[Federal Register Volume 80, Number 150 (Wednesday, August 5, 2015)]
[Rules and Regulations]
[Pages 46652-46728]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-18903]



[[Page 46651]]

Vol. 80

Wednesday,

No. 150

August 5, 2015

Part II





 Department of Health and Human Services





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 Centers for Medicare & Medicaid Services





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42 CFR Part 412





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

  Federal Register / Vol. 80 , No. 150 / Wednesday, August 5, 2015 / 
Rules and Regulations  

[[Page 46652]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 412

[CMS-1627-F]
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: Final rule.

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SUMMARY: This final rule updates 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 are 
applicable to IPF discharges occurring during fiscal year (FY) 2016 
(October 1, 2015 through September 30, 2016). This final rule also 
implements: a new 2012-based IPF market basket; an updated 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; a phase-out of the rural adjustment for IPF providers whose 
status changes from rural to urban as a result of the wage index CBSA 
changes; and new quality measures and reporting requirements under the 
IPF quality reporting program. This final 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: These regulations are effective October 1, 2015.

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 are available 
exclusively through the Internet. The wage index tables for this final 
rule are available exclusively through the Internet on the CMS Web site 
at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/WageIndex.html.
    To assist readers in referencing sections contained in this 
document, we are providing the following table of contents.

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 for the IPF PPS
    B. Overview of the IPF PPS
    C. Annual Requirements for Updating the IPF PPS
III. Provisions of the Final Rule and Responses to Comments
    A. Market Basket for the IPF PPS
    1. Background
    2. Overview of the 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. 2012-Based IPF Market Basket Cost Categories and Weights
    b. Selection of Price Proxies
    i. Price Proxies for the Operating Portion of the 2012-Based IPF 
Market Basket
    ii. Price Proxies for the Capital Portion of the 2012-Based IPF 
Market Basket
    iii. Summary of Price Proxies of the 2012-Based IPF Market 
Basket
    4. FY 2016 Market Basket Update
    5. Productivity Adjustment
    6. Labor-Related Share
    B. Updates to the IPF PPS Rates for FY 2016 (Beginning October 
1, 2015)
    1. Determining the Standardized Budget-Neutral Federal Per Diem 
Base Rate
    2. FY 2016 Update of the Federal Per Diem Base Rate and 
Electroconvulsive
    Therapy (ECT) Payment per Treatment
    C. 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. Updates to the IPF PPS Facility-Level Adjustments
    1. Wage Index Adjustment
    a. Background
    b. Wage Index for FY 2016
    c. OMB Bulletins and Transitional Wage Index
    d. Adjustment for Rural Location and The 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. Update to the Outlier Fixed Dollar Loss Threshold Amount
    3. Update to IPF Cost-to-Charge Ratio Ceilings
    IV. Other Payment Policy Issues
    A. ICD-10-CM and ICD-10-PCS Implementation
    B. Status of Future 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. Removal of HBIPS-4 From the IPFQR Program Measure Set for the 
FY 2017 Payment Determination and Subsequent Years
    D. New Quality Measures 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 
(NQF # 1656)
    2. SUB-2 Alcohol Use Brief Intervention Provided or Offered and 
SUB-2a Alcohol Use Brief Intervention (NQF # 1663)
    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
    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
    5. Screening for Metabolic Disorders
    6. Summary of Measures for the FY 2018 Payment Determination and 
Subsequent Years

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    E. Possible IPFQR Program Measures and Topics for Future 
Consideration
    F. Changes to Reporting Requirements
    1. Changes to Reporting by Age and Quarter for the FY 2017 
Payment Determination and Subsequent Years
    2. Changes to Aggregate Population Count Reporting for the FY 
2017 Payment Determination and Subsequent Years
    3. 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. Change to the Reporting Periods and Submission Timeframes
    3. Population and Sampling
    4. Data Accuracy and Completeness Acknowledgement (DACA) 
Requirements
    I. Reconsideration and Appeals Procedures
    J. Exceptions to Quality Reporting Requirements
VI. Provisions of the Final Regulations
VII. 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 
Reporting Requirements
    2. Estimated Burden of IPFQR Program
    C. Summary of Annual Burden Estimates
    D. ICRs Regarding the Hospital and Health Care Complex Cost 
Report (CMS-2552-10)
    E. Submission of PRA-Related Comments
VIII. 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 Rates and Adjustment Factors

Acronyms

    Because of the many terms to which we refer by acronym in this 
final 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
IPPS Inpatient Prospective Payment System
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 final rule updates the prospective payment rates for Medicare 
inpatient hospital services provided by inpatient psychiatric 
facilities (IPFs) for discharges occurring during the FY 2016 (October 
1, 2015 through September 30, 2016). For the Inpatient Psychiatric 
Facility Quality Reporting (IPFQR) Program, it also changes certain 
measures collected under the program and modifies reporting 
requirements for certain program measures.

B. Summary of the Major Provisions

    In this final rule, we updated the IPF Prospective Payment System 
(PPS), as specified in 42 CFR 412.428. The updates include the 
following:
     Effective for the FY 2016 IPF PPS update, we adopted a 
2012-based IPF market basket. However, we revised the proposed 2012-
based IPF market basket based on public comments. Specifically, we 
revised the methodology for calculating the Wages and Salaries and the 
Employee Benefits cost weights. The final 2012-based IPF market basket 
resulted in a labor-related share of 75.2 percent for FY 2016.
     We adjusted the 2012-based IPF market basket update 
(currently estimated to be 2.4 percent) by a reduction for economy-wide 
productivity (currently estimated to be 0.5 percent) 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 1.7 percent.
     We updated the IPF PPS per diem rate from $728.31 to 
$743.73. Providers that failed to report quality data for FY 2016 
payment will receive a final FY 2016 per diem rate of $729.10.
     We updated the electroconvulsive therapy (ECT) payment per 
treatment from $313.55 to $320.19. Providers that failed to report 
quality data for FY 2016 payment will receive a FY 2016 ECT payment per 
treatment of $313.89.
     We adopted 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 implemented 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 phased out the rural adjustment for the 37 rural IPFs 
that will be re-designated as urban IPFs due to the OMB CBSA changes. 
Specifically, we phased out the 17 percent rural adjustment for these 
37 providers over 3 years (two-thirds of the adjustment given in FY 
2016, one-third of the adjustment given in FY 2017, and no rural 
adjustment thereafter).
     We used the updated labor-related share of 75.2 percent 
(based on the final 2012-based IPF market basket) and CBSA rural and 
urban wage indices for FY 2016, and established a wage index budget-
neutrality adjustment of 1.0041.

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     We updated the fixed dollar loss threshold amount from 
$8,755 to $9,580 in order to maintain estimated outlier payments at 2 
percent of total estimated aggregate IPF PPS payments.
     We finalized that the national urban and rural cost-to-
charge ratio (CCR) ceilings for FY 2016 will be 1.7339 and 1.9041, 
respectively, and the national median CCR will be 0.4650 for urban IPFs 
and 0.6220 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, 
and to IPFs whose overall CCR exceeds 3 standard deviations above the 
national geometric mean.
     We note that IPF PPS patient-level and facility-level 
adjustments, other than those mentioned above, 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 will need drugs and 
laboratory services, we remind providers that the IPF PPS per diem 
payment rate includes the cost of all ancillary services, including 
drugs and laboratory services. We pay only the IPF for services 
furnished to a Medicare beneficiary who is an inpatient of that IPF, 
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 IPFQR Program, we are adopting several new measures and 
data submission requirements for the IPFQR Program. First, we adopted 
five new measures beginning with the 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 Alcohol Use Brief Intervention (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.
    We removed HBIPS-4 Patients Discharged on Multiple Antipsychotic 
Medications, beginning with the FY 2017 payment determination. We also 
removed the Hospital Based Inpatient Psychiatric Services (HBIPS)-6 
Post-Discharge Continuing Care Plan (NQF #0557) and HBIPS-7 Post-
Discharge Continuing Care Plan Transmitted to the Next Level of Care 
Provider Upon Discharge (NQF #0558) measures, beginning with the FY 
2018 payment determination.
    Second, we made several changes regarding how facilities report 
data for IPFQR Program measures:
     Beginning with the FY 2017 payment determination, we are 
requiring that measures be reported as a single yearly count rather 
than by quarter and age.
     Beginning with the FY 2017 payment determination, we are 
requiring that aggregate population counts be reported as a single 
yearly number rather than by quarter.
     Beginning with the FY 2018 payment determination, we will 
allow uniform sampling for certain measures.

C. Summary of Impacts

------------------------------------------------------------------------
         Provision description                   Total transfers
------------------------------------------------------------------------
FY 2016 IPF PPS payment rate update....  The overall economic impact of
                                          this final rule is an
                                          estimated $75 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 final 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 is equal to 0.5 percent, which we are 
implementing in this FY 2016 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

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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 implementing that reduction in this 
FY 2016 IPF PPS final 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.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/index.html?redirect=/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 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 did not make 
any refinements in this final rule. Rather, as explained in section 
V.B. of this final 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) updated 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

[[Page 46656]]

46734) in accordance with our established policies.

III. Provisions of the Final Rule and Responses to Comments

    On May 1, 2015 we published a proposed rule in the Federal Register 
(80 FR 25012) entitled Medicare Program; Inpatient Psychiatric 
Facilities Prospective Payment System--Update for Fiscal Year Beginning 
October 1, 2015 (FY 2016). The May 1, 2015 proposed rule (herein 
referred to as the FY 2016 IPF PPS proposed rule) proposed updates to 
the prospective payment rates for Medicare inpatient hospital services 
provided by inpatient psychiatric facilities. In addition to the 
updates, we proposed to: Adopt a 2012-based IPF market basket and 
update the labor-related share; adopt new OMB CBSA delineations for the 
FY 2016 IPF Wage Index; and phase out the rural adjustment for 37 rural 
providers that would become urban providers as a result of the new CBSA 
delineations. Additionally, the proposed rule reminded providers of the 
October 1, 2015 implementation of the International Classification of 
Diseases, 10th Revision, Clinical Modification (ICD-10-CM/PCS) for the 
IPF PPS, updated providers on the status of IPF PPS refinements, and 
proposed new quality reporting requirements for the IPFQR Program.
    We received a total of 76 comments on these proposals from 51 
providers, 12 industry groups or associations, 6 industry consultants, 
4 advocacy groups, 1 independent congressional agency, and 2 anonymous 
sources. Of the 76 comments, 12 focused on payment policies, and 73 
focused on the quality reporting proposals. A summary of the proposals, 
the comments, and our responses follows.

A. 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 
inpatient rehabilitation facilities (IRFs), IPFs, long-term care 
hospitals (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 
rehabilitation, psychiatric, and long-term care (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 two separate categories (Labor-related and Nonlabor-
related); and adding two 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.
    In the FY 2016 IPF PPS proposed rule, we proposed to create a 2012-
based IPF market basket, using Medicare cost report data for both 
freestanding and hospital-based IPFs.
    We received several general comments on the creation of an IPF 
market basket.
    Comment: One commenter supported CMS' use of an IPF-specific market 
basket, but recommended that CMS develop separate update percentages 
for freestanding units and hospital-based units. They stated patients 
treated in hospital-based units have more complex medical conditions 
and require more resources compared to freestanding facilities. They 
believe combining these two facilities for the purpose of establishing 
one market basket rate update could result in underpayments for 
Medicare patients treated in hospital-based facilities.
    Response: We appreciate the commenter's support of an IPF-specific 
market basket. However, we respectfully disagree with their 
recommendation to develop two specific market basket update percentages 
for hospital-based and freestanding units. The regression analysis from 
which the IPF PPS base rate payment (and related adjustments) was 
derived reflects data from both freestanding and hospital-based 
providers. As a result, we believe it is appropriate to update those 
rates with a market basket based on data from both types of providers. 
Moreover, we do not believe we have a large enough sample size to 
create a freestanding-specific IPF market basket. Finally, the IPF PPS 
already provides patient-level adjustments, including certain principal 
diagnoses and comorbidities that reflect the higher costs and resources

[[Page 46657]]

associated with more medically complex patients.
    Comment: One commenter stated their appreciation of the discussion 
in the proposed rule regarding the progress that CMS has made in the 
development of an IPF-specific market basket. They support CMS' efforts 
to ensure that the IPF payment system is updated to reflect current 
costs and resource use.
    Response: We appreciate the commenter's support for the proposed 
2012-based IPF market basket.
    Comment: One commenter did not support the adoption of the stand-
alone IPF market basket. They stated they still have major reservations 
about its accuracy. They urged CMS to publicly release the detailed 
data files that support the proposed IPF-specific market basket and to 
distinguish cost factors in order to ``evaluate the materiality of the 
consolidation effect on the market basket'' and to allow time for the 
industry to gain a clearer understanding of the proposal, and the 
consolidation of the IPF provider types in order to enable commenters' 
informed response to the proposal.
    Response: We appreciate the commenter's concern for the adoption of 
the 2012-based IPF market basket. However, we disagree with delaying 
the IPF-specific market basket. We believe we provided a clear 
description of the proposal and a sufficiently detailed data file to 
enable informed comment.
    All of the data used to develop the proposed IPF-market basket are 
publically available. The Medicare cost reports used to develop the 
major cost weights are publically available on the CMS Web site (http://www.cms.gov/Research-Statistics-Data-and-Systems/Downloadable-Public-Use-Files/Cost-Reports/Cost-Reports-by-Fiscal-Year.html under facility 
type ``Hospital-2010''). The Bureau of Labor Statistics (BLS) 
Occupational Employment Statistics (http://www.bls.gov/oes/#data) and 
BLS price indices (http://www.bls.gov/cpi/#data, http://www.bls.gov/ppi/#data, and http://www.bls.gov/ncs/ect/#data) are publically 
available. The last data source used was the Bureau of Economic 
Analysis 2007 Benchmark Input-Output (I-O) data which is also 
publically available (http://www.bea.gov/industry/io_annual.htm under 
`` `Use Tables/Before Redefinitions/Purchaser Value' for North American 
Industry Classification System (NAICS) 622000 Hospitals'').
    In addition, we also provided in the proposed rule a detailed 
description of the methodologies (including items such as Medicare Cost 
Report line items or BLS series codes) used to produce the proposed 
2012-based IPF market basket using the aforementioned data. We believe 
these methodology descriptions allowed for informed public comments and 
evaluation of the materiality of the ``consolidation effect'' (which we 
interpret to be the inclusion of freestanding and hospital-based IPF 
Medicare cost report data). We did receive several comments on our 
detailed methodology, which we used to further evaluate our 
methodology. In fact, in this final rule, we are adopting changes to 
the Wages and Salaries and Employee Benefits costs methodologies based 
on these detailed public comments. A more thorough description of the 
methodological changes is provided below.
    After consideration of the public comments, we are finalizing the 
creation and adoption of a 2012-based IPF market basket with a 
modification to the Wages and Salaries and Employee Benefits cost 
methodologies based on public comments. We believe that the use of the 
2012-based IPF market basket to update IPF PPS payments is a technical 
improvement as it is based on Medicare Cost Report data from both 
freestanding and hospital-based IPFs. Furthermore, the 2012-based IPF 
market basket does not include costs from either IRF or LTCH providers, 
which are included in the current 2008-based RPL market basket.
    In the following discussion, we provide an overview of the market 
basket and describe the methodologies used to determine the operating 
and capital portions of the 2012-based IPF market basket. For each 
proposed methodology, we indicate whether we received any public 
comments. We include responses for each comment. We then provide the 
methodology we are finalizing for the 2012-based IPF market basket.
2. Overview of the 2012-Based IPF Market Basket
    The 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 final 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 will 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 will 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. of this final rule, 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

[[Page 46658]]

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 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 final 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 final rule, we are finalizing 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 also evaluated the differences 
in cost weights for hospital-based and freestanding IPFs and found the 
most significant differences occurred for wages and salaries and 
pharmaceutical costs. Specifically, the hospital-based IPF wages and 
salaries 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 methodology for deriving costs for 
each of these categories can be found in section III.A.3.a.i. of this 
final rule. We will continue to monitor these cost shares during our 
on-going research 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. In the 
proposed rule, we proposed methodologies to create a stand-alone IPF 
market basket that reflects the cost structure of the universe of IPF 
providers. We described our methodologies and the resulting cost 
weights in section III.A.3.a.i. of the FY 2016 IPF proposed rule (80 FR 
25017) and solicited public comments on these proposals. In the 
sections below, we summarize and respond to comments we received on 
these proposed methodologies.
a. Development of Cost Categories and Weights
i. Medicare Cost Reports
    We proposed a 2012-based IPF market basket that consisted of seven 
major cost categories derived from the FY 2012 Medicare cost reports 
(CMS Form 2552-10) for freestanding and hospital-based IPFs. These 
categories were 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 
proposed to limit our selection of Medicare cost reports used in the 
2012-based IPF market basket to those facilities that had a Medicare 
LOS that was within a comparable range of their total facility average 
LOS. For freestanding IPFs, we proposed to use the Medicare days and 
discharges from line 14, columns 6 and 13, Worksheet S-3, Part I to 
determine the Medicare LOS and the total facility days and discharges 
from line 14, columns 8 and 15, to determine the facility LOS 
(consistent with the RPL market basket method). For hospital-based 
IPFs, we proposed to use the Medicare days and discharges from line 16, 
columns 6 and 13, of Worksheet S-3, Part I to determine the Medicare 
LOS and the total facility days and discharges from line 16, columns 8 
and 15, to determine the facility LOS. To derive the 2012-based IPF 
market basket, for those IPFs with an average facility LOS of greater 
than or equal to 15 days, we proposed 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 proposed to include IPFs where the Medicare LOS is within 95 
percent (higher or lower) of the facility LOS.
    Applying these trims resulted 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. Those providers that 
were excluded from the 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 were

[[Page 46659]]

freestanding providers whereas freestanding providers represent about 
30 percent of all IPFs.
    We did not receive any specific comments on our proposed LOS edit 
methodology.
    Final Decision: We are finalizing the LOS edit methodology as 
proposed.
    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 calculated 
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 
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 proposed to 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 proposed to 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, we proposed that total Medicare allowable costs 
would be equal to the total costs as reported on Worksheet B, part I, 
column 26. For hospital-based IPFs, we proposed that total Medicare 
allowable costs would be 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 also 
proposed to 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, Inpatient Prospective Payment System (IPPS), 
IRF, IPF and Skilled Nursing Facility (SNF))).
    We did not receive any specific comments on our methodology for 
calculating total costs.
    Final Decision: We are finalizing our methodology for calculating 
total costs as proposed.
    Below we provide a description of the methodologies used to derive 
costs for the six major cost categories.
Wages and Salaries Costs
    For freestanding IPFs, we proposed to derive Wages and Salaries 
costs as the sum of routine inpatient salaries, ancillary salaries, and 
a proportion of overhead (or general service cost center) salaries as 
reported on Worksheet A, column 1. Since overhead salary costs are 
attributable to the entire IPF, we proposed to only include the 
proportion attributable to the Medicare allowable cost centers. We 
estimated 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, we proposed to derive Wages and Salaries 
costs as the sum of routine inpatient 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 proposed to 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 proposed to 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 through 18) to total facility overhead costs (as reported on 
Worksheet A, column 7, lines 4 through 18). This methodology assumes 
the proportion of total costs related to salaries for the overhead cost 
center 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.
    We received several comments on our methodology for deriving Wages 
and Salaries costs. These comments led to changes to our proposed 
methodology. We discuss these changes below.
    Comment: Several commenters questioned the methodology we used to 
calculate the Wages and Salaries cost weight stating there was a risk 
of overstating the labor-related share. They encouraged CMS to utilize 
a more accurate calculation for the ancillary cost centers in order to 
mitigate the risk of overstating labor-related share costs.
    One commenter stated that our methodology for deriving hospital-
based IPF ancillary salary costs for a specific cost center using 
salary costs from Worksheet A, column 1 multiplied 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)) results in an 
overstatement of ancillary salary costs. Specifically, the commenter 
stated that the most accurate calculation would be to divide costs on 
Worksheet D-3, column 3 for the IPF subprovider by total costs on 
Worksheet C, column 5 for the hospital, and to apply this percentage to 
salary costs from Worksheet A, column 1. The commenter requested that 
we clarify how this ancillary salary calculation is used in determining 
the 74.9 percent labor-related share of the payment, and correct it as 
needed.
    Response: The proposed labor-related share of 74.9 percent is equal 
to the sum of the relative importance of moving averages of the Wages 
and Salaries, Employee Benefits, Contract Labor, Labor-Related Services 
cost categories, and a portion of the relative importance moving 
average of the Capital-Related cost category. For a detailed 
description of how these cost categories were

[[Page 46660]]

derived, please see the IPF proposed rule (80 FR 25017).
    Based on the commenter's request, we reviewed our proposed 
methodology for calculating Wages and Salaries costs for hospital-based 
IPFs (including the ancillary wages and salaries costs mentioned by the 
commenter). As stated in the proposed rule, the Wages and Salaries 
costs for hospital-based IPFs are derived by summing routine inpatient 
salary costs for the hospital-based IPF (from Worksheet A, column 1, 
line 40), ancillary salaries, and overhead salaries. The methodology 
for calculating ancillary salaries (as the commenter noted) is 
calculated as ancillary salary costs for a specific cost center using 
salary costs from Worksheet A, column 1 multiplied 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)).
    We respectfully disagree with the commenter's suggestion to use 
total costs on Worksheet C, column 5 as the denominator in the ratio 
above. We note that Worksheet D-3 represents Medicare IPF costs for 
ancillary services while Worksheet C, column 5 represents total 
ancillary costs for all payers. Our methodology for deriving all cost 
weights (for both freestanding and hospital-based providers) is based 
on Medicare-allowable costs (that is total costs for all patients for 
those cost centers that are Medicare-allowable under the IPF PPS). For 
example, the Contract Labor cost weight is based on contract labor 
costs reported on Worksheet S3, part V, for all hospital-based IPF 
patients; it is not specific to Medicare patients as that data is not 
reported on the Medicare cost report. The commenter's suggestion to use 
Worksheet C, column 5, would be inappropriate as the numerator would be 
based on Medicare patients (Worksheet D-3) and the denominator would be 
for all patients (Worksheet C), which would understate the proportion 
of ancillary salary costs that are attributable to all hospital-based 
IPF patients. Since the ancillary salary cost weight, in aggregate, is 
lower than the hospital-based IPF routine inpatient salary cost weight, 
this would lead to a higher Wages and Salaries cost weight relative to 
the proposed rule, and it would be calculated inconsistently with the 
other market basket cost weights (such as the Contract Labor cost 
weight). We believe using Medicare costs (Worksheet D-3) to determine 
the proportion of ancillary wages and salaries (and also total 
ancillary costs) that are attributable to the hospital-based IPF is a 
reasonable approach.
    Comment: Several commenters stated that they had not conducted 
their own analysis of the CMS proposed 2012-based IPF market basket, 
but they were aware of an analysis of the proposed IRF market basket. 
That analysis, prepared by Dobson DaVanzo,\1\ was submitted to CMS as 
part of the FY 2016 IRF PPS rulemaking record. These commenters 
encouraged CMS to review Dobson DaVanzo findings to determine if CMS 
needs to take corrective measures before finalizing the IPF-specific 
market basket, as the same methodologies in the IRF market basket 
methodology could exist in the IPF methodology.
---------------------------------------------------------------------------

    \1\ ``Analysis of CMS Proposed Inpatient Rehabilitation Facility 
Specific Market Basket'', submitted to HealthSouth Corporation by 
Dobson DaVanzo, May 22, 2015. The public reference for this comment 
letter is: CMS-2015-0053-0004, and can be retrieved from the 
following link: http://www.regulations.gov/#!documentDetail;D=CMS-
2015-0053-0004.
---------------------------------------------------------------------------

    Response: We appreciate the commenters' request to review the 
consultants' report on the methodology used to develop the IRF-specific 
market basket. As the commenter stated, the methodology used to develop 
the IPF major cost weights using the Medicare cost report data for the 
2012-based IPF market basket is similar to the methodology used in the 
proposed 2012-based IRF market basket. The only difference is the use 
of IPF-specific Medicare cost report data to calculate the major cost 
weights.
    Based on these comments, we reviewed the Dobson DaVanzo IRF report 
submitted by commenters on the IRF proposed rule. This report stated on 
page four that our proposed methodology for calculating hospital-based 
IRF wages and salaries was flawed as it disregards overhead wages and 
salaries associated with the ancillary departments. Our proposed 
methodology for the 2012-based IRF market basket was identical to our 
proposed methodology for the 2012-based IPF market basket. Our proposed 
methodology for the 2012-based IPF market basket included overhead 
wages and salaries attributable to the hospital-based IPF routine 
inpatient unit only. Therefore, we are revising our methodology for 
calculating the Wages and Salaries costs for hospital-based IPFs to 
account for the omission of the overhead wages and salaries 
attributable to the ancillary departments.
    For this final rule, we calculated the overhead salaries 
attributable to each ancillary department by first calculating total 
noncapital overhead costs attributable to the specific ancillary 
department (Worksheet B, part I, columns 4-18 less Worksheet B, part 
II, columns 4-18). We then identified the portion of the total 
noncapital overhead costs for each ancillary cost center that is 
attributable to the hospital-based IPF by multiplying by the ratio of 
IPF Medicare ancillary costs for the cost center (as reported on 
Worksheet D-3, column 3 for hospital-based IPFs) 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)). 
Finally, we identified the portion of these noncapital overhead costs 
attributable to Wages and Salaries by multiplying these costs by an 
``overhead ratio'', which is defined as the ratio of total facility 
overhead salaries (as reported on Worksheet A, column 1, lines 4-18) to 
total noncapital overhead costs (as reported on Worksheet A, column 1 & 
2, lines 4-18) for all ancillary departments. This methodology is 
almost identical to the methodology suggested in the Dobson DaVanzo 
report with slight modifications, which are further discussed below.
    Therefore, based on public comment, we are finalizing our 
methodology for calculating Wages and Salaries costs for hospital-based 
IPFs as the sum of routine inpatient salary costs for the hospital-
based IPF (from Worksheet A, column 1, line 40), ancillary salaries, 
and overhead salaries attributable to the routine inpatient unit for 
the hospital-based IPF and ancillary departments.
    During our review of the methodology to derive Wages and Salaries 
costs and the inclusion of overhead wages and salaries attributable to 
the ancillary department, we also found that the overhead ratios (used 
in the calculation of overhead wages and salaries attributable to the 
routine inpatient unit for the hospital-based IPF) (Worksheet A, column 
1 divided by Worksheet A, column 7) by cost center showed that many 
providers reported data for these columns that resulted in a ratio that 
exceeded 100 percent. One possible explanation for the overhead ratio 
exceeding 100 percent is that Worksheet A, column 7 reflects 
reclassifications and adjustments while column 1 does not. However, 
when we calculated an alternative overhead ratio by defining overhead 
salaries using Worksheet S-3, part II column 4, which reflects 
reclassifications, and total facility noncapital overhead costs using 
Worksheet A, column 7, we also found that many providers still had 
overhead ratios that exceeded 100 percent. An overhead ratio exceeding 
100 percent

