2)(A)(i) of the Act; 
further reduced by the ``other adjustment'' of 0.2 percentage point 
under sections 1886(s)(2)(A)(ii) and 1886 (s)(3)(D) of the Act; and the 
update to the outlier fixed dollar loss threshold amount.
    We estimate that the FY 2016 impact will be a net increase of $80 
million in payments to IPF providers. This reflects an estimated $95 
million increase from the update to the payment rates and a $15 million 
decrease due to the update to the outlier threshold amount to set total 
estimated outlier payments at 2.0 percent of total estimated payments 
in FY 2016. This estimate does not include the implementation of the 
required 2 percentage point reduction of the market basket increase 
factor for any IPF that fails to meet the IPF quality reporting 
requirements (as discussed in section VII.C.4. below).

[[Page 25060]]

2. Impact on Providers
    To understand the impact of the changes to the IPF PPS on 
providers, discussed in this proposed rule, it is necessary to compare 
estimated payments under the IPF PPS rates and factors for FY 2016 
versus those under FY 2015. We determined the percent change of 
estimated FY 2016 IPF PPS payments to FY 2015 IPF PPS payments for each 
category of IPFs. In addition, for each category of IPFs, we have 
included the estimated percent change in payments resulting from the 
update to the outlier fixed dollar loss threshold amount; the updated 
wage index data; the changes to wage index CBSAs; the changes to rural 
adjustment payments resulting from changes in rural or urban status, 
due to CBSA changes; the proposed labor-related share; and the 
estimated market basket update for FY 2016, as adjusted by the 
productivity adjustment according to section 1886(s)(2)(A)(i), and the 
``other adjustment'' according to sections 1886(s)(2)(A)(ii) and 
1886(s)(3)(D) of the Act.
    To illustrate the impacts of the FY 2016 changes in this proposed 
rule, our analysis begins with a FY 2015 baseline simulation model 
based on FY 2014 IPF payments inflated to the midpoint of FY 2015 using 
IHS Global Insight Inc.'s most recent forecast of the market basket 
update (see section III.A.4. of this proposed rule); the estimated 
outlier payments in FY 2015; the CBSA delineations for IPFs based on 
OMB's MSA definitions after June 2003; the FY 2014 pre-floor, pre-
reclassified hospital wage index; the FY 2015 labor-related share; and 
the FY 2015 percentage amount of the rural adjustment. During the 
simulation, the total estimated outlier payments are maintained at 2 
percent of total IPF PPS payments.
    Each of the following changes is added incrementally to this 
baseline model in order for us to isolate the effects of each change:
     The update to the outlier fixed dollar loss threshold 
amount;
     The FY 2015 pre-floor, pre-reclassified hospital wage 
index without the revised OMB delineations;
     The FY 2015 updated CBSA delineations, based on OMB's 
February 28, 2013 Bulletin No. 13-01, as described in section 
III.D.1.c. of this proposed rule, with the proposed blended FY 2016 IPF 
wage index;
     The FY 2016 rural adjustment, accounting for changes to 
rural or urban status due to the updated CBSA delineations, including 
the phase-out of the rural adjustment for the IPFs changing from rural 
to urban status, as described in section III.D.1.d;
     The proposed FY 2016 labor-related share;
     The estimated market basket update for FY 2016 of 2.7 
percent less the productivity adjustment of 0.6 percentage point 
reduction in accordance with section 1886(s)(2)(A)(i) of the Act and 
further reduced by the ``other adjustment'' of 0.2 percentage point in 
accordance with sections 1886(s)(2)(A)(ii) and 1886(s)(3)(D) of the 
Act.
    Our final comparison illustrates the percent change in payments 
from FY 2015 (that is, October 1, 2014, to September 30, 2015) to FY 
2016 (that is, October 1, 2015, to September 30, 2016) including all 
the changes in this proposed rule.

                                                         Table 26--IPF IMPACT Table for FY 2016
                                                                [% change in columns 3-9]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       Change  in     Labor
                                                   Number of                 Wage index                  rural       related     IPF market     Total
                Facility by type                      IPFs       Outlier        \1\        CBSA \2\    adjustment     share        basket      percent
                                                                                                          \3\      (74.9%) \4\   update \5\   change \6\
(1)                                                       (2)          (3)          (4)          (5)          (6)          (7)          (8)          (9)
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Facilities..................................        1,617         -0.3          0.0          0.0          0.0          0.0          1.9          1.6
    Total Urban.................................        1,274         -0.3          0.0          0.0          0.0          0.2          1.9          1.8
    Total Rural.................................          343         -0.3          0.0         -0.2          0.2         -1.1          1.9          0.6
    Urban unit..................................          847         -0.4          0.0          0.0          0.0          0.2          1.9          1.7
    Urban hospital..............................          427         -0.1         -0.1          0.1          0.0          0.1          1.9          1.9
    Rural unit..................................          275         -0.3          0.1         -0.2          0.2         -1.1          1.9          0.5
    Rural hospital..............................           68         -0.1          0.0         -0.3          0.2         -1.0          1.9          0.7
CBSA Change:
    Urban to Urban..............................        1,237         -0.3          0.0          0.0          0.1          0.2          1.9          1.8
    Rural to Rural..............................          340         -0.3          0.0         -0.2          0.1         -1.1          1.9          0.4
    Urban to Rural..............................            3         -0.1          3.1         -0.4         16.2         -1.1          1.9         20.1
    Rural to Urban..............................           37         -0.2          0.1          2.8         -4.1         -0.9          1.9         -0.5
By Type of Ownership:
Freestanding IPFs:
    Urban Psychiatric Hospitals:
        Government..............................          123         -0.3          0.1          0.0          0.0          0.1          1.9          1.8
        Non-Profit..............................           99         -0.1          0.4          0.1          0.0          0.4          1.9          2.7
        For-Profit..............................          205          0.0         -0.3          0.1          0.0          0.0          1.9          1.6
    Rural Psychiatric Hospitals:
        Government..............................           36         -0.1          0.2         -0.1          0.4         -0.8          1.9          1.5
        Non-Profit..............................           11         -0.5         -0.6          0.0          0.0         -0.3          1.9          0.5
        For-Profit..............................           21          0.0          0.0         -0.6          0.1         -1.3          1.9          0.1
IPF Units:
    Urban:
        Government..............................          129         -0.6         -0.2         -0.1          0.0          0.3          1.9          1.2
        Non-Profit..............................          552         -0.4          0.2          0.0         -0.1          0.3          1.9          1.9
        For-Profit..............................          166         -0.3         -0.2          0.0          0.0          0.0          1.9          1.3
    Rural:
        Government..............................           69         -0.2         -0.1         -0.3          0.1         -1.3          1.9          0.0
        Non-Profit..............................          142         -0.3          0.2         -0.2          0.3         -0.9          1.9          0.8
        For-Profit..............................           64         -0.3          0.0         -0.2          0.2         -1.2          1.9          0.3
By Teaching Status:
    Non-teaching................................        1,420         -0.2         -0.1          0.0          0.0         -0.1          1.9          1.5
    Less than 10% interns and residents to beds.          110         -0.3          0.2         -0.1          0.0          0.5          1.9          2.1
    10% to 30% interns and residents to beds....           61         -0.7          0.4         -0.1          0.0          0.5          1.9          2.1
    More than 30% interns and residents to beds.           26         -0.7          0.4          0.0          0.0          0.8          1.9          2.4

[[Page 25061]]