[[Page 46661]]

would suggest that wages and salaries costs are greater than total 
costs, which shows that the data we originally proposed to use results 
in an indisputable error to the allocation of overhead costs to wages 
and salaries. When we instead used an overhead ratio equal to the ratio 
of total facility overhead salaries (as reported on Worksheet A, column 
1, lines 4-18) to total facility noncapital overhead costs (as reported 
on Worksheet A, column 1 and 2, lines 4-18), the impacts of any 
potential misreporting is minimized.
    Therefore, based on the comment, and in order to address the error, 
we are revising the overhead ratio used to determine the proportion of 
overhead salaries attributable to the hospital-based IPF routine 
inpatient department. The revised overhead ratio is equal to the ratio 
of total facility overhead salaries (as reported on Worksheet A, column 
1, lines 4-18) to total facility noncapital overhead costs (as reported 
on Worksheet A, column 1 and 2, lines 4-18). This is now consistent 
with the overhead ratio we are using to determine overhead wages and 
salaries attributable to ancillary departments as described above.
    In addition, our review of the methodology for Wages and Salaries 
costs also found that our proposed methodology for calculating overhead 
wages and salaries attributable to the hospital-based IPF routine 
inpatient department were calculated using total (operating and 
capital) overhead costs attributable to the hospital-based IPF (sum of 
columns 4-18 on Worksheet B, part I, line 40). The proposed methodology 
resulted in a portion of overhead capital costs to be allocated to 
wages and salaries costs which is incorrect and inconsistent with the 
Medicare cost report instructions.
    The Medicare cost report instructions define capital-related costs 
as ``depreciation, leases and rentals for the use of facilities and/or 
equipment, and interest incurred in acquiring land or depreciable 
assets used for patient care, insurance on depreciable assets used for 
patient care and taxes on land or depreciable assets used for patient 
care.'' \2\ The instructions also state that providers should exclude 
the following from capital-related costs: ``costs incurred for the 
repair or maintenance of equipment or facilities, amounts included in 
rentals or lease payments for repair and/or maintenance agreements. * * 
*'' Based on this definition of capital costs as reported on the 
Medicare cost report, we concluded that capital costs do not include 
direct wages and salaries costs and that it would be erroneous to 
allocate a portion of capital costs to overhead wages and salaries.
---------------------------------------------------------------------------

    \2\ See the Medicare cost report instructions at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Paper-Based-Manuals-Items/CMS021935.html, Chapter, 40, Page 40-259 to 40-260..
---------------------------------------------------------------------------

    Therefore, we are revising the methodology to reflect operating 
costs (that is the sum of Worksheet B, part I, line 40, columns 4-18 
less Worksheet B, part II, line 40, columns 4-18).
    We are finalizing our methodology for calculating hospital-based 
IPF Wages and Salaries costs as described above. We discuss the effect 
of the changes to the proposed methodology on the market basket cost 
weight in section III.A.3.i. of this final rule.
    We did not receive any comments on our proposed methodology for 
calculating the freestanding IPF Wages and Salaries costs and 
therefore, we are finalizing the methodology for calculating the 
freestanding IPF Wages and Salaries costs as proposed.
Employee Benefits Costs
    Effective with our implementation of CMS Form 2552-10, we 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. We proposed that ancillary benefits attributable to the 
hospital-based IPF would be calculated by multiplying ancillary wages 
and 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 wages and salaries. Similarly, we 
proposed that overhead benefits attributable to the hospital-based IPF 
would be calculated by multiplying overhead wages and 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 wages and salaries.
    Based on the comment above regarding the omission of overhead Wages 
and Salaries attributable to the ancillary departments, we are revising 
our methodology for calculating Employee Benefits costs for hospital-
based IPFs to include overhead employee benefits attributable to the 
ancillary departments. Our proposed methodology included Employee 
Benefits attributable to hospital-based IPF routine inpatient unit 
only. We are estimating overhead employee benefits attributable to the 
ancillary departments using the same general methodology used to 
calculate routine inpatient overhead benefits and ancillary employee 
benefits attributable to the hospital-based IPF unit.
    Overhead employee benefits attributable to the ancillary 
departments are calculated by multiplying overhead wages and salaries 
attributable to the ancillary departments by the ratio of total 
facility benefits to total facility wages and salaries. Therefore, 
based on public comments, total employee benefits for hospital-based 
IPFs are now equal to the sum of benefit costs reported on Worksheet S-
3 Part V, line 3, column 2; a portion of ancillary benefits; and a 
portion of overhead benefits attributable to the routine inpatient unit 
and ancillary departments.
    In addition, our methodology to calculate overhead benefits 
attributable to the hospital-based IPF is to multiply overhead wages 
and salaries for the hospital-based IPF routine inpatient unit (as 
determined in the derivation of Wages and Salaries for the hospital-
based IPF) by the ratio of total facility benefits to total facility 
wages and

[[Page 46662]]

salaries. Therefore, our changes to the overhead wages and salaries for 
the hospital-based IPF routine inpatient unit discussed above would 
result in changes to the overhead employee benefits attributable to the 
hospital-based IPF routine inpatient unit. The effect of these 
methodology changes on the Employee Benefits cost weight are discussed 
in more detail in section III.A.3.a.ii below.
    We received one comment specific to our proposed methodology for 
calculating Employee Benefits costs.
    Comment: Two commenters encouraged CMS to review the Dobson/DaVanzo 
report (referenced above), which noted our proposal to change the 
methodology for determining Employee Benefits costs from the 
methodology used to determine the Employee Benefits cost weight for the 
2008-based RPL market basket. As discussed in the proposed rule, under 
the RPL methodology, we used data from IPPS hospitals as a proxy for 
determining these costs for RPL facilities. The Dobson DaVanzo report 
noted the low reporting of data on Worksheet S3, part V, used in the 
Employee Benefit and Contract Labor cost weight calculations. They 
stated that CMS should consider using IPPS data as a proxy for these 
specific data elements as is done for the RPL market basket.
    Response: In the proposed rule (80 FR 25019), we noted that many 
providers did not report Worksheet S-3, part V data but that we 
believed we had a large enough sample to produce a reasonable Employee 
Benefits cost weight. Specifically, we found that when we recalculated 
the cost weight, after weighting to reflect the characteristics of the 
universe of IPF providers (freestanding and hospital-based), it did not 
have a material effect on the resulting cost weight. We understand the 
commenters' concern for the methodology change. However, we believe 
that the use of employee benefit costs reported by IPFs is a technical 
improvement from the methodology used for the 2008-based RPL market 
basket. Specifically, this methodology calculated the Employee Benefit 
cost weight by multiplying the RPL market basket Wages and Salaries 
cost weight by the IPPS employee benefit ratio. The IPPS employee 
benefit ratio was equal to the 2006-based IPPS market basket Employee 
Benefit cost weight divided by the 2006-based IPPS market basket Wages 
and Salaries cost weight. Using the rebased and revised 2010- based 
IPPS market basket, we calculate an employee benefit ratio of 28 
percent compared to the 2012-based IPF market basket with 26 percent. 
Much of this two-percentage-point difference is attributable to the 
characteristics of the IPF facilities as compared to the IPPS 
hospitals. Approximately 20 percent of total costs for IPFs are 
attributable to for-profit facilities (80 percent are attributable to 
nonprofit and government facilities) while approximately 10 percent of 
total costs for IPPS hospitals are attributable to for-profit 
facilities (90 percent are attributable to nonprofit and government 
facilities). Both the IPF and IPPS hospital data show that the employee 
benefit ratio for for-profit facilities is lower than the employee 
benefit ratio for nonprofit/government facilities (in the range of 6-7 
percentage points lower), thus IPFs' higher proportion of for-profit 
facilities compared to IPPS hospitals leads to a lower employee benefit 
ratio.
    Final Decision: In conclusion, we believe the use of Worksheet S-3, 
part V data for IPFs is a technical improvement from the methodology 
used for the 2008-based RPL market basket as we believe it better 
reflects the cost structures of IPFs. We encourage IPF providers to 
continue to report Worksheet S-3, part V data and we will continue to 
monitor the data as the reporting improves. Therefore, after 
consideration of public comments, we are finalizing our proposed 
methodology for calculating the freestanding Employee benefit costs for 
the 2012-based IPF market basket using the Worksheet S-3, part V data 
as proposed.
    Also, as discussed above, we are now capturing the proportion of 
overhead employee benefits attributable to ancillary departments in the 
hospital-based IPF employee benefit costs, based on public comments. 
Therefore, total employee benefits for hospital-based IPFs is equal to 
the sum of benefit costs reported on Worksheet S-3 Part V, line 3, 
column 2; a portion of ancillary benefits; and a portion of overhead 
benefits attributable to both the routine inpatient unit and ancillary 
departments.
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.i. of this final rule. As discussed in 
this final rule 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, we proposed Contract Labor costs would be 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.
    We received one comment on our methodology for calculating Contract 
Labor costs that was similar to the comments we received regarding 
Employee Benefits.
    Comment: Two commenters encouraged CMS to review the Dobson/DaVanzo 
report (noted above), which noted CMS' proposal to change the 
methodology for determining Contract Labor cost weight from the 
methodology used to derive the 2008-based RPL market basket. Under the 
RPL methodology, CMS used data from IPPS hospitals as a proxy for 
determining these costs for RPL facilities. The report expressed 
concern for the low response rate and its potential impact on the 
contract labor cost weight.
    Response: We appreciate and understand the commenters' concern for 
the methodology change from the RPL market basket. The RPL market 
basket contract labor costs were calculated by multiplying the RPL 
market basket Wages and Salaries cost weight by the IPPS contract labor 
ratio. The IPPS contract labor ratio was equal to the 2006-based IPPS 
market basket Contract Labor cost weight divided by the 2006-based IPPS 
market basket Wages and Salaries cost weight. We implemented this 
methodology as the Medicare cost report available at that time did not 
capture contract labor costs for IPFs while CMS Form 2552-10, used for 
the 2012-based IPF market basket, collects contract labor costs data 
for freestanding and hospital-based IPFs. As stated in the proposed 
rule (80 FR 25019), we believed we had a large enough sample to produce 
a reasonable Contract Labor cost weight as we found that when we 
recalculated the cost weight after weighting to reflect the 
characteristics (by urban/rural and ownership type) of the universe of 
IPF providers (freestanding and hospital-based), it did not have a 
material effect on the resulting cost weight (less than 0.2

[[Page 46663]]

percentage point). In addition, we would note that the 2012-based IPF 
cost report data produces a contract labor ratio that is similar to the 
contract labor ratio using the 2010-based IPPS market basket with a 
contract labor ratio of 4 percent.
    Final Decision: We are finalizing our methodology for calculating 
Contract Labor costs as proposed.
Pharmaceuticals Costs
    For freestanding IPFs, we proposed to calculate pharmaceuticals 
costs using 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, we proposed to calculate pharmaceuticals 
costs causing 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 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 (that is, IPPS, IRF, IPF and SNF)). We 
did not receive any specific comments on our proposed methodology for 
calculating Pharmaceuticals costs for freestanding and hospital-based 
IPFs.
    Final Decision: We are finalizing our methodology for calculating 
Pharmaceuticals costs as proposed.
Professional Liability Insurance (PLI) Costs
    For freestanding IPFs, we proposed that 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 proposed to 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. We did not receive 
any specific comments on our proposed methodology for calculating PLI 
costs for freestanding and hospital-based IPFs.
    Final Decision: We are finalizing our methodology for calculating 
PLI costs as proposed.
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 routine 
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)). We did not receive 
any specific comments on our proposed methodology for calculating 
Capital-related costs for freestanding and hospital-based IPFs.
    Final Decision: We are finalizing our methodology for calculating 
Capital-related costs as proposed.
ii. 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 
proposed to 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 for the resulting cost weights for these major cost categories 
that we obtain from the Medicare cost reports. In Table 1, we provide 
the proposed cost weights, as well as the final major cost weights 
after implementing the methodological changes to the calculation of the 
Wages and Salaries and Employee Benefits costs as described above.

                      Table 1--Major Cost Categories as Derived From Medicare Cost Reports
----------------------------------------------------------------------------------------------------------------
                                                           Proposed 2012-
                 Major cost categories                       based IPF      Final 2012- based    2008-Based RPL
                                                             (percent)        IPF (percent)        (percent)
----------------------------------------------------------------------------------------------------------------
Wages and Salaries.....................................               50.8               51.0               47.4
Employee Benefits \1\..................................               13.0               13.1               12.3
Contract Labor \1\.....................................                1.4                1.4                2.6
Professional Liability Insurance (Malpractice).........                1.1                1.1                0.8
Pharmaceuticals........................................                4.8                4.8                6.5
Capital................................................                7.0                7.0                8.4
All Other..............................................               22.0               21.6               22.0
----------------------------------------------------------------------------------------------------------------
Note: 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.


[[Page 46664]]

    As discussed in section III.A.3.i of this final rule, we made 
revisions to our proposed methodology for calculating Wages and 
Salaries costs for the IPF market basket based on public comments. The 
total effect of this methodology change on the 2012-based IPF market 
basket Wages and Salaries aggregate cost weight (which reflects 
freestanding and hospital-based IPFs) is an increase of 0.2 percentage 
point from the proposed 2012-based IPF market basket Wages and Salaries 
cost weight of 51.0 percent. This net overall effect can be broken down 
into two components including: (1) The inclusion of overhead wages and 
salaries attributable to the ancillary departments for hospital-based 
IPFs (resulting in an increase of 2.2 percentage points to the 
aggregate Wages and Salaries cost weight) and (2) our change in 
methodology for deriving the overhead wages and salaries attributable 
to the hospital-based IPF routine inpatient unit (resulting in a 
decrease of 1.9 percentage points to the Wages and Salaries cost 
weight). The Wages and Salaries cost weight obtained directly from the 
Medicare cost reports for the final 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 IRF and long-term care hospitals. These latter 
facilities were included in the 2008-based RPL market basket.
    Also as discussed in section III.A.3.a.i. of this final rule, we 
made revisions to our calculation of Employee Benefits costs based on 
public comment. The total effect of this methodology change on the 
2012-based IPF market basket Employee Benefits aggregate cost weight 
(which reflects freestanding and hospital-based IPFs) is an increase of 
about 0.1 percentage point from the proposed 2012-based IPF market 
basket Employee Benefits cost weight of 13.1 percent. This net overall 
effect can be broken down into two components including: (1) The 
inclusion of overhead employee benefits attributable to the ancillary 
departments (resulting in an increase of 0.8 percentage point to the 
aggregate Employee Benefits cost weight) and (2) changes to the 
overhead employee benefits attributable to the hospital-based IPF 
routine inpatient unit as a result of changes to the routine overhead 
wages and salaries for the hospital-based IPF (resulting in a decrease 
of 0.7 percentage point to the Employee Benefits cost weight).
    As we did for the 2008-based RPL market basket, we proposed 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. For the proposed rule, 
this rounded percentage was 80 percent; therefore, we proposed 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. 
We did not receive any public comments on our methodology for 
allocating Contract Labor to the Wages and Salaries and Employee 
Benefits cost weights.
    Final Decision: We are finalizing our methodology for allocating 
Contract Labor as proposed. For the final rule, after making changes to 
the Wages and Salaries and Employee Benefits cost weights, the rounded 
percentage remains 80 percent. Therefore, we are finalizing our 
methodology as proposed and allocating 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--Wages and Salaries and Employee Benefits Cost Weights After Contract Labor Allocation
----------------------------------------------------------------------------------------------------------------
                                                           Proposed 2012-    Final 2012-based
                 Major cost categories                       based IPF             IPF           2008-Based RPL
----------------------------------------------------------------------------------------------------------------
Wages and Salaries.....................................               51.9               52.1               49.4
Employee Benefits......................................               13.3               13.4               12.8
----------------------------------------------------------------------------------------------------------------

iii. 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 proposed 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 http://www.bea.gov/industry/io_annual.htm.
    The BEA Benchmark I-O data are scheduled for publication every 5 
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.\3\ 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 proposed to 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 calculated 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 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 (21.6 
percent), yielding a ``final'' Food: Direct Purchases cost weight of 
1.4 percent in the proposed 2012-based IPF market basket (0.065 * 21.6 
percent = 1.4 percent).
---------------------------------------------------------------------------

    \3\ http://www.bea.gov/papers/pdf/IOmanual_092906.pdf
---------------------------------------------------------------------------

    Using this methodology, we proposed to derive eighteen detailed IPF 
market basket cost category weights from the

[[Page 46665]]

2012-based IPF market basket residual cost weight (21.6 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. We did not receive any specific comments on 
our proposed methodology of deriving detailed market basket cost 
category weights using the BEA Benchmark I-O data.
    Final Decision: We are finalizing our methodology for deriving the 
detailed market basket cost weights as proposed. However, since the 
methodological change to the derivation of Wages and Salaries and 
Employee Benefits results in a compensation cost weight that is 
slightly higher than proposed, the residual cost share weight is 
slightly lower than proposed. Therefore, we are finalizing the residual 
cost share weight of 21.6 percent rather than the proposed 22.0 
percent. We would note that the residual All-Other cost weight was 
calculated using three decimal places and then rounded to a tenth of a 
percentage point for presentation purposes. Since this residual is used 
to calculate the detailed cost category weights using the BEA I-O data, 
these detailed cost category weights would also have slight revisions. 
These revisions round to no more than 0.1 percentage point.
iv. Derivation of the Detailed Capital Cost Weights
    As described in section III.A.3.a.i. of the proposed rule, we 
proposed 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 proposed to 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 proposed to determine separately for hospital-based IPFs and 
freestanding IPFs what proportion of total capital-related costs the 
category represent.
    For freestanding IPFs, we proposed 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 proposed 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 will 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 2012-based IPF market basket, we proposed 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.
    Next, we proposed 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 will result in 3 primary capital-
related cost categories in the 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 2012-based IPF market basket, but rather we proposed 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 proposed 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 distributed 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 proposed to further divide the Depreciation and 
Interest cost categories. We proposed to separate Depreciation into the 
following two categories: (1) Building and Fixed Equipment; and (2) 
Movable Equipment; and proposing to separate Interest into the 
following two 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 2012-based IPF market basket, we proposed 
to use slightly different methods to obtain the fixed percentages for 
hospital-based IPFs compared to freestanding IPFs.
    For freestanding IPFs, we proposed 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 proposed 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 proposed to then weight these two fixed 
percentages (routine 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 then proposed to 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 proposed

[[Page 46666]]

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 
determined the percent of total interest costs that are attributed to 
government and nonprofit IPFs separately for hospital-based and 
freestanding IPFs. We then proposed 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 provides the detailed capital cost shares obtained from the 
Medicare cost reports. Ultimately, these detailed capital cost shares 
were applied to the total Capital-Related cost weight determined in 
section III.A.3.a.i. of the proposed rule to split out the total weight 
of 7.0 percent into more detailed cost categories and weights. We did 
not receive any specific comments on our proposed methodology for 
calculating the detailed capital cost weights for the 2012-based IPF 
market basket.
    Final Decision: We are finalizing our methodology for deriving the 
detailed capital cost weights as proposed.
    Therefore, the detailed capital cost weights for the final 2012-
based IPF market basket contained in Table 3 are unchanged from the 
proposed rule.

              Table 3--Detailed Capital Cost Weights for the Proposed 2012-Based IPF Market Basket
----------------------------------------------------------------------------------------------------------------
                                                                                            Proposed detailed
                                                                  Cost shares obtained     capital cost shares
                                                                   from Medicare cost      after allocation of
                                                                   reports (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. 2012-Based IPF Market Basket Cost Categories and Weights
    As stated in section III.A.3.i of this final rule, we are revising 
our methodology for deriving Wages and Salaries and Employee Benefit 
cost weights based on public comments. The methodological changes 
results in an increase of the Wages and Salaries and Employee Benefit 
cost weights of 0.2 percentage point and 0.1 percentage point, 
respectively. As a result of these methodology changes, the residual 
All-Other cost category was revised down 0.3 percentage point. Since 
this residual is used to calculate the detailed cost category weights 
using the BEA I-O data, these cost category weights would also have 
slight revisions. These revisions round to no more than 0.1 percentage 
point.
    Table 4 shows the cost categories and weights for the proposed 
2012-based IPF market basket, final 2012-based IPF market based on 
public comments, and the 2008-based RPL market basket.

                  Table 4--2012-Based IPF Cost Weights Compared to 2008-Based RPL Cost Weights
----------------------------------------------------------------------------------------------------------------
                                                           Proposed 2012-
                     Cost category                         based IPF cost    Final 2012-based    2008-Based RPL
                                                               weight        IPF cost weight      cost weight
----------------------------------------------------------------------------------------------------------------
Total..................................................              100.0              100.0              100.0
    Compensation.......................................               65.2               65.5               62.3
        Wages and Salaries.............................               51.9               52.1               49.4
        Employee Benefits..............................               13.3               13.4               12.8
    Utilities..........................................                1.8                1.7                1.6
        Electricity....................................                0.8                0.8                1.1
        Fuel, Oil, and Gasoline........................                0.9                0.9                0.4
        Water & Sewerage...............................                0.1                0.1                0.1
    Professional Liability Insurance...................                1.1                1.1                0.8
        Malpractice....................................                1.1                1.1                0.8
    All Other Products and Services....................               25.0               24.6               27.0
    All Other Products.................................               11.7               11.5               15.6
        Pharmaceuticals................................                4.8                4.8                6.5
        Food: Direct Purchases.........................                1.4                1.4                3.0
        Food: Contract Services........................                0.9                0.9                0.4
        Chemicals......................................                0.6                0.6                1.1
        Medical Instruments............................                1.9                1.9                1.8
        Rubber & Plastics..............................                0.5                0.5                1.1
        Paper and Printing Products....................                1.0                0.9                1.0
        Apparel........................................                n/a                n/a                0.2
        Machinery and Equipment........................                n/a                n/a                0.1
        Miscellaneous Products.........................                0.7                0.6                0.3
    All Other Services.................................               13.3               13.1               11.4
    Labor-Related Services.............................                6.7                6.6                4.7
        Professional Fees: Labor-related...............                2.9                2.9                2.1
        Administrative and Facilities Support Services.                0.7                0.7                0.4
        Installation, Maintenance, and Repair..........                1.6                1.6                  -

[[Page 46667]]

 
        All Other: Labor-related Services..............                1.5                1.5                2.1
    Nonlabor-Related Services..........................                6.6                6.5                6.7
        Professional Fees: Nonlabor-related............                2.6                2.6                4.2
Financial services.....................................                2.3                2.3                0.9
Telephone Services.....................................                0.6                0.6                0.4
Postage................................................                n/a                n/a                0.6
All Other: Nonlabor-related Services...................                1.1                1.1                0.6
    Capital-Related Costs..............................                7.0                7.0                8.4
    Depreciation.......................................                5.2                5.2                5.5
        Fixed Assets...................................                3.7                3.7                3.3
        Movable Equipment..............................                1.5                1.5                2.2
    Interest Costs.....................................                1.2                1.2                2.0
        Government/Nonprofit...........................                1.0                1.0                0.7
        For Profit.....................................                0.2                0.2                1.3
    Other Capital-Related Costs........................                0.6                0.6                0.9
        Other Capital-Related Costs....................                0.6                0.6                0.9
----------------------------------------------------------------------------------------------------------------
Note: Totals may not sum due to rounding.

    We proposed that the 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 proposed 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 
2012-based IPF market basket. For the 2012-based IPF market basket, we 
also proposed to include a separate cost category for Installation, 
Maintenance, and Repair. We did not receive any public comments on our 
proposed list of detailed cost categories for the 2012-based IPF market 
basket.
    Final Decision: We are finalizing our list of detailed cost 
categories as proposed.
b. Selection of Price Proxies
    After developing the cost weights for the 2012-based IPF market 
basket, we proposed to select 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 
grouped 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 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 selected meet these criteria. 
Therefore, we believe that they continue to be the best measure of 
price changes for the cost categories to which they would be applied.
    Table 6 lists all price proxies that we proposed to use for the 
2012-based IPF market basket. Below is a detailed explanation of the 
price proxies we are finalizing for each cost category weight.

[[Page 46668]]

i. Price Proxies for the Operating Portion of the 2012-Based IPF Market 
Basket
Wages and Salaries
    To measure wage price growth in the proposed 2012-based IPF market 
basket, we proposed 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 proposed 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 used OES' May 2012 data. Detailed information on 
the methodology for the national industry-specific occupational 
employment and wage estimates survey can be found athttp://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 2012 occupational assignments for the six wage subcategories.

                            Table 5--2012 Occupational Assignments for IPF Wage Blend
----------------------------------------------------------------------------------------------------------------
                                                          2012 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.
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.
----------------------------------------------------------------------------------------------------------------


[[Page 46669]]

    Total expenditures by occupation (that is, 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 then proposed to use 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--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 for All         CIU1026200000000I
                                                     Civilian workers in Healthcare and
                                                     Social Assistance.
Health Professional and Technical.            33.5  ECI for Wages and Salaries for All         CIU1026220000000I
                                                     Civilian workers in Hospitals.
NonHealth Service.................             9.2  ECI for Wages and Salaries for             CIU2020000300000I
                                                     Private Industry workers in
                                                     Service Occupations.
NonHealth Professional and                     7.3  ECI for Wages and Salaries for             CIU2025400000000I
 Technical.                                          Private Industry workers in
                                                     Professional, Scientific, and
                                                     Technical Services.
Management........................             7.1  ECI for Wages and Salaries for             CIU2020000110000I
                                                     Private Industry workers in
                                                     Management, Business, and
                                                     Financial.
Clerical..........................             6.7  ECI for Wages and Salaries for             CIU2020000220000I
                                                     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 
2012-based IPF wage blend and the 2008-based RPL wage proxy is shown in 
Table 7. The average annual increase in the two price proxies is 
similar, and in no year is the difference greater than 0.4 percentage 
point.

        Table 7--Fiscal Year Growth in the 2012-Based IPF Wage Proxy Blend and 2008-Based RPL Wage Proxy
----------------------------------------------------------------------------------------------------------------
                                                                                                       Average
                                                                   2012     2013     2014     2015    2012-2015
----------------------------------------------------------------------------------------------------------------
2012-based IPF Proposed Wage Proxy Blend.......................      1.6      1.6      1.6      2.1          1.7
2008-based RPL Wage Proxy......................................      1.5      1.5      1.5      1.7          1.6
----------------------------------------------------------------------------------------------------------------
Source: IHS Global Insight, Inc., 2nd Quarter 2015 forecast with historical data through 4th Quarter 2014.

    We did not receive any comments on our proposed Wages and Salaries 
price proxy methodology.
    Final Decision: We are finalizing the use a blended Wages and 
Salaries price proxy as proposed.
Benefits
    For measuring benefits price growth in the 2012-based IPF market 
basket, we proposed to apply a benefits proxy blend based on the same 
six subcategories and the same six blend weights used in the wage proxy 
blend. These subcategories and blend weights are listed in Table 8.
    We proposed that the applicable benefit ECIs be identical in 
industry definition to the wage blend ECIs selected for each of the six 
subcategories. These benefit ECIs, listed in Table 8, are not 
publically available. Therefore, we calculated ``ECIs for Total 
Benefits'' using publically available ``ECIs for 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 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--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.