 
By Region:
    New England.................................          108         -0.3          0.8          0.0          0.0          0.7          1.9          3.2
    Mid-Atlantic................................          243         -0.2          0.2         -0.1          0.0          0.6          1.9          2.4
    South Atlantic..............................          238         -0.2         -0.3          0.1         -0.1         -0.4          1.9          0.9
    East North Central..........................          259         -0.2          0.0          0.0          0.1         -0.2          1.9          1.6
    East South Central..........................          160         -0.2         -0.5          0.0         -0.1         -1.1          1.9          0.0
    West North Central..........................          141         -0.4          0.0          0.1          0.0         -0.3          1.9          1.3
    West South Central..........................          243         -0.2         -0.5          0.0         -0.1         -0.7          1.9          0.3
    Mountain....................................          103         -0.2          0.4          0.0          0.1          0.2          1.9          2.3
    Pacific.....................................          122         -0.4          0.5          0.0          0.1          1.3          1.9          3.4
By Bed Size:
    Psychiatric Hospitals:
        Beds: 0-24..............................           83         -0.1          0.0          0.1         -0.3         -0.7          1.9          0.8
        Beds: 25-49.............................           77         -0.1         -0.4          0.3         -0.1         -0.2          1.9          1.4
        Beds: 50-75.............................           84         -0.1          0.0          0.0          0.1          0.0          1.9          1.9
        Beds: 76 +..............................          251         -0.1          0.0          0.0          0.0          0.1          1.9          2.0
    Psychiatric Units:
        Beds: 0-24..............................          662         -0.4          0.0          0.0          0.0         -0.3          1.9          1.2
        Beds: 25-49.............................          301         -0.4          0.0          0.1          0.0          0.0          1.9          1.7
        Beds: 50-75.............................          103         -0.3          0.1          0.0          0.0          0.1          1.9          1.9
        Beds: 76 +..............................           56         -0.4         -0.1         -0.2          0.0          0.5          1.9          1.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Includes a FY 2016 IPF wage index, current CBSA delineations, and a labor-related share of 0.69294.
\2\ Includes a 50/50 FY 2016 proposed blended IPF wage index, new CBSA delineations, and a labor-related share of 0.69294.
\3\ Includes a 50/50 FY 2016 proposed blended IPF wage index, new CBSA delineations, a labor-related share of 0.69294, and a rural adjustment. Providers
  changing from urban to rural status will receive a 17 percent rural adjustment, and providers changing from rural to urban status will receive 2/3 of
  the 17 percent rural adjustment in FY 2016. For those changing from urban to rural status, the total impact shown is affected by outlier threshold
  increasing, which results in smaller outlier payments as part of total payments. For those changing from rural to urban status, the outlier threshold
  is being lowered by 2/3 of 17 percent, which results in more providers being eligible for outlier payments, increasing the outlier portion of their
  total payments.
\4\ Includes a 50/50 FY 2016 proposed blended IPF wage index, new CBSA delineations, a labor-related share of 0.749, and a rural adjustment.
\5\ This column reflects the payment update impact of the IPF-specific market basket update of 2.7 percent, a 0.6 percentage point reduction for the
  productivity adjustment as required by section 1886(s)(2)(A)(i) of the Act, and a 0.2 percentage point reduction in accordance with sections
  1886(s)(2)(A)(ii) and 1886(s)(3)(D) of the Act.
\6\ Percent changes in estimated payments from FY 2015 to FY 2016 include all of the changes presented in this proposed rule. Note, the products of
  these impacts may be different from the percentage changes shown here due to rounding effects.

3. Results
    Table 26 above displays the results of our analysis. The table 
groups IPFs into the categories listed below based on characteristics 
provided in the Provider of Services (POS) file, the IPF provider 
specific file, and cost report data from HCRIS:
     Facility Type
     Location
     Teaching Status Adjustment
     Census Region
     Size
    The top row of the table shows the overall impact on the 1,617 IPFs 
included in this analysis.
    In column 3, we present the effects of the update to the outlier 
fixed dollar loss threshold amount. We estimate that IPF outlier 
payments as a percentage of total IPF payments are 2.3 percent in FY 
2015. Thus, we are adjusting the outlier threshold amount in this 
proposed rule to set total estimated outlier payments equal to 2 
percent of total payments in FY 2016. The estimated change in total IPF 
payments for FY 2016, therefore, includes an approximate 0.3 percent 
decrease in payments because the outlier portion of total payments is 
expected to decrease from approximately 2.3 percent to 2.0 percent.
    The overall impact of this outlier adjustment update (as shown in 
column 3 of Table 26), across all hospital groups, is to decrease total 
estimated payments to IPFs by 0.3 percent. The largest decrease in 
payments is estimated to reflect a 0.7 percent decrease in payments for 
IPFs located in teaching hospitals with an intern and resident Average 
Daily Census (ADC) ratio that is 10 percent or greater.
    In column 4, we present the effects of the budget-neutral proposed 
update to the IPF wage index. This represents the effect of using the 
most recent wage data available without taking into account the revised 
OMB delineations, which are presented separately in the next column. 
That is, the impact represented in this column is solely that of 
updating from the FY 2015 IPF wage index to the FY 2016 IPF wage index 
without any changes to the OMB delineations. We note that there is no 
projected change in aggregate payments to IPFs, as indicated in the 
first row of column 4. However, there will be distributional effects 
among different categories of IPFs. For example, we estimate the 
largest increase in payments to be 3.1 percent for IPFs changing from 
urban to rural status, and the largest decrease in payments to be 0.6 
percent for rural non-profit freestanding IPFs.
    In column 5, we present the effects of the new OMB delineations and 
the proposed transition to the new delineations using the transitional 
IPF wage index. The FY 2016 IPF proposed transitional wage index is a 
blended wage index using 50 percent of the IPF's FY 2016 wage index 
based on the new OMB delineations and 50 percent of the IPF's FY 2016 
wage index based on the OMB delineations used in FY 2015. In the 
aggregate, since these proposed updates to the wage index are applied 
in a budget-neutral manner, we do not estimate that these proposed 
updates would affect overall estimated payments to IPFs. However, we 
estimate that these proposed updates would have distributional effects. 
We estimate the largest increase in payments would be 2.8 percent for 
IPFs changing from rural to urban status and the largest decrease in 
payments would be 0.6 percent for rural for-profit freestanding IPFs.
    In column 6, we present the effects of the changes to the rural 
adjustment under the new CBSA delineations. There are 3 urban IPFs 
which would be

[[Page 25062]]

newly designated as rural IPFs, which would now receive a full 17 
percent rural adjustment. We estimate that the largest increase in 
payments would be to these 3 newly-rural IPFs. Note that each column's 
simulations include both regular and outlier payments; as regular 
payments increase, outlier payments decrease to maintain outlier 
payments at 2 percent of total payments. As such, the increase to total 
IPF payments is estimated to be 16.2 percent. There are also 37 rural 
IPFs which would be newly designated as urban IPFs, where we proposed 
to phase out their rural adjustment over 3 years. These 37 newly-urban 
providers would receive \2/3\ of the 17 percent rural adjustment in FY 
2016, \1/3\ of the 17 percent rural adjustment in FY 2017, and no rural 
adjustment for FY 2018 and subsequent years. As the regular payments 
for these 37 providers decrease, their outlier payments increase to 
maintain outlier payments at 2 percent of total payments. We estimate 
that the largest decrease in payments would be 4.1 percent for these 37 
newly-urban providers.
    In column 7, we present the estimated effects of the proposed 
labor-related share. The proposed update to the IPF labor-related share 
is made in a budget-neutral manner and therefore would not affect total 
estimated IPF PPS payments. However, it would affect the estimated 
distribution of payments among providers. For example, we estimate the 
largest increase in payments would be 1.3 percent to IPFs in the 
Pacific region. We estimate the largest decrease in payments would be 
1.3 percent to rural for-profit freestanding IPFs and to rural IPF 
governmental units.
    In column 8, we present the estimated effects of the update to the 
IPF PPS payment rates of 1.9 percent, which are based on a proposed 2.7 
percent IPF-specific market basket update, less the productivity 
adjustment of 0.6 percentage point in accordance with section 
1886(s)(2)(A)(i), and further reduced by 0.2 percentage point in 
accordance with section 1886(s)(2)(A)(ii) and 1886(s)(3)(D).
    Finally, column 9 compares our estimates of the total changes 
reflected in this proposed rule for FY 2016 to the payments for FY 2015 
(without these changes). This column reflects all proposed FY 2016 
changes relative to FY 2015. The average estimated increase for all 
IPFs is approximately 1.6 percent. This estimated net increase includes 
the effects of the estimated 2.7 percent market basket update reduced 
by the productivity adjustment of 0.6 percentage point, as required by 
section 1886(s)(2)(A)(i) of the Act and further reduced by the ``other 
adjustment'' of 0.2 percentage point, as required by sections 
1886(s)(2)(A)(ii) and 1886(s)(3)(D) of the Act. It also includes the 
overall estimated 0.3 percent decrease in estimated IPF outlier 
payments as a percent of total payments from the update to the outlier 
fixed dollar loss threshold amount. Since we are making the updates 
noted in columns 4 through 7 in a budget-neutral manner, they will not 
affect total estimated IPF payments in the aggregate. However, they 
will affect the estimated distribution of payments among providers.
    Overall, urban IPFs are estimated to experience a 1.8 percent 
increase in payments in FY 2016 and rural IPFs are estimated to 
experience a 0.6 percent increase in payments in FY 2016. The largest 
estimated decrease in payments is 0.5 percent for rural IPFs that 
transition to urban status as a result of the new OMB delineations. As 
noted previously, we proposed to mitigate the effects of the loss of 
the rural adjustment to these 37 providers by phasing the adjustment 
out over 3 years. The largest payment increase is estimated at 20.1 
percent for IPFs that transition from urban to rural status (thereby 
gaining the 17 percent rural adjustment), followed by a 3.4 percent 
increase for IPFs in the Pacific region.
4. Effects of Updates to the IPFQR Program
    As discussed in section V. of this proposed rule and in accordance 
with section 1886(s)(4)(A)(i) of the Act, we will implement a 2 
percentage point reduction in the FY 2018 market basket update for IPFs 
that have failed to comply with the IPFQR Program requirements for FY 
2018, including reporting on the required measures. In section V. of 
this proposed rule, we discuss how the 2 percentage point reduction 
will be applied. For FY 2015, of the 1,725 IPFs eligible for the IPFQR 
Program, 31 IPFs (1.8 percent) did not receive the full market basket 
update because of the IPFQR Program; 10 of these IPFs chose not to 
participate and 21 did not meet the requirements of the program. We 
anticipate that even fewer IPFs would receive the reduction for FY 2016 
as IPFs become more familiar with the requirements. Thus, we estimate 
that this policy will have a negligible impact on overall IPF payments 
for FY 2016.
    Based on the proposals made in this rule, we estimate a total 
increase in burden of 174.4 hours per IPF or 282,004.80 hours across 
all IPFs, resulting in a total increase in financial burden of 
$3,901.33 per IPF or $6,308,447.38 across all IPFs. As discussed in 
section VI. of this proposed rule, we will attribute the costs 
associated with the proposals to the year in which these costs begin; 
for the purposes of all the proposals in this proposed rule, that year 
is FY 2016. Further information on these estimates can be found in 
section VI. of this proposed rule.
    We intend to closely monitor the effects of this quality reporting 
program on IPFs and help facilitate successful reporting outcomes 
through ongoing stakeholder education, national trainings, and a 
technical help desk.
5. Effect on Beneficiaries
    Under the IPF PPS, IPFs will receive payment based on the average 
resources consumed by patients for each day. We do not expect changes 
in the quality of care or access to services for Medicare beneficiaries 
under the FY 2016 IPF PPS, but we continue to expect that paying 
prospectively for IPF services would enhance the efficiency of the 
Medicare program.