[[Page 46670]]

 
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 
2012-based IPF benefit proxy blend and the 2008-based RPL benefit proxy 
is shown in Table 9. The average annual increase in the two price 
proxies is similar, and in no year is the difference greater than 0.4 
percentage point.

     Table 9--Fiscal Year Growth in the 2012-Based IPF Benefit Proxy Blend and 2008-Based RPL Benefit Proxy
----------------------------------------------------------------------------------------------------------------
                                                                                                       Average
                                                                   2012     2013     2014     2015    2012-2015
----------------------------------------------------------------------------------------------------------------
2012-based IPF Proposed Benefit Proxy Blend....................      2.5      1.9      2.0      2.0          2.1
2008-based RPL Benefit Proxy...................................      2.1      1.8      2.1      2.0          2.0
----------------------------------------------------------------------------------------------------------------
Source: IHS Global Insight, Inc., 2nd Quarter 2015 forecast with historical data through 1st Quarter 2015

    We did not receive any comments on our proposed methodology and use 
of a blended wage proxy index.
    Final Decision: We are finalizing our proposal to use a blended 
wage proxy.
Electricity
    We proposed 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 proposed 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 2012-based IPF market basket, we proposed 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 proposed to 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 2012-based 
IPF market basket.
Water and Sewerage
    We proposed 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 proposed 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 proposed 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 proposed 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 proposed 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.
Chemicals
    We proposed 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 updated 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 shows the 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.

[[Page 46671]]



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

Medical Instruments
    We proposed 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 
blended 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 proposed 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 proposed 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 proposed 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 proposed 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 proposed 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 proposed 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 proposed 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 proposed 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 proposed 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 proposed 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 proposed 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.
    We did not receive any public comments on our proposed selection of 
price proxies.
    Final Decision: We are finalizing our selection of price proxies as 
proposed.
ii. Price Proxies for the Capital Portion of the 2012-Based IPF Market 
Basket
Capital Price Proxies Prior to Vintage Weighting
    We proposed 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 
also proposed 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 proposed 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 proposed to proxy the Depreciation: Movable Equipment cost 
category by the PPI for Machinery and Equipment (BLS series code 
#WPU11). We proposed to proxy the Nonprofit Interest cost category by 
the average yield on domestic municipal bonds (Bond Buyer 20-bond 
index). We proposed to proxy for the For-profit Interest cost category 
by the average yield on Moody's Aaa bonds (Federal

[[Page 46672]]

Reserve). We proposed 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.
    We did not receive any public comments on our proposed selection of 
price proxies for the capital-related portion of the market basket.
    Final Decision: We are finalizing our selection of price proxies 
for the capital-related portion of the market basket as proposed.
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 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 proposed 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 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 proposed to use data 
from the AHA Panel Survey and the AHA Annual Survey to obtain a time 
series of total expenses for hospitals. We then proposed 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 proposed 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 2012-based IPF 
market basket. We proposed 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 proposed 
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 proposed to apply a similar method for 
movable equipment. Using these 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 proposed to use the real annual capital-related purchase 
amounts for each asset type to capture the actual amount of the 
physical acquisition, net of the effect of price inflation. These real 
annual capital-related purchase amounts are produced by deflating the 
nominal annual purchase amount by the associated price proxy as 
provided above. For the interest vintage weights, we proposed 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 proposed 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

[[Page 46673]]

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.
    We did not receive any public comments on the proposed methodology 
for calculating the vintage weights for the 2012-based IPF market 
basket.
    Final Decision: We are finalizing the vintage weights as proposed.
    The vintage weights for the capital-related portion of the 2008-
based RPL market basket and the 2012-based IPF market basket are 
presented in Table 11 below.

                Table 11--2008-Based RPL Market Basket and 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 2012-Based IPF Market Basket
    As stated above, we did not receive any public comments on our 
proposed list of operating or capital price proxies.
    Final Decision: We are finalizing the list of operating and capital 
price proxies as proposed.
    Table 12 shows both the operating and capital price proxies for the 
2012-based IPF Market Basket.

                          Table 12--Price Proxies for the 2012-Based IPF Market Basket
----------------------------------------------------------------------------------------------------------------
                                                                                                      Weight
             Cost description                                  Price proxies                         (percent)
----------------------------------------------------------------------------------------------------------------
Total....................................  .....................................................           100.0
    Compensation.........................  .....................................................            65.5
        Wages and Salaries...............  Blended Wages and Salaries Price Proxy...............            52.1
        Employee Benefits................  Blended Benefits Price Proxy.........................            13.4
    Utilities............................  .....................................................             1.7
        Electricity......................  PPI for Commercial Electric Power....................             0.8
        Fuel, Oil, and Gasoline..........  Blend of the PPI for Petroleum Refineries and PPI for             0.9
                                            Natural Gas.

[[Page 46674]]

 
        Water & Sewerage.................  CPI-U for Water and Sewerage Maintenance.............             0.1
    Professional Liability Insurance.....  .....................................................             1.1
        Malpractice......................  CMS Hospital Professional Liability Insurance Premium             1.1
                                            Index.
    All Other Products and Services......  .....................................................            24.6
    All Other Products...................  .....................................................            11.5
        Pharmaceuticals..................  PPI for Pharmaceuticals for human use, prescription..             4.8
        Food: Direct Purchases...........  PPI for Processed Foods and Feeds....................             1.4
        Food: Contract Services..........  CPI-U for Food Away From Home........................             0.9
        Chemicals........................  Blend of Chemical PPIs...............................             0.6
        Medical Instruments..............  Blend of the PPI for Surgical and medical instruments             1.9
                                            and PPI for Medical and surgical appliances and
                                            supplies.
        Rubber & Plastics................  PPI for Rubber and Plastic Products..................             0.5
        Paper and Printing Products......  PPI for Converted Paper and Paperboard Products......             0.9
        Miscellaneous Products...........  PPI for Finished Goods Less Food and Energy..........             0.6
    All Other Services...................  .....................................................            13.1
    Labor-Related Services...............  .....................................................             6.6
        Professional Fees: Labor-related.  ECI for Total compensation for Private industry                   2.9
                                            workers in Professional and related.
        Administrative and Facilities      ECI for Total compensation for Private industry                   0.7
         Support Services.                  workers in Office and administrative support.
        Installation, Maintenance, and     ECI for Total compensation for Civilian workers in                1.6
         Repair.                            Installation, maintenance, and repair.
        All Other: Labor-related Services  ECI for Total compensation for Private industry                   1.5
                                            workers in Service occupations.
    Nonlabor-Related Services............  .....................................................             6.5
        Professional Fees: Nonlabor-       ECI for Total compensation for Private industry                   2.6
         related.                           workers in Professional and related.
        Financial services...............  ECI for Total compensation for Private industry                   2.3
                                            workers in Financial activities.
        Telephone Services...............  CPI-U for Telephone Services.........................             0.6
        All Other: Nonlabor-related        CPI-U for All Items Less Food and Energy.............             1.1
         Services.
    Capital-Related Costs................  .....................................................             7.0
    Depreciation.........................  .....................................................             5.2
        Fixed Assets.....................  BEA chained price index for nonresidential                        3.7
                                            construction for hospitals and special care
                                            facilities--vintage weighted (23 years).
        Movable Equipment................  PPI for machinery and equipment--vintage weighted (11             1.5
                                            years).
    Interest Costs.......................  .....................................................             1.2
        Government/Nonprofit.............  Average yield on domestic municipal bonds (Bond Buyer             1.0
                                            20 bonds)--vintage weighted (23 years).
        For Profit.......................  Average yield on Moody's Aaa bonds--vintage weighted              0.2
                                            (23 years).
    Other Capital-Related Costs..........  CPI-U for Rent of primary residence..................             0.6
----------------------------------------------------------------------------------------------------------------
Note: Totals may not sum to 100.0 percent due to rounding.

4. FY 2016 Market Basket Update
    For FY 2016 (that is, beginning October 1, 2015 and ending 
September 30, 2016), we proposed to use an estimate of the 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. 
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).
    In the FY 2016 proposed rule, using 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 was 2.7 percent. We also proposed 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 this final rule, we are estimating the market basket update for 
the IPF PPS using the most recent available data. Based on IGI's second 
quarter 2015 forecast with historical data through the first quarter of 
2015, the final 2012-based IPF market basket increase factor for FY 
2016 is 2.4 percent. For comparison, the current 2008-based RPL market 
basket is projected to increase by 2.4 percent in FY 2016 based on 
IGI's second quarter 2015 forecast and the proposed 2012-based IPF 
market basket is projected to increase 2.4 percent in FY 2016 based on 
IGI's second quarter 2015 forecast.
    Final Decision: We are finalizing our methodology for determining 
the market basket increase as proposed. Therefore, consistent with our 
historical practice of estimating market basket increases based on the 
best available data, we are finalizing a market basket increase factor 
of 2.4 percent for FY 2016. Table 13 compares the final 2012-based IPF 
market basket and the 2008-based RPL market basket percent changes.

[[Page 46675]]



 Table 13--2012-Based IPF Market Basket and 2008-Based RPL Market Basket
                Percent Changes, FY 2010 Through FY 2018
------------------------------------------------------------------------
                                     Final 2012-based    2008-Based RPL
                                    IPF market basket    market basket
         Fiscal Year (FY)             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.......................                1.9                2.0
    FY 2016.......................                2.4                2.4
    FY 2017.......................                2.9                2.9
    FY 2018.......................                3.0                3.1
    Average 2015-2018.............                2.6                2.6
------------------------------------------------------------------------
Note: These market basket percent changes do not include any further
  adjustments as may be statutorily required.
Source: IHS Global Insight, Inc. 2nd quarter 2015 forecast.

    For FY 2016, the 2012-based IPF market basket update (2.4 percent) 
is the same as the 2008-based RPL market basket (2.4 percent).
5. 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 final 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.
    In the FY 2016 proposed rule, 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) was projected to be 0.6 percent. 
Furthermore, we also proposed 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. For this final 
rule, based on IGI's second quarter 2015 forecast with historical data 
through the first quarter of 2015, the MFP adjustment for FY 2016 (the 
10-year moving average of MFP for the period ending FY 2016) is 
projected to be 0.5 percent.
    Thus, in accordance with section 1886(s)(2)(A)(i) of the Act, we 
are finalizing our proposal 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 final 2012-based IPF 
market basket (estimated to be 2.4 percent based on IGI's second 
quarter 2015 forecast). We then reduced this percentage increase by the 
current estimate of the MFP adjustment for FY 2016 of 0.5 percentage 
point (the 10-year moving average of MFP for the period ending FY 2016 
based on IGI's second quarter 2015 forecast).
    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 implementing 
the productivity adjustment and ``other adjustment'' in this final 
rule.
6. Labor-Related Share
    Due to variations in geographic wage levels and other labor-related 
costs, we

[[Page 46676]]

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 2012-based IPF market basket, we proposed 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.
    Comment: Several commenters expressed concerns over the accuracy of 
the labor-related share using the proposed 2012-based IPF market 
basket, particularly given the proposed increase in the labor-related 
share of six percentage points over the FY 2015 labor-related share 
using the 2008-based RPL market basket. One commenter stated that they 
anticipated that the IPF labor costs would be higher than possibly 
rehabilitation or long-term care hospitals; however, a labor share of 
this magnitude was not anticipated. They further stated that CMS 
acknowledged in the proposed rule that approximately 69 percent of the 
IPFs have a wage index value less than 1.00 and would face permanent 
payment reductions, while the remaining IPFs in high-cost areas will 
receive payment increases due to the budget neutrality and cost-
shifting that will occur if the proposed labor-related share and 
proposed wage indices are adopted.
    Several other commenters stated there is a potential to overstate 
the labor-related share by multiplying the ancillary salary cost 
reported on worksheet A ``by the ratio of IPF Medicare ancillary costs 
for the cost center.'' They urged CMS to utilize a more accurate 
calculation for the ancillary cost centers in order to mitigate the 
risk of overstating labor- related share costs.
    Response: We appreciate the commenters' concern over the increase 
in the FY 2016 labor-related share using the proposed 2012-based IPF 
market basket compared to the FY 2015 labor-related share using the 
2008-based RPL market basket. As stated in the FY 2016 proposed rule 
(80 FR 25032), of the six percentage-point difference in the labor-
related shares, three percentage points are 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 
two percentage points are attributable to the higher weight associated 
with the labor-related services cost categories. Further, we stated 
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.
    The freestanding IPF Wages and Salaries cost weight is 
approximately 10 percentage points higher than the hospital-based IPF 
Wages and Salaries cost weight. It is also about six percentage points 
higher than the freestanding IRF Wages and Salaries cost weight, and 13 
percentage points higher than the LTCH Wages and Salaries cost weight, 
all of which were included in the 2008-based RPL market basket. The 
methodology used to develop the freestanding IPF Wages and Salaries 
cost weight is similar to that used in the 2008-based RPL market 
basket, and we did not receive any comments on our proposed methodology 
outlined in the FY 2016 IPF PPS rule.
    As stated in section III.A.3.a.i of this final rule, we evaluated 
our methodology for Wages and Salaries cost weight, including that of 
ancillary wages and salaries. Based on the comments received, we are 
revising our methodology for calculating the Wages and Salaries cost 
weight and Employee Benefits cost weight, resulting in an increase in 
the cost weights of 0.2 and 0.1 percentage point, respectively.
    Comment: One commenter stated they had major reservations about the 
new inclusion of the Installation, Maintenance and Repair cost category 
in the labor-related share, stating that it adds an additional 1.6 
percentage points in non-health related labor costs to the IPF labor-
related share. They further stated that it is unclear why CMS considers 
this additional category a technical improvement to the IPF market 
basket since CMS has never recognized this cost category in its RPL 
market basket computations in prior years nor has CMS shown how this 
additional cost category improves the labor-related share computation. 
They urged CMS not to adopt this change to the labor-related share.
    Response: We disagree with the commenter's claim that the 
Installation, Maintenance and Repair category is a new cost category in 
the labor-related share. As stated in the proposed rule (80 FR 25027 
and 25032), Installation, Maintenance and Repair services costs 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. Also, as stated in the 
proposed rule (80 FR 20527), we chose to create a separate cost 
category for Installation, Maintenance and Repair services in order to 
proxy these costs by the ECI for Total Compensation for Civilian 
workers in Installation, Maintenance, and Repair services. We believe 
this price proxy better reflects the price changes of labor associated 
with maintenance-related services. In the 2008-based RPL market basket, 
these services are proxied by the ECI for total Compensation for 
Private Industry in Service Occupations, which reflects price growth 
associated with general service occupations.
    During our development of the 2012-based IPF market basket using 
2007 Benchmark I-O data, we decided to aggregate detailed I-O NAICS 
data to create a cost category specific to Installation, Maintenance 
and Repair services and to proxy these costs by a more specific price 
index. A comparison of the average historical growth rate over the last 
10 years showed that the ECI for Total Compensation for Civilian 
workers in Installation, Maintenance, and Repair outpaced the ECI for 
total Compensation for Private Industry in Service Occupations by 
approximately 0.4 percentage point. We continue to believe that the 
inclusion of this cost category is a technical improvement to the 2012-
based IPF market basket as we are able to proxy Installation, 
Maintenance, and Repair services with a price proxy that better 
reflects the price changes of labor associated with maintenance-related 
services. Because Installation, Maintenance and Repair services tend to 
be labor-intensive and

[[Page 46677]]

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 and thus, should be 
included in the labor-related share.
    Similar to the 2008-based RPL market basket, the 2012-based IPF 
market basket includes two cost categories for non-medical 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 estimated 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 proposed to apply 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 
proposed to classify 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 derived 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 proposed to classify 36 percent of these 
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).
    We received one comment on our methodology for determining the 
Professional Fees: Labor-related and Professional Fees: Nonlabor-
related cost weights.
    Comment: One commenter pointed out that CMS's proposed FY 2016 
labor-related share of 74.9 percent is an 8.1 percent increase compared 
to the FY 2015 labor-related share of 69.294 percent, and disagreed 
with the logic used to support this increase, stating that CMS 
disproportionately emphasizes professional fees and home office costs 
in the calculations of the labor-related share. The commenter stated 
that of the 1,617 psychiatric hospitals/units, 69.4 percent are IPF 
units. The commenter then stated that the majority of IPF unit salaries 
relate to direct patient care (RNs, LPNs, Aides, etc.) and are 
consistent with salaries in the hospital acute care areas. The 
commenter noted that the FY 2016 IPPS proposed rule for acute care 
hospitals indicates no changes to the labor-related share for wage 
indexes less than 1.000 or wage indexes greater than 1.000 (the labor-
related share for IPPS hospitals is 69.6 percent). The commenter stated 
that yet, in the FY 2016 IPF proposed rule, CMS believes an 8.1 percent 
increase is justified and indicative of salary changes to almost 70 
percent of psychiatric providers. The commenter stated that this change 
also negatively impacts 64.4 percent of psychiatric providers, all 
located in CMS' Central/South Atlantic Regions. The commenter disagreed 
that East and West coast provider costs have increased significantly 
compared to the Midwest and thus should bear the brunt of this change.
    The commenter further proposed that CMS consider calculating labor-
related share percentages similar to those calculated for IPPS, where 
CMS uses a percentage for providers with a wage index less than 1.00 
and a percentage for providers with a wage index greater than 1.00.
    Response: We respectfully disagree with the commenter's statement 
that we are disproportionately emphasizing professional fees and home 
office costs in the calculations of the labor-related share. The 
components of the labor-related share are identical to those used in 
the IPPS labor-related share, including the inclusion of professional 
fees and home office costs in the IPPS labor-related share. (As stated 
above, we note that the Installation, Maintenance, and Repair services 
costs are included in the All Other: Labor-related Services in both the 
FY 2016 IPPS labor-related share and FY 2015 IPF labor-related share 
using the 2008-based RPL market basket).
    The differences in the IPF labor-related share and IPPS labor-
related share are primarily attributable to the Wages and Salaries, 
Employee Benefits, and Contract Labor cost weights (the sum of which is 
the Compensation cost weight) which are based on IPF PPS and IPPS 
Medicare cost report data,

[[Page 46678]]

respectively. We note that the 2010-based IPPS market basket cost 
weights are based on costs as a percent of total operating costs while 
the 2012-based IPF market basket cost weights are based on a percent of 
total costs (the sum of operating costs and capital costs). The 2012-
based IPF Compensation cost weight as a percent of total operating 
costs (after removing the capital cost weight) is about 10 percentage 
points higher than the 2010-based IPPS Compensation cost weight whereas 
the 2012-based IPF market basket Professional Fees: Labor-related share 
cost weight as a percent of total operating costs (after removing the 
capital cost weight) is about two percentage points lower than the 
2010-based IPPS market basket Professional Fees: Labor-related share 
cost weight. In addition, the 2012-based IPF Professional Fees: Labor-
related share cost weight is about four percent of the 2012-based IPF 
Compensation cost weight whereas the 2010-based IPPS Professional Fees: 
Labor-related share cost weight is about nine percent of the 2012-based 
IPPS Compensation cost weight.
    As the commenter stated, the Professional Fees: Labor-related share 
includes home office costs. As described above, we determine the 
proportion of the home office costs that are labor-related by comparing 
the IPF provider's location (that is, MSA) to the location of its home 
office (also, MSA). This is the same methodology used in the 2008-based 
RPL market basket and 2010-based IPPS market basket. The 2012 IPF 
Medicare cost report and Medicare HOMER data found that 36 percent were 
located in the same MSA (and thus were allocated to the Professional 
Fees: Labor-related share cost weight) whereas the same analysis using 
2010 IPPS Medicare cost report data and Medicare HOMER data found this 
percentage to be much higher with 62 percent.
    We would further note that the approximately three percentage point 
difference between the IPF labor-related share of 74.9 percent and the 
IPPS labor-related share of 69.6 percent is attributable to the IPF 
labor-related share including a portion of capital-related costs. The 
IPPS labor-related share applies to the operating base payment rate and 
therefore, does not include a portion of capital-related costs. IPPS 
has a separate capital base payment rate and geographic adjustment 
factor. The IPF PPS base payment rate reflects both operating and 
capital costs (similar to the IRF and SNF PPS); therefore, the labor-
related share also reflects both costs.
    We acknowledge the commenter's concern regarding an IPPS labor-
related share of 62 percent for wage indexes less than 1.000 but there 
is no such provision for IPFs. The 62 percent rule is mandated by 
Section 403 of Public Law 108-173, which amended section 1886(d)(3)(E) 
of the Act and is applicable to IPPS hospitals operating base payment 
rate only.
    We would also note that the FY 2016 IPPS proposed rule did not 
include a revision to the IPPS labor-related share. The IPPS labor-
related share was last revised effective for FY 2014 when CMS finalized 
their proposal to rebase and revise the IPPS market basket as is now 
being done for the FY 2016 IPF PPS proposed rule.
    Therefore, we disagree with the commenters' claim that we are 
overemphasizing professional fees and home office costs in the IPF 
labor-related share and we continue to believe a labor-related share 
based on the 2012-based IPF market basket is appropriate.
    Final Decision: We are finalizing our methodology for determining 
the IPF labor-related share based on the final 2012-based IPF market 
basket (reflecting methodological revisions to the Wages and Salaries 
and Employee Benefit cost weights based on public comments as described 
in section III.A.3.a.i in this final rule).
    Using this method and the IHS Global Insight, Inc. 2nd quarter 2015 
forecast for the final 2012-based IPF market basket, the 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 FY 2016 labor-
related share using the final 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 72.1 percent, as shown in Table 14. We specified 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).
    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 2012-based IPF market 
basket in FY 2016, we took 46 percent of 6.8 percent to determine the 
labor-related share of Capital for 2016. The result will be 3.1 
percent, which we added to 72.1 percent for the operating cost amount 
to determine the total labor-related share for FY 2016.
    The FY 2016 labor-related share using the 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 5 
percentage point difference in the labor-related shares, three 
percentage points are 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 two percentage 
points are attributable to the higher weight associated with the labor-
related services cost categories. Further, we stated 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 both of which 
were included in the 2008-based RPL market basket.

                 Table 14--2016 IPF Labor-Related Share
------------------------------------------------------------------------
                                          FY 2016 Labor-
                                           related share
                                          based on 2012-   FY 2015 Final
                                             based IPF     labor-related
                                           market basket     share \2\
                                                \1\
------------------------------------------------------------------------
Wages and Salaries......................            51.9          48.271
Employee Benefits.......................            13.5          12.936

[[Page 46679]]

 
Professional Fees: Labor-related........             2.9           2.058
Administrative and Facilities Support                0.7           0.415
 Services...............................
Installation, Maintenance and Repair....             1.6
All Other: Labor-related Services.......             1.5           2.061
                                         -------------------------------
    Subtotal............................            72.1          65.741
Labor-related portion of capital (46%)..             3.1           3.553
                                         -------------------------------
        Total LRS.......................            75.2          69.294
------------------------------------------------------------------------
\1\ IHS Global Insight, Inc. 2nd quarter 2015 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 will be adjusted by the wage index value. 
About 69 percent of IPFs will have wage index values of less than one 
using FY2015 CBSA data, and 30 percent of these providers are rural. 
While the LRS will be updated in a budget neutral manner so that the 
overall impact on payments is zero, there will still be distributional 
effects on specific categories of IPFs. We considered the 
distributional effects of the multiple updates made in this final rule, 
including the update to 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 28 in section VIII. 
of this final rule. Additionally, we made two other adjustments to 
benefit providers: A transitional wage index and a phase-out of the 17 
percent rural adjustment for the 37 IPFs that will change from rural to 
urban status due to the new CBSA delineations. As presented in section 
III.A.6. of this final rule, we used the 2012-based IPF market basket 
relative importance's to determine the FY 2016 IPF LRS. We believe this 
is appropriate as it is based on more recent, provider-specific data 
for IPFs. For all of these reasons, we implemented the full LRS in FY 
2016.
    Comment: We received three comments, which asked that we phase in 
the updated LRS over 2 years rather than implementing it in a single 
year. Commenters were concerned about the effect of the increase in the 
LRS on providers.
    Response: We thank the commenters for their suggestion, but we are 
not providing a transition to the updated LRS. The 2012-based IPF 
market basket improves the accuracy of the IPF PPS, and the updated LRS 
is a more accurate reflection of the IPF labor-related share. Although 
in two other instances we are providing a transition that will benefit 
providers--a 1-year transitional wage index and the 3-year transition 
of the rural adjustment--in this case, we believe the impact on those 
providers that will be negatively affected by the updated LRS is 
relatively small. Furthermore, we have not typically provided a 
transition in the IPF PPS when the LRS has changed. For example, in the 
May 6, 2011 IPF PPS final rule, we rebased the RPL market basket, and 
the LRS changed from 75.400 to 70.317. Although this decrease in the 
LRS would have benefitted IPFs with wage index values less than one, 
but would have had a negative payment effect on IPFs with wage index 
values greater than one, we did not provide a transition to this lower 
LRS. For all of these reasons, we are implementing the updated IPF-
specific LRS of 75.2 in full in FY 2016.

B. 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).
    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

[[Page 46680]]

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) payment per treatment 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.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientPsychFacilPPS/index.html.
2. FY 2016 Update of the Federal Per Diem Base Rate and 
Electroconvulsive Therapy (ECT) Payment Per Treatment
    The current (that is, FY 2015) Federal per diem base rate is 
$728.31 and the ECT payment per treatment is $313.55. For FY 2016, we 
applied an update of 1.7 percent (that is, the 2012-based IPF market 
basket increase for FY 2016 of 2.4 percent less the productivity 
adjustment of 0.5 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 final rule) to the FY 2015 Federal per diem 
base rate of $728.31, yielding a Federal per diem base rate of $743.73 
for FY 2016. Similarly, we applied the 1.7 percent payment update and 
the 1.0041 wage index budget-neutrality factor to the FY 2015 ECT 
payment per treatment, yielding an ECT payment per treatment of $320.19 
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 final 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 will apply a 2.0 percentage point reduction to the 
Federal per diem base rate and the ECT payment per treatment as 
follows:
    For IPFs that failed to submit quality reporting data under the 
IPFQR program, we will apply a -0.3 percent annual update (that is, 1.7 
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 $729.10 for FY 2016.
    Similarly, we will apply the -0.3 percent annual update and the 
1.0041 wage index budget-neutrality factor to the FY 2015 ECT payment 
per treatment of $313.55, yielding an ECT payment per treatment of 
$313.89 for FY 2016.

C. 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. We 
did not propose any changes to the IPF PPS Patient-level 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' 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 making 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 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 will continue to make a payment adjustment for 
psychiatric diagnoses that group to one of the existing 17 IPF-MS-DRGs 
listed in the Addendum. Psychiatric principal diagnoses that do not 
group to one of the 17 designated DRGs will 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.

[[Page 46681]]

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 did not propose any refinements to the comorbidity adjustments, 
and will continue to use the existing adjustments in effect in FY 2015. 
The FY 2016 comorbidity adjustments are found in the Addendum to this 
final rule.
    Comment: We received one comment suggesting that we change the 
comorbidity adjustment to add a number of infectious diseases which the 
commenters felt increased IPF costs. The commenter provided a listing 
of ICD-10-CM codes for these conditions.
    Response: Changes to the comorbidity adjustment would occur as part 
of a larger IPF PPS refinement, as the comorbidity adjustment factors 
are derived through a regression analysis, which also includes other 
IPF PPS adjustments (for example, the age adjustment). We did not 
propose to refine the IPF PPS in the FY 2016 IPF PPS proposed rule, and 
therefore, this comment is outside the scope of this rule. However, we 
will consider the comment when we undertake future refinements.
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.
    We did not propose any changes to the patient age adjustments; for 
FY 2016, we will continue to use the patient age adjustments currently 
in effect in FY 2015, as shown in the Addendum to this final 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 final rule.
    We did not propose any changes to the variable per diem adjustment 
factors; for FY 2016, we will continue to use the variable per diem 
adjustment factors currently in effect as shown in the Addendum to this 
final rule. A complete discussion of the variable per diem adjustments 
appears in the November 2004 IPF PPS final rule (69 FR 66946).

D. 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. 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

[[Page 46682]]

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 of the IPF in an urban or rural area as defined in 
Sec.  412.64(b)(1)(ii)(A) and (C).
b. 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 will 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 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 changed from 69.294 percent to 75.2 percent 
in FY 2016. This percentage reflects the labor-related share of the 
2012-based IPF market basket for FY 2016 (see section III.A.6. of this 
final rule).
c. OMB Bulletins and 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 have adopted these new OMB CBSA delineations in the 
FY 2016 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 adopting these changes for the IPF PPS, it was necessary to 
identify the new labor market area delineation for each county and 
facility in the country. For example, there will 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 will become urban, 
beginning October 1, 2015, will generally experience an increase in 
their wage index values. We identified 105 counties and 37 IPFs that 
will 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

[[Page 46683]]

 
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
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

[[Page 46684]]

 
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                      34  RURAL..............          0.7995           49180  URBAN..............          0.8679            8.56
 Carolina.
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                      42  RURAL..............          0.8374           25940  URBAN..............          0.8708            3.99
 Carolina.
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
Lancaster County, South                     42  RURAL..............          0.8374           16740  URBAN..............          0.9073            8.35
 Carolina.
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

[[Page 46685]]

 
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,                     49  RURAL..............          0.7674           44420  URBAN..............          0.8326            8.50
 Virginia.
Columbia County, Washington...              50  RURAL..............          1.0892           47460  URBAN..............          1.0934            0.39
Pend Oreille County,                        50  RURAL..............          1.0892           44060  URBAN..............          1.1425            4.89
 Washington.
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 will become rural 
when we adopt the new CBSA delineations may experience a decrease in 
their wage index values. We identified 38 counties and four IPFs that 
will move from urban to rural status due to the new CBSA delineations 
beginning in FY 2016. Our use of updated data for this final rule 
increased the number of counties and the number of IPFs that changed 
status from urban to rural from 37 to 38, and three to four, 
respectively. 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 will change 
from urban to rural, beginning in FY 2016, when we 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

[[Page 46686]]

 
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
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,                   40060  URBAN..............          0.9625              49  RURAL..............          0.7554          -21.52
 Virginia.
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                   37620  URBAN..............          0.8186              51  RURAL..............          0.7274          -11.14
 Virginia.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    We note that IPFs in some urban CBSAs will 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 can 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 will 
remain urban even though the CBSA boundaries and/or counties included 
in that CBSA will change.

[[Page 46687]]



                                           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                  48900  URBAN..............          0.8867           34820  URBAN..............          0.8620           -2.79
 Carolina.
Bucks County, Pennsylvania....           37964  URBAN..............          1.0837           33874  URBAN..............          1.0157           -6.27
Chester County, Pennsylvania..           37964  URBAN..............          1.0837           33874  URBAN..............          1.0157           -6.27
Montgomery County,                       37964  URBAN..............          1.0837           33874  URBAN..............          1.0157           -6.27
 Pennsylvania.
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             49500  URBAN..............          0.3375           38660  URBAN..............          0.4154           23.08
 Rico.
Hatillo Municipio, Puerto Rico           41980  URBAN..............          0.4449           11640  URBAN..............          0.4213           -5.30

[[Page 46688]]

 
Luquillo Municipio, Puerto               21940  URBAN..............          0.3669           41980  URBAN..............          0.4438           20.96
 Rico.
Penuelas Municipio, Puerto               49500  URBAN..............          0.3375           38660  URBAN..............          0.4154           23.08
 Rico.
Quebradillas Municipio, Puerto           41980  URBAN..............          0.4449           11640  URBAN..............          0.4213           -5.30
 Rico.
Yauco Municipio, Puerto Rico..           49500  URBAN..............          0.3375           38660  URBAN..............          0.4154           23.08
Anderson County, South                   11340  URBAN..............          0.8744           24860  URBAN..............          0.9161            4.77
 Carolina.
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 will 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 will 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 will result in reduced payments to some IPFs and increased 
payments to other IPFs, due to changes in wage index values. 
Approximately 23.3 percent of IPFs will experience a decrease in wage 
index values due to CBSA changes, while 12.3 percent of IPFs will 
experience an increase in wage index values due to CBSA changes. The 
remaining 64.4 percent of IPFs will experience no change in their wage 
index values. While the wage index CBSA changes will be implemented in 
a budget-neutral fashion, the distributional effects of these CBSA 
changes appear to affect

[[Page 46689]]

rural IPFs in particular; column 5 in Table 29 in section VIII. of this 
final 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 0.5 percent.
    We believe that it will 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 are implementing 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 will 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 two values. The FY 
2017 IPF PPS wage index and subsequent IPF PPS wage indices will 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 final 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/InpatientPsychFacilPPS/WageIndex.html.
    Comment: We received one comment on the proposed transitional wage 
index, supporting the new OMB delineations, but stating that a 2-year 
transition was too short given the impact on providers. This commenter 
asked for 3-year transition instead of a 2-year transition.
    Response: We appreciate the commenter's support for the new OMB 
delineations, but note that we proposed a 1-year transition, not a 2-
year transition. We believe that our proposed 1-year transition is 
sufficient to allow providers to adjust to changes resulting from the 
new OMB delineations. A 1-year transition is also consistent with how 
the new OMB delineations have been handled in other Medicare benefits. 
Therefore, we are implementing the FY 2016 IPF PPS Wage Index as 
proposed, with a 1-year transition.
d. Adjustment for Rural Location and 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 will 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 final rule, we are adopting 
OMB updates to CBSA delineations. Adoption of the updated CBSAs will 
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 will no longer receive the 17 percent rural 
adjustment.
    While 34 of these 37 rural IPFs that will be designated as urban 
under the new CBSA delineations will experience an increase in their 
wage index value, all 37 of these IPFs will 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 
will 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 will 
experience a steeper and more abrupt reduction in their payments 
compared to other IPFs.
    Therefore, in addition to the 1-year wage index transition policy 
noted above, we are finalizing a budget-neutral 3-year phase-out of the 
rural adjustment for existing FY 2015 rural IPFs that will 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 will be taken over FYs 2016, 2017 and 2018. This policy will 
allow rural IPFs that will 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 will receive the full FY 
2017 wage index and one-third of the FY 2015 rural adjustment. For FY 
2018, these IPFs will 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 will 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 implementing 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 implementation of 
a 1-year blended wage index for all IPFs. We believe that the 
incremental reduction of the FY 2015 rural adjustment will be 
appropriate to mitigate a significant reduction in payment. We 
considered alternative timeframes for phasing out the rural adjustment 
for IPFs which will transition from rural to urban status in FY 2016, 
but believe that a 3-year budget-neutral phase-out of the rural 
adjustment will 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.
    Comment: We received one comment asking that we phase out the rural 
adjustment for the 37 affected providers over 4 years rather than 3 
years. This commenter was concerned that affected providers would be 
significantly impacted by the loss of the rural adjustment.
    Response: We appreciate the commenter's request, but as noted 
above, we considered alternate timeframes for phasing out the rural 
adjustment. We believe that a 3-year phase-out balances the need for us 
to pay accurately and appropriately with sufficient time for providers 
to adjust to, and to mitigate the adverse payment effect. A 3-year 
phase-out is also consistent with the policy we followed in FY 2006 for 
Inpatient Rehabilitation

[[Page 46690]]

Facilities. As such, we are finalizing the rural adjustment phase-out 
for these 37 IPFs as proposed, with a 3-year phase out.
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 
will 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 final rule. The final 
wage index budget-neutrality factor for FY 2016 is 1.0041. We received 
no comments on the wage index budget-neutrality factor for FY 2016.
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 FR 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 final rule, for FY 2016, we will 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 NDAA, 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.

[[Page 46691]]

    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), we 
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 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 continue to use such a cap 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 will 
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 final rule.
4. 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.
    We did not propose any changes to the ED adjustment. For FY 2016, 
we will 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 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

[[Page 46692]]

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 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. Update to the Outlier Fixed Dollar Loss Threshold Amount
    In accordance with the update methodology described in Sec.  
412.428(d), we are updating 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, the 
March 2015 update of 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 used 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 these updated data, we 
estimate that IPF outlier payments as a percentage of total estimated 
payments are approximately 2.2 percent in FY 2015. Therefore, we will 
update the outlier threshold amount to $9,580 to maintain estimated 
outlier payments at 2 percent of total estimated aggregate IPF payments 
for FY 2016.
    Comment: One commenter wrote that the increase in the outlier 
threshold would result in significant losses for hospitals with a high 
percentage of outlier cases, and suggested that CMS transition to the 
higher threshold over 2 years.
    Response: Our longstanding policy is to maintain a 2 percent 
outlier threshold, which would not be possible if we transitioned to 
the FY 2016 outlier threshold. We note that when we reanalyzed the 
outlier data for this final rule using the March 2015 update of the 
2014 MedPAR claims, the final outlier threshold was lower than the 
proposed outlier threshold ($9,825).
3. 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 1.7339 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 did not propose any changes to the application of the national 
CCRs or to the procedures for updating the CCR ceilings in FY 2016. 
However, we are updating 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 0.6220 for rural IPFs and the national 
median CCR of 0.4650 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

[[Page 46693]]

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 we are 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, we were 
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) (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 we 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 are revising 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.
    We received no comments on the proposed revision to the regulation 
text at Sec.  412.428(e), and are implementing it as proposed. We 
received 2 comments on ICD-10-CM/PCS issues.
    Comment: One commenter asked that CMS remain receptive to comments 
related to ICD-10-CM/PCS and conversion issues as health care staff 
become more familiar with the new coding. The other commenter was 
pleased that CMS had provided end-to-end testing, but noted that while 
claims submission was fairly seamless, receiving a remittance was less 
consistent. This commenter suggested that CMS allow IPFs to submit a 
larger number of varied claims and that we complete additional testing 
on the Medicare Administrative Contractor's ability to issue 
remittances timely.
    Response: We thank the commenters for their thoughts and 
suggestions. While these comments are outside the scope of this rule, 
we have shared them with the areas within CMS that handle ICD-10-CM/PCS 
conversion and end-to-end testing.

B. Status of Future IPF PPS 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

[[Page 46694]]

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 we pay 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 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 
making refinements in this final 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.
    Comment: We received two comments on this section, with one 
commenter asking that CMS engage stakeholders in the policy development 
process for refinements, and that CMS consider any changes carefully, 
to preserve access to IPF services for vulnerable beneficiaries. A 
second commenter was concerned that CMS lacks accurate cost data for 
refinements, particularly if unbundling is occurring with ancillary 
costs. This commenter also cited findings by the Medicare Payment 
Advisory Commission which also noted concerns about limited IPF data, 
and which suggested CMS consider using an assessment tool with IPF 
patients for future refinements. This commenter suggested that CMS 
examine the tools already in use in IPFs to gauge their effectiveness 
in explaining differences in patient needs and their ability to add 
data collection at minimal cost to providers.
    Response: We thank the commenters for their comments, and will 
consider them as we undertake IPF refinements in future rulemaking.

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 \4\ and each subsequent fiscal year, the 
Secretary must reduce any annual update to a standard federal rate for 
discharges occurring during the fiscal year by 2.0 percentage points 
for any inpatient psychiatric hospital or psychiatric unit that does 
not comply with quality data submission requirements with respect to an 
applicable fiscal year.
---------------------------------------------------------------------------

    \4\ 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, unless the

[[Page 46695]]

exception of subclause (ii) applies, 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 an exception to the 
requirement for NQF endorsement of measures: 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 section 4.a. of the FY 2013 IPPS/LTCH PPS 
final rule (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 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 IPFQR 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. 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 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, the 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 . . . .'' \5\ 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.'' 
\6\ For these reasons, the Steering Committee did not re-endorse HBIPS-
4.
---------------------------------------------------------------------------

    \5\ 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.
    \6\ 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, the 
NQF no longer believes HBIPS-4 is necessary in that set, and we agree. 
As we stated in the proposed rule, 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

[[Page 46696]]

sufficiently includes the information HBIPS-4 was intended to collect, 
we stated our belief that removal of HBIPS-4 from the IPFQR Program is 
warranted. We noted that the data collection period for FY 2016 has 
ended and providers are required to submit this data. Therefore, we 
stated that FY 2017 is the first year that we will be able to remove 
this measure from the program, and we proposed to remove HBIPS-4 
beginning with the FY 2017 payment determination.
    We welcomed public comments on this proposal. The comments received 
and our responses are outlined below.
    Comment: Many commenters supported the removal of HBIPS-4, noting 
that it is no longer NQF-endorsed and is not risk-adjusted, the use of 
a measure for the sake of documentation does not lead to improved care 
or provide actionable information and only increases burden, and HBIPS-
5 details the quality of care for those receiving multiple 
antipsychotic medications. A few commenters, however, did not support 
CMS' removal of HBIPS-4, stating that the practice of prescribing more 
than one antipsychotic medication is a major contributor to high-dose 
prescribing, which increases the potential of adverse side effects and 
healthcare costs, and HBIPS-4 and HBIPS-5 are paired and, therefore, 
HBIPS-5 is less meaningful without HBIPS-4.
    Response: As stated above, although HBIPS-4 and HBIPS-5 were 
originally paired, the NQF no longer believes that HBIPS-4 is necessary 
to that set and has removed endorsement of HBIPS-4, stating that HBIPS-
4 ``does not allow for the distinction of differences in providers . . 
. .'' \7\ 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. . . .'' \8\ We agree and believe that HBIPS-5 is sufficient 
without HBIPS-4 and that HBIPS-4 should be removed from the IPFQR 
Program measure set as it increases burden without concomitant benefit.
---------------------------------------------------------------------------

    \7\ 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.
    \8\ Ibid.
---------------------------------------------------------------------------

    Comment: Some commenters supported CMS' removal of HBIPS-4 but 
contended that problems remain with HBIPS-5 because IPFs are not always 
able to obtain a thorough history about patients and do not know, 
therefore, whether there is adequate justification for patients to be 
on more than one antipsychotic. Commenters recommended that CMS work 
with the measure developer and other stakeholders to determine if 
HBIPS-5 should include additional exclusions, such as patients for whom 
an IPF was unable to obtain records due to an inability to contact 
previous or current providers or patients for whom a caregiver wishes 
to be on multiple antipsychotics.
    Response: We have not proposed to change HBIPS-5, and, therefore, 
will not be altering it in the final rule (77 FR 53650). We will, 
however, continue to monitor these issues in future years of the IPFQR 
Program.
    For the reasons stated above, and as displayed in Table 19, we are 
finalizing our proposal to remove HBIPS-4: Patients Discharged on 
Multiple Antipsychotic Medications beginning with the FY 2017 payment 
determination.

  Table 19--IPFQR Program Measure To Be Removed for the FY 2017 Payment
                   Determination and Subsequent Years
------------------------------------------------------------------------
             NQF #                  Measure ID            Measure
------------------------------------------------------------------------
N/A...........................  HBIPS-4..........  Patients Discharged
                                                    on Multiple
                                                    Antipsychotic
                                                    Medications.
------------------------------------------------------------------------

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

    In the FY 2016 IPF PPS proposed rule, we proposed to add five new 
measures to the IPFQR Program for the FY 2018 payment determination and 
subsequent years (80 FR 25047). 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.\9\ 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.\10\ 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.\11\ One study 
has estimated that these individuals are twice as likely to smoke as 
the rest of the population.\12\ Tobacco use also creates a heavy 
financial cost to both individuals and society. Smoking-attributable 
health care expenditures are estimated at $96 billion per year in 
direct medical expenses and $97 billion in lost productivity.\13\
---------------------------------------------------------------------------

    \9\ 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.
    \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, 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.
    \12\ Lasser K., Boyd J.W., Woolhandler S., Himmelstein, D.U., 
McCormick D., Bor D.H.. Smoking and mental illness: A population-
based prevalence study. JAMA. 2000; 284(20):2606-2610.
    \13\ 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

[[Page 46697]]

disease.\14\ Even a minimal intervention has been shown to result in 
cessation.\15\ Research discloses that tobacco users hospitalized with 
psychiatric illnesses who enter into smoking-cessation treatment can 
successfully overcome their tobacco dependence; \16\ however, ``studies 
show that many hospitals do not consistently provide cessation services 
to their patients.'' \17\ 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.\18\ 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.\19\
---------------------------------------------------------------------------

    \14\ 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.
    \15\ Fiore M.C., Ja[eacute]n C.R., Baker T.B., 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.
    \16\ Prochaska, J.J., et al. ``Efficacy of Initiating Tobacco 
Dependence Treatment in Inpatient Psychiatry: A Randomized 
Controlled Trial.'' Am. J. Pub. Health. 2013 August 15; e1-e9.
    \17\ 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.
    \18\ 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.
    \19\ 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.'' 
\20\ 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.'' \21\ 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).'' \22\ 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.\23\ For the reasons stated above, we stated that 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, 
will result in better overall health outcomes for IPF patients.
---------------------------------------------------------------------------

    \20\ TOB-3 and TOB-3a Measure Specifications, available at 
http://www.jointcommission.org/assets/1/6/HIQR_Jan2015_v4_4a_1_EXE.zip.
    \21\ Ibid.
    \22\ TOB-3 and TOB-3a Measure Specifications, available at 
https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1228773989482.
    \23\ 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, we noted that the adoption of this measure set will 
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) 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. We noted that 
if the TOB-3/TOB-3a measure set is adopted, the IPFQR Program's measure 
set will 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, we stated that 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. We noted our belief that this 
knowledge will support the development of quality improvement plans and 
better engage patients in treatment.
    We also stated our belief that public reporting of this information 
will provide consumers and other stakeholders with useful information 
in choosing among different facilities for patients who use tobacco 
products. In addition, we observed that 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, \24\ contributing to various forms of 
cardiovascular disease, among many other conditions. \25\ ``Tobacco use 
remains the chief preventable cause of illness and death in our 
society.'' \26\ Cessation interventions can significantly reduce the 
risk of developing tobacco-related disease, \27\ leading to decreases 
in cardiovascular disease, among other diseases, and, ultimately, 
mortality. We noted our belief that encouraging intervention would 
promote effective treatment of tobacco use, and may contribute to 
prevention of the many

[[Page 46698]]

diseases that are associated with tobacco use.
---------------------------------------------------------------------------

    \24\ 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.
    \25\ 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.
    \26\ 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.
    \27\ 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.
    For these reasons, we proposed to adopt TOB-3/3a for the FY 2018 
payment determination and subsequent years. We welcomed public comments 
on this proposal. The comments we received and our responses are set 
forth below.
    Comment: Comments submitted from a consumer perspective strongly 
recommended adopting TOB-3/3a given the prevalence of tobacco use among 
those with mental illness, noting that rates are 2 to 4 times higher 
than the overall adult population in the United States. These 
commenters noted that tobacco use is the leading cause of premature 
disease and death in the United States, is a primary driver of 
hospitalizations for cancers, stroke, cardiovascular and respiratory 
disease, causes complications in pregnancy and newborns, and interferes 
with recovery and healing. These commenters also noted that 
hospitalizations are an ideal time to initiate cessation because most 
hospitals are smoke-free or tobacco-free environments, patients may be 
more likely to quit if the reason for hospitalization is caused or made 
worse by smoking, and patients may be more likely to continue cessation 
medications if they are given them during hospitalizations with a 
positive effect. They also pointed out that HHS has stated that 
hospitalizations present an unequaled opportunity to promote tobacco 
cessation, urging evidence-based interventions. Despite these facts, 
commenters noted that most hospitals have not placed a high priority on 
cessation efforts, specifically at discharge, thus presenting an 
opportunity for incorporation of cessation strategies into discharge 
planning and sustained participation in cessation treatment after 
patients reenter communities. Supporters of the measure also noted 
that, together with TOB-1 and TOB-2/2a, TOB-3/3a provides a 
comprehensive picture of tobacco use treatment around all episodes of 
inpatient psychiatric care. Finally, these commenters stated that, 
although the measure is chart-abstracted, the abstraction can be done 
at the same time the facility is abstracting data for TOB-1 and TOB-2/
2a, thereby not substantively increasing burden.
    Response: We thank commenters for their support.
    Comment: Many commenters recommended that CMS not adopt TOB-3/3a 
because, they said the measure is a population health measure not 
created for IPFs and, therefore, does not address quality of 
psychiatric care. In addition, commenters stated that tobacco cessation 
is not a primary treatment goal for the majority of patients and may 
even be contraindicated if a practitioner believes the patient should 
focus on modifying a different behavior. These commenters also asserted 
that, when needed, IPFs already use appropriate screening tools. 
Commenters underscored that measures should be directly related to the 
reasons that patients seek or require IPF services. One commenter 
stated that this measure should not be adopted because 5 measures in 
the area of tobacco cessation are excessive. Other commenters stated 
that the measure is redundant given TOB-1 and TOB-2/2a. One commenter 
contended that the measure will show no differentiation in providers, 
rendering it meaningless to consumers. Finally, one commenter suggested 
that it may be operationally difficult for IPFs to comply with TOB-3/3a 
because IPFs may have to modify discharge procedures in order to manage 
offering and providing medications or counseling for heavy smokers, and 
suggested, therefore, that the measure be delayed until the FY 2019 
payment determination.
    Response: As we stated in the FY 2014 IPPS/LTCH PPS final rule (79 
FR 45972), we disagree with commenters that maintain that tobacco 
cessation measures do not provide meaningful information regarding 
quality of care at IPFs. We continue to believe that reporting this 
information will provide meaningful distinctions between IPFs and that 
tobacco cessation treatment is an essential step for IPF patients, 
specifically because of the prevalence of tobacco use in this 
community. Tobacco use is the leading preventable cause of premature 
morbidity and mortality in the United States,\28\ affects people with 
co-existing mental health conditions at a much higher rate than for the 
general population,\29\ and is associated with estimated costs of $96 
billion per year in direct medical expenses and $97 billion in lost 
productivity. \30\ These figures are supported by recent studies, 
including those provided by the U.S. Surgeon General.\31\ Furthermore, 
we disagree that measures must be created for IPFs or specifically for 
the IPF population to be indicative of quality care. We believe that 
limiting the program to only measures or conditions that specifically 
apply to the psychiatric population creates a false demarcation between 
nonpsychiatric and psychiatric care. In our opinion, IPFs should be 
considering the overall health of the patient throughout the length of 
his/her episode of care, in addition to the patient's psychiatric 
condition. Finally, although some IPFs may currently use appropriate 
screening tools, as asserted by commenters, these rates may not be 
publicly reported; a major goal of the IPFQR Program is to provide the 
public with information upon which to choose providers. Since, as 
discussed above, tobacco use is high among the IPF-population, we 
believe that publicly reporting this data will facilitate patient 
choice.
---------------------------------------------------------------------------

    \28\ 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.
    \29\ 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.
    \30\ 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.
    \31\ U.S. Department of Health and Human Services. The Health 
Consequences of Smoking--50 Years of Progress: 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, 2014. Available at http://www.cdc.gov/tobacco/data_statistics/sgr/50th-anniversary/index.htm. CDC. Vital 
Signs: Current cigarette smoking among adults aged >=18 years with 
mental illness--United States, 2009-2011. MMWR 2013;62(05):81-87. 
Available at http://www.cdc.gov/mmwr/preview/mmwrhtml/mm6205a2.htm?s_cid=mm6205a2_w. Xu X, Bishop EE, Kennedy SM, Simpson 
SA, Pechacek TF. Annual healthcare spending attributable to 
cigarette smoking: an update. Am J Prev Med 2015;48(3):326-333.
---------------------------------------------------------------------------

    Additionally, we do not believe that TOB-3/3a is redundant, 
excessive or unnecessary. TOB-3/3a rounds out the tobacco measures we 
have previously adopted by showcasing 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