D. Alternatives Considered

    The statute does not specify an update strategy for the IPF PPS and 
is broadly written to give the Secretary discretion in establishing an 
update methodology. Therefore, we are updating the IPF PPS using the 
methodology published in the November 2004 IPF PPS final rule, but with 
a proposed IPF-specific market basket, and updated labor-related share, 
a proposed transitional wage index to implement new OMB CBSA 
designations, and a proposed phase-out of the rural adjustment for the 
37 providers changing from rural to urban status as a result of the 
updated OMB CBSA delineations used in the FY 2016 IPF PPS transitional 
wage index. We considered implementing the new OMB designations for the 
FY 2016 IPF PPS wage index without a blend, but wanted to mitigate any 
negative effects of CBSA changes on IPFs. Additionally, we considered 
abruptly ending the rural adjustment for the 37 IPF providers which 
changed from rural to urban status as a result of the OMB CBSA changes. 
However, we wanted to propose relief from the effects of OMB's new CBSA 
delineations to the 37 providers which changed from rural to urban 
status. We also considered whether to allow a phase-in of the updated 
LRS, but decided that the impact of full implementation did not warrant 
a phase-in, especially given that we also proposed a transitional wage 
index and a phase-out of the rural adjustment for those IPFs which 
changed status from rural to urban under the new CBSAs. Additionally, 
for

[[Page 25063]]

the IPFQR Program, alternatives were not considered because the 
Program, as designed, best achieves quality reporting goals for the 
inpatient psychiatric care setting, while minimizing associated 
reporting burdens on IPFs. Section V. of this proposed rule discusses 
other benefits and objectives of the Program.