[[Page 46699]]

of the stay (TOB -1/2/2a) and upon discharge (TOB-3/3a), thus 
encompassing the entire episode of care. Furthermore, we are unaware of 
a situation in which tobacco cessation measures, which could lead to a 
decrease in disease and even premature death, would be contraindicated. 
As we state above, we believe the provider should be considering the 
overall health of the patient.
    Finally, we understand that the measure may require some facilities 
to change their existing discharge procedures for the purpose of 
improving their performance on the measure, and that such changes may 
take longer to accomplish than the time available before measure data 
is collected. However, because we already require TOB-1/2/2a, we 
believe these changes will be minimal. In addition, if facilities have 
low measure rates, these low measure rates help signal important 
quality improvement and operational gaps and encourage IPFs to close 
these gaps, with the goal of higher measure rates in the future.
    Comment: Several commenters recommended changes to this measure. 
One commenter recommended that CMS change the measure specifications to 
include minors since these individuals would also benefit from smoking 
cessation. Another commenter noted that the current specification 
require an appointment made by the healthcare provider for ongoing 
evidence-based counseling with clinicians, and IPFs may not be able to 
arrange a specific date for outpatient appointments. This commenter 
asked CMS to modify the measure to allow hospitals to arrange a 
referral without a specific appointment date. Other commenters stated 
that the measure should exclude patients who were screened but later 
decided they did not wish to receive treatment, asserting that informed 
consent is a hallmark of medical delivery, and, as specified, the 
measure is a measure of patient cooperation rather than provider 
quality; one commenter suggested, instead, capturing a rate of 
``patient refusal after treatment was offered.''
    Response: When feasible and practicable, we believe it is important 
to implement measures as they are specified, especially once such 
measures are NQF-endorsed. As such, we do not believe we should make 
the suggested modifications to the measure. We encourage commenters to 
suggest these changes to the measure's steward, The Joint Commission, 
so that the measure can be properly specified, tested, and endorsed for 
these changes. Furthermore, we believe that patient compliance is 
indicative of quality care. That is, we maintain that it is important 
that providers understand gaps in patient compliance so that they can 
modify their actions and policy to systematically encourage such 
compliance.
    Comment: One commenter requested that the measure be refined so 
that ``referral to evidence-based outpatient counseling'' specifies 
that ``referral to evidence-based tobacco cessation interventions'' may 
include outpatient counseling, community resources, or telephonic 
counseling services. Another commenter maintained that the measure 
should be inclusive of behavioral healthcare treatment approaches that 
meet the intent of ``outpatient counseling.'' Another commenter 
expressed concern with the availability of outpatient counseling 
services, particularly in rural areas, noting that many patients may 
not feel comfortable having a referral made from a psychiatric 
facility.
    Response: As specified, the measure does not state examples of what 
``referral to evidence-based outpatient counseling'' should include. We 
believe it is important to give providers flexibility in prescribing 
interventions to best fit the needs of the patient; telephonic 
counseling services or other types of community resources may meet the 
requirements for the measure and provide additional opportunities for 
outpatient counseling in rural areas if they provide evidence-based 
tobacco cessation counseling on an outpatient basis. Finally, upon 
discharge, many patients are referred to outpatient providers; we do 
not believe this measure presents unique issues to discharge referrals 
and believe that providers should adhere to confidentiality laws and 
requirements in all of these situations.
    Comment: One commenter stated that because of its limited resources 
as a community mental health center, it would likely face reduced 
payment as a result of this measure, and, therefore, urged us not to 
adopt it.
    Response: As we stated above, the IPFQR Program does not penalize 
facilities for low measure rates; facilities are only penalized if they 
fail to report these data.
    Comment: Many commenters recommended that CMS review the TOB 
measures to see if they are effective and appropriate in the IPF 
setting and should continue to be required for the IPFQR Program.
    Response: We continuously evaluate whether our measures are 
effective and appropriate for the IPFQR Program. Furthermore, as stated 
above, this measure is endorsed for all inpatient settings, which is 
inclusive of the IPF-setting. We will continue to do so for the TOB 
measure set.
    Comment: One commenter noted that several states do not provide 
financial support for prescription medication for tobacco use 
treatment, which may translate to high costs for the patient, and 
recommended that the measure track patients who are unable to accept 
treatment due to costs.
    Response: We thank the commenter for this suggestion, and we will 
consider it for future years of the IPFQR Program.
    For the reasons stated above, we are finalizing our proposal to 
adopt TOB-3 Tobacco Use Treatment Provided or Offered at Discharge and 
the subset measure TOB-3a Tobacco Use Treatment at Discharge (NQF 
#1656) 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.\32\ Roughly 
6 percent of the elderly are considered to be heavy users of 
alcohol.\33\ 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.
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    \32\ Ross, S. (2005). Alcohol Use Disorders in the Elderly. 
Primary Psychiatry, 12(1):32-40.
    \33\ 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.
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    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

[[Page 46700]]

the hospital \34\ stay.'' \35\ SUB-2a includes ``[p]atients who 
received the brief intervention during the hospital stay.'' \36\ 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.'' \37\ 
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.
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    \34\ 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.
    \35\ SUB-2 and SUB-2a Measure Specifications, available at 
https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1228773989482.
    \36\ Ibid.
    \37\ SUB-2 and SUB-2a Measure Specifications, available at 
https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1228773989482.
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    We stated our belief that the addition of the SUB-2/SUB-2a measure 
set to the related existing substance abuse measure in the IPFQR 
Program will 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 stated our belief 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 \38\ and contribute to serious medical conditions, including 
cardiovascular disease and liver disease. We noted that 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.
---------------------------------------------------------------------------

    \38\ 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.
    Therefore, we proposed to adopt SUB-2/2a for the FY 2018 payment 
determination and subsequent years. We welcomed public comments on this 
proposal. The comments we received and our responses are set forth 
below.
    Comment: Comments submitted from a consumer perspective supported 
the measure since alcohol use may be a contributing factor to the 
mental health of patients. Commenters noted that mental health and 
substance abuse treatment have historically been provided separately 
and not in a coordinated fashion and the measure could serve as a 
catalyst for coordinated, integrated responses. Furthermore, these 
commenters stated that the addition of these measures will complement 
SUB-1.
    Response: We thank commenters for their support.
    Comment: Many commenters recommended that CMS not adopt SUB-2/2a 
because, they submitted, the measure is a population screening measure 
neither created for IPFs nor systematically tested in the IPF setting, 
and, therefore, does not address quality of psychiatric care. 
Specifically, commenters stated that this measure penalizes providers 
for a patient's refusal to receive treatment, and is therefore a 
measure of patient cooperation rather than provider quality. In 
addition, commenters asserted that measures should be directly related 
to reasons that patients seek or require IPF services to focus 
providers on optimal care and recommended measures specific to 
evidence-based practices. Finally, commenters noted that IPFs already 
perform an in-depth assessment of patients' alcohol and substance abuse 
history, and current use and patients with such disorders are treated 
through a multi-disciplinary and multi-model plan, so the measure is 
not necessary, and the measure will show no differentiation in 
providers, rendering it meaningless to consumers.
    Response: As we stated in the FY 2014 IPPS/LTCH PPS final rule (78 
FR 50891), although the SUB measures were developed using all 
hospitalizations in general acute care, we believe that SUB-2 is 
equally applicable to freestanding IPFs and psychiatric units within 
acute care facilities because risky alcohol use is an area of high 
comorbidity for populations hospitalized in all of these settings. 
Furthermore, we disagree that measures must be created for IPFs or 
specifically for the IPF population to be indicative of quality care. 
We believe that limiting the program to only measures or conditions 
that specifically apply to the psychiatric population creates a false 
demarcation between nonpsychiatric and psychiatric care. In our 
opinion, IPFs should be considering the overall health of the patient 
throughout the length of his/her episode of care, in addition to the 
patient's psychiatric condition. Furthermore, we believe that patient 
compliance is indicative of quality care. That is, we maintain that it 
is important that providers understand gaps in patient compliance so 
that they can modify their actions and policy to systematically 
encourage such compliance. Additionally, although we believe that the 
measure will differentiate between providers, we will monitor measure 
rates to assure the measure provides meaningful information to 
consumers by differentiating care among IPFs. Finally, although some 
IPFs may currently use appropriate screening tools and provide 
cessation treatment, as asserted by commenters, these rates may not be 
publicly reported; a major goal of the IPFQR Program is to provide the 
public with information upon which to choose providers. Since, as 
discussed above,

[[Page 46701]]

alcohol use is high among the IPF-population, we believe that publicly 
reporting this data will facilitate patient choice.
    Comment: Several commenters stated that the measure should not be 
adopted because it does not go far enough, stating the measure 
separates alcohol use from other substances when psychiatric patients 
are routinely screened for all substance use issues.
    Response: As we stated in the FY 2014 IPPS/LTCH PPS final rule (78 
FR 58092), we recognize that this measure only assesses alcohol use and 
that screening for risky use/abuse of other substances would also be 
desirable. We believe the SUB measure set to be an important first step 
in this area, and we intend to consider the incorporation of other 
substance use measures into the program in the future.
    Comment: Many commenters urged CMS to modify this measure to 
include more than a ``brief'' intervention since patients who 
demonstrate behaviors sufficient to warrant involuntary inpatient 
commitment and are dually diagnosed with substance abuse or dependence 
require more intensive than ``brief'' substance use treatments. One 
commenter stated that ``brief intervention'' needs further definition 
and clarification to suggest or require brief intervention structures 
supported by evidence, such as the FRAMES (feedback, responsibility, 
advice, menu of options, empathy, and self-efficacy) structure. Other 
commenters submitted that there is no evidence supporting the efficacy 
of brief interventions for individuals that have alcohol or other 
substance use.
    Response: We disagree with the commenters regarding the efficacy of 
brief interventions, specifically as they are defined by the measure. 
In 2014, during the measures maintenance process, the NQF's Behavioral 
Health Steering Committee stated that ``in order to receive credit for 
the brief intervention there must be a bedside discussion with the 
patient focusing on increasing the patient's understanding of the 
impact of substance use on his or her health and motivating the patient 
to change risky behaviors. The intervention should include feedback 
concerning the quantity and frequency of alcohol consumed by the 
patient in comparison with national norms, a discussion of negative 
physical, emotional, and occupational consequences, and a discussion of 
the overall severity of the problem. The brief intervention may be 
given by a variety of healthcare professionals such as physician, 
nurse, certified addictions counselor, psychologist, social worker, or 
health educator with training in brief intervention.'' \39\ We 
understand that for heavy users of alcohol, brief intervention may not 
be enough, but these brief interventions, we believe, are an important 
first-step to cessation. Furthermore, if providers believe that 
additional cessation strategies are warranted, we highly encourage 
using them. In addition, as described, the FRAMES structure would 
satisfy the requirements for ``brief intervention,'' and we believe 
that the provider community could use this framework. We note, however, 
that such structure is not required as long as the provider meets the 
elements discussed above.
---------------------------------------------------------------------------

    \39\ http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=76540.
---------------------------------------------------------------------------

    Comment: One commenter expressed concern that the measure set does 
not exclude cases when treatment was offered but refused. This 
commenter requested that CMS report the measure as the percentage of 
patients who were offered treatment and refused, or retitle the measure 
to ``patients who were offered alcohol use intervention and accepted.'' 
This commenter also requested that CMS allow clinicians to determine 
whether a patient's cognitive impairment in the first three days of 
admission prevented screening because some patients are alert and 
oriented but impaired cognitively so as to not allow screening for 
substance abuse.
    Response: When feasible and practicable, we believe it is important 
to implement measures as they are specified, especially where, as here, 
the measure set is NQF-endorsed. As such, we do not believe we should 
make the suggested modifications to the measure. We encourage the 
commenter to suggest these changes to the measure's steward, The Joint 
Commission, so that the measure can be properly specified, tested, and 
endorsed for these changes. In addition, the measure set is bifurcated 
specifically to delineate patients that refuse or do not otherwise 
receive treatment. SUB-2 measures ``[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 \40\ stay,'' \41\ but 
SUB-2a only includes ``[p]atients who received the brief intervention 
during the hospital stay.'' \42\ Thus, the measure rates that will be 
published on Hospital Compare will allow the public to derive rates of 
patient refusal. As stated above, however, we believe that patient 
compliance is indicative of quality care. That is, we maintain that it 
is important that providers understand gaps in patient compliance so 
that they can modify their actions and policy to systematically 
encourage such compliance.
---------------------------------------------------------------------------

    \40\ 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.
    \41\ SUB-2 and SUB-2a Measure Specifications, available at 
https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1228773989482.
    \42\ Ibid.
---------------------------------------------------------------------------

    Comment: One commenter stated that because of its limited resources 
as a community mental health center, it would likely face reduced 
payment as a result of this measure, and, therefore, urged us not to 
adopt it.
    Response: As we stated above, the IPFQR Program does not penalize 
facilities for low measure rates; facilities are only penalized if they 
fail to report these data.
    Comment: One commenter noted that individuals screening positive 
for alcohol dependency may need both brief interventions and further 
assessment or referral to specialty treatment and, therefore, suggested 
an additional quality measure that assesses patients who were defined 
as alcohol dependent and referred to a substance use disorder 
specialist for assessment. Another commenter urged CMS to adopt SUB-3/
3a to complement SUB-1/2/2a, noting that co-occurring substance use 
disorders are prevalent in many patients with psychiatric diagnoses and 
SUB-3/3a will ensure that patients continue to receive treatment after 
discharge. Another commenter encouraged CMS to consider additional non-
alcohol substance abuse disorder measures, specifically the use of 
opioids.
    Response: We thank the commenters for these suggestions and will 
consider them for future years of the program.
    For the reasons stated above, we are finalizing our proposal to 
adopt SUB-2 Alcohol Use Brief Intervention Provided or Offered and SUB-
2a Alcohol Use Brief Intervention (NQF #1663) 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

[[Page 46702]]

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 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.\43\
---------------------------------------------------------------------------

    \43\ 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 an 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.'' \44\ At a minimum, the transition record should include:
---------------------------------------------------------------------------

    \44\ 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.\45\
---------------------------------------------------------------------------

    \45\ 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.'' \46\ 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.
---------------------------------------------------------------------------

    \46\ 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.\47\
---------------------------------------------------------------------------

    \47\ Medicare Payment Advisory Commission. Promoting Greater 
Efficiency in Medicare. June 2007. Available at: http://www.medpac.gov/documents/reports/Jun07_EntireReport.pdf.
---------------------------------------------------------------------------

    We stated our belief that public reporting of this measure will 
afford patients and their families or caregivers useful information in 
choosing among different facilities and will 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.'' \48\ This measure will promote appropriate care 
coordination by specifying that patients discharged from an inpatient 
facility receive relevant and meaningful transition information. This 
measure also promotes 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.'' \49\ This measure will 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 will support open communication of the patient's, and his/her 
caregiver's/surrogate's, wishes, resulting in improved patient-provider 
communication.
---------------------------------------------------------------------------

    \48\ US DHHS. ``National Healthcare Disparities Report 2013.'' 
Available at: http://www.ahrq.gov/research/findings/nhqrdr/nhdr13/chap7.html.
    \49\ 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 \50\ 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.\51\ 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.
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    \50\ http://www.qualityforum.org/Publications/2012/10/MAP_Families_of_Measures.aspx.
    \51\ http://www.qualityforum.org/Publications/2014/08/2014_Input_on_Quality_Measures_for_Dual_Eligible_Beneficiaries.aspx.
---------------------------------------------------------------------------

    We proposed that, if this measure is finalized, it would replace 
the existing HBIPS-6 Post-Discharge Continuing Care Plan measure.\52\ 
We stated our belief 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:
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    \52\ 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.\53\
---------------------------------------------------------------------------

    \53\ 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,

[[Page 46703]]

decrease costs, and increase beneficiary engagement.
    First, this 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 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.\54\ HBIPS-6 does not require 
providers to specify studies pending at discharge.
---------------------------------------------------------------------------

    \54\ 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.
---------------------------------------------------------------------------

    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 this 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, this 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 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 stated our belief 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 proposed 
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 to remove HBIPS-6. We welcomed 
public comments on these proposals. The comments we received and our 
responses are set forth below.
    Comment: Many comments submitted from a consumer perspective 
supported the adoption of this measure, stating that the transition 
from inpatient to home/self-care or any other site is extremely 
critical; the measure supports patient engagement, and patient 
activation, and provides patients with necessary documentation for 
follow-up care. Commenters also stated that, unlike HBIPS-6, because 
this measure is not limited to the inpatient psychiatric setting, it 
decreases the separation between psychiatric and nonpsychiatric care.
    Response: We thank the commenters for their support.
    Comment: Many commenters recommended that CMS not replace HBIPS-6 
with 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 several reasons. First, 
commenters asserted that HBIPS-6 is widely-used and fully operational, 
was developed with the input of IPFs, and fully tested in the IPF-
setting, whereas the proposed measure does not appear to be widely used 
or have benchmarking data available. One commenter specifically 
submitted that the measure was developed for use at the individual-
clinician level rather than at the facility-level. Commenters stated 
that most IPFs have been reporting HBIPS data for over eight years, 
allowing them to understand trends and performance gaps, and believed 
that removing HBIPS-6 could upset quality improvement efforts currently 
in place. Commenters also stated that continually revising the measures 
does not provide reliable data on which to base decisions about patient 
care and evaluate care improvement over time.
    Second, commenters contended that HBIPS-6 better addresses the core 
elements of the proposed measure and requires more stringent 
documentation of medications, noting that, although the proposed 
measure requires more information, it is the practice of IPFs to 
include all relevant information in the continuing care plan, and, if 
needed, hospitals communicate additional elements to the next level 
care provider. Commenters further stated that the new elements required 
by this measure are not germane to the vast majority of psychiatric 
patients, commenting that the rule mainly cites articles that did not 
necessarily study psychiatric patients, and that the new elements are 
primarily based on medical models rather than psychiatric care.
    Third, commenters contended that retiring HBIPS-6 will increase 
burden on IPFs because of the 7 additional elements required by the 
proposed measure and because IPFs will still be required to abstract 
data for HBIPS-6 for The Joint Commission.
    Finally, some commenters stated that the measure is duplicative of, 
and sometimes misaligned with, the requirements of Medicare's 
Conditions of Participation. Commenters believed that the Conditions of 
Participation meet the goals of promoting care coordination by 
specifying that patients discharged from an inpatient facility receive 
relevant and meaningful transition information and the results are 
publicly reported.
    Commenters suggested that, if CMS wishes to require transition 
elements in addition to HBIPS-6, CMS either allow hospitals more time 
to operationalize the measure, implementing the measure beginning with 
the FY 2019 payment determination, or that CMS work with The Joint 
Commission to revise HBIPS-6 to include additional elements.
    Response: We agree with commenters that there may be some increase 
in burden due to the removal of HBIPS-6 and the adoption of 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, since HBIPS-6 requires 4 elements 
while 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 11 elements. However, 
we believe that this burden will be significantly mitigated by the 
overlap in the two measures; the 4 elements required by HBIPS-6 satisfy 
4 of the 11 elements for the new measure. We clarify in this final rule 
that, if the IPF

[[Page 46704]]

meets the documentation requirements of HBIPS-6, it also meets the 
documentation requirements for the following elements for 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: (1) Reason for hospitalization; (2) 
principal diagnosis; (3) discharge medications; and (4) next level of 
care recommendations. Therefore a hospital could abstract data for and 
comply with HBIPS-6 by also complying with and abstracting data for 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. Furthermore, if it is currently the 
practice of IPFs to include all relevant information in the continuing 
care plan, as some commenters assert, we do not understand how the 
measure would substantially increase burden. In addition, for the 
reasons stated above, we believe the additional elements in the new 
transition measure are indicative of quality care, leading to a 
decrease in re-hospitalizations and an increase in patient safety. We 
also do not agree that replacing this measure will upset quality 
improvement efforts begun by HBIPS-6. If IPFs have already begun 
quality improvement in this area, we believe it will continue and even 
surpass the current state because the proposed measure is even more 
robust, requiring 7 additional elements. Therefore, we believe that the 
benefit of the removal of HBIPS-6 and the adoption of 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 outweighs any associated burden and furthers the 
goals of the IPFQR Program. In addition, the measure is endorsed at the 
facility-level, not the clinical-level, and was developed with a broad 
range of inpatient settings in mind that did not specifically exclude 
IPFs; the measure developer is considering explicitly including the 
IPF-setting in the next round of measure maintenance so that the 
measure is endorsed not only for all inpatient settings, but explicitly 
states that it is endorsed for the IPF-setting.
    Furthermore, we disagree that the Conditions of Participation are 
duplicative of or misaligned with this measure. To the extent that the 
measure and Conditions of Participation overlap, they are aligned in 
their requirements. Furthermore, this measure requires elements in 
addition to those of the Conditions of Participation, increasing the 
quality of care delivered to patients.
    To clarify, although HBIPS-6 requires documentation in the medical 
record of discharge medications, dosage, and indication for use or that 
no medications were prescribed at discharge, the new measure requires 
documentation of all medications to be taken by patient after 
discharge, including all continued and new medications. We believe that 
it is important that patients understand all medications that they 
should be taking, even those not specifically prescribed at discharge. 
Thus, we believe that this new measure is actually more robust than 
HBIPS-6.
    Additionally, as we have stated previously, we disagree that 
measures must be created for IPFs or specifically for the IPF 
population to be indicative of quality care. Many issues concerning 
service quality are not specific to a particular setting. We believe 
that the content of transition records is one such issue. Further, we 
believe that limiting the program to only measures or conditions that 
specifically apply to the psychiatric population creates a false 
demarcation between nonpsychiatric and psychiatric care.
    Finally, although we believe this measure to be a critical 
indicator of quality care, we understand that with the additional 
elements required it may take providers time to change their operations 
to begin collecting this data. Therefore, we will only require IPFs to 
report the last two quarters of data for this measure for the FY 2018 
payment determination; that is, providers will only be required to 
report data for July 1, 2016-December 31, 2016. Beginning with the FY 
2019 payment determination, IPFs will be required to report all four 
quarters of data or will face a payment reduction.
    Comment: Some commenters asserted that patients have expressed 
frustration with the length of discharge instructions, and the number 
of elements required by this measure may overwhelm the patient, causing 
the patient or caregiver to lose interest and disregard the important 
information. Commenters also stated that some of this information could 
be misinterpreted if the patient reviews the information after 
discharge and not in the presence of a clinician. One commenter 
specifically contended that ``patient instructions'' should not be 
included in the record because they will become lost in the packet of 
information and many patients are discharged to places, such as a group 
home, residential care, or jail, where they are not able to keep such a 
large amount of information, putting their confidentiality at risk. 
Another commenter stated its belief that the requirements in the 
measure for patients to receive and understand their transition records 
is burdensome because the timeframe for collection does not allow 
enough time for hospitals to modify the language in their current 
systems to account for health literacy. Therefore, some commenters 
requested that the measure be limited to items necessary for the 
transition period to the next follow-up care visit and be tailored to 
psychiatric patient's ability to comprehend. Other commenters, however, 
specifically noted that the measure will enhance the likelihood that 
patients will have the information they need to effectively manage 
their own care (or for their caregiver to understand and assist with 
managing the patient's care).
    Response: We agree that the measure will help, rather than harm, 
patients. We are committed to patient engagement and believe that the 
more that patients know about their condition and treatment, the more 
empowered they become in their care and their follow-up treatment. If 
facilities believe that certain items in the record need to be 
explained, we believe it is incumbent upon them to become partners in 
care with patients and sufficiently explain these details. Although 
such changes may present additional burden to facilities, we believe 
that this burden is far outweighed by the benefit of fostering an 
involved and empowered patient population. Additionally, we do not 
believe that this measure presents confidentiality issues for patients. 
Once a patient receives his or her record, the disposition of the 
information is up to the patient. Thus, as with all discharge records, 
a patients may choose to do with the information as they so choose 
without raising confidentiality concerns.
    Comment: Some commenters supported the measure because it more 
closely aligns with existing summary of care document requirements for 
EHRs, but some commenters stated that, psychiatric hospitals are not 
eligible for the EHR Incentive Program and the majority of 
organizations to which IPFs discharge patients do not have electronic 
records. Other commenters stated their belief that this measure would 
require providers to modify their EHRs.
    Response: Nothing in this measure requires a facility to use an 
EHR. While we recognize that psychiatric hospitals are not eligible for 
the EHR Incentive Program, we believe that, whenever

[[Page 46705]]

possible, the goals of the agency should be aligned to foster 
streamlined processes and procedures across providers and care 
settings. Furthermore, we are not aware of any specific EHR changes 
that would need to be made to accommodate this measure, and, when the 
record is transmitted to a next-level provider per the measure 
discussed below, the ``transition record may be transmitted to the 
facility or physician or other health care professional designated for 
follow-up care via fax, secure email, or mutual access to an electronic 
health record (EHR).'' \55\
---------------------------------------------------------------------------

    \55\ 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.
---------------------------------------------------------------------------

    Comment: Some commenters maintained that CMS inappropriately 
compared HBIPS-6 with the proposed measure when the HBIPS-6 transition 
plan is not required to go to the patient.
    Response: We believe comparing these measures was appropriate 
because both concern practices around documentation of the care 
provided during the inpatient stay. In fact, the requirements for 
patient communication in the measure is an important reason for 
choosing it to replace HBIPS-6, which does not require the 
documentation to go to the patient. As we discuss above, we believe it 
is vital to provide this information to enhance patient engagement.
    Comment: Commenters expressed concern 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 not stratified by age, which limits the usefulness of the 
data, given the variation across populations.
    Response: As stated above, when feasible and practicable, we 
believe it is important to implement measures as they are specified 
especially where, as here, the measure is NQF-endorsed. As such, this 
measure is not specified to be reported by age. Furthermore, we believe 
that presenting the measure as an aggregate number rather than 
stratified by age will allow greater rather than less insight into 
these data because, as further explained in section V.F.1. of this 
final rule, the resultant number of cases is often too small to allow 
public reporting when data are stratified by age.
    Comment: Comments submitted from a consumer perspective recommended 
that CMS consider adding the following additional elements to the 
existing transition measure: (1) Information on locations and contacts 
for community services and support group meetings; (2) recommendations 
for additional, non-medication mental health treatments; (3) 
recommendations for relevant physical health suggested appointments and 
clinical references; (4) patient surveys evaluating the quality of 
mental health care received; (5) information about side effects from 
medications and potential warning signs of adverse medication 
interactions; (6) information about follow-up care for alcohol or 
substance use treatment; and (7) documented coordination between 
inpatient and outpatient providers. Another commenter stated that the 
measure should exclude patients discharged in less than 24 hours 
because collecting the required information takes at least this amount 
of time. The same commenter also submitted that patients discharged to 
another acute facility should be excluded from the measure since such a 
discharge is always accompanied by an appropriate transition record. 
Another commenter stated that additional exclusions should be added, 
including patient refusal and unplanned discharges, noting that more 
than 6 percent of discharges fall in these categories. One commenter 
noted that ``medication indications'' is missing from the proposed 
measure, but appears in HBIPS-6, and questions why CMS believes this is 
no longer a necessary element, noting that such an omission is welcome 
because of the burden in documenting this information. Other 
commenters, however, stated that this more stringent documentation of 
medications is necessary.
    Response: As stated above, when feasible and practicable, we 
believe it is important to implement measures as they are specified, 
especially once such measures are NQF-endorsed. As such, we do not 
believe we should make the suggested modifications to the measure. We 
encourage the commenters to suggest these changes to the measure's 
steward, the AMA-convened PCPI, so that the measure can be properly 
specified, tested, and endorsed for these changes.
    Comment: Some commenters stated that this measure was either the 
same as or similar to a measure previously adopted by the Hospital OQR 
Program that was subsequently removed because hospitals raised concerns 
about potential privacy issues related to releasing certain elements of 
the record to family members or caregivers. Commenters asked if the 
measure had been revised to address these issues and if IPFs will be 
constrained by state laws, and, if so, since state laws differ from 
state-to-state, how the measure can be implemented nationwide.
    Response: We believe the commenters stating that the measure is the 
same as a measure adopted by the Hospital OQR Program are incorrect. 
The Hospital OQR Program adopted and finalized NQF #0649 Transition 
Record with Specified Elements Received by Discharged Patients 
(Emergency Department Discharges to Ambulatory Care [Home/Self Care] or 
Home Health Care). Although this measure is also stewarded by the AMA-
PCPI and requires a transition record, it is not the same as NQF #0647, 
which we proposed. The measures differ in regards to the location from 
which the patient is discharged; specifically, NQF #0649 measures 
discharges from the emergency department, while NQF #0647 measures 
discharges from an inpatient facility. We believe that this difference 
is critical because the circumstances surrounding discharge from an 
emergency department are typically not planned; that is, a patient is 
discharged the same day he/she arrives with the individual that brought 
him/her to the emergency room, whom a patient may or may not feel 
comfortable sharing information. Those discharged from an inpatient 
setting usually have advanced notice and can plan accordingly. Thus, we 
do not believe, and neither does the AMA-PCPI, that NQF #0647 raises 
any of the privacy concerns articulated by the Hospital OQR Program for 
#0649.
    Comment: Commenters requested clarification on several elements of 
the discharge plan: (1) What needs to be transmitted to satisfy the 
advanced directive requirement and who is a ``surrogate decision 
maker''; (2) what is defined as a ``major procedure''; (3) which tests 
should be included in the transition record; and (4) what is ``24 hour, 
7-day a week contact information.'' Another commenter requested that 
CMS clarify whether psychiatric patients undergo major procedures and 
tests during their stay, and, if so, the most common procedures and 
tests. Another commenter requested CMS to opine if Indiana's Physician 
Order for Scope Treatment document would satisfy the advance directive 
element. Another commenter stated that psychiatric patients are often 
not in the best position to formulate an advanced care plan.
    Response: According to the measure steward, the AMA-convened PCPI, 
to satisfy the ``advance directive or surrogate decision maker 
documented or reason for not providing advance care plan'' element, the 
IPF need only document whether the patient has an