E. Accounting Statement

    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars_a004_a-4), in Table 27 below, we have 
prepared an accounting statement showing the classification of the 
expenditures associated with the provisions of this proposed rule. The 
costs for data submission presented in Table 27 are calculated in 
section VI, which also discusses the benefits of data collection. This 
table provides our best estimate of the increase in Medicare payments 
under the IPF PPS as a result of the changes presented in this proposed 
rule and based on the data for 1,617 IPFs in our database. Furthermore, 
we present the estimated costs associated with updating the IPFQR 
program. The increases in Medicare payments are classified as Federal 
transfers to IPF Medicare providers.

Table 27--Accounting Statement: Classification of Estimated Expenditures
------------------------------------------------------------------------
 Change in Estimated Transfers From FY 2015 IPF PPS to FY 2016 IPF PPS:
-------------------------------------------------------------------------
              Category                             Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers......  $80 million.
From Whom to Whom?..................  Federal Government to IPF Medicare
                                       Providers.
------------------------------------------------------------------------
    FY 2016 Costs to Updating the Quality Reporting Program for IPFs:
------------------------------------------------------------------------
              Category                               Costs
------------------------------------------------------------------------
 Annualized Monetized Costs for IPFs  $6.31 million.
  to Submit Data (Quality Reporting
               Program)
------------------------------------------------------------------------

    In accordance with the provisions of Executive Order 12866, this 
proposed rule was reviewed by the Office of Management and Budget.

List of Subjects in 42 CFR Part 412

    Administrative practice and procedure, Health facilities, Medicare, 
Puerto Rico, Reporting and recordkeeping requirements.

    For the reasons set forth in the preamble, the Centers for Medicare 
and Medicaid Services proposes to amend 42 CFR chapter IV as set forth 
below:

PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL 
SERVICES

0
1. The authority citation for part 412 continues to read as follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh), sec. 124 of Pub. L. 106-113 (113 Stat. 
1501A-332), sec. 1206 of Pub. L. 113-67, and sec. 112 of Pub. L. 
113-93.

0
2. Section 412.428 is amended by revising paragraph (e) to read as 
follows:


Sec.  412.428  Publication of Updates to the inpatient psychiatric 
facility prospective payment system.

* * * * *
    (e) Describe the ICD-10-CM coding changes and DRG classification 
changes discussed in the annual update to the hospital inpatient 
prospective payment system regulations.
* * * * *

    Dated: April 13, 2015.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Approved: April 22, 2015.
Sylvia M. Burwell,
Secretary.
    Note: The following addendum will not publish in the Code of 
Federal Regulations.

Addendum--FY 2016 Proposed Rates and Adjustment Factors

    Per Diem Rate:

Federal Per Diem Base Rate...................................    $745.19
Labor Share (0.749)..........................................     558.15
Non-Labor Share (0.251)......................................     187.04
 

    Per Diem Rate Applying the 2 Percentage Point Reduction

Federal Per Diem Base Rate...................................    $730.56
Labor Share (0.749)..........................................     547.19
Non-Labor Share (0.251)......................................     183.37
 

    Fixed Dollar Loss Threshold Amount: $9,825.
    Wage Index Budget-Neutrality Factor: 1.0041.
    Facility Adjustments:

Rural Adjustment Factor...................  1.17
Teaching Adjustment Factor................  0.5150
Wage Index................................  Pre-reclass Hospital Wage
                                             Index (FY2015)
 

    Cost of Living Adjustments (COLAs):

------------------------------------------------------------------------
                                                         Cost of living
                         Area                          adjustment factor
------------------------------------------------------------------------
Alaska:
    City of Anchorage and 80-kilometer (50-mile)                    1.23
     radius by road..................................
    City of Fairbanks and 80-kilometer (50-mile)                    1.23
     radius by road..................................
    City of Juneau and 80-kilometer (50-mile) radius                1.23
     by road.........................................
    Rest of Alaska...................................               1.25
Hawaii:
    City and County of Honolulu......................               1.25
    County of Hawaii.................................               1.19
    County of Kauai..................................               1.25
    County of Maui and County of Kalawao.............               1.25
------------------------------------------------------------------------

    Patient Adjustments:

ECT--Per Treatment...................................            $320.82
ECT--Per Treatment Applying the 2 Percentage Point                314.52
 Reduction...........................................
 