[[Page 46706]]

advance directive or surrogate decision maker or a reason he/she does 
not have one. No additional documentation need be transmitted and a 
patient need not create an advance directive to satisfy the measure. A 
``surrogate decision maker'' is an individual that the patient has 
designated to make decisions for him/her. Again, per the measure 
specifications, the patient need not necessarily have a surrogate 
decision maker, but the IPF should document why he or she does not in 
the absence of one.
    The AMA-PCPI has also clarified that ``major procedure'' and 
``tests'' are intentionally not defined to allow flexibility for 
providers; therefore, we cannot quantify which procedures or tests are 
major. If a provider believes a procedure to be ``major'' or a test 
important enough to be included, it should be included in the 
transition record.
    Regarding the ``24 hour, 7-day a week contact information,'' IPFs 
need only provide a number where a patient can contact the facility 
with questions. This number need not connect the patient to his/her 
specific doctor, although it may do so.
    For the reasons stated above, we are finalizing our proposal to 
adopt Transition Record with Specified Elements Received by Discharged 
Patients (Discharges from an Inpatient Facility to Home/Self Care or 
Any Other Site of Care) and remove HPIBS-6: Post-Discharge Continuing 
Care Plan for the FY 2018 payment determination and subsequent years 
with one modification. For the FY 2018 payment determination, we will 
only require IPFs to report data on this measure for the last two 
quarters of the reporting period (July 1, 2016-December 1, 2016). 
Beginning with the FY 2019 payment determination, IPFs will be required 
to report all four quarters of data.
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.\56\ 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,\57\ 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.'' \58\ For more information on this measure, 
including its specifications, we refer the readers to http://www.qualityforum.org/Qps/0648.
---------------------------------------------------------------------------

    \56\ 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.
    \57\ Medicare Payment Advisory Commission. Promoting Greater 
Efficiency in Medicare. June 2007. Available at: http://www.medpac.gov/documents/reports/Jun07_EntireReport.pdf.
    \58\ 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 stated our belief 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.'' \59\ This 
measure enables a patient's primary care physician or other healthcare 
practitioner to timely receive a transition record of the inpatient 
hospitalization.
---------------------------------------------------------------------------

    \59\ 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 \60\ 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.\61\ 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.
---------------------------------------------------------------------------

    \60\ http://www.qualityforum.org/Publications/2012/10/MAP_Families_of_Measures.aspx.
    \61\ http://www.qualityforum.org/Publications/2014/08/2014_Input_on_Quality_Measures_for_Dual_Eligible_Beneficiaries.aspx.
---------------------------------------------------------------------------

    We proposed that if we finalized this measure, it would replace the 
existing HBIPS-7: Post Discharge Continuing Care Plan Transmitted to 
the Next Level of Care Provider Upon Discharge measure.\62\ HBIPS-7 
requires that the continuing care plan be transmitted to the next care 
provider no later than the fifth day post discharge.\63\ 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 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,64 65 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 
stated our belief that replacing HBIPS-7 with the Timely Transmission 
of Transition Record (Discharges from an Inpatient Facility to Home/
Self Care

[[Page 46707]]

or Any Other Site of Care) measure would increase the quality of care 
provided to patients, reduce avoidable readmissions, and increase 
patient safety.
---------------------------------------------------------------------------

    \62\ 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.
    \63\ https://manual.jointcommission.org/releases/TJC2014A1/.
    \64\ 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.
    \65\ Jack BW, Chetty VK, Anthony D, et al. (2009). A 
reengineered hospital discharge program to decrease 
rehospitalization. Ann Intern Med.150(3),178-187.
---------------------------------------------------------------------------

    Therefore we proposed to replace 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 beginning 
with the FY 2018 payment determination. We welcomed public comments on 
these proposals. The comments we received and our responses are set 
forth below.
    Comment: Comments submitted from a consumer perspective strongly 
supported the adoption of this measure, specifically the 24-hour 
requirement, since lack of coordinated care has led to high rates of 
re-hospitalization, arrests, homelessness, and other negative 
consequences, and the measure will ensure that there is only a 
potential 24-hour gap between discharge and the next level of care. 
Commenters maintained that the measure would promote safe and effective 
care and communication and care coordination efforts of the National 
Quality Strategy. Commenters also stated that the measure more closely 
aligns with existing summary of care document requirements for EHRs, 
and is applicable to more settings than HBIPS-7, decreasing the 
separation between psychiatric and nonpsychiatric care.
    Response: We thank the commenters for their support, and agree that 
psychiatric and nonpsychiatric care should be considered as a whole in 
treating a patient.
    Comment: Many commenters recommended that CMS not replace 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 
for several reasons. First, commenters submitted that HBIPS-7 is 
widely-used and fully operational, was developed with the input of 
IPFs, and fully tested in the IPF setting, whereas the proposed measure 
does not appear to be widely used or have benchmarking data available. 
One commenter specifically maintained that the measure was developed 
for use at the individual clinician level rather than at the facility 
level. Other commenters stated that most IPFs have been reporting HBIPS 
data for over 8 years, allowing them to understand trends and 
performance gaps, and believed that removing HBIPS-7 could upset 
quality improvement efforts currently in place. Commenters also stated 
that any comparative data may not be meaningful since national 
comparative rates would include settings other than IPFs. Many 
commenters specifically noted that room for improvement in HBIPS-7 
remains, with a compliance rate of only 44 percent for the two-thirds 
of psychiatric facilities that began using this measure as a result of 
the IPFQR Program. Commenters recommended that CMS refrain from 
changing measures in the same domain to allow time for providers to 
change and stabilize their procedures.
    Second, commenters expressed concern that the 24-hour window for 
transmission does not improve the quality of data submitted to the next 
level of care provider, is in conflict with other documentation 
requirements, such as the allowable time for the discharge summary to 
be completed, focuses on how quickly the documentation is completed 
rather than the quality of data transmitted, and is nearly impossible 
for providers to meet. Some commenters noted that the 24-hour timeframe 
is not necessary because most patients are not seen by an outpatient 
provider within 24 hours of discharge and most communication is done 
through fax, necessitating a longer timeframe to ensure control over 
who receives the data and compliance with confidentiality requirements.
    Third, commenters contended that HBIPS-7 better addresses the core 
elements of the proposed measure and requires more stringent 
documentation of medications, noting that, although the proposed 
measure requires more information, it is the practice of IPFs to 
include all relevant information in the continuing care plan. In 
addition, commenters stated that the new elements are primarily based 
on medical models rather than psychiatric care and focus on areas not 
important in the psychiatric population.
    Finally, commenters asserted that removing HBIPS-7 will increase 
burden on IPFs because IPFs will still be required to abstract data for 
this measure for The Joint Commission.
    Commenters suggested that, if we wish to require transition 
elements in addition to HBIPS-7, we either allow hospitals more time to 
operationalize the measure, implementing it beginning with the FY 2019 
payment determination, or that CMS work with The Joint Commission to 
revise HBIPS-7 to include additional elements.
    Response: Although we agree that there may be some increase in 
burden due to the removal of HBIPS-7 and the adoption of the Timely 
Transmission of Transition Record (Discharges from an Inpatient 
Facility to Home/Self Care or Any Other Site of Care) measure, we note 
that the primary difference between the two measures is in the timing 
of transmission; HBIPS-7 requires transmission to the next-level care 
provider within 5 days of discharge, while the Timely Transmission of 
Transition Record (Discharges from an Inpatient Facility to Home/Self 
Care or Any Other Site of Care) measure requires the same within 24-
hours of discharge. Thus, by transmitting the transition record within 
24 hours, the provider satisfies both the Timely Transmission of 
Transition Record (Discharges from an Inpatient Facility to Home/Self 
Care or Any Other Site of Care) measure and HBIPS-7. Therefore a 
hospital could abstract data for and comply with HBIPS-7 by also 
complying with and abstracting data for the Timely Transmission of 
Transition Record (Discharges from an Inpatient Facility to Home/Self 
Care or Any Other Site of Care) measure. Furthermore, although we 
believe that high-quality data is important, we note that the point of 
this measure is timeliness. As we explain above, 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,66 67 which may be within a day (or days) of 
discharge. Additionally, the AMA-PCPI maintains, and we agree, that 
studies have documented the prevalence of communication gaps and 
discontinuities in care for patients after discharge and the 
significant effect of these lapses on hospital readmissions and other 
indicators of the quality of transitional care.\68\ Therefore, we 
believe that the 24-hour window is critical to quality improvement and 
that the benefit of the removal of HBIPS-7 and the adoption of the 
Timely Transmission of Transition Record (Discharges from an Inpatient 
Facility to Home/Self Care or Any Other Site of Care) measure outweighs 
any associated burden and further the goals of the IPFQR Program. 
Furthermore, we do not agree with commenters that it is ``impossible'' 
for providers to meet the 24-hour transmission requirement; the NQF 
specifically reviews a measure for feasibility and has endorsed this 
measure. Thus, we believe this measure

[[Page 46708]]

can be implemented. In addition, although some patients are not seen in 
24-hours, some are, and we believe that their records should be 
available to the next-level provider. Finally, as explained below, we 
do not believe this measure presents any confidentiality issues.
---------------------------------------------------------------------------

    \66\ 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.
    \67\ Jack BW, Chetty VK, Anthony D, et al. (2009). A 
reengineered hospital discharge program to decrease 
rehospitalization. Ann Intern Med. 150(3),178-187.
    \68\ 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.
---------------------------------------------------------------------------

    Additionally, we note that the additional elements that commenters 
state are required by this measure are actually required by the measure 
we are adopting above, NQF #0647. In addition, the need for ``more 
stringent documentation of medications,'' is found in the measure we 
are removing above, HBIPS-6. We discuss any issues associated with the 
measures in that section. We believe the only additional burden when 
comparing this measure to HBIPS-7 is the decreased timeline. In 
addition, the measure was developed with a broad range of inpatient 
settings in mind and did not specifically exclude IPFs; the measure 
developer is considering explicitly including the IPF-setting in the 
next round of measure maintenance so that the measure is endorsed not 
only for all inpatient settings, but explicitly states that it is 
endorsed for the IPF-setting.
    We do not agree that replacing this measure will upset quality 
improvement efforts begun by HBIPS-7. If IPFs have already begun 
quality improvement in this area, we believe it will continue and even 
surpass the current state because the proposed measure is even more 
robust. We also disagree that the data may not be meaningful because, 
when posted on Hospital Compare, the data will include all IPFs 
participating in the IPFQR Program, thus allowing consumers to 
meaningfully compare the quality of care provided by each IPF 
participating in the program.
    Finally, although we believe this measure to be a critical 
indicator of quality care, we understand that the change from requiring 
the document within 5 days of discharge to within 24 hours may 
initially prove operationally difficult for providers. Therefore, we 
will only require IPFs to report the last two quarters of data for this 
measure for the FY 2018 payment determination; that is, providers will 
only be required to report data for July 1, 2016-December 31, 2016. 
Beginning with the FY 2019 payment determination, IPFs will be required 
to report all four quarters of data or will face a payment reduction.
    Comment: Some commenters noted that it could be problematic to 
implement this measure if a patient is discharged on a weekend. 
Commenters noted that some of the discharge planning resources such as 
social workers and case managers are not present to support the 
inpatient discharge process and many offices are closed on Saturday and 
Sunday. One commenter noted that some providers turn off their fax 
machines on weekends. Other commenters stated that 24 hours is not 
realistic even on weekdays because EHRs across systems are not yet a 
reality, and the measure may require providers to modify their EHRs. 
One commenter also noted that some community mental health clinics may 
not be able to receive the transition document, noting that quality 
care may not be improved if the next-level care provider is overloaded 
or unable to provide the necessary care. Commenters requested that CMS 
amend the measure to allow more time for transmission, with one 
commenter urging that 3 days is a more reasonable timeline.
    Response: As stated above, we believe that the 24-hour window is 
critical to this measure. Furthermore, we note that the measure only 
requires transmission of the record, not receipt of the record. The 
``transition record may be transmitted to the facility or physician or 
other health care professional designated for follow-up care via fax, 
secure email, or mutual access to an electronic health record (EHR).'' 
\69\ Thus, the measure can be satisfied even if an office is closed. 
Finally, we are not aware of any specific EHR changes that would need 
to be made to accommodate this measure, because the measure need not be 
transmitted as an EHR.
---------------------------------------------------------------------------

    \69\ 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.
---------------------------------------------------------------------------

    Comment: Commenters expressed concern that the Timely Transmission 
of Transition Record (Discharges from an Inpatient Facility to Home/
Self Care or Any Other Site of Care) measure is not stratified by age, 
which limits the usefulness of the data, given the variation across 
populations.
    Response: As stated above, when feasible and practicable, we 
believe it is important to implement measures as they are specified, 
especially where, as here, such measures are NQF-endorsed. This measure 
is not specified to be reported by age. Furthermore, we believe that 
presenting the measure as an aggregate number rather than stratified by 
age will allow greater rather than less insight into these data 
because, as further explained in section V.F.1. of this final rule, the 
resultant number of cases is often too small to allow public reporting 
when data are stratified by age.
    Comment: One commenter stated that this measure violates HIPAA 
because patients have no control over how the next-level provider will 
use the discharge record and noted that the same measure was suspended 
from the Hospital OQR Program for privacy concerns.
    Response: Neither we nor the measure developer are aware of any 
provision of HIPAA that this measure would violate. Furthermore, we 
believe the commenter is incorrect. The Hospital OQR Program adopted 
and finalized NQF #0649 Transition Record with Specified Elements 
Received by Discharged Patients (Emergency Department Discharges to 
Ambulatory Care [Home/Self Care] or Home Health Care). Although this 
measure, NQF #0648, is also stewarded by the AMA-PCPI and requires a 
transition record, it is not the same as NQF #0649. The measures differ 
in regards to the location from which the patient is discharged; 
specifically, NQF #0649 measures discharges from the emergency 
department, while NQF #0648 measures discharges from an inpatient 
facility. We believe that this difference is critical because the 
circumstances surrounding discharge from an emergency department are 
typically not planned; that is, a patient is discharged the same day 
he/she arrives with the individual that brought him/her to the 
emergency room, whom a patient may or may not feel comfortable sharing 
information. Those discharged from an inpatient setting usually have 
advanced notice and can plan accordingly. Thus, we do not believe, and 
neither does the AMA-PCPI, that NQF #0648 raises any of the privacy 
concerns articulated by the Hospital OQR Program for #0649.
    Comment: One commenter stated that many patients do not have 
follow-up care, and, therefore, suggested that the measure should 
specify that the record be provided to family members or other 
caregivers when appropriate.
    Response: We note that we are adopting 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 
above, which requires transmission of the transition record to the 
patient. We believe this measure will allow family members and 
caregivers the opportunity to understand the discharge information if 
the patient wishes to share such information.
    For the reasons stated above, we are finalizing our proposal to 
adopt the Timely Transmission of Transition Record (Discharges from an 
Inpatient Facility to Home/Self Care or Any Other Site of Care) measure 
and remove HBIPS-7: Post Discharge Continuing

[[Page 46709]]

Care Plan Transmitted to the Next Level of Care Provider Upon Discharge 
for the FY 2018 payment determination and subsequent years with one 
modification. For the FY 2018 payment determination, we will only 
require IPFs to report data for this measure for the last two quarters 
of the reporting period (July 1, 2016-December 1, 2016). Beginning with 
the FY 2019 payment determination, IPFs will be required to report all 
four quarters of data.
5. Screening for Metabolic Disorders
    Studies show that both second generation antipsychotics (SGAs) and 
antipsychotics increase the risk of metabolic syndrome.\70\ 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.'' \71\ SGAs also have an effect on serum 
lipids and could result in dyslipidemia.\72\ 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.\73\ 
Although the consensus statement specifically discussed the issues with 
SGAs, the ADA also emphasized that ``all patients receiving 
antipsychotic medications [should] be screened'' \74\ 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'' \75\
---------------------------------------------------------------------------

    \70\ 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.
    \71\ 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.
    \72\ Ibid.
    \73\ Ibid.
    \74\ 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).
    \75\ 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).
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    Numerous other organizations have also made similar 
recommendations.\76\ 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.'' \77\ 
Likewise, the Mount Sinai Conference,\78\ 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.\79\
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    \76\ 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.
    \77\ 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.
    \78\ 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.
    \79\ 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.\80\ Studies show a systematic lack of metabolic 
risk monitoring of patients who have been prescribed 
antipsychotics.\81\ Screening for metabolic syndrome may reduce the 
risk of preventable adverse events and improve the physical health 
status of the patient. Therefore, we stated our belief that it is 
necessary to include a measure of metabolic syndrome screening in the 
IPFQR Program.
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    \80\ 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.
    \81\ 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 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

[[Page 46710]]

psychological condition; and (2) patients with a length of stay equal 
to or greater than 365 days, or less than 3 days. In section V.F.3. of 
this final rule, we finalize 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).\82\
---------------------------------------------------------------------------

    \82\ 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.'' \83\ However, the different NQF-endorsed 
measure was not identified by the MAP, and we stated that we are 
unaware of any screening measures for metabolic syndrome that are NQF-
endorsed. We noted 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 
stated our belief 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, we stated our belief that we, by limiting the application 
of the measure only to those receiving antipsychotics, 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.
---------------------------------------------------------------------------

    \83\ 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 also stated our belief 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 stated our belief that 
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.
    For the reasons stated above, we proposed to adopt the Screening 
for Metabolic Disorders measure beginning with the FY 2018 payment 
determination. We welcomed public comments on this proposal. The 
comments we received and our responses are set forth below.
    Comment: Comments submitted from a consumer perspective supported 
this measure, noting that it is imperative to treat co-occurring 
conditions. Furthermore, these commenters noted that this measure has 
some potential to connect the ``physical health care provider to the 
psychiatric services provider'', and metabolic screening is an 
important area of follow-up that will improve patient outcomes. These 
commenters also made the following recommendations: (1) The measure 
should also include reviewing the results of the screening with the 
patient; (2) the measure should require further cardiovascular disease 
testing be performed if the screening indicates that it is warranted; 
(3) the measure should refer patients to the appropriate cardiovascular 
specialist, if needed; (4) the measure should include all patients 
receiving mental health treatment; (5) individuals for whom a screening 
cannot be completed within the stay ``due to the patient's enduring 
unstable medical or psychological condition'' should not be discharged 
until such a screening can occur since these individuals are arguably 
at greatest risk and their conditions should be stabilized before 
discharged; (6) for individuals excluded because of a length of stay of 
less than 3 days, the need for screening should be clearly identified 
as part of the discharge planning record so that this takes place on an 
outpatient basis; and (7) the rationale for excluding individuals who 
are hospitalized for 365 days or more be explained or removed.
    Response: We thank commenters for their support and will address 
each of these recommendations in turn. First, we agree with the 
importance of the processes of care described by the commenters (that 
is, recommendations 1-4). However, the current measure, as specified 
and tested, addresses only the screening for metabolic abnormalities. 
We believe that this measure is an important first step in metabolic 
screening, and we will consider additional measures that address any 
necessary follow-up care in future years. Furthermore, we believe that 
other measures we are adopting, Transition Record with Specified 
Elements Received by Discharged Patients (Discharges from an Inpatient 
Facility to Home/Self Care or Any Other Site of Care) and Timely 
Transmission of Transition Record (Discharges from an Inpatient 
Facility to Home/Self Care or Any Other Site of Care), address the 
communication of specific information to the next care provider, such 
as major procedures and tests performed during inpatient stay and 
summary of results.
    The exclusion ``due to the patient's enduring unstable medical or 
psychological condition'' is harmonized with other screening measures 
developed by the Joint Commission for the IPF setting. This exclusion 
was reviewed and supported by a Technical Expert Panel and an Expert 
Workgroup.\84\ Additionally, during the testing of this measure, the 
exclusion applied to only one patient (0.2% of sample) indicating that 
the exclusion would be rare and only applied in the most severe cases 
where screening could not be conducted. Therefore, we will retain the 
exclusion and further evaluate the frequency of the exclusion with data 
from implementation.
---------------------------------------------------------------------------

    \84\ Health Services Advisory Group. Inpatient Psychiatric 
Facility Outcome and Process Measure Development and Maintenance: 
Screening of Metabolic Disorders Measure Workgroup. Tampa, FL; 2015. 
Available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/Downloads/Inpatient-Psychiatric-Facility-IPF-Outcome-and-Process-Measure-Development-and-Maintenance.zip.

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[[Page 46711]]

    Patients with stays of fewer than 3 days were excluded from the 
metabolic screening measure based on the rationale that IPFs could not 
be expected to complete all metabolic screening tests (or verify that 
they were completed elsewhere within the previous 12 months) within 
that short time period. Therefore, we believe that we should retain 
this exclusion as specified.
    Finally, as noted above, the screening must have been completed at 
least once in the 12 months prior to the patient's date of discharge. 
Thus, an IPF need only consider the past 12 months of records for a 
patient after that patient is discharged. Since this lookback is one 
year, we do not believe we should include patients who have been at the 
facility for more than one year. Furthermore, based on our testing of 
this measure, we believe this exclusion will be negligible, applying to 
less than 1.5 percent of the population. Therefore, we will retain the 
exclusion and further evaluate the frequency of the exclusion with data 
from implementation.
    Comment: One commenter suggested that the ADA Consensus guidelines 
recommended a lipid profile every 5 years while the Screening for 
Metabolic Disorders measure requires a lipid profile every year, 
creating unnecessary costs. This commenter recommended that the measure 
be changed to require lipid panels every 5 years.
    Response: The ADA Consensus guidelines from 2004 recommended that 
``in those with normal lipid profile, repeat testing should be 
performed at 5-year intervals or more frequently if clinically 
indicated.\85\ More recent recommendations, however, indicate yearly 
monitoring is preferred throughout treatment.86 87 88 
Therefore, to ensure appropriate screening and monitoring for patients 
on routinely scheduled antipsychotic medication(s), we believe that 
IPFs need to obtain either documentation of metabolic screening 
performed in the past 12 months or conduct the lipid panel testing 
prior to a patient's discharge from the facility.
---------------------------------------------------------------------------

    \85\ American Diabetes Association, American Psychological 
Association, American Association of Clinical Endocrinologists, 
North American Association for the Study of Obesity. Consensus 
development conference on antipsychotic drugs and obesity and 
diabetes. Diabetes Care. 2004;27(596-601).
    \86\ American Diabetes Association, American Psychological 
Association, American Association of Clinical Endocrinologists, 
North American Association for the Study of Obesity. Consensus 
development conference on antipsychotic drugs and obesity and 
diabetes. Diabetes Care. 2004;27(596-601).
    \87\ National Institute for Health and Care Excellence (NICE). 
Bipolar disorder: The assessment and management of bipolar disorder 
in adults, children and young people in primary and secondary care. 
London, UK 2014.
    \88\ National Institute for Health and Care Excellence (NICE). 
Psychosis and schizophrenia in adults: Treatment and management. 
London, UK 2014.
---------------------------------------------------------------------------

    Comment: Some commenters stated that the purpose of the ADA 
Consensus guidelines is to ensure long-term monitoring rather than 
annual screening and suggested that, as such, monitoring should be done 
in an outpatient rather than inpatient setting. One commenter suggested 
that the measure should be modified so that IPFs are required to 
communicate any baseline or ongoing screening tests with the outpatient 
provider who is assuming the management of medications at discharge.
    Response: Although we agree that long-term metabolic monitoring of 
psychiatric patients is important, studies indicate that 40 percent to 
80 percent of patients fail to find outpatient treatment after 
discharge from the inpatient setting.\89\ In addition, studies find 
consistently low adherence rates to metabolic screening 
guidelines.90 91 These studies are confirmed by empirical 
analysis of calendar year 2012 and 2013 Medicare claims data, which 
indicated that only 53.8 percent of patients discharged from an IPF 
with at least two prescription claims for antipsychotic medications had 
at least one lipid panel annually in the outpatient setting.\92\ 
Therefore, although we agree that the long-term monitoring for 
individuals is appropriate in the outpatient setting, we believe that 
the inpatient setting represents a clear opportunity to screen 
patients. We do believe it is important to convey test results to the 
next-level care provider, and we believe that the additional measures 
that we are adopting, Transition Record with Specified Elements 
Received by Discharged Patients (Discharges from an Inpatient Facility 
to Home/Self Care or Any Other Site of Care) and Timely Transmission of 
Transition Record (Discharges from an Inpatient Facility to Home/Self 
Care or Any Other Site of Care), should facilitate the communication of 
such information.
---------------------------------------------------------------------------

    \89\ Cuffel B, Held M, Goldman W. Predictive Models and the 
Effectiveness of Strategies for Improving Outpatient Follow-up Under 
Managed Care. Psychiatric Services. 2002 November; 53 (11): 1438-
1443.
    \90\ Cohn T. Metabolic Monitoring for Patients on Antipsychotic 
Medications. Psychiatric Times. December 2013.
    \91\ Rodday AM, Parsons SK, Mankiw C, et al. Child and 
Adolescent Psychiatrists' Reported Monitoring Behaviors for Second-
Generation Antipsychotics. J. Child Adolesc. Psychopharmacol. 2015.
    \92\ Health Services Advisory Group. Inpatient Psychiatric 
Facility Outcome and Process Measure Development and Maintenance: 
Screening of Metabolic Disorders Measure Workgroup. Tampa, FL; 2015. 
Available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/Downloads/Inpatient-Psychiatric-Facility-IPF-Outcome-and-Process-Measure-Development-and-Maintenance.zip.
---------------------------------------------------------------------------