[[Page 25064]]

    Variable Per Diem Adjustments:

------------------------------------------------------------------------
                                                       Adjustment factor
------------------------------------------------------------------------
Day 1--Facility Without a Qualifying Emergency                      1.19
 Department..........................................
Day 1--Facility With a Qualifying Emergency                         1.31
 Department..........................................
Day 2................................................               1.12
Day 3................................................               1.08
Day 4................................................               1.05
Day 5................................................               1.04
Day 6................................................               1.02
Day 7................................................               1.01
Day 8................................................               1.01
Day 9................................................               1.00
Day 10...............................................               1.00
Day 11...............................................               0.99
Day 12...............................................               0.99
Day 13...............................................               0.99
Day 14...............................................               0.99
Day 15...............................................               0.98
Day 16...............................................               0.97
Day 17...............................................               0.97
Day 18...............................................               0.96
Day 19...............................................               0.95
Day 20...............................................               0.95
Day 21...............................................               0.95
After Day 21.........................................               0.92
------------------------------------------------------------------------

    Age Adjustments:

------------------------------------------------------------------------
                    Age (in years)                     Adjustment factor
------------------------------------------------------------------------
Under 45.............................................               1.00
45 and under 50......................................               1.01
50 and under 55......................................               1.02
55 and under 60......................................               1.04
60 and under 65......................................               1.07
65 and under 70......................................               1.10
70 and under 75......................................               1.13
75 and under 80......................................               1.15
80 and over..........................................               1.17
------------------------------------------------------------------------

    DRG Adjustments:

------------------------------------------------------------------------
            MS-DRG               MS-DRG descriptions   Adjustment factor
------------------------------------------------------------------------
056...........................  Degenerative nervous                1.05
057...........................   system disorders w
                                 MCC.
                                Degenerative nervous
                                 system disorders w/o
                                 MCC.
080...........................  Nontraumatic stupor &               1.07
081...........................   coma w MCC.
                                Nontraumatic stupor &
                                 coma w/o MCC.
876...........................  O.R. procedure w                    1.22
                                 principal diagnoses
                                 of mental illness.
880...........................  Acute adjustment                    1.05
                                 reaction &
                                 psychosocial
                                 dysfunction.
881...........................  Depressive neuroses..               0.99
882...........................  Neuroses except                     1.02
                                 depressive.
883...........................  Disorders of                        1.02
                                 personality &
                                 impulse control.
884...........................  Organic disturbances                1.03
                                 & mental retardation.
885...........................  Psychoses............               1.00
886...........................  Behavioral &                        0.99
                                 developmental
                                 disorders.
887...........................  Other mental disorder               0.92
                                 diagnoses.
894...........................  Alcohol/drug abuse or               0.97
                                 dependence, left AMA.
895...........................  Alcohol/drug abuse or               1.02
                                 dependence w
                                 rehabilitation
                                 therapy.
896...........................  Alcohol/drug abuse or               0.88
897...........................   dependence w/o
                                 rehabilitation
                                 therapy w MCC.
                                Alcohol/drug abuse or
                                 dependence w/o
                                 rehabilitation
                                 therapy w/o MCC.
------------------------------------------------------------------------

    Comorbidity Adjustments:

------------------------------------------------------------------------
                     Comorbidity                       Adjustment factor
------------------------------------------------------------------------
Developmental Disabilities...........................               1.04
Coagulation Factor Deficit...........................               1.13

[[Page 25065]]

 
Tracheostomy.........................................               1.06
Eating and Conduct Disorders.........................               1.12
Infectious Diseases..................................               1.07
Renal Failure, Acute.................................               1.11
Renal Failure, Chronic...............................               1.11
Oncology Treatment...................................               1.07
Uncontrolled Diabetes Mellitus.......................               1.05
Severe Protein Malnutrition..........................               1.13
Drug/Alcohol Induced Mental Disorders................               1.03
Cardiac Conditions...................................               1.11
Gangrene.............................................               1.10
Chronic Obstructive Pulmonary Disease................               1.12
Artificial Openings--Digestive & Urinary.............               1.08
Severe Musculoskeletal & Connective Tissue Diseases..               1.09
Poisoning............................................               1.11
------------------------------------------------------------------------

[FR Doc. 2015-09880 Filed 4-24-15; 4:15 pm]
BILLING CODE 4120-01-P