    Comment: Many commenters recommended that CMS not adopt the 
Screening for Metabolic Disorders measure at the present time, but, 
instead suggested that CMS propose the measure after it has been tested 
and NQF-endorsed with full specifications available. Some commenters 
questioned why CMS did not take the measure through the NQF-endorsement 
process, arguing that premature adoption may cause discrepancies 
between what the IPFQR Program implements and what NQF ultimately 
endorses. One commenter urged us to share the measure with the IPF TEP 
and other stakeholders. One commenter stated that the TEP convened to 
evaluate the measure made several important recommendations to amend 
the measure and recommended that, if the measure is adopted, it should 
include these recommendations. Another commenter noted that the measure 
was only tested among six facilities.
    Response: The measure has been finalized for NQF submission and 
will be submitted during the next call for behavioral health measures, 
which is expected in calendar year 2016. The measure specifications 
were evaluated by two separate Technical Expert Panels and an Expert 
Workgroup. The recommendations from these experts have been 
incorporated into the measure definitions. Although we agree that NQF 
endorsement of a measure is preferred, we are permitted to include a 
measure that has not been NQF-endorsed under section 1886(s)(4)(D)(ii) 
of the Act. Under that section, the Secretary is authorized to specify 
a measure that is not endorsed by the 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 attempted to find 
available measures that had been endorsed or adopted by a consensus 
organization and found no other feasible and practical measures on the 
topic of metabolic screening for patients taking antipsychotics in the 
IPF setting. We believe that this area is important, specifically 
because of the gaps in treatment, and we believe it is important to 
implement a measure of metabolic screening as soon as possible.
    We acknowledge that testing for this measure occurred in six 
facilities; however the facilities selected represent a variety of 
facility types from across the

[[Page 46712]]

country. These facilities are diverse in both structure and size. Three 
of the IPFs selected are private psychiatric units with fewer than 50 
patient beds, two are public freestanding facilities with over 100 
beds, and one is a private freestanding facility with 400 beds. In 
addition, the six IPFs were geographically distributed by region 
including Mid-Atlantic, Northeast, Midwest, South, and West.\93\ 
Therefore, we believe this testing was adequate to evaluate the 
measure.
---------------------------------------------------------------------------

    \93\ Blair R, Liu J, Rosenau M, et al. Development of Quality 
Measures for Inpatient Psychiatric Facilities: Final Report. 2015; 
Washington, DC: Office of the Assistant Secretary for Planning and 
Evaluation, U.S. Department of Health & Human Services 2015. 
Available at: http://aspe.hhs.gov/daltcp/reports/2015/ipf.cfm. 
Accessed April 21, 2015.
---------------------------------------------------------------------------

    Comment: Many commenters expressed concern that the measure adds 
significant burden for providers. Specifically, they suggested that 
IPFs involved in measure testing verified that chart-abstraction of 
this measure was more intensive than the other screening measures; they 
also expressed concern that the additional lab tests required by this 
measure may not be fully reimbursed by CMS, stating that most lab tests 
cost between $30 and $50. One commenter noted that, because the measure 
allows screenings at another facility, the measures may increase burden 
not only to the immediate facility, but potentially to other 
facilities.
    Response: In testing the measure, the abstraction time for this 
measure did not exceed 20 minutes for any given discharge, which is 
only slightly more time (5 minutes more) than the measures previously 
adopted by this program (79 FR 45979). Furthermore, the CMS-convened 
Screening of Metabolic Disorders Measure Workgroup reviewed this 
measure and the majority of members indicated that the costs of any 
duplicate testing would have minimal unintended consequences.\94\ 
Finally, we believe that transmitting records between providers for the 
purpose of improving patient care is an essential component of 
effective care coordination and communication of previously delivered 
care, and, therefore, the benefits of such communication outweigh any 
associated burden.
---------------------------------------------------------------------------

    \94\ Health Services Advisory Group. Inpatient Psychiatric 
Facility Outcome and Process Measure Development and Maintenance: 
Screening of Metabolic Disorders Measure Workgroup. Tampa, FL; 2015. 
Available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/Downloads/Inpatient-Psychiatric-Facility-IPF-Outcome-and-Process-Measure-Development-and-Maintenance.zip.
---------------------------------------------------------------------------

    Comment: Many commenters stated that they could not comment on the 
measure without full specifications, noting that many issues remained 
unclear, including: (1) If the measure allows for patient refusal of a 
screening; (2) how the measure addresses ``fasting'' bloodwork 
protocols; (3) how the measure addresses patients with changes in 
antipsychotic medication; (4) how the measure avoids unnecessary 
testing requirements for patients previously screened but whose records 
are unobtainable within a reasonable period of time; (5) how screening 
records ``available to the reporting facility'' from another facility 
is defined; (6) if the measure identified all appropriate patient 
exclusions; (7) if there are potential medical necessity issues that 
need to be addressed; (8) the actionability of the measure during a 
short-term hospitalization; (9) if the public reporting of a screening 
measure rate a measure of quality that will help the public 
differentiate among facilities; and (10) if the measure reflects an 
appropriate application of various practice guidelines from the 
perspective of the guideline developers.
    Response: We agree with commenters that elements in the measure 
need to be clarified. We will take each of these issues in turn.
    First, as stated above, we believe that patient compliance is 
indicative of quality care. That is, we maintain that it is important 
that providers understand gaps in patient compliance so that they can 
modify their actions and policy to systematically encourage patients to 
receive appropriate tests. We encourage providers to educate patients 
about the importance of these screenings, and we, therefore, will not 
exclude patients who refuse the screening.
    Second, the emphasis in this measure is on the screening itself 
rather than the associated measure values. Clinical judgments about the 
best methods for conducting and interpreting the testing, including 
whether to use fasting glucose or an HbA1c test, are left to the 
facility.
    Third, since all antipsychotic medication regimens require regular 
monitoring,95 96 we will not distinguish between patients 
whose antipsychotic regimens have changed during the inpatient stay.
---------------------------------------------------------------------------

    \95\ National Institute for Health and Care Excellence (NICE). 
Bipolar disorder: The assessment and management of bipolar disorder 
in adults, children and young people in primary and secondary care. 
London, UK 2014.
    \96\ National Institute for Health and Care Excellence (NICE). 
Psychosis and schizophrenia in adults: Treatment and management. 
London, UK 2014.
---------------------------------------------------------------------------

    Fourth, we agree that avoiding unnecessary testing requirements is 
an important consideration. But, as stated above, 40 percent to 80 
percent of psychiatric patients fail to receive outpatient 
treatment,\97\ and an analysis conducted of calendar year 2012 and 2013 
claims data indicated that a little over half of patients taking 
antipsychotics had a lipid panel conducted annually in the outpatient 
setting.\98\ Therefore, we believe it is important to conduct this 
testing in the inpatient setting, even if some duplication may result 
because the testing conducted in another setting was not obtainable.
---------------------------------------------------------------------------

    \97\ Cuffel B, Held M, Goldman W. Predictive Models and the 
Effectiveness of Strategies for Improving Outpatient Follow-up Under 
Managed Care. Psychiatric Services. 2002 November; 53 (11): 1438-
1443.
    \98\ Health Services Advisory Group. Inpatient Psychiatric 
Facility Outcome and Process Measure Development and Maintenance: 
Screening of Metabolic Disorders Measure Workgroup. Tampa, FL; 2015. 
Available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/Downloads/Inpatient-Psychiatric-Facility-IPF-Outcome-and-Process-Measure-Development-and-Maintenance.zip.
---------------------------------------------------------------------------

    Fifth, we believe that there are potentially multiple sources 
available to facilities to obtain testing results conducted by other 
providers and the phrase ``available to the reporting facility'' is not 
meant to limit the method of obtaining numerical lab results within the 
previous 12 months of the index discharge for evidence of screening. To 
fulfill the measure requirements, evidence of screening includes 
presence/absence of each screening element, based on the chart review 
and documentation of lab results (numeric values) in the medical 
record.
    Sixth, we believe the measure incorporates all appropriate patient 
exclusions taking into consideration the comments provided by the TEPs 
and Screening of Metabolic Disorders Measure Workgroup.
    Seventh, we believe it is important to treat the whole patient by 
addressing both the mental and the physical needs of patients in the 
IPF and guideline recommendations indicate yearly monitoring is 
preferred throughout treatment for patients taking antipsychotic 
medications.99 100 101
---------------------------------------------------------------------------

    \99\ American Diabetes Association, American Psychological 
Association, American Association of Clinical Endocrinologists, 
North American Association for the Study of Obesity. Consensus 
development conference on antipsychotic drugs and obesity and 
diabetes. Diabetes Care. 2004;27(596-601).
    \100\ National Institute for Health and Care Excellence (NICE). 
Bipolar disorder: The assessment and management of bipolar disorder 
in adults, children and young people in primary and secondary care. 
London, UK2014.
    \101\ National Institute for Health and Care Excellence (NICE). 
Psychosis and schizophrenia in adults: Treatment and management. 
London, UK2014.

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

[[Page 46713]]

    Eighth, we believe that even short-term hospitalizations provide an 
opportunity for providing the best quality care for patients. As we 
state above, the inpatient setting represents a clear opportunity to 
screen patients and may be the only opportunity some patients have for 
this screening. We recognize, however, that obtaining the records or 
conducting the screening of very short-stay patients might be too 
difficult for the IPF, and therefore, patients with lengths of stay of 
less than 3 days is an exclusion in the measure.
    Ninth, we believe a vital component of the CMS quality reporting 
programs is the public reporting of the information to inform patients 
and caregivers of differences in quality across providers. We believe 
that this measure will inform patients and caregivers of the quality of 
care in IPFs in terms of the screening for metabolic disorders among 
patients taking antipsychotic medications. Among the six test 
facilities, there was an average performance score of 41.5 percent, 
with a wide range of performance from 6.2 percent to 98.6 percent.\102\
---------------------------------------------------------------------------

    \102\ Blair R, Liu J, Rosenau M, et al. Development of Quality 
Measures for Inpatient Psychiatric Facilities: Final Report. 2015; 
Washington, DC: Office of the Assistant Secretary for Planning and 
Evaluation, U.S. Department of Health & Human Services 2015. 
Available at: http://aspe.hhs.gov/daltcp/reports/2015/ipf.cfm. 
Accessed April 21, 2015.
---------------------------------------------------------------------------

    Tenth, the measure is aligned with clinical practice guidelines for 
patients taking antipsychotic medications.103 104 105.
---------------------------------------------------------------------------

    \103\ American Diabetes Association, American Psychological 
Association, American Association of Clinical Endocrinologists, 
North American Association for the Study of Obesity. Consensus 
development conference on antipsychotic drugs and obesity and 
diabetes. Diabetes Care. 2004;27(596-601).
    \104\ National Institute for Health and Care Excellence (NICE). 
Bipolar disorder: The assessment and management of bipolar disorder 
in adults, children and young people in primary and secondary care. 
London, UK2014.
    \105\ National Institute for Health and Care Excellence (NICE). 
Psychosis and schizophrenia in adults: Treatment and management. 
London, UK 2014.
---------------------------------------------------------------------------

    We recognize it may take time for providers to review and 
understand these clarifications and changes to the measure. Therefore, 
we will only require IPFs to report the last two quarters of data for 
this measure for the FY 2018 payment determination; that is, providers 
will only be required to report data for this measure for July 1, 2016-
December 31, 2016. Beginning with the FY 2019 payment determination, 
IPFs will be required to report all four quarters of data or will face 
a payment reduction.
    Comment: Many commenters noted that, although the measure allows 
IPFs to obtain data from outside sources, because of the cost of doing 
so, most would complete the testing themselves, unnecessarily 
increasing costs and leading to an overutilization of tests. One 
commenter stated its belief that it will be difficult to determine the 
patients that were on one antipsychotic medication in the past year and 
suggested, instead, that the measure be limited to the four 
antipsychotic medications that contribute to metabolic disorders, 
Clozaril, Seroquel, Zyprexa, and Risperdal, indicating that these 
medications should have a metabolic screening every 3 months, which 
would be easier to monitor.
    Response: The Screening of Metabolic Disorders Measure Workgroup 
reviewed this measure and the majority of members indicated that the 
costs of any duplicate testing would have minimal unintended 
consequences based on data that only about half of the patients 
discharged from an IPF had at least one annual screening.\106\ 
Furthermore, studies suggest that antipsychotic-induced weight gain 
occurs in all diagnostic groups and is common in both first and second 
generation antipsychotics.107 108 109 110 Generally, 
guidelines recommending monitoring do not distinguish their 
recommendations based on first or second generation 
antipsychotics.111 112 113 Therefore, although it may be 
less burdensome to monitor the four antipsychotics the commenter 
suggested above, based on the heightened risk of metabolic disorders in 
this population, we believe this measure should apply to all patients 
on any antipsychotic regimen.
---------------------------------------------------------------------------

    \106\ Health Services Advisory Group. Inpatient Psychiatric 
Facility Outcome and Process Measure Development and Maintenance: 
Screening of Metabolic Disorders Measure Workgroup. Tampa, FL: 
Health Services Advisory Group; 2015. Available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/Downloads/Inpatient-Psychiatric-Facility-IPF-Outcome-and-Process-Measure-Development-and-Maintenance.zip.
    \107\ Musil R, Obermeier M, Russ P, Hamerle M. Weight gain and 
antipsychotics: A drug safety review. Expert Opin Drug Saf. 
2015;14(1):73-96.
    \108\ Chiliza B, Asmal L, Oosthuizen P, et al. Changes in body 
mass and metabolic profiles in patients with first-episode 
schizophrenia treated for 12 months with a first-generation 
antipsychotic. Eur. Psychiatry. 2015;30(2):277-283.
    \109\ Alvarez-Jimenez M, Gonzalez-Blanch C, Crespo-Facorro B, et 
al. Antipsychotic-induced weight gain in chronic and first-episode 
psychotic disorders: A systematic critical reappraisal. CNS Drugs. 
2008;22(7):547-562.
    \110\ Strassnig M, Miewald J, Keshavan M, Ganguli R. Weight gain 
in newly diagnosed first-episode psychosis patients and healthy 
comparisons: One-year analysis. Schizophr. Res. 2007;93(1-3):90-98.
    \111\ National Institute for Health and Care Excellence (NICE). 
Psychosis and schizophrenia in adults: Treatment and management. 
2014; http://www.nice.org.uk/guidance/cg178. Accessed CG 178.
    \112\ National Institute for Health and Care Excellence (NICE). 
Bipolar disorder: the assessment and management of bipolar disorder 
in adults, children and young people in primary and secondary care. 
2014; http://www.nice.org.uk/guidance/cg185. Accessed CG 185.
    \113\ Marder SR, Essock SM, Miller AL, et al. Physical health 
monitoring of patients with schizophrenia. Am. J. Psychiatry. 
2004;161(8):1334-1349.
---------------------------------------------------------------------------

    For the reasons stated above, we are finalizing our proposal to 
adopt the Screening for Metabolic Disorders measure for the FY 2018 
payment determination and subsequent years with one modification. For 
the FY 2018 payment determination, we will only require IPFs to report 
data for this measure for the last two quarters of the reporting period 
(July 1, 2016-December 1, 2016). Beginning with the FY 2019 payment 
determination, IPFs will be required to report all four quarters of 
data.
6. Summary of Measures for the FY 2018 Payment Determination and 
Subsequent Years
    The measures that we are adopting for the IPFQR Program for the FY 
2018 payment determination and subsequent years are set forth in Table 
20.

         Table 20--New IPFQR Program Measures for the FY 2018 Payment Determination and Subsequent Years
----------------------------------------------------------------------------------------------------------------
  National Quality Strategy Priority         NQF #              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.

[[Page 46714]]

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

    The measures that we are removing beginning with the FY 2018 
payment determination are set forth in Table 21.

 Table 21--IPFQR Program Measures To Be Removed for the FY 2018 Payment
                   Determination and Subsequent Years
------------------------------------------------------------------------
        NQF #             Measure ID                 Measure
------------------------------------------------------------------------
0557.................  HBIPS-6.........  Post-Discharge Continuing Care
                                          Plan.
0558.................  HBIPS-7.........  Post Discharge Continuing Care
                                          Plan Transmitted to the Next
                                          Level of Care Provider Upon
                                          Discharge.
------------------------------------------------------------------------

    Therefore, the number of measures for the FY 2018 IPFQR Program and 
subsequent years will total 16, as set forth in Table 22.

   Table 22--Measures for FY 2018 Payment Determination and Subsequent
                                  Years
------------------------------------------------------------------------
          NQF #                 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
                           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.*
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.
------------------------------------------------------------------------
* New measures finalized 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 for development or adoption 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

[[Page 46715]]

currently in use in other CMS quality reporting programs, such as the 
Hospital Inpatient Quality Reporting Program. 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 welcomed public comments on possible new measures. The comments 
we received and our responses are set forth below.
    Comment: One commenter expressed concern that CMS proposed time-
intensive, chart-abstracted measures without discussing a future goal 
of working toward electronic submission of these measures.
    Response: We agree that moving to electronic clinical quality 
measures is important and will ultimately reduce burden. At this time, 
we are not operationally able to implement electronic clinical quality 
measure reporting and not all of our measures are electronically 
specified. However, we continue to work toward transitioning to 
electronic clinical quality measures in the future.
    Comment: Commenters urged the program not to burden providers with 
too many process measures and to move toward the use of outcome 
measures since these measures are more meaningful to patients and can 
have a greater impact on provider behavior. Some commenters 
specifically supported a readmissions measure, noting that such measure 
should focus on readmissions that are clinically related to the index 
admission and potentially preventable by the IPF. Commenters expressed 
concern that the IPF population is complex, with patients often having 
multiple comorbid mental health, substance abuse, and other medical 
conditions, and outpatient compliance is challenging. Therefore, 
commenters suggested that CMS adjust the measure for sociodemographic 
variables and work to ensure that the readmissions measure is 
adequately adjusted for case mix and provider type in order to more 
accurately capture and report readmission rates in an unbiased way, 
particularly for those hospitals that treat the most vulnerable 
patients. One commenter cautioned that a readmission measure can be 
gamed if it does not include all readmissions to the acute care system 
within a specified window. Another commenter noted that to accurately 
risk adjust a readmissions measure, the program may need to collect 
patient assessment data. Commenters also encouraged us to adopt a 
readmission measure only if it is NQF-endorsed for the IPF setting and 
has broad stakeholder support that considers important components of 
measures, including reliability, validity, feasibility of 
implementation, and stakeholders' and clinicians' input. Several 
commenters questioned whether the measure could be adequately risk-
adjusted using claims and suggested a thorough NQF review to determine 
if claims-based measures can be accurately risk-adjusted for mental 
health patients. Another commenter encouraged us to ensure the measure 
does not incentivize facilities to deny admissions to meet the quality 
measurement.
    Response: When appropriate, we strive to move toward measures of 
outcome and will consider these measures for future years of the 
program. Specifically, we believe a measure of readmissions to be 
important and will consider these important issues raised by commenters 
as we move forward with developing such a measure.
    Comment: One commenter recommended including psychiatric patients 
in the HCAHPS survey rather than creating a survey just for the IPF 
population, noting that the HCAHPS survey is applicable to IPF 
patients, these patients can answer the questions in the HCAHPS survey, 
and creating a new survey would be overly burdensome. Other commenters, 
however, recommended developing a patient experience of care measure 
specified for psychiatric patients.
    Response: We thank the commenters for their recommendations. We 
believe that patient and family engagement measures are important, and 
we will consider this suggestion in the future.
    Comment: Commenters recommended the following measures for future 
consideration: (1) Number of hours before the individual was seen by a 
psychiatrist; (2) number of hours before the individual was transferred 
to a facility where he/she would receive appropriate treatment; (3) 
readmission to the same IPF within 30 days of discharge; (4) improved 
functioning or stabilization of functioning as measures through 
clinical assessment, patient self-assessment, or discharge to lower 
level of care; (5) receiving best practices specific to the conditions 
noted in the treatment plan as well as acuity of illness; (6) scheduled 
appointment for aftercare within 7 days of discharge, controlling for 
urban/rural area and type of provider, at minimum; (7) documentation of 
follow-up mental health services in the community within 14 days of 
discharge; (8) reduced payment rates for readmissions to psychiatric 
hospitals after discharge; (9) a change score on a standardized measure 
of psychiatric functioning to demonstrate the impact of hospitalization 
on a patient admitted to the IPF; and (10) length of stay.
    Response: We thank the commenters for their recommendations and 
will consider them in the future.
    Comment: One commenter encouraged CMS to consider adding staff-
level related measures, specifically NQF #0205: Nursing Hours per 
Patient Day, since nursing and staff time contribute to a large amount 
of IPF costs and freestanding locations have a larger percentage of 
labor costs than IRFs or LTCHs.
    Response: We thank the commenter for its recommendation and will 
consider such measures in the future.
    Comment: Some commenters recommended CMS include HBIPS-1 in future 
years of the program since the measure will increase compliance with 
admission screening and will not increase burden to providers that 
report data to The Joint Commission.
    Response: We thank the commenters for their recommendation and will 
consider it in the future.

F. Changes to Reporting Requirements

    We are making the following changes to our reporting requirements 
for FY 2017 and subsequent years:
     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 making one change, 
allowing uniform sampling requirements for certain measures.
1. Changes to Reporting by Age and Quarter for the 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

[[Page 46716]]

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 the FY 2017 payment determination, we 
proposed 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. We proposed to require IPFs to report a single 
aggregate measure rate for each measure annually for each payment 
determination.
    We stated our belief that this change will reduce provider burden 
because IPFs would report a single rate for each measure. In addition, 
we stated that 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 noted, 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.
    We welcomed public comments on this proposal. The comments we 
received and our responses are set forth below.
    Comment: Many commenters supported this proposal, noting that IPFs 
will more easily be able to comply with reporting aggregate population 
as a single yearly count rather than by quarter and by age, and the 
proposal will improve the usability of the public display data.
    Response: We thank commenters for their support.
    Comment: Many commenters did not support the proposal, stating that 
submitting data by year rather than quarter will not decrease burden 
since it requires the same number of abstractions, is contrary to the 
national desire to have more current data, would reduce the ability of 
consumers to know if there are lower measure rates for certain age 
groups, and would decrease the ability to monitor trends over the year 
and by age. Other commenters suggested that we continue to work to 
improve the report format for consumers and consider allowing providers 
to report on a quarterly basis without segregating the measure by age 
so that we can publicly report data closer to real time. Many 
commenters requested that we convene TEPs to identify the best ways to 
reduce reporting burden.
    Response: We believe that reporting data yearly and no longer 
reporting by age will be easier for IPFs because it will decrease the 
number of values reported from 16 numbers (that is, four age groups 
multiplied by four quarters) to 1 number for every measure, leading to 
an aggregate decrease of 210 values per year. Furthermore, although the 
public will no longer be able to view data by age, we believe that 
submitting and reporting data as an aggregate number will increase 
rather than decrease the ability to monitor trends, since, as we 
explain above, doing so will increase the number of cases that are 
reported and that we are, therefore, able to report on Hospital 
Compare. Finally, although we are not operationally able to implement 
them at this time, we will continue to consider commenters' suggestions 
to modify our reporting structures to allow more consumer-friendly 
interfaces and real-time data entry and viewing. We will also consider 
the suggestion that we convene TEPs to identify ways to reduce provider 
burden.
    Comment: Some commenters contended that this change in methodology 
will only affect HBIPS-5, and stated that changing a methodology to 
improve reporting on one measure is ineffective, specifically because 
the change will not reduce provider burden since providers will still 
be required to submit this data to The Joint Commission by age and 
quarter. These commenters stated that it may be more effective and 
efficient to report HBIPS-5 by year rather than changing the data 
collection methodology.
    Response: We do not agree that the reporting change is limited to 
HBIPS-5. Although the example provided in the proposed rule only 
includes HBIPS-5, we believe that, as we collect more data, 
specifically data on measures that we adopted last year and for which 
we will be collecting data this summer, values that do not meet minimum 
reporting thresholds as a result of age and quarter stratification will 
exist across measures. Additionally, although we acknowledge that many 
IPFs may report data to The Joint Commission by age and quarter, we 
believe the burden required to aggregate these numbers is minimal.
    For the reasons stated above, we are finalizing our proposal 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 
beginning with the FY 2017 payment determination. In Table 23, we set 
forth the 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.

   Table 23--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.
------------------------------------------------------------------------

    In Table 24, we set forth the quality reporting and submission 
timelines for the FY 2018 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's National 
Healthcare Safety Network, 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). In addition, we note that, as finalized above, 
for 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), Timely Transmission of

[[Page 46717]]

Transition Record (Discharges from an Inpatient Facility to Home/Self 
Care or Any Other Site of Care), and Screening for Metabolic Disorders 
measures, we are only requiring facilities to report data for July 1, 
2016-December 31, 2016 for the FY 2018 payment determination.

  Table 24--Quality Reporting Periods and Timeframes for the FY 2018 Payment Determination and Subsequent Years
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Payment determination                       Reporting period for services provided        Data submission
(FY)                                                                                       timeframe
----------------------------------------------------------------------------------------------------------------
2018...............................  For All Measures Except NQF  January 1, 2016-        July 1, 2017-August
                                      #0647, NQF #0648, and        December 31, 2016.      15, 2017.
                                      Screening for Metabolic
                                      Disorders.
                                     For NQF #0647, NQF #0648,    July 1, 2016-December
                                      and Screening for            31, 2016.
                                      Metabolic Disorders.
----------------------------------------------------------------------------------------------------------------

2. Changes to Aggregate Population Count Reporting for the 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 final rule, we finalized our 
proposal to only require measure reporting as an annual aggregate rate, 
rather than by quarter. Likewise, beginning with the FY 2017 payment 
determination, we proposed to require non-measure data to be reported 
as an aggregate, yearly count rather than by quarter. We welcomed 
public comments on this proposal. The comments we received and our 
responses are set forth below.
    Comment: Some commenters supported this proposal.
    Response: We thank commenters for their support.
    Comment: Some commenters stated that aggregating data increases the 
possibility of human error and suggested that we allow patient-level 
reporting in the same way it is submitted to The Joint Commission. 
Commenter suggested that CMS convene TEPs to identify the best ways to 
reduce reporting burden in the future.
    Response: To our knowledge, The Joint Commission does not require 
reporting non-measure data as required by the IPFQR Program. Thus, it 
is unclear to us what commenters mean in suggesting that we allow 
patient-level reporting in the same way as The Joint Commission. 
Additionally, we do not agree that adding together 4 numbers rather 
than reporting these numbers separately will increase human error by 
any noticeable margin, specifically since facilities were already 
required to manually submit these data. Furthermore, as stated above, 
we are finalizing our proposal 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 beginning with the FY 2017 
payment determination. We believe it is important to collect non-
measure data similarly to how measure data is collected. Finally, we 
will consider convening TEPs to identify ways to reduce provider burden 
in the future.
    For the reasons stated above, we are finalizing our proposal to 
require facilities to report non-measure data as an aggregate, yearly 
count rather than by quarter beginning with the FY 2017 payment 
determination.
3. Changes to Sampling Requirements for the FY 2018 Payment 
Determination and Subsequent Years
    Measure specifications for the measures that we have adopted 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 will 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 in this final rule tip the balance of 
benefit and burden. Therefore, and for the reasons provided below, we 
proposed to allow a uniform sampling methodology both for measures that 
require sampling and for certain other measures. Specifically, we 
proposed 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. We stated our belief that this will allow IPFs to take one, 
global sample for all measures specified in Table 25, thereby 
decreasing burden on these facilities and streamlining policies and 
procedures.
    In our current measure set, the measures for which we proposed to 
allow The Joint Commission/CMS Global sampling included those outlined 
in Table 25.

              Table 25--Measures to Which Sampling Applies
------------------------------------------------------------------------
        NQF #             Measure ID                 Measure
------------------------------------------------------------------------
0560................  HBIPS-5..........  Patients Discharged on Multiple
                                          Antipsychotic Medications with
                                          Appropriate Justification.
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
                      TOB-2a...........   or Offered and Tobacco Use
                                          Treatment.

[[Page 46718]]

 
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.
------------------------------------------------------------------------

    In section V.F.1. of this final rule, we are finalizing our 
proposal 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 proposed 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 proposed the 
following sampling guidelines for the measures above:

           Table 26--Number of Records Required To Be Sampled
------------------------------------------------------------------------
  Number of cases in initial patient
              population                Number of records to be sampled
------------------------------------------------------------------------
>=6,117..............................  1,224.
3,057-6,116..........................  20% of initial patient
                                        population.
609-3,056............................  609.
0-608................................  All cases.
------------------------------------------------------------------------

    We stated our belief that this will simplify processes and 
procedures for IPFs because uniform requirements will promote 
streamlined procedures and reporting. We also stated our belief that 
the proposal will decrease burden by allowing IPFs to identify a 
single, initial patient population for all of the measures specified in 
Table 25 from which to calculate the sample size. Furthermore, we 
stated that 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 stated that 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.
    Therefore, we proposed to allow The Joint Commission/CMS Global 
Initial Patient Population sampling, with limited methodology changes 
as described above, for the measures in Table 25 beginning with the FY 
2018 payment determination. We welcomed public comments on this 
proposal. The comments we received and our responses are set forth 
below.
    Comment: Many commenters supported this proposal, stating that it 
would make the abstraction process less burdensome for providers.
    Response: We thank commenters for their support.
    Comment: Some commenters suggested that changing the sampling 
requirements for HBIPS measures increases burden for providers since 
IPFs are required to submit HBIPS data to The Joint Commission using 
the HBIPS sampling methodology and suggested aligning the sampling 
methodology with the HBIPS methodology. These commenters also noted 
that misalignment between CMS and The Joint Commission may result in 
consumer confusion since both publicly report data.
    Response: We do not agree that this proposal increases burden. Most 
of our measures (IMM-2, TOB-1, TOB-2/2a, and SUB-1) currently require 
sampling per The Joint Commission/CMS Global Initial Patient Population 
guidelines. Only HBIPS-5 is required to be reported to The Joint 
Commission using a different sampling methodology. Therefore, we 
believe that, overall, allowing uniform sampling for the measures 
discussed in Table 25 will greatly decrease burden, specifically 
because some of these measures (the transition and metabolic screening 
measures) currently do not allow sampling at all. In addition, we note 
that, if providers believe using this optional sampling is too 
burdensome, we are not requiring them to do so.
    We appreciate the comment that the public may be confused if 
numbers are reported differently in different programs. We note, 
however, that this confusion would be limited to HBIPS-5, the only 
measure that uses a different sampling methodology from The Joint 
Commission/CMS Global Initial Patient Population sampling, and we 
believe, even in this case, the public can understand that reporting 
requirements, and their results, vary by program and organization.
    Comment: Commenters stated that the sampling tables were developed 
by The Joint Commission to ensure that most healthcare organizations 
would be able to obtain a sample size large enough to distinguish 
meaningful differences from the national average, and adopting a 
uniform methodology could cause over-sampling for measures with large 
populations and under-sampling for those with small populations, 
affecting the ability of providers to monitor measures where their 
patient populations are heterogeneous.
    Response: We will monitor the results of this proposal to see if it 
causes the inability to distinguish meaningful differences between 
providers and will make appropriate adjustments if we believe this is 
the case.
    Comment: One commenter noted that the HBIPS measure set and the SUB 
and TOB measure sets use different population criteria for sampling and 
asked CMS to clarify its proposal.
    Response: As we explained in the proposed rule (80 FR 25056), we 
proposed to allow IPFs to use The Joint Commission/CMS Global Initial 
Patient Population guidelines for the measures in Table 25, which 
includes these measures. Thus, for both sampling and population 
purposes, IPFs may use The Joint Commission/CMS Global Initial Patient 
Population guidelines found at https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1228773989482.
    Comment: Many commenters suggested that CMS convene TEPs to 
identify the best ways to reduce reporting burden.
    Response: We will also consider convening a TEP to discuss ways to 
diminish provider burden in the future.

[[Page 46719]]

    For the reasons stated above, we are finalizing our proposal to 
allow The Joint Commission/CMS Global Initial Patient Population 
sampling for the measures in Table 25 beginning with the FY 2018 
payment determination.

G. Public Display and Review Requirements

    We did not propose 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 did not propose 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. 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 making one change to these requirements, 
as discussed above in section V.F.1. of this final rule. Specifically, 
we are no longer requiring that measure rates be reported quarterly and 
by age; we will only require an aggregate, yearly number beginning with 
the FY 2017 payment determination.
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 making one change to these policies, as discussed 
above in section V.F.3. of this final rule. Specifically, we will allow 
uniform sampling on certain measures beginning with the FY 2018 payment 
determination.
4. Data Accuracy and Completeness Acknowledgement (DACA) Requirements
    We did not propose 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, by which IPFs can request a reconsideration of their payment 
update reduction if an IPF believes that its annual payment update has 
been incorrectly reduced for failure to meet all IPFQR Program 
requirements. We did not propose 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 did not propose 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 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. Provisions of the Final Regulations

    For the most part, this final rule incorporates the provisions of 
the proposed rule. Those provisions of this final rule that differ from 
the proposed rule are as follows:
     Effective for FY 2016 IPF PPS update, we adopted a 2012-
based IPF-market basket. However, we revised the proposed 2012-based 
IPF market basket based on public comments. Specifically, we revised 
the methodology for calculating the Wages and Salaries and the Employee 
Benefits cost weights.
     We adopted an updated FY 2016 LRS of 75.2 percent, which 
increased from the proposed LRS of 74.9 percent largely due to the 
methodological changes made to the 2012-based IPF market basket based 
on public comments. We are implementing the LRS as proposed, in full in 
FY 2016.
     Effective for FY 2016 IPF PPS update, we adopted a 2012-
based IPF market basket. We adjusted the 2012-based IPF market basket 
update for FY 2016 (currently estimated to be 2.4 percent) by a 
reduction for economy-wide productivity (currently estimated to be 0.5 
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 a final 
estimated market basket update of 1.7 percent.
     We updated the IPF per diem rate from $728.31 to $743.73. 
Providers that failed to report quality data for FY 2016 payment will 
receive a final FY 2016 per diem rate of $729.10.
     We updated the electroconvulsive therapy (ECT) payment per 
treatment from $313.55 to $320.19. Providers that failed to report 
quality data for FY 2016 payment would receive a FY 2016 ECT payment 
per treatment of $313.89.
     We updated the fixed dollar loss threshold amount from 
$8,755 to $9,580 in order to maintain outlier payments that are 2 
percent of total estimated IPF PPS payments.
     We finalized that the national urban and rural cost-to-
charge ratio (CCR) ceilings for FY 2016 will be 1.7339 and 1.9041, 
respectively, and the national median CCR will be 0.4650 for urban IPFs 
and 0.6220 for rural IPFs.
    All other payment policy proposals are being implemented as 
proposed. We are implementing the IPF Quality Reporting Program 
proposals as proposed, except for the following changes: Due to 
concerns with the timeline required to operationalize the Transition 
Record with Specified Elements Received by Discharged Patients, Timely 
Transmission of Transition Record, and Screening for Metabolic 
Disorders measures, we are only requiring that facilities report the 
last two quarters of data for the first year of public reporting. That 
is, for the FY 2018 payment determination, facilities must only report 
data from July 1, 2016-December 1, 2016 for these measures. Beginning 
with the FY 2019 payment determination, IPFs must report all four 
quarters of data or face a payment reduction.

VII. 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.

[[Page 46720]]

     Our effort to minimize the information collection burden 
on the affected public, including the use of automated collection 
techniques.
    In our May 1, 2015, proposed rule, we solicited public comment on 
each of the section 3506(c)(2)(A)-required issues for the following 
information collection requirements (ICRs). While comments were 
received on the proposed rule, none of those comments were related to 
the PRA or to the ICRs. All of this final rule's information collection 
requirements and burden estimates are unchanged from what was set out 
in the proposed rule.

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.\114\ 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.\115\ 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.
---------------------------------------------------------------------------

    \114\ http://www.bls.gov/ooh/healthcare/medical-records-and-health-information-technicians.html.
    \115\ http://www.whitehouse.gov/omb/circulars_a076_a76_incl_tech_correction.

                                                  Table 27--Occupational Employment and Wage Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                  Mean hourly wage      Fringe benefit  (at     Adjusted hourly wage  ($/
                     Occupation title                         Occupation code         ($/hour)           36.25% in $/hour)                hour)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Medical Records and Health Information Technician.........            29-2071                16.42                       5.95                     22.37
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The BLS is ``the principal Federal agency responsible for measuring 
labor market activity, working conditions, and price changes in the 
economy.'' \116\ 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.
---------------------------------------------------------------------------

    \116\ 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 final rule. 
Although we are finalizing provisions that impact both the FY 2017 and 
FY 2018 payment determinations, all of these new elements begin to 
apply to facilities in FY 2016. For example, data collection for the 
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 to the year in which these costs begin; for the 
purposes of all of the provisions in this final rule, that year is FY 
2016.
1. Changes in Time Required To Chart-Abstract Data Based on Reporting 
Requirements
    As discussed in section V.F. of this final rule, we are finalizing 
the following 3 changes regarding how facilities should report data for 
IPFQR Program measures: (1) Beginning with the FY 2017 payment 
determination, measures must be reported as a single yearly count 
rather than by quarter and age; (2) beginning with the FY 2017 payment 
determination, aggregate population counts must be reported as a single 
yearly number rather than by quarter; and (3) beginning with the FY 
2018 payment determination, uniform sampling is allowed for certain 
measures.
    We believe that these changes will lead to a decrease in burden 
since facilities are 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 25 of 
this final rule. 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 minutes or -0.05 hour.
2. Estimated Burden of IPFQR Program
    In section V. of this final rule, we are finalizing our proposal to 
adopt the following 5 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 Alcohol Use Brief Intervention (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 finalizing our proposal to remove 
the following 3 measures:
     HBIPS-4: Patients Discharged on Multiple Antipsychotic 
Medications;
     HBIPS-6: Post-Discharge Continuing Care Plan (NQF #0557); 
and
     HBIPS-7: Post-Discharge Continuing Care Plan Transmitted 
to the Next Level of Care Provider Upon Discharge (NQF #0558).
    We believe that approximately 1,617 \117\ 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 \118\ cases per year. Although 
we note that,

[[Page 46721]]

as finalized in section V. of this final rule, for 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), Timely Transmission of Transition Record (Discharges 
from an Inpatient Facility to Home/Self Care or Any Other Site of 
Care), and the Screening for Metabolic Disorders measures, we are only 
requiring facilities to report data for two quarters for the FY 2018 
payment determination, we believe it is best to estimate the burden for 
the full year of reporting as this will be the requirement going 
forward. Therefore, we estimate that adopting 5 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).
---------------------------------------------------------------------------

    \117\ 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.
    \118\ 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 
this final rule's revised data collection and submission requirements 
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 adopting 5 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 5 measures 
leads to a net negligible change in burden associated with non-measure 
data collection.

C. Summary of Annual Burden Estimates



                              Table 28--Annual Recordkeeping and Reporting Requirements Under OMB Control Number 0938-1171
                                                                       [CMS-10432]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                            Burden per     Total annual   Labor cost  of
    Preamble section(s)        Proposed action       Respondents      Responses  (per        response         burden      reporting  ($/    Total cost
                                                                        respondent)          (hours)*         (hours)          hour)            ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
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 final 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 comments on these potential information collection 
requirements. If you wish to comment, please identify the rule (CMS-
1627-F) and submit your comments to the OMB desk officer via one of the 
following transmissions:
    Mail: OMB, Office of Information and Regulatory Affairs, Attention: 
CMS Desk Officer, Fax Number: 202-395-5806 or, Email: 
[email protected], ICR-related comments are due August 31, 
2015.

VIII. Regulatory Impact Analysis

A. Statement of Need

    This final rule updates the prospective payment rates for Medicare 
inpatient hospital services provided by IPFs for discharges occurring 
during FY 2016 (October 1, 2015, through September 30, 2016). We are 
applying the final 2012-based IPF market basket increase of 2.4 
percent, less the productivity adjustment of 0.5 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 final rule, we are adopting a 2012-
based IPF market basket and updating the IPF labor-related share; 
adopting new OMB CBSA delineations for the FY 2016 IPF Wage Index; and 
phasing out the rural adjustment for 37 rural providers which will 
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-10-CM/PCS) for the IPF prospective 
payment system, updates providers on the status of IPF PPS refinements, 
and

[[Page 46722]]

finalizes new quality reporting requirements for the IPFQR Program.

B. Overall Impact

    We have examined the impact of this final 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 final 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 $75 million. This reflects an $85 million increase from 
the update to the payment rates, as well as a $10 million decrease as a 
result of the update to the outlier threshold amount. Outlier payments 
are estimated to decrease from 2.2 percent in FY 2015 to 2.0 percent of 
total estimated 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 29, we estimate that the overall revenue impact 
of this final rule on all IPFs is to increase Medicare payments by 
approximately 1.5 percent. As a result, since the estimated impact of 
this final rule is a net increase in revenue across almost all 
categories of IPFs, the Secretary has determined that this final rule 
will 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 604 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 
final rule would not have an adverse impact on the rural hospitals 
based on the data of the 277 rural units and 65 rural hospitals in our 
database of 1,617 IPFs for which data were available. Therefore, the 
Secretary has determined that this final 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 final 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 final 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 final 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 payment per treatment 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 final 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 payment per treatment. Therefore, the budgetary 
impact to the Medicare program of this final rule will be due to the 
final market basket update for FY 2016 of 2.4 percent (see section 
III.A.4. of this final rule) less the productivity adjustment of 0.5 
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 $75 
million in payments to IPF providers. This reflects an estimated $85 
million increase from the update to the payment rates and a $10 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 VIII.C.4. below).
2. Impact on Providers
    To understand the impact of the changes to the IPF PPS on 
providers, discussed in this final rule, it is necessary to compare 
estimated

[[Page 46723]]

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 final labor-related share; and the final 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 final 
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 final 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, total 
outlier payments are maintained at 2 percent of total estimated 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 final rule, with the final 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 final FY 2016 labor-related share;
     The final market basket update for FY 2016 of 2.4 percent 
less the productivity adjustment of 0.5 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 final rule.

                                                            Table 29--IPF Impact for FY 2016
                                                             [Percent change in columns 3-9]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       Change  in     Labor-
                                                        Number of                Wage                    rural       related     IPF market     Total
                   Facility by type                        IPFs     Outlier   index \1\    CBSA \2\    adjustment     share        basket      percent
                                                                                                          \3\       (75.2) \4\   update \5\   change \6\
(1)                                                           (2)        (3)        (4)          (5)          (6)          (7)          (8)          (9)
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Facilities........................................      1,617       -0.2        0.0          0.0          0.0          0.0          1.7          1.5
    Total Urban.......................................      1,275       -0.2        0.0          0.0          0.0          0.2          1.7          1.7
    Total Rural.......................................        342       -0.2        0.1         -0.2          0.2         -1.1          1.7          0.4
    Urban unit........................................        845       -0.3        0.0          0.0          0.0          0.2          1.7          1.6
    Urban hospital....................................        430       -0.1        0.0          0.1          0.0          0.1          1.7          1.8
    Rural unit........................................        277       -0.2        0.1         -0.2          0.2         -1.1          1.7          0.3
    Rural hospital....................................         65       -0.1        0.1         -0.3          0.2         -1.0          1.7          0.5
CBSA Change:
    Urban to Urban....................................      1,238       -0.2        0.0          0.0          0.1          0.2          1.7          1.7
    Rural to Rural....................................        338       -0.2        0.0         -0.2          0.1         -1.1          1.7          0.2
    Urban to Rural....................................          4       -0.7        2.4         -0.2         13.2         -0.9          1.7         15.7
    Rural to Urban....................................         37       -0.1        0.1          2.8         -4.1         -0.9          1.7         -0.7
By Type of Ownership:
Freestanding IPFs:
    Urban Psychiatric Hospitals:
        Government....................................        125       -0.2        0.1          0.0          0.0          0.1          1.7          1.7
        Non-Profit....................................        102       -0.1        0.4          0.1          0.0          0.4          1.7          2.5
        For-Profit....................................        203        0.0       -0.3          0.1          0.0          0.0          1.7          1.4
    Rural Psychiatric Hospitals:
        Government....................................         35       -0.1        0.2         -0.1          0.4         -0.8          1.7          1.2
        Non-Profit....................................         11       -0.4       -0.6          0.0          0.1         -0.3          1.7          0.4
        For-Profit....................................         19        0.0        0.1         -0.5          0.1         -1.3          1.7         -0.1
IPF Units:
    Urban:
        Government....................................        128       -0.5       -0.2         -0.1          0.0          0.3          1.7          1.3
        Non-Profit....................................        547       -0.3        0.2          0.0         -0.1          0.3          1.7          1.8
        For-Profit....................................        170       -0.2       -0.3          0.0          0.0          0.0          1.7          1.3
    Rural:
        Government....................................         70       -0.2       -0.1         -0.3          0.0         -1.4          1.7         -0.3
        Non-Profit....................................        143       -0.2        0.2         -0.2          0.3         -1.0          1.7          0.7
        For-Profit....................................         64       -0.3        0.0         -0.2          0.2         -1.3          1.7          0.2
By Teaching Status:
    Non-teaching......................................      1,427       -0.2        0.0          0.0          0.0         -0.1          1.7          1.4
    Less than 10% interns and residents to beds.......        103       -0.3        0.2         -0.1          0.0          0.5          1.7          2.0

[[Page 46724]]

 
    10% to 30% interns and residents to beds..........         61       -0.5        0.4         -0.1          0.1          0.5          1.7          2.1
    More than 30% interns and residents to beds.......         26       -0.5        0.5          0.0          0.1          0.9          1.7          2.7
By Region:
    New England.......................................        108       -0.3        0.8          0.0          0.0          0.8          1.7          3.1
    Mid-Atlantic......................................        242       -0.2        0.2         -0.1          0.0          0.6          1.7          2.2
    South Atlantic....................................        240       -0.1       -0.3          0.0         -0.1         -0.4          1.7          0.7
    East North Central................................        259       -0.2        0.0          0.0          0.1         -0.2          1.7          1.4
    East South Central................................        160       -0.2       -0.6          0.0         -0.1         -1.1          1.7         -0.2
    West North Central................................        140       -0.3        0.0          0.0          0.0         -0.4          1.7          1.2
    West South Central................................        243       -0.2       -0.5          0.0         -0.1         -0.8          1.7          0.2
    Mountain..........................................        102       -0.2        0.4          0.0          0.1          0.2          1.7          2.2
    Pacific...........................................        123       -0.3        0.5          0.0          0.1          1.4          1.7          3.4
By Bed Size:
Psychiatric Hospitals:
    Beds: 0-24........................................         81       -0.1        0.0          0.2         -0.3         -0.7          1.7          0.7
    Beds: 25-49.......................................         74       -0.1       -0.3          0.3         -0.1         -0.1          1.7          1.4
    Beds: 50-75.......................................         87       -0.1        0.0          0.0          0.1          0.0          1.7          1.6
    Beds: 76+.........................................        253        0.0        0.0          0.0          0.0          0.1          1.7          1.8
Psychiatric Units:
    Beds: 0-24........................................        667       -0.3        0.0          0.0          0.0         -0.3          1.7          1.0
    Beds: 25-49.......................................        294       -0.3        0.0          0.1          0.0          0.0          1.7          1.5
    Beds: 50-75.......................................        105       -0.2        0.1          0.0          0.0          0.2          1.7          1.8
    Beds: 76+.........................................         56       -0.3       -0.1         -0.2          0.1          0.5          1.7          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 blended IPF wage index, new CBSA delineations, and a labor-related share of 0.69294.
\3\ Includes a 50/50 FY 2016 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 blended IPF wage index, new CBSA delineations, a labor-related share of 0.752, and a rural adjustment.
\5\ This column reflects the payment update impact of the 2012-based IPF market basket update of 2.4 percent, a 0.5 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 final rule. The products of these impacts
  may be different from the percentage changes shown due to rounding effects.

3. Results
    Table 29 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 2.2 percent in FY 
2015. Thus, we are adjusting the outlier threshold amount in this final 
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 0.2 percent decrease in 
payments because the outlier portion of total payments is expected to 
decrease from approximately 2.2 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 0.2 percent. The largest decrease in 
payments is estimated to reflect a 0.7 percent decrease in payments for 
IPFs that change from urban to rural status under the new CBSA 
delineations.
    In column 4, we present the effects of the budget-neutral final 
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 2.4 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 and IPFs in the East 
South Central region.

[[Page 46725]]

    In column 5, we present the effects of the new OMB delineations and 
the finalized transition to the new delineations using the transitional 
IPF wage index. The FY 2016 IPF final 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 final updates to the wage index are applied in a 
budget-neutral manner, we do not estimate that these final updates 
would affect overall estimated payments to IPFs. However, we estimate 
that these final 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 0.5 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. Four urban IPFs would be 
newly designated as rural IPFs and would now receive a full 17 percent 
rural adjustment. We estimate that the largest increase in payments 
would be to these four 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 13.2 percent. There are also 37 rural 
IPFs which would be newly designated as urban IPFs, where we finalized 
a phase-out of their rural adjustment over 3 years. These 37 newly 
urban providers will 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 final labor-
related share. The final update to the IPF labor-related share is made 
in a budget-neutral manner and therefore will not affect total 
estimated IPF PPS payments. However, it will affect the estimated 
distribution of payments among providers. For example, we estimate the 
largest increase in payments will be 1.4 percent to IPFs in the Pacific 
region. We estimate the largest decrease in payments will be 1.4 
percent to rural IPF governmental units.
    In column 8, we present the estimated effects of the update to the 
IPF PPS payment rates of 1.7 percent, which are based on the 2012-based 
IPF market basket update of 2.4 percent, less the productivity 
adjustment of 0.5 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 final rule for FY 2016 to the payments for FY 2015 
(without these changes). This column reflects all finalized FY 2016 
changes relative to FY 2015. The average estimated increase for all 
IPFs is approximately 1.5 percent. This estimated net increase includes 
the effects of the final 2.4 percent market basket update reduced by 
the productivity adjustment of 0.5 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 0.2 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 1.7 percent 
increase in payments in FY 2016 and rural IPFs are estimated to 
experience a 0.4 percent increase in payments in FY 2016. The largest 
estimated decrease in payments is 0.7 percent for rural IPFs that 
transition to urban status as a result of the new OMB delineations. As 
noted previously, we are finalizing our proposal 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 15.7 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 final 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 final 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 we finalized 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 VII. of this final rule, we will attribute the costs associated 
with the finalized proposals to the year in which these costs begin; 
for the purposes of all the changes made in this final rule, that year 
is FY 2016. Further information on these estimates can be found in 
section VII. of this final 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 
implementing a 2012-based IPF market basket with some methodological 
changes to the calculations of Wages and Salaries and Employee Benefit

[[Page 46726]]

costs, based on public comments; finalizing the updated labor-related 
share as proposed; finalizing a transitional wage index to implement 
new OMB CBSA designations as proposed; and implementing a phase-out of 
the rural adjustment as proposed 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 
provide 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 are also implementing 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 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 final 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 30 below, we have 
prepared an accounting statement showing the classification of the 
expenditures associated with the provisions implemented in this final 
rule. The costs for data submission presented in Table 30 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 final 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 30--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.........  $75 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 to   $6.31 million.
 Submit Data (Quality Reporting
 Program).
------------------------------------------------------------------------

    In accordance with the provisions of Executive Order 12866, this 
final 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 amends 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: July 27, 2015.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Dated: July 27, 2015.
Sylvia M. Burwell,
Secretary, Department of Health & Human Services.
    Note: The following addendum will not publish in the Code of 
Federal Regulations.

Addendum--FY 2016 Final Rates and Adjustment Factors

                              Per Diem Rate
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Federal Per Diem Base Rate...................................    $743.73
Labor Share (0.752)..........................................     559.28
Non-Labor Share (0.248)......................................     184.45
------------------------------------------------------------------------


         Per Diem Rate Applying the 2 Percentage Point Reduction
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Federal Per Diem Base Rate...................................    $729.10
Labor Share (0.752)..........................................     548.28
Non-Labor Share (0.248)......................................     180.82
------------------------------------------------------------------------

    Fixed Dollar Loss Threshold Amount: $9,580.
    Wage Index Budget-Neutrality Factor: 1.0041.

[[Page 46727]]



                          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) radius by          1.23
     road..................................................
    City of Fairbanks and 80-kilometer (50-mile) radius by          1.23
     road..................................................
    City of Juneau and 80-kilometer (50-mile) radius by             1.23
     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.........................................      $320.19
ECT--Per Treatment Applying the 2 Percentage Point                313.89
 Reduction.................................................
------------------------------------------------------------------------


                      Variable Per Diem Adjustments
------------------------------------------------------------------------
                                                              Adjustment
                                                                factor
------------------------------------------------------------------------
Day 1--Facility Without a Qualifying Emergency Department..         1.19
Day 1--Facility With a Qualifying Emergency Department.....         1.31
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
------------------------------------------------------------------------
                                                              Adjustment
                      Age  (in years)                           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
------------------------------------------------------------------------
                                                              Adjustment
           MS-DRG                  MS-DRG Descriptions          factor
------------------------------------------------------------------------
056.........................  Degenerative nervous system           1.05
057.........................   disorders w MCC.
                              Degenerative nervous system
                               disorders w/o MCC.
080.........................  Nontraumatic stupor & coma w          1.07
081.........................   MCC.
                              Nontraumatic stupor & coma w/
                               o MCC.
876.........................  O.R. procedure w principal            1.22
                               diagnoses of mental illness.
880.........................  Acute adjustment reaction &           1.05
                               psychosocial dysfunction.
881.........................  Depressive neuroses..........         0.99
882.........................  Neuroses except depressive...         1.02
883.........................  Disorders of personality &            1.02
                               impulse control.
884.........................  Organic disturbances & mental         1.03
                               retardation.
885.........................  Psychoses....................         1.00
886.........................  Behavioral & developmental            0.99
                               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
------------------------------------------------------------------------
                                                              Adjustment
                        Comorbidity                             factor
------------------------------------------------------------------------
Developmental Disabilities.................................         1.04
Coagulation Factor Deficit.................................         1.13
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

[[Page 46728]]

 
Poisoning..................................................         1.11
------------------------------------------------------------------------


[FR Doc. 2015-18903 Filed 7-31-15; 4:15 pm]
 BILLING CODE 4120-01-P